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February 8, 1950


The opinion of the court was delivered by: John E. Miller, District Judge.

On December 9, 1949, the plaintiff, a corporation organized and existing under the laws of the State of Missouri and engaged in the operation of a line of railroad from Kansas City, Missouri, to Port Arthur, Texas, through the Fort Smith Division of the Western District of Arkansas, filed its complaint against the defendant, a citizen and resident of the State of Arkansas and the duly appointed and acting Commissioner of Revenues for the State of Arkansas.

The plaintiff alleges that it in due time filed its income tax returns as required by the laws of Arkansas for the years 1943, 1944 and 1945 with the Commissioner of Revenues for the State of Arkansas; that it reported in said returns its net income allocable to Arkansas and duly paid to the State of Arkansas the income taxes shown to be due by said returns.

That the claims sought to be asserted by the defendant are barred by the statute of limitations; that the demands and attempts of defendant to collect said taxes are illegal and to impose interest and penalties for failure to pay same constitutes an illegal exaction from plaintiff for which plaintiff is entitled to relief; that plaintiff has no adequate remedy at law and it is entitled to an injunction against defendant enjoining him from attempting to collect said alleged taxes.

The plaintiff prays that the defendant be permanently enjoined from taking any action against plaintiff to collect said taxes and for all other relief to which it may be entitled in equity.

On December 15, 1949, the defendant filed a motion to dismiss for want of jurisdiction on the ground that the State of Arkansas is the real party in interest; that the income tax sought to be collected is the property of the State of Arkansas and that the defendant, Morley, is acting only in his official capacity as Commissioner of Revenues; that the said Morley has no personal interest or claim to said tax and that the State of Arkansas is not a citizen and that, therefore, there is no diversity of citizenship between plaintiff and the real party in interest, the State of Arkansas.

That, under Section 32 of the Income Tax Act of the State of Arkansas, Ark. Stats, § 84-2038, if a taxpayer is dissatisfied with the computation or assessment of the tax made by the Commissioner, the taxpayer is authorized to appeal said assessment within thirty days to the Pulaski Chancery Court; that if said appeal is taken the amount of the tax so assessed by the Commissioner shall be paid to the Commissioner and deposited in a special fund, and that the judgment of the court shall determine if said assessment and determination of the amount of tax due is correct and, if found incorrect, it shall enter judgment for refund or payment of all or any part of said tax illegally or wrongfully collected; that, under the provisions of the statute, the plaintiff has an adequate and complete remedy at law; that an appeal will lie from a judgment or decree of the Pulaski Chancery Court to the Supreme Court of Arkansas and an appeal on any proper question may be taken from the judgment of the Supreme Court of Arkansas to the Supreme Court of the United States.

The attorney for the defendant, Commissioner of Revenues, has filed a statement of points and authorities in support of the motion to dismiss as required by local Rule 8, but because of the inadequacy of the citation of authorities, the memorandum has not been of maximum service to the Court in determining the questions presented by the motion to dismiss. He has not furnished the Court with any citations of the applicable official statutes of the United States contained in Title 28, United States Code Annotated, effective September 1, 1948, nor has he referred to the compilation of the statutes of Arkansas appearing in Arkansas Statutes, 1947, Annotated.

In determining the motion to dismiss the Court is required to accept the allegations of facts in the complaint as true and upon that assumption, the Court has considered the motion to dismiss.

Section 1341 of Title 28 U.S.C.A., effective September 1, 1948, is a revision of the last sentence of Section 41(1) of Title 28 U.S.C.A., 1940 Ed., which is a part of the Act of August 21, 1937, of the First Session of the 75th Congress, and which appears in 50 Stat. 738. The revised statute above referred to reads as follows: "The district court shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State."

In Miller v. City of Greenville, Mississippi, and Chicot County v. City of Greenville, Mississippi, 8 Cir., 138 F.2d 712, 721, the Court in quoting from Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 63 S.Ct. 1070, 1072, 87 L.Ed. 1407, said:

"`The considerations which persuaded federal courts of equity not to grant relief against an allegedly unlawful state tax, and which led to the enactment of the Act of August 21, 1937, are persuasive that relief by way of declaratory judgment may likewise be withheld in the sound discretion of the court. With due regard for these considerations, it is the court's duty to withhold such relief when, as in the present case, it appears that the state legislature has provided that on payment of any challenged tax to the appropriate state officer, the taxpayer may maintain a suit to recover it back. In such a suit he may assert his federal rights and secure a review of them by this Court. This affords an adequate remedy to the taxpayer, and at the same time leave undisturbed the state's administration of its taxes.

"`The Act of August 21, 1937, was predicated upon the desirability of freeing, from interference by the federal courts, state procedures which authorize litigation challenging a tax only after the tax has been paid. See S. Rep. No. 1035, 75th Cong., 1st Sess.; R.R. Rep. No. 1503, 75th Cong., 1st Sess.'"

In view of the provisions of the statute above set forth, the question arises whether the plaintiff has "a plain, speedy and efficient remedy" in the courts of Arkansas to ...

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