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 defendant, "on behalf of said State of Arkansas", has
by written notice made demand upon plaintiff for additional
income taxes for the said years 1943, 1944 and 1945; that the
written notice was the
first demand made upon the plaintiff for additional state income
taxes and that the defendant is now threatening to impress a lien
upon the plaintiff's property in the State of Arkansas and have
the same sold under Act 118 of the Acts of Arkansas of 1929, as
amended, Ark.Stats. (1947) Secs. 84-2001 to 84-2048, inclusive,
and Act 135, Acts of Arkansas for the year 1947; that, if the
defendant carries out the threat to impress a lien upon
plaintiff's property in the State of Arkansas and to sell the
same in satisfaction thereof, the same would disrupt plaintiff's
service in interstate commerce and result in taking plaintiff's
property without due process of law, in violation of Article 2,
section 8 of the Constitution of the State of Arkansas and
Amendment 14 of the Constitution of the United States.
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 ...