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November 9, 1956


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

On October 9, 1956, the plaintiffs filed their motion for preliminary injunction and temporary restraining order, restraining the defendant and its agents from proceeding to sell the property comprising the estate of plaintiffs' decedent, until a trial of the question of liability is consummated during the January, 1957, jury calendar in the Fort Smith Division.

Upon the presentation of the motion, the Court issued a temporary restraining order, restraining the defendant and various named collection agents of defendant from "proceeding to take inventory of the estate of J.W. Myers, deceased, giving notice of the sale of the said estate and selling the assets comprising the estate as it is proposed they do to satisfy the assessment of additional income tax, penalties and interest assessed against the estate for 1942 and 1943".

The temporary restraining order would have expired by its own terms on October 20, 1956, except that on October 12 the Court extended it to October 31, 1956, and set for hearing on October 31, 1956, at 9:30 a.m., the plaintiffs' motion for preliminary injunction.

The motion for preliminary injunction came on for hearing on the date set, at which time the plaintiffs proceeded to introduce ore tenus testimony and certain exhibits thereto in support of their motion.

The defendant did not introduce any testimony, but did cross-examine the witnesses produced by the plaintiffs.

It is the contention of the defendant that:

1. The Court is without authority to hear plaintiffs' motion or grant the relief requested therein on the ground that the United States, as a sovereign, is immune from suit save as it consents to be sued and not otherwise, and that the Congress has not, by legislative enactment, granted authority for the maintenance of an action on motion for an injunction.

2. That all persons sought to be enjoined are not properly before the Court in that the motion seeks to enjoin the United States and certain agents for collection of taxes named in the motion from proceeding to sell the property until the trial of the principal case is completed; that the United States is properly before the Court, but if the Court should issue the injunction as prayed for in the motion, that it would be a denial to the other persons named in the motion of an opportunity to be heard in their own behalf.

3. That the motion for a preliminary injunction is in the nature of a "suit for the purpose of restraining the * * * collection of a tax * * * and is specifically prohibited by the provisions of Section 7421(a) of the Internal Revenue Code of 1954".

4. That under the mandate of the United States Court of Appeals for the Eighth Circuit, issued in the case of Bushmiaer v. United States, 230 F.2d 146, 152, the Director of Internal Revenue has been authorized to proceed to collect the taxes "without let or hindrance".

The plaintiffs contend:

1. That Section 7421(a) of the 1954 Internal Revenue Code does not bar equitable relief under the facts in the instant case, and the facts and the applicable decisions make it clear "that in the sound discretion of this Court the extraordinary remedy of injunctive relief is available to these taxpayers".

2. That the Court is invested with jurisdiction to consider a request for an injunction against a Collector of Internal Revenue individually, and that in such a suit the defendant here, the United States of America, is in law the real party in interest.

It is clear that the United States as sovereign is immune from suit save as it consents to be sued, and the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit. United States v. Sherwood, 312 U.S. 584, 61 S.Ct. 767, 85 L.Ed. 1058; United States v. Shaw, 309 U.S. 495, 60 S.Ct. 659, 84 L.Ed. 888.

Section 7421(a) of the Internal Revenue Code of 1954, 26 U.S.C.A., provides:

    "(a) Tax. — Except as provided in sections 6212(a)
  and (c), and 6213(a), no suit for the purpose of
  restraining the assessment or collection of any tax
  shall be maintained in any court."

The exceptions in the above statute are not applicable to the question before the Court.

However, the United States Supreme Court, in Miller v. Standard Nut Margarine Co. of Florida, 284 U.S. 498, 52 S.Ct. 260, 264, 76 L.Ed. 422, in commenting upon R.S. § 3224, which at that time provided "`No suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court'", held, in harmony with the rules generally followed in courts of equity, that a suit will lie to restrain the collection of an illegal tax when exceptional and extraordinary circumstances exist.

Beginning with the second sentence on page 509 of 284 U.S., on page 263 of 52 S.Ct., the court said:

    "The principal reason is that, as courts are
  without authority to apportion or equalize taxes or
  to make assessments, such suits would enable those
  liable for taxes in some amount to delay payment or
  possibly to escape their lawful burden, and so to
  interfere with and thwart the collection of revenues
  for the support of the government. And this court
  likewise recognizes the rule that, in cases where
  complainant shows that in addition to the illegality
  of an exaction in the guise of a tax there exist
  special and extraordinary circumstances sufficient to
  bring the case within some acknowledged head of
  equity jurisprudence, a suit may be maintained to
  enjoin the collector. Dows v. City of Chicago, 11
  Wall. 108, 20 L.Ed. 65; Hannewinkle v. [City of]
  Georgetown, 15 Wall. 547, 21 L.Ed. 231; State
  Railroad Tax Cases, 92 U.S. 575, 614, 23 L.Ed. 663.
  Section 3224 is declaratory of the principle first
  mentioned and is to be construed as near as may be in
  harmony with it and the reasons upon which it rests.
  Cumberland Telephone & Telegraph Co. v. Kelly, 6
  Cir., 160 F. 316, 321. Baker v. Baker, 13 Cal. 87,
  95. Bradley v. People, 8 Colo. 599, 604, 9 P. 783; 2
  Sutherland, 2d Lewis ed., § 454. The section does not
  refer specifically to the rule applicable to cases
  involving exceptional circumstances. The general
  words employed are not sufficient, and it would
  require specific language undoubtedly disclosing that
  purpose to warrant the inference that Congress
  intended to abrogate that salutary and
  well-established rule. This court has given effect to
  Section 3224 in a number of cases. Snyder v. Marks,
  109 U.S. 189, 191, 3 S.Ct. 157, 27 L.Ed. 901; Dodge
  v. Osborn, 240 U.S. 118, 121, 36 S.Ct. 275, 60 L.Ed.
  557; Dodge v. Brady, 240 U.S. 122, 36 S.Ct. 277, 60
  L.Ed. 560. It has never held the rule to be absolute,
  but has repeatedly indicated that extraordinary and
  exceptional circumstances render its provisions
  inapplicable. Hill v. Wallace, 259 U.S. 44, 62, 42
  S.Ct. 453, 66 L.Ed. 822; Dodge v. Osborn, supra, at
  page 121 of 240 U.S., at

  page 276 of 36 S.Ct.; Dodge v. Brady, supra. Cf.
  Graham v. Du Pont, 262 U.S. 234, 257, 43 S.Ct. 567,
  67 L.Ed. 965; Brushaber v. Union Pacific R. Co.,
  240 U.S. 1, 36 S.Ct. 236, 60 L.Ed. 493."

None of the tax collecting officers of the United States are parties to this proceeding. They are named in the motion for the preliminary injunction, but there has been no service of process on any of the officials, and the only defendant before the Court is the United States, and, as heretofore stated, there does not appear to be any legislative enactment by the ...

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