1. Refusals to grant interlocutory injunctions to stay
proceedings before a board of arbitration
held not
res
judicata in favor of the validity of those proceedings. P.
485.
2. The provision in Georgia for reviewing tax assessments by
arbitration, Code 1910, § 1059; Acts 1910, pp. 22, 24, Parks
Ann.Code, 1914, § 1116(d), was superseded by Acts of 1918, No. 270,
p. 232, which substitutes a petition in equity to enjoin excessive
assessments. P.
267 U. S.
485.
3. Where the only remedy afforded by the state law to a taxpayer
against an invalid tax is by a proceeding in equity in the state
court, purely judicial in character, to enjoin excessive
assessment, the federal court has jurisdiction of a bill to enjoin
collection in which it is set up that the tax violates the federal
Constitution. P.
267 U. S.
486.
4. If the administration of the tax laws of a state is shown to
result in a systematic and intentional discrimination against the
plaintiff, the federal court may grant injunctive relief allowed by
the state law without deciding the federal constitutional question
upon which jurisdiction of the bill is based. P.
267 U. S.
489.
5. Evidence
held sufficient to show such systematic
underassessment of property in Georgia, particularly of stocks and
bonds, as justified a decree holding invalid an assessment of
plaintiff's securities at full market value, and reducing it to
25%. P.
267 U. S.
489.
Page 267 U. S. 480
6. In cases of this kind, it is proper to call as witnesses tax
officials of the state and county, because of their experience in
assessing property, to testify to the existence of systematic and
intentional undervaluation.
C. B. & Q. Ry. v. Babcock,
204 U. S. 55,
distinguished. P.
267 U. S.
491.
7. To avoid addition of interest, a tender of money in discharge
of a disputed tax should not be tied to the condition that it be
received in full payment. P.
267 U. S.
492.
291 F. 243 affirmed.
These are an appeal and a cross-appeal direct from the District
Court for the Southern District of Georgia, under § 238 of the
Judicial Code, because involving the application of the federal
Constitution.
The bill sought to enjoin the levy of executions on delinquent
tax assessments of the tax receiver of Richmond County, Georgia,
against the estate of J. B. White, for the seven years from 1911 to
1917. The assessments were as follows:
Tax
Assessment, 1911 $1,000,866.87 $13,552.20
" 1912 1,399,161.67 18,888.68
" 1913 1,558,300.83 22,751.19
" 1914 1,548,735.38 21,527.42
" 1915 1,439,160.83 21,011.75
" 1916 1,509,936.00 22,347.05
" 1917 1,623,567.52 25,490.01
The aggregate amount of the executions was $145,568.30, with
interest thereon to the date when issued July 28, 1918, of
$70,764.01, or a total of principal and interest of
$216,332.01.
The bill of the complainant, who was White's executor, asked an
injunction on two grounds. One was that in the sum assessed were
national bank stocks, which, under § 5219, R.S., should have been
assessed for taxation in New York City, where the banks were, and
not in Georgia,
Page 267 U. S. 481
and also stock in a Georgia railway exempt from taxation by the
state law.
The second ground was that the assessment of the stocks and
other securities was at their full market value, whereas in Georgia
and in Richmond County, property of this class in the hands of
others was generally and intentionally assessed by the taxing
officers at less than 25 percent of such value, and that such
discrimination was unlawful under the statutes and constitution of
Georgia, and would work a denial of the equal protection of the
laws in violation of the Fourteenth Amendment of the federal
Constitution.
J. B. White, a native of Ireland, came to Georgia in 1866, and
resided there continuously until 1909. He never was naturalized. In
1909, he went abroad and died at Genoa, Italy, in March, 1917,
leaving a will, in which he described himself as of Richmond County
in that state and named the complainant, E. H. Callaway, as his
executor. The executor probated the will and filed an inventory of
the estate in the Court of the Ordinary. During the seven years --
1911 to 1917 -- White had returned for taxation his real estate in
Richmond County amounting to $600,000 and $300 of household and
kitchen furniture, but no other personal property. After the
probate of the will, the tax receiver of the county demanded of the
executor returns of taxation for seven years on the securities
shown in the inventory. The certificates of stock and the bonds
were physically in possession of Henry Clews & Co. in New York.
The executor insisted (though he subsequently abandoned the claim)
that they are not subject to taxation in Georgia, for the reason
that White was a nonresident. The tax receiver withdrew his demand.
Thereafter, the board of county commissioners directed institution
of proceedings in mandamus to compel the tax receiver to assess
this property as delinquent. The suit for mandamus,
Page 267 U. S. 482
though it did not go to a rule absolute, brought out from a
member of the firm of Clews & Co. evidence of the exact amount
and value of the property which White had left with them. The tax
receiver then made the assessments at full market value. The
executor demanded arbitration, as provided by § 1059 of the Georgia
Code of 1910 and the General Arbitration Act. Acts of Georgia of
1910, pp. 22, 24, as codified in Park's Annotated Code 1914, §
1116(d). The latter section directed the county tax receiver to
assess property at the valuation fixed by the taxpayer in the
return, if satisfactory, and, if not, within 30 days to make an
assessment on the best information he could procure and notify the
taxpayer. The latter might, by a demand within 20 days, have the
question of true value referred to arbitrators, one selected by
him, one by the tax receiver, and a third by the other two, and in
default of their agreement, by the board of county commissioners.
In this case, the executor selected his arbitrator, the tax
receiver his, and the county commissioners selected the third. On
the day of the meeting of the arbitrators, the state applied to the
superior court of the county for an injunction to prevent their
further proceeding, but the application was denied. The issue was
then heard by the arbitrators, the state and county appearing and
taking part therein by counsel. The arbitrators made an award
fixing the valuation at 25 percent of the market value of the
securities, and the same was "fastened in tax digest of the county
for the year 1917." The tax collector calculated the taxes due and
submitted the amount to the executor as $27,980.88. This sum the
executor tendered as full payment of the taxes due. On advice of
counsel representing the state, the collector declined it. The
state and county then filed a second petition in the superior court
to enjoin the tax receiver and the tax collector from making the
assessments and collections according to the arbitration.
Page 267 U. S. 483
The superior court held the petition insufficient on demurrer,
and dismissed the application. Meantime, the first application to
enjoin the proceedings in arbitration reached the supreme court,
and the superior court was sustained in refusing the injunction.
Georgia v. Callaway, 150 Ga. 235. When the second
application for injunction reached the Supreme Court, two of the
judges out of six (only four being present) held that an Act of
1918 (Acts of Georgia of 1918, No. 270, p. 232) repealed the
section of the Act of 1910 on which the arbitration had preceded
and rendered it void, and that therefore the original assessments
made by the tax receiver were valid, the executions could issue,
and no injunction was necessary. Of the other two judges, one held
that the Act of 1918 did not prevent the arbitration proceedings in
which the state participated. The other held that the state had not
put itself in a position to object to the assessment of the
arbitrators, because its only complaint was that the award was
fraudulent, and it had not made out its case, and that the effect
of the Act of 1918 it was not necessary for the court to decide. So
an injunction was a second time refused.
Georgia v.
Callaway, 152 Ga. 871.
The second decision was made March 4, 1922. On March 9th
following, tax executions on the assessments made by the tax
receiver July 28, 1919, including those on the stock of the
national banks of New York City, were issued. The executor
thereupon again tendered payment of taxes and interest under the
award of the arbitrators to the tax collector which, was again
declined.
On March 22, 1922, the bill in the present case was filed, and,
after a hearing before three judges, a temporary injunction was
issued by the district court. The state and the county and the tax
officials were made defendants, and filed answers. Among other
objections by them to the equitable relief sought was that, though
the
Page 267 U. S. 484
complainant in his bill admitted that there was due from him
$27,980.88 to the tax receiver, it had not been paid, and the bill
should be dismissed. Thereafter on the 25th of September, 1922, the
executor tendered the sum of $27,980.88, and it was accepted,
without prejudice to the rights of any of the parties in the
pending litigation. The executor then, upon leave of court, amended
his bill and made the averment of the payment.
The district court, after a full hearing, sustained its
jurisdiction, held that the award of the arbitrators was invalid
and that the state and county were not estopped by the state court
orders to attack it, enjoined execution of the assessments on the
national bank and Georgia railway stocks as nontaxable, found
unlawful discrimination in the assessments on the other securities,
enjoined collection thereof to the extent of 75 percent, and
decreed against the complainant interest on the 25 percent of the
assessments already paid by him from the date of his first tender
until their actual payment. The cross-appeal of the executor raised
in his assignments of error the validity of the award of the
arbitration and the question of interest.
MR. CHIEF JUSTICE TAFT, after stating the case as above,
delivered the opinion of the Court.
First. A primary and preliminary question is that of the
validity of the arbitration and award. The proceeding was initiated
and award made under the Act of 1910,
Page 267 U. S. 485
but it was not begun until July 28, 1919, a year after the Act
of 1918 claimed by appellants to have repealed the arbitration
provision, was enacted.
The executor contends that the refusal of the state supreme
court to enjoin the arbitration board from proceeding was
res
adjudicata as to its validity. There were no defensive
pleadings. It was a decision upon an interlocutory injunction, and
was presumably made in the exercise of judicial discretion upon a
balance of convenience as to halting the proceeding of arbitration
before its conclusion.
Chicago Great Western Ry. v.
Kendall, 266 U. S. 94,
266 U. S. 100.
The court pointed out that the ruling it affirmed was only a
pendente lite injunction. 150 Ga. 235. Neither the court
nor counsel referred to or considered the Act of 1918. Its effect
upon the arbitration proceeding does not seem to have been called
to the attention of either. To give finality to such a temporary
ruling would be contrary to the principles governing estoppel by
judgment.
Santowsky v. McKey, 249 F. 51;
Knox v.
Alwood, 228 F. 753;
Webb v. Buckalew, 82 N.Y. 555.
When the case came again to the supreme court on the second
application for injunction by the tax authorities, it was dismissed
for varying reasons of the four judges. Certainly, in view of the
holding by two of them that the Act of 1918 repealed the provision
for arbitration, it could not be said to be a judgment binding the
parties to the validity of the award. We agree with the district
judge that no estoppel grew out of the injunction suits.
Second. Did the Act of 1918 render the award a nullity? Two of
the state supreme court judges held that it did. Four federal
judges have agreed with them. The sections of the Act of 1918 here
applicable were the first, third fifth, seventh, and eighth. By the
first section, when the owner of property had omitted to return the
same for taxation at the time and for the
Page 267 U. S. 486
years the return should have been made, he, or, if he was dead,
his personal representative, was required to return the property
for taxation for each year it was delinquent. By the third section,
when such property was of the class which should have been returned
to the tax receiver of the county, the latter was to notify in
writing the delinquent, or, if dead, his personal representative,
requiring a return within 20 days. By the fifth section, if the
delinquent or his personal representative refused to return the
property after notice, the tax receiver was to assess the property
from the best information he could obtain as to its value for the
years in default, and to notify such delinquent of the valuation,
which should be final unless the person or persons so notified
raised the question that it was excessive, in which event the
further procedure should be by petition in equity in the superior
court of the county where such property was assessed. By the
seventh section, if the delinquent or his personal representative
disputed the taxability of such property, he might also raise that
question by petition in equity. By the eighth section, all laws and
parts of laws in conflict with the act were repealed.
As already stated, by the laws in force before 1918, the remedy
for the delinquent taxpayer was, in case of excessive assessment,
to demand arbitration in 20 days. Obviously the Act of 1918 gave to
the taxpayer an opportunity to file a petition in equity to enjoin
excessive assessment as a substitute for his previous remedy by
arbitration. The repealing section, though not specific, was quite
broad enough to end a resort to arbitration under the old law.
Third. Had the federal court jurisdiction to entertain the bill
and enjoin the enforcement of the executions issued upon the
assessments? Appellants cite
Keokuk & Hamilton Bridge Co.
v. Salm, 258 U. S. 122, as
indicating
Page 267 U. S. 487
the contrary. That was a bill in equity by a bridge company to
enjoin a tax assessment by county assessors on a railroad bridge
because of discrimination. The assessment made by the county
assessors was subject to revision by a board of review required to
give a hearing and to correct the assessment as should appear just.
The payment of taxes was not to be enforced by distraint or levy,
but by legal proceedings in a civil suit for the collection of a
debt in which the owner might appear and defend on any legal
ground, including discrimination. The complainant there brought his
bill without taking any of the steps offered by the statute as an
administrative remedy and ignored the defense he might make in the
suit to collect the tax. The question here is different. The remedy
to be taken by the taxpayer against excessive assessment is by
petition in equity. That is a judicial proceeding. Such a
proceeding is not administrative, as the appeal to the Supreme
Court was in the case of
Prentis v. Atlantic Coast Line
Co., 211 U. S. 210.
Nothing in the Georgia decisions shows that the petition here
provided was other than a regular application to a court of equity
for relief by injunction. Nothing indicates that the court was to
make administrative assessment. It was only to enjoin excessive
assessment. No reason existed why a federal court sitting in the
same jurisdiction might not grant equitable relief to the taxpayer
against the executions on the assessments, provided there be stated
in the bill ground for federal equity jurisdiction. This was a suit
of a civil nature under § 247 of the Judicial Code, and arose under
the Constitution of the United States. It was properly in equity
because there was no adequate remedy at law, the assessments being
final except as subject to equitable intervention. The Georgia law
gives no right of action to recover taxes voluntarily paid, even
under protest on the ground that they were illegally assessed and
collected.
Page 267 U. S. 488
Section 4317 of the Civil Code of Georgia of 1910 is as
follows:
"Payment of taxes or other claims, made through ignorance of the
law, or where the facts are all known and there is no misplaced
confidence and no artifice, deception, or fraudulent practice used
by the other party, are deemed voluntary, and cannot be recovered
back unless made under an urgent and immediate necessity therefor,
or to release person or property from detention, or to prevent an
immediate seizure of person or property. Filing a protest at the
time of payment does not change the rule."
In Georgia, the statutory methods for levy, assessment, and
collection of taxes are not merely cumulative -- they are
exhaustive.
Richmond County v. Steed, 150 Ga. 229;
State v. Western & Atlantic R. Co., 136 Ga. 619. It
would seem to follow that the only remedy intended to be furnished
in Georgia in such a case as this was by injunction in equity
against excessive assessments. If the remedy by law is doubtful,
equitable relief may be had.
Wilson v. Ill. So. Ry.,
263 U. S. 574,
263 U. S. 577;
Union Pacific R. Co. v. Weld County, 247 U.
S. 282,
247 U. S.
285-286;
Davis v. Wakelee, 156 U.
S. 680,
156 U. S. 688.
The case seems to be quite like that of
Cummings v. National
Bank, 101 U. S. 153, in
which, under a statute of Ohio authorizing a suit for injunction to
prevent the collection of illegal taxes, it was held that a bill
would lie in the federal court to enjoin the collection of a tax as
illegal because it discriminated against the shares of a national
bank.
Another objection to the bill is that the assessments made in
July, 1919, have become final by the delay because this bill was
not filed until March 11, 1922. It is argued that, as the petition
in equity takes the place of the arbitration proceeding and the
arbitration proceeding had to be begun within 20 days after the
notification to the taxpayer of the assessment, in some way or
other the 20-day limitation is projected into the new act.
Page 267 U. S. 489
No statutory time limitation which would bar the resort to a
petition or a bill in equity as filed in this case has been pointed
out to us by counsel, and we cannot infer one.
We come now to the issue of discrimination. By the Constitution
of Georgia, Article 7, § 2, it is provided that:
"All taxation shall be uniform upon the same class of subjects,
and
ad valorem on all property subject to be taxed within
the territorial limits of the authority levying the tax, and shall
be levied and collected under general laws."
By the laws of Georgia, all real and personal property,
including stocks and securities in corporations in other states
owned by citizens of Georgia, is to be returned and taxed at its
fair market value --
i.e., what it would bring at cash
sale when sold in such manner as it is usually sold. Park's
Annotated Code of Georgia (1914), §§ 1002, 1002a, 1003, and
1004.
It is well settled that, if the administration of the tax laws
of a state is shown to result in an intentional and systematic
discrimination against a complainant by a bill in a federal court,
the court may grant relief by injunction under the state law
without deciding the federal constitutional question upon which
jurisdiction of the bill is based.
Louis. & Nash. R. Co. v.
Greene, 244 U. S. 522,
244 U. S. 527;
Greene v. Louisville R. Co., 244 U.
S. 499,
244 U. S. 508,
244 U. S.
514-519;
Taylor v. L. & N. R. Co., 88 F.
350;
Georgia Railroad v. Wright, 125 Ga. 589, 602,
603.
Complainant's evidence to show that the valuation of real and
personal property by the county officials was far below the market
value in Richmond County and throughout the State of Georgia is
convincing. It consists of reports and admissions by the
Comptroller General and the State Tax Commissioner, the chief
taxing officers of the state, and of the testimony of past and
present taxing officials of a great number of counties,
Page 267 U. S. 490
some having large cities, and others without such cities in
different parts of the state. In his report of 1920, the state tax
commissioner said he thought it wise not to require more than 35
percent of the true value of real estate as a minimum basis for
equalizing purposes, and be finally approved a comparative
statement of counties showing the highest percent of true value of
lands returned to be 60 and the lowest 25. The evidence further
showed that the assessment of intangible personalty was at a much
less percentage of true value than that of real estate. The fact
seemed to be that stocks and bonds were not generally returned at
all, and when they were returned, they were assessed at a mere
nominal figure. The condition in respect to the low valuations was
attributed by several of the taxing officials, who were witnesses
for the complainant, in part to the arbitration method. They said
that, if they attempted to impose anything like the real value, an
arbitration was demanded, and the invariable result was a reduction
of the assessment, so that there had come to be a generally
understood acquiescence by county officials in low percentages. It
was quite apparent that the undervaluation of both realty and
personalty by county taxing officials in Richmond County and
elsewhere in Georgia had become systematic and intentional. It
would seem from the evidence and the reports that not more than 10
percent of stocks and bonds was taxed at all. The comptroller
general's report for 1912 said that the system of assessment of
such property was but little better than voluntary contributions of
taxpayers to state's revenue. The recognition of these conditions
seems to have led equalizers and assessors, in fairness, to scale
down the assessment of stocks and bonds when returned. Hence, we
find that the Board of Tax Assessors of Richmond County, a body
whose duty it was to receive the regular annual returns from the
tax receiver and equalize them as between individuals, Park's
Page 267 U. S. 491
Annotated Code (1914), § 1116(k), in determining the value of
the White estate for taxing purposes for 1918 -- a current
assessment the next year after those here in suit -- fixed the
value of the same stocks and bonds and intangibles at $250,000, or
about 18 percent of their market value. Two of the assessors, by
affidavit, testified from their experience that such percentage was
at a higher rate than that at which such property when returned was
usually assessed. The tax receiver who returned the property in
this case at its full market value for the seven years testified
before the board of arbitration that neither he nor the board of
appraisers had ever taxed real estate at more than two-thirds of
its value, mortgages. or stocks at more than 50 percent, and county
property at more than 33 1/3 percent
Objection is made to the testimony of tax officials in this
case, especially to that of the tax receiver, who fixed the 100
percent assessment in the present case, and to that of the members
of the board of tax assessors and equalizers who assessed the value
of the White estate for the year 1918. It is based upon the
language of this Court in
C., B. & Q. Ry. v. Babcock,
204 U. S. 585,
204 U. S. 593.
We do not think that the citation has application here. That was a
case where members of a state railway assessing board were called
by the taxpayers and subjected to an elaborate cross-examination
with reference to the operation of their minds in valuing and
taxing the particular railroads whose assessment was there in
question. It was held to be improper thus to impeach official
awards. The witnesses in this case were not subjected to
cross-examination as to the reasons for their official action in
this case. They were called, because they were men of long
experience in assessing property in the county and state, to
testify to the existence of a systematic and intentional
undervaluation of the property of others -- of property
generally.
Page 267 U. S. 492
The court, in reaching a conclusion as to the percentage to
which the valuation here should be reduced in order fairly to avoid
discrimination, fixed 25 percent, the same as that in the award of
the board of arbitration. It is insisted that the action of the
board, because its power to make an award was abolished by the law
of 1918, was not admissible evidence. It is quite true that the
award might be of doubtful competency if offered as independent
evidence, but the fact that the award was made an issue in the
pleadings and evidence and was a part of the record suggests a
difference. But even if it ought not to have been considered, the
other evidence sustaining the conclusion of the court was ample.
The evidence which the defendants offered was of a stereotyped
character from the state and county officials of many counties, in
which it was said that they all struggled to obey the law, but
nothing which was said by them was any real contradiction of the
affidavits already referred to, or of the reports of the state
officials already commented on.
There only remains to consider the question of interest made by
the executor on his cross-appeal. The district court exacted
interest on the amount found to be due and which the executor
admitted to be due, from the time of the first tender by him at the
time of the award of the arbitrators until the final tender some
three years later, when the amendment to the bill was filed. We
think this was right. The tenders of the complainant were with a
condition attached -- namely that the money to be received was to
be received in full payment of the claim. The complainant had no
right to impose such limitation. If he owed the money, as he
admitted he did, he should have paid it without restriction, and
his withholding it for three years requires that he pay interest on
it during the time of detention.
Decree affirmed.
