Opinion
No. 49.
September 28, 1939.
Troff McKessy and John H. Bloem, all of Kalamazoo, Mich., for plaintiff.
Thomas Read, Atty. Gen., and James W. Williams, Asst. Atty. Gen., for defendants.
Action by Brown Motor Freight Lines, Inc., against John J. O'Hara and others individually, and as members of the Michigan Public Service Commission, to enjoin defendants from collecting a state tax imposed upon the operation of motor vehicles.
Bill of complaint dismissed and motion for temporary injunction denied.
Findings of Fact.
1. Plaintiff is a corporation organized and existing under the laws of the State of Indiana, and since its incorporation on June 25, 1935, has been exclusively engaged in interstate commerce as a common carrier operating between certain points in Illinois, Indiana and Michigan by virtue of a certificate of public convenience, under the Federal Motor Carrier Act of 1935, 49 U.S.C.A. §§ 301- 327.
2. Defendants are members of the Michigan Public Service Commission, created by Act No. 3 of the Public Acts of 1939, which succeeded to the duties and powers of the Michigan Public Utilities Commission.
3. Plaintiff by its bill of complaint seeks temporary and permanent injunction against defendants to restrain them from the enforcement of collection of certain mileage fees imposed by Act 254 of the Public Acts of Michigan of 1933, upon the ground that on November 14, 1938, the Michigan Public Utilities Commission denied plaintiff's alleged absolute right to reciprocity exemption therefrom, under the provisions of Act 185 of the Public Acts of Michigan of 1937 and the reciprocity agreement entered into pursuant thereto between the States of Michigan and Indiana on November 30, 1937. It also asks for an order directing repayment of the sum of $400 of such taxes already paid.
4. On November 30, 1937, the duly constituted authorities of the State of Michigan and the State of Indiana entered into a reciprocity agreement with respect to motor vehicles, the pertinent provisions of which are as follows:
"The term `Indiana Motor Carrier' as used in this agreement shall be deemed to mean a natural person, resident of Indiana, or a firm, partnership, association or corporation organized or domesticated under the laws of Indiana, and who or which is engaged in the business of transporting goods, or passengers for hire by means of motor vehicles operating over the public streets and highways, being such motor carrier as shall have its principal business headquarters within the State of Indiana; and the said term `Indiana Motor Carrier' shall also include and be deemed to mean an owner resident of Indiana or a firm, partnership, association or corporation organized or domesticated under the laws of Indiana, while actually engaged in the operation of transporting carrier's own commodities in carrier's own motor vehicles.
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"The term `Michigan Motor Carrier' as used in this agreement shall be deemed to mean a natural person, resident of Michigan, or a firm, partnership, association or corporation, organized or domesticated under the laws of Michigan, and who or which is engaged in the business of transporting goods, or passengers for hire by means of motor vehicles operating over the public streets and highways, being such motor carrier as shall have its principal business headquarters within the State of Michigan; and the said term `Michigan Motor Carrier' shall also include and be deemed to mean an owner, resident of Michigan or a firm, partnership, association or corporation organized or domesticated under the laws of Michigan, while actually engaged in the operation of transporting carrier's own commodities in carrier's own vehicles.
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"In order to facilitate motor vehicle movements in interstate commerce of their several residents, between and through their combined geographical territories, the State of Indiana with respect to the interstate operations of the Michigan motor carriers within Indiana territorial limits, and the State of Michigan with respect to the interstate operations of Indiana motor carriers within Michigan territorial limits, agree that when such outstate carriers have secured reciprocity exemption cards or plates, upon application as hereinafter mentioned, then they, the said states, will to the extent of granted exemptions, severally waive and forego and do hereby so waive and forego, payment by their respective outstate motor carriers, of the license plate taxes, including present weight taxes, and also weight taxes under Chapter 255, Acts 1937 of the laws of Indiana, and under Act 302, Michigan Public Acts of 1915 as amended, for motor vehicles, and also mileage fees for their operation under Section (2), Article IV, Act 254, Michigan Public Acts of 1933 and under any corresponding Indiana law and including Indiana Public Service Commission registration fees, but exclusive in all cases, of filing fees for procurement of operating authority and carrier's commercial operating permits, which said taxes and fees included within this waiver provision are sometimes herein described as exempted taxes and fees.
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"And both states during the term of this agreement and subject to carriers procurements of reciprocity exemption will permit motor carriers of the other state, as qualified and included in the definition `motor carrier' as contained in Paragraph I hereof, to travel and operate in interstate commerce upon their several public streets and highways without necessity for payment of the fees and taxes for which waiver provision is herein made.
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"In order to secure exemption from the foregoing taxes and fees for which waiver provision is made in this agreement, motor carriers seeking same, shall, in all cases except where outstate authorities' operating certificate is unnecessary, file with the appropriate authority where exemption is sought, proper application therefor in such form as the said authority may require, showing eligibility to such exemption under the terms of this agreement, and such motor carriers, if required by home state authority when filing such applications with outstate authority, shall file with the home state authority notice of acceptance of the terms of this agreement.
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"The contracting parties hereto agree to cooperate with each other and furnish such aid and assistance to the other as may be within their several possession, as will be conducive to the appropriate enforcement of this agreement and to the purpose of their respective legislative acts, pursuant to which this agreement has been made. And each of said State Public Service or Utilities Commissions, upon application by their respective home state carriers and under such rules and regulations as said authorities may adopt, will supply certificates for use of their respective outstate authorities, for purpose of informing latter as to applicant's residential and domiciliary eligibility to secure exemption under this agreement in applicant's respective outstates."
5. On January 26, 1938, plaintiff made application to the Michigan Public Utilities Commission for exemption from payment of Michigan license plate taxes and mileage fees in accordance with the terms of the agreement between the States of Michigan and Indiana, and after a full hearing on August 24, 1938, an order was made on October 6, 1938, denying plaintiff's application. No steps have been taken by plaintiff for review of the order of the Commission under the provisions of Sec. 20 of Article V of Act 254 of the Public Acts of Michigan of 1933, which provides that orders of the Commission shall be subject to review by the Supreme Court of the State, both as to the law and to the facts.
6. The total amount of fees involved is approximately $1,400, upon which plaintiff has paid the sum of $400. The fees are accruing at the rate of approximately $75 per month.
7. Under the provisions of Act 254 of the Public Acts of Michigan of 1933, it is the duty of defendants to collect the fees imposed thereby and they are authorized to take the necessary steps to prevent continued unlawful operation of motor vehicles over the highways of the State by impounding vehicles at the expense of the owner.
8. The mileage fees, the collection of which plaintiff seeks to have restrained, are due and payable under the provisions of Act 254 of the Public Acts of Michigan for 1933, and plaintiff has failed and neglected to pay the same.
Conclusions of Law.
1. The bill of complaint, properly construed, seeks to enjoin defendants from the collection of a state tax imposed upon the operation of motor vehicles.
2. In order to be entitled to exemption from the taxes the payment of which is here sought to be restrained, it is necessary not only that plaintiff shall be an Indiana corporation but also that it come within the terms of the reciprocity agreement between the State of Michigan and the State of Indiana.
3. Plaintiff is not entitled to exemption under the terms of said agreement, for the reason that it appears under the testimony submitted in this case and by the terms of the order of the Michigan Public Utilities Commission that at the time of making application for reciprocity exemption and at the time of the hearing thereon, plaintiff's principal place of business was in the city of Kalamazoo, in the State of Michigan.
4. The proceedings before the court are in substance to restrain the collection of a tax by the State of Michigan.
5. This court is without jurisdiction to entertain this suit for the reason that the amount in controversy does not exceed $3,000 and for the further reason that the suit is in substance one against the State of Michigan to restrain the collection of a tax.
6. An order will be entered dismissing the bill of complaint and denying the motion for temporary injunction.
The findings filed herewith obviate necessity for an extended opinion.
The controlling issue upon the pending motion for temporary injunction and upon defendants' motion to dismiss involves construction of Act 185 of the Public Acts of Michigan of 1937 which created a Michigan highway reciprocity board and prescribed its powers and duties. Plaintiff insists that under its provisions plaintiff is absolutely entitled (because it is an Indiana corporation engaged in interstate commerce) to reciprocity exemption from the mileage fees and license plate taxes imposed by the provisions of section 2 of Article IV of Act 254 of the Public Acts of Michigan of 1933. Defendants urge that under the provisions of Act 185 of 1937 and the reciprocity agreement entered into with the State of Indiana pursuant thereto, plaintiff's right to exemption must rest not alone upon the fact of its being an Indiana corporation and engaged in interstate commerce, but also upon a determination by the Michigan Public Utilities Commission (later the Michigan Public Service Commission) concerning the location of its "principal business headquarters". Plaintiff does not question the constitutionality of either of the Michigan statutes involved.
The court is of the opinion that under the provisions of Act 185 of the Public Acts of Michigan of 1937 and the reciprocity agreement entered into pursuant thereto, it is incumbent upon the plaintiff to show that it is eligible for the exemptions therein provided for and that under the provisions of paragraph 1 of Article I of said agreement it must show that it has its principal business headquarters within the State of Indiana in order to entitle it to said exemptions. This it has clearly failed to do.
It also appears that the suit is in violation of that portion of 28 U.S.C. § 41, subd. (1), 28 U.S.C.A. § 41(1), which reads: "* * * no district court shall have jurisdiction of any suit to enjoin, suspend, or restrain the assessment, levy, or collection of any tax imposed by or pursuant to the laws of any State where a plain, speedy, and efficient remedy may be had at law or in equity in the courts of such State."
If the Michigan Public Utilities Commission erred upon either the law or the facts in making its order of October 6, 1938, the order was subject to review by the Supreme Court of Michigan. In the case of Kohn v. Central Distributing Co., 306 U.S. 531, 59 S.Ct. 689, 83 L.Ed. 965, it was held, because of this provision, that a suit in the federal court will not lie where the state courts afford a plain, speedy and efficient remedy. See, also, Worcester County Trust Co. v. Riley, 302 U.S. 292, 58 S.Ct. 185, 82 L.Ed. 268.
The court is also of opinion that the amount involved is not sufficient to invoke the jurisdiction of this court. Plaintiff urges that, because the penalty for non-payment will be the seizure of its trucks and the ruination of its business, the value of the business is the amount in controversy. In the case of Healy v. Ratta, 292 U.S. 263, 269, 54 S.Ct. 700, 703, 78 L.Ed. 1248, it is said: "* * * But the possible suppression of the business here, through the prosecution of those who conduct it, is but the threatened consequence or penalty for nonpayment of the challenged tax. It is true that, where there is no method at law to test the legality of a tax without risk of incurring a penalty, the imminence of the penalty may involve such a threat of irreparable injury as to satisfy the requirements of equity jurisdiction. See Matthews v. Rodgers, 284 U.S. 521, 526, 52 S.Ct. 217, 76 L.Ed. 447. But the inability of a taxpayer to litigate the validity of a tax without risk of irreparable injury to his business, which is ground for invoking the equity powers of a federal court, affords no measure of the value of the matter in controversy. Atlantic Coast Line R. Co. v. Railroad Comm. [D.C., 281 F. 321], supra. The disputed tax is the matter in controversy, and its value, not that of the penalty or loss which payment of the tax would avoid, determines the jurisdiction."
For these reasons, the bill of complaint must be dismissed.