Suits to recover back moneys illegally exacted as internal revenue duties cannot, under existing laws, be commenced in the Circuit Courts, except in cases where the taxpayer and the defendant, whether the assessor or collector, are citizens of different States. Such suits under any other circumstances must be commenced in the State courts, as the Circuit Courts have no jurisdiction to hear and determine the same, except when they are removed from a State court into the Circuit Court for the same district, on motion of the defendant. Where the parties are citizens of the same State the action must be brought in the State court, but the defendant, if he sees fit, and seasonably takes the proper steps, may remove the case into the Circuit Court for trial. Both parties in this case were citizens of the same State, and the action was accordingly commenced by the plaintiff in the State court, and the collector, as the defendant, not having taken any steps to remove the suit into the Circuit Court, the same was heard and determined in the State court in which it was commenced.
Taxes were assessed against the plaintiff, under the internal revenue laws, in the sum of one thousand five hundred and ninety-seven dollars, and the findings of the court show that the assessor duly returned his assessment list to the collector; that the collector demanded of the plaintiff the amount of the tax assessed, and that he threatened if the plaintiff refused to pay the same that he would coerce the collection of the whole amount; that the assessor gave due notice to the plaintiff when and where appeals from the assessment would be heard, but that the plaintiff did not appeal from the same, either to the assessor or to the Commissioner of Internal Revenue, and that he paid the whole amount of the assessment under protest.
Pursuant to the practice in that jurisdiction, the Superior Court reserved the questions of law arising upon the facts found, and the question what judgment ought to be rendered in the case, for the opinion and advice of the Supreme Court of Errors, and the record shows that the Supreme Court of Errors advised the Superior Court to render judgment for the plaintiff, as exhibited in the transcript of the record removed here by the writ of error for re-examination.
1. Remarks respecting the jurisdiction of the court to reexamine the judgment rendered by the State court may well be omitted, as the claim of the plaintiff as set forth in the declaration necessarily draws in question the acts of Congress imposing internal revenue duties and the authority exercised by the defendant in collecting the same, and the decision of the State court was against the validity of both, if the acts of Congress be construed as authorizing the assessment and collection of the duties.
2. Tried as the case was by the judge of the Superior Court, as a substitute for a jury, the Supreme Court of Errors was bound to take the facts as found by that court, and this court in re-examining the judgment must proceed upon the same basis, as the finding of facts is made a part of the record.
By the finding, it appears that at the time of the assessment the plaintiff owned a majority of the stock in two certain manufacturing corporations, whose affairs respectively were managed by three or more directors, of which the plaintiff was one; that the profits realized by the respective companies the year preceding the assessment was greater than the dividends which they made within the same period; that the profits at the time of the assessment had not been divided nor had they been in any way set apart from the general assets of the respective corporations, nor had they been appropriated for the use of the stockholders, otherwise than the law will imply from the fact of the existence of such profits; that the profits made by the respective corporations during that year were to such an amount that if the interest of the plaintiff therein was legally subject to the assessment the amount assessed and collected was the proper amount; that the plaintiff delivered, under oath, his list to the assistant assessor on the day of its date, omitting the amount now in controversy from the list; that the assessor required him to add the same to the list, which he declined to do, and that the same was then added to the list by the assessor; and the court also found that the assessment was legally made, if such profits were in law liable to such an assessment.