Before a special assessment, levied by legislative authority of
a state -- in this case providing for back taxes in Kentucky -- can
be actually enforced, or during the process of its enforcement, the
taxpayer must have an opportunity to be heard as to its validity
and extent; but this rule is met where the state court has afforded
the taxpayer full opportunity to be heard on both of those
questions, and, after such opportunity, has rendered a judgment
providing for the enforcement of such amount of the tax as it finds
actually due.
In so determining the amount due and reducing the amount
assessed, the state court does not assume the legislative function
of making an assessment, but merely, after hearing, judicially
decides the amount of an assessment, made by the assessor under
color of legislative authority.
Whether, under the constitution and laws of the state, the
burden of showing the invalidity of a tax is on the taxpayer is not
a federal question.
The plaintiff in error, which was plaintiff below, filed its
Page 203 U. S. 324
petition in the Fayette County Circuit Court, State of Kentucky,
in equity, on February 3, 1899, for the purpose of obtaining an
injunction restraining the defendants in error from the collection
of certain back taxes accruing during the years 1894 to 1898, both
inclusive, imposed in favor of the City of Lexington, and which the
plaintiff asserted were illegally assessed. A temporary injunction
was prayed for and granted restraining the collection of the tax,
and upon the trial, the amount of the taxes was reduced, and, as so
reduced, declared to be a lien on the property of the plaintiff in
error as trustee, and judgment accordingly was entered, which
judgment was, upon appeal to the Court of Appeals of the state,
affirmed, and the plaintiff brings the case here by writ of
error.
In the amended petition, it is averred that the plaintiff, as
trustee, owned certain real estate in the City of Lexington, and
that the tax collector of the city, asserting a claim for back
taxes from 1894 to 1898, both inclusive, in favor of the city
against the trust estate in the plaintiff's hands for $13,964.96,
had, to satisfy the claim, levied on the real property held by it
as trustee and described in the petition, and had advertised the
same to be sold, and would sell the same, unless restrained by
order of the court. It was averred that the claim for back taxes
was for alleged omissions of personal property owned by the
plaintiff as trustee which had not been assessed for city taxation
for the years stated, and that the tax was based on alleged
assessments imposed in December, 1898, for these years, made by the
City Assessor of Lexington. The plaintiff denied that the pretended
assessments made in 1898 for those years were any assessments at
all, and alleged that there had been no assessment for the back
taxes of those years or for any of them. It was averred that
certain entries which had been made in the assessor's books for the
years mentioned, purporting to assess the property for these back
taxes, were interpolated among the assessments for those years, but
were not legally made; that such entries were not assessments, nor
any step in the valid assessment of back taxes in those years,
and
Page 203 U. S. 325
were made by the city assessor without any notice to, or
conference with, the plaintiff of his intention to make the same,
or any assessment, and the plaintiff at no time either before or
since said pretended assessment had been given or allowed any
opportunity or privilege to make any complaint or show cause
against the assessment before any competent officer or tribunal
whatever. It was also averred that all the property of plaintiff as
trustee, during each of the years covered by the claim for back
taxes, had been duly assessed, and if it had been given the
opportunity, plaintiff would have established the fact of such
assessment and that it had been fully and legally paid.
The plaintiff averred that collection of taxes based on
assessments made as above stated would be in violation of the
Constitution of the United States and of the State of Kentucky
forbidding that a citizen should be deprived of his property
without due process of law.
The defendants, in their answer, averred that all of the
property (with an exception not material) on which the defendants
were claiming taxes as upon omitted property had in fact been
omitted by the plaintiff from its assessment lists during the years
mentioned, and that the lists made out by the plaintiff for those
years had been imperfect and improper lists, and that there was
omitted therefrom a large part of the personalty owned by the
plaintiff as trustee. The defendants averred that all the omitted
property was properly assessable for the respective years, and that
there was due thereon, in 1898, as the back taxes on the said
omitted property, the sum named, to-wit, $13,964,96, and the
defendants denied that the valuation of the property, as fixed in
the assessment, was any larger in proportion than the value of the
assessment generally placed on similar property in the City of
Lexington. After the assessment was made, it was averred that the
delinquent tax collector demanded payment of the same, which was
refused, and thereupon he levied upon the property on the
thirty-first of December, 1898. The answer then set up the making
of the assessment
Page 203 U. S. 326
on the property omitted, and showed that it was made,
substantially as averred in the amended petition, by inserting in
each of the books for the various years an additional assessment on
account of omitted property, and that, after each of the entries of
assessment in the various books had been made by the assessor, he
signed his name after the words, "Assessed by me," and it is
averred that the assessment was also recorded by the assessor in
the back tax assessment book kept by the City of Lexington, and was
by him reported to the Auditor of the City of Lexington on the day
that the assessment was made, December 31, 1898. The defendants
also averred that, more than thirty days prior to the time the
assessment was made, the city, through its duly authorized officers
and agents, had notified the plaintiff that it had omitted from its
assessments for the years 1894 to 1898, both inclusive, a large
portion of the estate held by it as trustee, and, at the time of
giving such notice, the officers of the city had furnished and
delivered, as a part of such notice, an itemized statement of the
securities and other personal property belonging to the estate and
held by the plaintiff on the respective dates for taxation for the
respective years, and that payment of the taxes upon this omitted
property was repeatedly demanded of the plaintiff by the city
during a period of more than thirty days prior to the assessment,
and the plaintiff refused to pay any additional taxes or to list
the omitted property, and that ample time and opportunity were
afforded plaintiff to show that the property had not been omitted
from the yearly assessments, and the plaintiff failed to do so.
A reply and rejoinder were filed, and, upon the pleadings, the
parties went to trial.
Judgment was given for the defendants, refusing the injunction
and providing for the sale of the real estate to satisfy the amount
due for back taxes as stated in the judgment. The total amount of
back taxes due on the omitted property was by such judgment reduced
from $13,964.96, the amount claimed by the defendants, to the sum
of $8,626.63.
Page 203 U. S. 329
MR. JUSTICE PECKHAM, after making the foregoing statement,
delivered the opinion of the Court.
There are in the State of Kentucky two distinct methods by which
an assessment for so-called back taxes can be made. One method is
an assessment by a special back tax assessor,
Page 203 U. S. 330
elected as provided for by an ordinance of the City of
Lexington. This ordinance the Court of Appeals of the State of
Kentucky has held, contrary to the contention of the plaintiff in
this case, did not displace the regular assessor or affect his
right to make an assessment for back taxes. The other method
provides for an assessment by the regular assessor under §
3179 of the laws relating to the City of Lexington, which section,
among other things therein contained, provides that:
"Whenever the assessor shall ascertain that there has, in any
former year or years, been any property omitted which should have
been taxed, he shall assess the same against the person who should
have been assessed with it, if living; if not, against his
representative."
In this case, the assessment for back taxes was made by the
regular assessor, but not until December 31, 1898, under the
above-quoted provision in § 3179. It was, however, a special
assessment, made after the regular assessment in the assessor's
books of 1898, and after such books had been transmitted within the
time prescribed by law (sec. 3180), December 1, 1898, to the
auditor, subject to the inspection of the public. In regard to the
regular assessment, the statutes of Kentucky provide (section 3181)
for a board of equalization, which sits on the first Monday of
January and continues in session not longer than four weeks. The
auditor must deliver to the board the assessment books filed with
him by the assessor, and it is to hear all complaints against the
assessments made by the assessor, and may determine the same, but
it cannot increase the assessment without notice to the party whose
property is to be increased. The section is part of the general
statutes as to assessments for the annual taxes, and it refers
evidently to the assessments made by the assessor up to the first
of December preceding, and which appear in the book which the law
directs to be sent to the auditor and by him transmitted to the
board of equalization. It does not refer to an extraordinary
assessment made by the assessor for back taxes subsequently to the
time provided for by law for
Page 203 U. S. 331
the making of the general assessment. The assessor must return
the general assessment which he makes in his book under § 3179
to the auditor on or before December 1 in each year. (Section
3180.) This book remains in the auditor's office subject to the
inspection of the public until transmitted, in the January
following, to the board of equalization under section 3181. In the
case before us, the assessment for the back tax was made December
31, 1898, by entering a separate assessment for each year in the
assessor's book for that year, and therefore these various
assessments were not contained in the books of the assessor as they
were sent to the auditor on December 1 of each year, respectively.
The assessor's books for the years prior to 1898 were obtained in
some way, and the entries of the assessments were therein made,
because, as stated, there were no other books provided. We find no
provision of the statute as to assessments for back taxes, which
requires notice of such assessment if made at any time other than
in the regular course for the general assessment as provided for in
the general statute. If the assessment happens to be made in the
assessor's book prior to December 1 in any year, it, of course,
goes with the book to the auditor and remains there for inspection
by the public until taken before the board of equalization. Such an
assessment would carry with it the provision of the law of the
state applicable to the city on the subject of assessments,
including the general notice under the law providing for such
assessment. But that, of course, cannot apply where the assessment
is not made on or before December 1 in the regular assessment book.
That book the taxpayer must omit to examine at his peril, when
filed with the auditor, or when before the board of equalization.
As sent to the auditor December 1, 1898, the book did not contain
the assessment in question. And as to the books of the former
years, they had passed out of the legal custody of the assessor,
and he could not take any such books, and, without notice, impose a
conclusive assessment for back taxes for the particular year the
book had been made
Page 203 U. S. 332
use of as an assessment book. Such assessment could not be
enforced unless the taxpayer could thereafter at some time, and as
a matter of right, be heard upon the question of the validity and
the amount of such tax. The general statutory notice as to the
regular assessment proceedings cannot be regarded as notice of this
special assessment, made years after the completion of the old
assessments.
In regard to the question of notice, the Court of Appeals held
that the burden of proof in such a proceeding as this was upon the
plaintiff to establish that there was no notice of the assessment
given it; but it also held that the defendant had in fact proved
that there was notice given to the plaintiff in error before the
assessment was made. This applies to a notice in fact, but the
Court of Appeals did not hold that there was any notice made
necessary by the statute in regard to such a special assessment as
above described. An assessment made on December 31, 1898, in the
manner set forth, although imposed before the meeting of the board
of equalization in January following, was not imposed at a time
which made the general statutes as to assessments applicable, and
therefore the taxpayer had no statutory notice or opportunity
furnished him to appear and be heard before the board. He may have
examined the assessor's books for the various years 1894-1898, when
filed in the auditor's office on the first of December, by the
assessor, and prior to December 31, when this assessment was made,
and found that there was no assessment made against him for any
back taxes. There was no statutory obligation imposed on him to
again examine the books, lest perchance they may have had an
interlined assessment made in them, for the making of which the law
provided no notice. It follows that the subsequent assessments
placed in such books, and not appearing on any book when sent to
the auditor by the assessor, would not be made under any statutory
provision for notice, and would not afford the taxpayer an
opportunity to be heard before the board of equalization in regard
to the illegality of such tax.
Page 203 U. S. 333
If the statute did not provide for a notice in any form, it is
not material that, as a matter of grace of favor, notice may have
been given of the proposed assessment. It is not what notice,
uncalled for by the statute, the taxpayer may have received in a
particular case that is material, but the question is whether any
notice is provided for by the statute.
Stuart v. Palmer,
74 N.Y. 183. Before this special assessment could be actually
enforced or during the process of enforcement, the taxpayer must
have an opportunity to be heard as to its validity and extent. In
Weyerhaueser v. Minnesota, 176 U.
S. 550, it was held that the taxpayer was entitled to an
opportunity to be heard before the tax could be enforced (see page
176 U. S.
556), that the filing of the tax list therein spoken of
was, in effect, as held by the court, the institution of an action
against each tract of land described in it, and the taxpayer
thereafter had opportunity to make any defense he might have. This
the court held was sufficient. The proceedings leading up to that
assessment originated in a complaint, in writing, to the governor,
who thereupon appointed a commission to hear the matter, and, if
proper, impose the tax, but before it could be enforced or during
the process of collection, the landowner had a right to be heard.
The statute now before us does not provide for a notice of the
special assessment, nor did the plaintiff have an opportunity to be
heard as to the assessment before the board of equalization.
But, in this case, the state court has afforded to the taxpayer
full opportunity to be heard on the question of the validity and
amount of the tax, and, after such opportunity, has rendered a
judgment which provides for the enforcement of the tax as it has
been reduced by the court, the reduction amounting to over $5,000.
The plaintiff has therefore been heard, and on the hearing has
succeeded in reducing the assessment. What more ought to be given?
Whether the opportunity to be heard which has been afforded to the
plaintiff has been pursuant to the provisions of some statute, as
in
McMillen v. Anderson, 95 U. S. 37, and
Hagar v.
Page 203 U. S. 334
Reclamation Dist. No. 108, 111 U.
S. 701, or by the holding of the court that the
plaintiff has such right in the trial of a suit to enjoin the
collection of the tax, is not material. The state court in this
case has held the taxpayer entitled to a hearing, and has granted
and enforced such right, and upon the trial has reduced the tax. In
so doing, the court below has not assumed the legislative function
of making an assessment. It has merely reduced, after a full
hearing, the amount of an assessment made by the assessor under
color, at least, of legislative authority.
The Court of Appeals has held that the power of the trial court
in giving the hearing has been properly exercised.
It is urged that the court below has not in fact decided that
the assessment against plaintiff as reduced was legal, but only
that plaintiff will not be heard upon the question of enjoining the
collection of the tax until plaintiff tenders the amount of tax
equitably due. The plaintiff denies that there is any amount
equitably due, and it contends that it has not had an opportunity
to show the invalidity of the assessment. We think the contention
not well founded. The court has held that the burden rested upon
the plaintiff to show the invalidity of the tax. Even if erroneous,
the decision is not of a federal nature. It had the chance, at all
events, to show the invalidity of the tax in whole or in part. Upon
the evidence given on the trial, the tax was reduced, and the Court
of Appeals has said:
"The claim of appellant to escape a retrospective assessment of
the property of its
cestui que trust in this case is
wholly technical. That it owes the tax it seeks to evade is made
apparent by an examination of this record. Although it had in its
hands the means of instantly and most conclusively showing either
that the trust estate did not own the property with which it was
assessed, or that the values were too high, it introduced no
evidence whatever on this subject. While it was not incumbent upon
the appellees to introduce any evidence, being authorized under the
principles herein enunciated to
Page 203 U. S. 335
await the evidence of appellant showing the invalidity of the
assessment complained of, yet they did introduce evidence which we
think clearly establishes that appellant justly owes the amount of
the tax which has been adjudged against the estate of its
cestui que trust."
We think it sufficiently appears that the plaintiff had an
opportunity to be heard upon the question of the validity of the
tax, both for want of notice in fact and whether the property
assessed for back taxes had really been omitted from the original
list for the years in question, and was therefore properly taxable
under the assessment for back taxes. Even if the assessment had
been made by the assessor without notice, yet if, upon the hearing
in this cause, the plaintiff had the right and an opportunity to be
heard, and the assessment was thereon reduced, it has obtained all
the hearing it was entitled to. We think the plaintiff did have
such a hearing, and the judgment is correct, so far at least, as
this Court is authorized to review it. It is therefore
Affirmed.
