Great Northern Life Insurance Company v. Read/Opinion of the Court
This writ brings here for review the action of petitioner, a foreign insurance company, to recover taxes paid to respondent, the Insurance Commissioner of Oklahoma, which were levied by Section 10478, Oklahoma Statutes 1931, as amended by Chapter 1(a), Title 36, Session Laws of Oklahoma 1941, 36 O.S.1941 § 104. This was an annual four per cent tax on premiums received by foreign insurance companies in Oklahoma, and it, together with certain specified fees, was in lieu of all other taxes and fees in Oklahoma. Petitioner paid the tax under protest and, alleging diversity of citizenship, 28 U.S.C. § 41, 28 U.S.C.A. § 41, brought suit against the Insurance Commissioner in the District Court of the United States. The procedure for recovery is laid down by Section 12665, Oklahoma Statutes 1931, 68 O.S.A. § 15.50. 

The percentage of premiums due was increased from two to four per cent by the amendment of 1941, effective April 25th of that year. The District Court refused recovery. The Circuit Court of Appeals affirmed. Great Northern Life Insurance Co. v. Read, 10 Cir., 136 F.2d 44. Certiorari was granted on petitioner's assertion of error in requiring it to pay a tax allegedly discriminatory under the Fourteenth Amendment as compared with the taxation of domestic insurance companies, and also unconstitutional as levied after the company's admission to the state and on premiums collected during the business year for which a license was already in force. A conflict in principle was suggested with Hanover Fire Insurance Company v. Harding, 272 U.S. 494, 47 S.Ct. 179, 71 L.Ed. 372, 49 A.L.R. 713. We granted certiorari, 320 U.S. 726, 64 S.Ct. 62, and asked discussion of the right of petitioner to maintain its suit in a Federal court. As we conclude that this suit could not be maintained in the Federal court, we do not reach the merits of the issue as to the validity of the tax.

The right of petitioner to maintain this suit in a Federal court depends, first, upon whether the action is against an individual or against the State of Oklahoma. Secondly, if the action is determined to be against the state, the question arises as to whether or not the state has consented to suit against itself in the Federal court.

Respondent challenged the right of petitioner to seek relief in the District Court by the defense in its answer that the complaint fails to state a claim upon which relief can be granted. R.C.P. 12(b) and (e), 28 U.S.C.A. following section 723c.  This challenge, on the ground that the state had not consented to be sued, was sustained by the District Court. The contention is available here to sustain the judgment on appeal. LeTulle v. Scofield, 308 U.S. 415, 60 S.Ct. 313, 84 L.Ed. 355.

In Smith v. Reeves, 178 U.S. 436, 20 S.Ct. 919, 44 L.Ed. 1140, an action was instituted in the Federal trial court by railroad receivers against the defendant 'as treasurer of the state of California' to recover taxes assessed against the paid by the railroad. The proceeding was brought under Section 3669 of the California Political Code, as amended by California Statutes, 1891, p. 442, which authorized a suit against the State Treasurer for the recovery of taxes which were illegally exacted. The defendant could demand trial of the action in the Superior Court of the County of Sacramento, California. If the final judgment was against the Treasurer, the Comptroller of the state was directed to draw his warrant on state funds for its satisfaction.

As the suit was against a state official as such, through proceedings which were authorized by statute, to compel him to carry out with the state's funds the state's agreement to reimburse moneys illegally exacted under color of the tax power, this Court held, page 439 of 178 U.S., page 920 of 20 S.Ct., 44 L.Ed. 1140, it was a suit against the state. The state would be required to pay.  The case therefore is plainly distinguishable from those to recover personally from a tax collector money wrongfully exacted by him under color of state law, Atchison, etc., Ry. Co. v. O'Connor, 223 U.S. 280, 32 S.Ct. 216, 56 L.Ed. 436, Ann.Cas.1913C, 1050; cf. Matthews v. Rodgers, 284 U.S. 521, 528, 52 S.Ct. 217, 220, 76 L.Ed. 447; to recover under general law possession of specific property likewise wrongfully obtained or held, Tindal v. Wesley, 167 U.S. 204, 221, 17 S.Ct. 770, 777, 42 L.Ed. 137; Virginia Coupon Cases, 114 U.S. 269, 285, 5 S.Ct. 903, 962, 29 L.Ed. 185, 207; United States v. Lee, 106 U.S. 196, 1 S.Ct. 240, 27 L.Ed. 171; to perform a plain ministerial duty, Board of Liquidation v. McComb, 92 U.S. 531, 541, 23 L.Ed. 623; Rolston v. Missouri Fund Com'rs, 120 U.S. 390, 411, 7 S.Ct. 599, 610, 30 L.Ed. 720, or to enjoin an affirmative act to the injury of plaintiff, Sterling v. Constantin, 287 U.S. 378, 393, 53 S.Ct. 190, 193, 77 L.Ed. 375; Tomlinson v. Branch, 15 Wall. 460, 21 L.Ed. 189; Davis v. Gray, 16 Wall. 203, 220, 21 L.Ed. 447; In re Tyler, 149 U.S. 164, 190, 13 S.Ct. 785, 792, 37 L.Ed. 689. Only in Smith v. Reeves was the action authorized by statute against the officer in his official capacity. In the other instances relief was sought under general law from wrongful acts of officials. In such cases the immunity of the sovereign does not extend to wrongful individual action and the citizen is allowed a remedy against the wrongdoer personally.

This ruling that a state could not be controlled by courts in the performance of its political duties through suits against its officials has been consistently followed. Chandler v. Dix, 194 U.S. 590, 24 S.Ct. 766, 48 L.Ed. 1129; Fitts v. McGhee, 172 U.S. 516, 529, 19 S.Ct. 269, 274, 43 L.Ed. 535; Murray v. Wilson Distilling Co., 213 U.S. 151, 167, 29 S.Ct. 458, 462, 53 L.Ed. 742; Lankford v. Platte Iron Works, 235 U.S. 461, 468 et seq., 35 S.Ct. 173, 59 L.Ed. 316; Ex parte State of New York, No. 1, 256 U.S. 490, 500, 41 S.Ct. 588, 590, 65 L.Ed. 1057; Worcester County Co. v. Riley, 302 U.S. 292, 296, 299, 58 S.Ct. 185-187, 82 L.Ed. 268. Efforts to force, through suits against officials, performance of promises by a state collide directly with the necessity that a sovereign must be free from judicial compulsion in the carrying out of its policies within the limits of the Constitution. Principality of Monaco v. Mississippi, 292 U.S. 313, 320, 54 S.Ct. 745, 746, 78 L.Ed. 1282; State of Louisiana v. Jumel, 107 U.S. 711, 720, 2 S.Ct. 128, 135, 27 L.Ed. 448. A state's freedom from litigation was established as a constitutional right through the Eleventh Amendment. The inherent nature of sovereignty prevents actions against a state by its own citizens without its consent. Hans v. Louisiana, 134 U.S. 1, 10, 16, 10 S.Ct. 504, 505, 507, 33 L.Ed. 842.

Oklahoma provides for recovery of unlawful exactions paid to its collectors under protest. Section 12665 Oklahoma Statutes 1931. Note 1, supra. In our view of this case it is unnecessary for us to pass upon whether this method of protecting taxpayers was intended to be exclusive of all other remedies, including actions against an individual who happened to be a tax collector, or whether if it were so intended it would surmount all constitutional objections. Compare Burrill v. Locomobile Co., 258 U.S. 34, 42 S.Ct. 256, 66 L.Ed. 450, and Anniston Mfg. Co. v. Davis, 301 U.S. 337, 341, 343, 57 S.Ct. 816 819, 81 L.Ed. 1143. See also Antrim Lumber Co. v. Sneed, 175 Okl. 47, 49-51, 52 P.2d 1040, 1043-1045.

A suit against a state official under Section 12665 to recover taxes is held to be a suit against the state by Oklahoma and the remedy exclusive of other state remedies. Antrim Lumber Co. v. Sneed, supra, 175 Okl. at page 51, 52 P.2d at page 1045. This interpretation of an Oklahoma statute by the Supreme Court of the state accords with our view, as set out above, of the meaning of a suit against a state. Petitioner brought this action against the collector, the Insurance Commissioner, in strict accord with the requirements of Section 12665. It alleged that there was no appeal provided by Oklahoma laws from defendant's action in collecting and gave notice of protest and suit to defendant at the time of payment in the language of the Section. By so doing petitioner was relieved of the necessity of establishing that the payment was not voluntary  and obtained the advantage of a statutory lien lis pendens on the tax payment.

By Section 12665, Oklahoma creates a judicial procedure for the prompt recovery by the citizen of money wrongfully collected as taxes. It is the sovereign's method of tax administration. Oklahoma designates the official to be sued, orders him to hold the tax, empowers its courts to do complete justice by determining the amount properly due and directs its collector to pay back any excess received to the taxpayer. The state provides this procedure in lieu of the common law right to claim reimbursement from the collector. The issue of coercion and duress was eliminated at the pre-trial conference without objection by the petitioner. The section makes sure the taxpayer's recovery of illegal payments. The section is like the California statute involved in Smith v. Reeves, supra, except for the immaterial difference that the money collected is directed to be held separate and apart by the collector instead of being held in the general funds of the State Treasurer. See § 3669, California Political Code, as amended by California Statutes 1891 p. 442. In the Reeves case, as here, the suit was against the official, not the individual. The Oklahoma section differs from the Colorado law, Section 6, Chapter 211, Session Laws of Colorado 1907, considered in Atchison, etc., Ry. Co. v. O'Connor, supra, in that the Colorado statute left the taxpayer to his remedy against the collector and merely directed the refund of the tax by the Treasurer in accordance with any judgment or decree which might be obtained. In the O'Connor case, in accordance with the statute, the suit, as this Court's opinion shows, was against the individual, not the official. We are of the view that the present proceeding under § 12665 is like Smith v. Reeves, a suit against the state.

But it is urged that if this is a suit against the state, Oklahoma has consented to this action in the Federal court. Cf. Reagan v. Farmers' Loan & Trust Co., 154 U.S. 362, 391, 14 S.Ct. 1047, 1052, 38 L.Ed. 1014.

The principle of immunity from litigation assures the states and the nation from unanticipated intervention in the processes of government, while its rigors are mitigated by a sense of justice which has continually expanded by consent the suability of the sovereign. The history of sovereign immunity and the practical necessity of unfettered freedom for government from crippling interferences require a restriction of suability to the terms of the consent, as to persons, courts and procedure. Antrim Lumber Co. v. Sneed, 175 Okl. 47, 52 P.2d 1040; Patterson v. City of Checotah, 187 Okl. 587, 103 P.2d 97; Beers v. State of Arkansas, 20 How. 527, 15 L.Ed. 991; Kawananakoa v. Polyblank, 205 U.S. 349, 27 S.Ct. 526, 51 L.Ed. 834; State of Minnesota v. United States, 305 U.S. 382, 388, 59 S.Ct. 292, 295, 83 L.Ed. 235; United States v. United States Fidelity & Guaranty Co., 309 U.S. 506, 512, 60 S.Ct. 653, 656, 84 L.Ed. 894.  The immunity may, of course, be waived. Clark v. Barnard, 108 U.S. 436, 447, 29 S.Ct. 878, 882, 27 L.Ed. 780. When a state authorizes a suit against itself to do justice to taxpayers who deem themselves injured by any exaction, it is not consonant with our dual system for the Federal courts o be astute to read the consent to embrace Federal as well as state courts. Federal courts, sitting within states, are for many purposes courts of that state, Madisonville Traction Company v. Mining Company, 196 U.S. 239, 255, 25 S.Ct. 251, 257, 49 L.Ed. 462, but when we are dealing with the sovereign exemption from judicial interference in the vital field of financial administration a clear declaration of the state's intention to submit its fiscal problems to other courts than those of its own creation must be found. 

The Oklahoma section in question, 12665, was enacted in 1915 as a part of a general amendment to then existing tax laws. Session Laws 1915, p. 149, Chap. 107, Art. 1, subdivision B. sec. 7.  This subdivision of the act of 1915 is concerned with administrative review of boards of equalization and provides a complete procedure including review by the district and Supreme Court of Oklahoma, as the case may be, which are given authority to affirm, modify or annul the action of the boards. Sections 2 and 3. Section 6 requires the payment of the taxes which fall due, pending administrative review, and provides for recovery of such taxes in accordance with the ultimate finding on review in language practically identical with that of Section 7 (§ 12665) here involved. Furthermore, section 12665 gives directions to the Oklahoma officer as to his obligations, requires the court to give precedence to these cases and directs the kind of judgment to be returned, see note 1, supra, which is quite different in language, if not in effect, from the judgment a Federal court would render. It is clear to us that the legislature of Oklahoma was consenting to suit in its own courts only. Chandler v. Dix, 194 U.S. 590, 24 S.Ct. 766, 48 L.Ed. 1129.

Smith v. Reeves, supra, 178 U.S. page 445, 20 S.Ct. page 922, 44 L.Ed. 1140, holds that an act of a state is valid which limits to its own courts suits against it to recover taxes. There California's intention to so limit was made manifest by authorizing the state officer to demand trial in the Superior Court of Sacramento County. Atchison etc., Ry. Co. v. O'Connor, considered above (64 S.Ct. 876), is not applicable since it was not a suit against the state.

Petitioner urges that Smyth v. Ames, 169 U.S. 466, 517, 18 S.Ct. 418, 422, 42 L.Ed. 819, and Reagan v. Farmers' Loan & Trust Co., 154 U.S. 362, 391, 392, 14 S.Ct. 1047, 1052, 38 L.Ed. 1014, are precedents which lead to a contrary conclusion on this issue of the suability of Oklahoma in the District Court of the United States. The former is clearly inapposite. That case involved proceedings to enjoin enforcement of an allegedly unconstitutional state statute providing for intrastate railroad rates. Since the state act provided a remedy, the state took the position that Federal equity jurisdiction was ousted. This Court held the Federal equity jurisdiction continued to restrain unconstitutional acts by state officers which threatened irreparable damage. Pages 474, 477, 515-519 of 169 U.S., pages 420-423 of 18 S.Ct., 42 L.Ed. 819.

In the Reagan case, a proceeding for injunction to restrain the members of the Texas Railroad Commission from enforcing rates which were alleged to be unconstitutional was allowed to be maintained in equity in a Federal court. This Court said it was maintainable against the defendants both under the general equity jurisdiction of the Federal courts and under the provisions of the state statute which allowed review 'in a court of competent jurisdiction in Travis county, Texas * * *.' (154 U.S. 362, 14 S.Ct. 1052, 38 L.Ed. 1014.) It was thought that the United States Circuit Court, sitting in Travis County, was covered by this language. As it was concluded, however, that this was not a suit against the state, page 392 of 154 U.S., page 1052 of 14 S.Ct., 38 L.Ed. 1014, we do not feel impelled to extend the ruling of the Reagan case on this alternative basis of jurisdiction to a suit, such as this, against a state for recovery of taxes.

Gunter v. Atlantic Coast Line R. Co., 200 U.S. 273, 26 S.Ct. 252, 50 L.Ed. 477, is also distinguishable. There the Attorney General of South Carolina appeared in a Federal court to answer for the state in an injunction suit under the authority of a statute which read as follows:

'if the state be interested in the revenue in said action, the county auditor shall immediately, upon the commencement of said action, inform the auditor of state of its commencement, of the alleged cause thereof, and the auditor of state shall submit the same to the attorney general, who shall defend said action for and on behalf of the state.' Page 286 of 200 U.S., page 257 of 26 S.Ct., 50 L.Ed. 477.

This Court construed this to consent to an appearance in the Federal court and held its decision res judicata against the state and added at page 287 of 200 U.S., page 257 of 26 S.Ct., 50 L.Ed. 477: 'If there were doubt-which we think there is not-as to the construction which we give to the act of 1868, that doubt is entirely dispelled by a consideration of the contemporaneous interpretation given to the act by the officials charged with its execution, by the view which this court took as to the real party in interest on the record in the Pegues case, and by the action as well as nonaction which followed the decision of that case by the state government in all its departments through a long period of years.'

The administrative construction by a state of these statutes of consent have influence in determining our conclusions. Cf. Farish v. State Banking Board, 235 U.S. 498, 512, 35 S.Ct. 185, 189, 59 L.Ed. 330; Richardson v. Fajardo Sugar Co., 241 U.S. 44, 47, 36 S.Ct. 476, 477, 60 L.Ed. 879; State of Missouri v. Fiske, 290 U.S. 18, 24, 54 S.Ct. 18, 20, 78 L.Ed. 145.

It may be well to add that the construction given the Oklahoma statute leaves open the road to review in this Court on constitutional grounds after the issues have been passed upon by the state courts. Chandler v. Dix, 194 U.S. 590, 592, 24 S.Ct. 766, 48 L.Ed. 1129; Smith v. Reeves, 178 U.S. 436, 445, 20 S.Ct. 919, 922, 44 L.Ed. 1140.

The judgment of the Circuit Court of Appeals is vacated and the cause is remanded to the District Court with directions to dismiss the complaint for want of jurisdiction.

Vacated and remanded.

Mr. Justice FRANKFURTER, with whom the CHIEF JUSTICE and Mr. Justice ROBERTS concur, dissenting. 

Notes