APPEAL from the Circuit Court of Pope County; the Hon. R.
GERALD TRAMPE, Judge, presiding.
MR. JUSTICE JONES DELIVERED THE OPINION OF THE COURT:
Rehearing denied April 24, 1973.
The question in this appeal is, literally, where is Dog Island?
Although the Illinois Constitution of 1970 is silent on the subject, article I of the Illinois Constitution of 1870 fixes the boundary line of Illinois with Kentucky along the Ohio River on its northwestern shore. When Virginia ceded to the United States the Northwest Territory, in the year 1784, she retained the title to the bed of the Ohio River to the low-water mark on its north or northwest side. When Kentucky became a State she succeeded to the rights of Virginia.
It is stated in Joyce-Watkins Co. v. Industrial Com., 325 Ill. 378, 156 N.E. 346, that "The rule is that when a stream dividing coterminus States alters its channel by a gradual or imperceptible process of wear or alluvion the boundary shifts with the stream. Where a river is declared to be the boundary between States the river as it runs continues to be that boundary although it may have changed its course from natural causes by imperceptible wear, but if it suddenly changes its course or deserts its original channel the boundary remains in the middle of the deserted river bed. [Citations.] Considering the analogy of such a boundary line to one designated as `low-water mark,' constituting the boundary between Illinois and Kentucky, we are of the opinion that in the absence of a showing of sudden or perceptible changes in the course of the river the low-water mark of the Ohio river as referred to in the designation of the boundary between Illinois and Kentucky is to be determined by the evidence as to the point to which the waters of that river have receded at its lowest stage."
In the case at hand complaint for declaratory judgment was filed in the circuit court of Pope County, Illinois by the People of the State of Illinois ex rel. William J. Scott, Attorney General, The Department of Revenue of the State of Illinois and Barney J. Grabiec, Director of the Department of Labor of the State of Illinois as plaintiffs against Dravo Corporation, a corporation, S.J. Groves & Sons Company, a corporation and Gust K. Newberg Construction Company, a corporation as defendants. The complaint recites that defendants have entered into contracts with the Army Corps of Engineers to perform construction work on Dog Island, alleged to be in Pope County within the territorial limits of the State of Illinois. It further alleges that the boundary of the State of Illinois extends to a line which represents the low-water mark on the northwest shore of the Ohio River and the low-water mark has at times past and times relevant to determining the Illinois-Kentucky boundary been located such that Dog Island was not an island but rather was attached by dry land to the State of Illinois. By reason of the location of the construction work by defendants in the State of Illinois the defendants are required to comply with the laws of the State of Illinois, including the Illinois Income Tax Act and Unemployment Compensation Act. Plaintiffs have demanded defendants' compliance with those statutes but defendants have advised the plaintiffs that they consider Dog Island to be within the State of Kentucky and that therefore their work will be governed by the laws of Kentucky and they are not liable to comply with the Illinois Income Tax Act or Unemployment Compensation Act. The complaint prays a declaratory judgment that Dog Island is within the territorial limits of the State of Illinois and that defendants are required to comply with the Illinois Income Tax Act and Unemployment Compensation Act.
Defendants appeared together and filed a motion to dismiss the complaint upon the grounds, as pertinent to this appeal, (1) that Dog Island is part of and under the jurisdiction of the State of Kentucky which has not been made a party to the proceeding; (2) in view of the conflicting claims of jurisdiction over Dog Island a complete determination of the issues may not be had without the presence in the case of the State of Kentucky and it is an indispensable party; (3) because of the controversy between the State of Illinois and the State of Kentucky the Supreme Court of the United States has exclusive jurisdiction of the case; and (4) inasmuch as the decision of the Illinois court in the present posture of the case cannot constitute a bar to proceedings by Kentucky in its courts for collection of Kentucky taxes, it would be a denial of defendants' rights to due process under the fourteenth amendment to the Constitution of the United States for the Illinois court to maintain or exercise jurisdiction in the matter. Attached to the motion to dismiss is an affidavit of an attorney for the defendants which states that the three defendants are a joint venture engaged in the performance of a contract for the United States Government in the Ohio River on an island known as Dog Island; that various departments of the State of Kentucky have contended that Dog Island is within the Commonwealth of Kentucky and the joint venturers are therefore subject to certain taxes imposed by said State as more fully appears from exhibits A and B attached. Exhibit A to the affidavit purports to be a letter from the Commissioner of Revenue of Kentucky addressed to the three defendants. The letter states in essence that it has come to the attention of the department that the defendants are engaged in a joint venture on the Ohio River in the vicinity of Dog Island located near Smithland; since Kentucky has jurisdiction over the Ohio River to the low-water mark on the northern shore defendants will be liable for sales and use taxes on tangible personal property used and consumed in the construction operations and for the withholding of income tax on salaries paid to employees while engaged in the project and for corporation income tax on profits from the operation. Exhibit B to the affidavit purports to be a letter from the General Counsel of the Bureau of Employment Security of Kentucky. It is addressed to an attorney for the defendants and notifies him that Kentucky claims the defendants will be subject to unemployment insurance tax on wages paid to employees in the construction of the Ohio River dam at or near what is known as "Dog Allen" near Smithland, Kentucky. The letter also claims that "Dog Allen" is south of the Ohio River low-water mark of the river's northwest shore and consequently is a part of the Sovereign Commonwealth of Kentucky and has been recognized as such since the border line was established. The letters described as exhibits A and B are both dated almost a month after the filing of the complaint.
After argument on the motion the trial court entered an order dismissing plaintiffs' complaint. The only finding in the order was as follows:
"The Court Finds that since the Courts Order in this case could not bind the State of Kentucky, to proceed further would be a denial of due process of law."
Plaintiffs appeal. We reverse.
The issue here, as in the court below, revolves around the associated questions of the judicial jurisdiction of the Illinois court over the cause of action as alleged in plaintiffs' complaint and whether the defendants will be deprived of due process of law as guaranteed in the fourteenth amendment to the United States Constitution if the case is permitted to proceed in the State court.
This suit is by the State of Illinois against three corporations with which it has a close affinity, one is chartered in Illinois and two possess certificates of authority to conduct business in Illinois. The applicable statute grants the latter two the same rights and privileges as domestic corporations and subjects them to the same duties, restrictions, penalties and liabilities. (Ill. Rev. Stat., ch. 32, sec. 157.103.) The action, then, is essentially one between a State and its corporate citizens. There is no question of notice and opportunity for hearing.
Defendants' principal reliance is placed upon the case of Western Union Telegraph Co. v. Commonwealth of Pennsylvania, 368 U.S. 71, 82 S.Ct. 199, 7 L.Ed.2d 139. In that case the State of Pennsylvania, proceeding in its State court, sought to escheat certain obligations of Western Union, consisting of unclaimed telegraphic money orders and the like. The unclaimed monies were alleged to be properties within Pennsylvania. By reason of the unclaimed money orders large sums of money due from Western Union to the payees of those money orders had accumulated in the company's offices and bank accounts throughout the country. Pennsylvania's complaint was directed specifically against the amount of undispersed money held by Western Union arising out of money orders bought in Pennsylvania offices to be transmitted to payees in Pennsylvania and other States, chiefly other States. Western Union was a New York corporation with its principal place of business in that State. It contested Pennsylvania's right to escheat the funds, urging that a judgment of escheat for Pennsylvania in its courts would not protect the company from multiple liability either in Pennsylvania or in other States. It argued that senders of money orders and holders of drafts would not be bound by the Pennsylvania judgment because service by publication did not give the State court jurisdiction. The Supreme Court declined consideration of the adequacy of notice and validity of service on the individual claimants by publication, rather, they found a far more important question raised by the record whether Pennsylvania had power at all to render a judgment of escheat which would bar New York or any other State from escheating the same property. They noted that their prior opinions have recognized that when a State court's jurisdiction purports to be based on the presence of property within the State, the holder of such property is deprived of due process of law if he is compelled to relinquish it without assurance that he will not be held liable again in another jurisdiction or in a suit brought by a claimant who is not bound by the first judgment. Upon applying that principle the court held that Western Union had been denied due process by the Pennsylvania judgment unless the Pennsylvania courts had power to protect Western Union from any other claim, including the claim of the State of New York; that the obligations are property "within" New York and are therefore subject to escheat under its laws. Since New York was not a party to the proceeding in the State court and could not have been made a party, Western Union was not protected by the Pennsylvania judgment, because a State court judgment need not be given full faith and credit by other States as to parties and property not subject to the jurisdiction of the court that rendered it. The court's opinion was apparently in some conflict with its holding in Standard Oil Co. v. State of New Jersey, 341 U.S. 428, 71 S.Ct. 822, where it said that "The debts or demands * * * having been taken from the appellant company by a valid judgment of New Jersey, the same debts or demands against appellant cannot be taken by another state. The Full Faith and Credit Clause bars any such double escheat." But that case was distinguished because an actual controversy between States was found to exist in the Western Union case, as demonstrated by the fact that the State of New York was present and participated in the case before the Supreme Court as amicus curiae and had, in fact, already escheated some of the funds sought by Pennsylvania. The court concluded by stating that multiple claims of power to escheat should be considered only when all interested States along with all other claimants can be afforded a full hearing. Since the Pennsylvania courts, with no power to bring other States before them, cannot give such hearing their judgments cannot protect Western Union from having to pay the same obligation twice and such judgment therefore cannot stand.
Defendants align the case before us with Western Union Telegraph Co. contending that since Kentucky is not and cannot be a party in the Illinois court, Kentucky need not accord full faith and credit to the Illinois judgment and will be free to pursue remedies in its own courts. Accordingly, the argument runs, defendants will be subjected to ...