50 W. Va. 533 | W. Va. | 1901
This is an appeal from a decree of the circuit court of Kana-wha County, sustaining a demurrer to a bill in equity, filed by the Blue Jacket Consolidated Copper Co., a corporation organized and existing under the laws of this State, against Arnold C. Scherr, Auditor of the State of West Virginia, praying that the said Scherr, as Auditor of the State of West Virginia, may be restrained from proceeding, or attempting to proceed, to collect the franchise or license tax, imposed upon said corporation by section 87 of chapter 35, Acts of 1901, amending certain sections of chapters 52, 53, 54, 32 and 66 of the Code, and from proceeding, to institute or procure the institution of any action or actions for the forfeiture of the charter of said company pursuant to the laws of this State. The payment of said tax is resisted on the ground that the act violates the provisions of section 1 of Article X of the Constitution of this State and the provisions of the Constitution of the United States, prohibiting any
Section 1 of Article S of the Constitution of this State reads as follows: “Taxation shall be equal and uniform throughout the State, and all property, both real and personal, shall be taxed in, proportion to its value, to be ascertained as directed by law. No one species of property from which a tax may be collected, shall be taxed higher than any other species of property of equal value; but'property used for educational, literary, 'scientific, religious and charitable purposes; all cemeteries and public property may, by law, be exempted from taxation. The legislature shall have power to tax, by uniform and equal laws, all privileges and franchises of persons and corporations.” It is claimed that said act violates the last clause of said section.
The legislature, by section 8 of chapter 20 of the Acts of 1885, classified corporations, chartered under the laws of this State, for the purpose of taxation, imposing upon those which had their principal places of business or chief works outside of the State a much heavier license tax than those having their principal places of business or chief works located inside of the State. That provision of the act is as follows: “Upon every corporation which has heretofore obtained or which shall hereafter obtain a charter or certificate of incorporation from this State, and whose principal place of business or chief works are located inside of this Shite, there shall be an annual license tax of ten dollars, to be paid on or before the first day of May of each year, or at the time of obtaining such charter or certificate of incorporation, and on or before the first day of May thereafter, as the case may be, to the auditor, and by him turned into the general treasury.
And upon every corporation which has heretofore obtained or which shall hereafter obtain a charter or certificate of incorporation from this State, and whose principal place of business or chief works are located outside of this State, there shall be an annual license tax of fifty dollars, to be paid on or before the first day of May of' each year, or at the time of obtaining such charter or certificate of incorporation, and on or before the first day of May thereafter, as the case may be, to the auditor, and by him turned over to the general treasury of the State.”
Chapter 35 of the Acts, 1901, preserves the same classification and greatly increases the license tax upon both classes of cor
As has been seen, the annual license tax on every corporation, having its principal place of business or chief works located outside of the State was fifty dollars under the Act of 1885, without regard to the amount of its capital, while the tax on every corporation having its principal place of business or chief works located within the State was only ten dollars. By chapter 35 of the Acts of 1901, the annual license tax on both classes of corporations, chartered under the laws of this State, is graduated according to their authorized capital stock, on non-resident corporations beginning with twenty dollars and going up to one thousand and ten dollars and an additional fifty dollars on each and every one million dollars or fraction thereof, in excess of four million dollars, when the authorized capital stock is more than four million dollars. The company complaining here has an authorized capital stock of one million dollars, which, under this act, makes its annual license tax four hundred and ten dollars instead of fifty dollars. The tax on resident corporations is a great deal less. Its certificate of incorporation is dated January 25, 1901, and said chapter 35 went into effect February 18, 1901.
The principal administrative provisions of the license tax law are, that the tax year shall begin on the first day of May and end on the 30th day of April next ensuing; that the tax shall be payable at the beginning of such year; that the auditor, on or before the first day of March in each year, shall notify every corporation, liable to such tax, of the amount thereof and the time of payment; that the auditor, within sixty days after the first day of May of every year, shall publish, in some newspaper of general circulation published at the capital of the State, a list of all such corporations as have failed to pay the license tax which became due on the first day of May preceding; that any such corporation may, within sixty days after such publication, or before the first day of September of that year, pay to the auditor such tax and five dollars in addition and an additional one per
Appellant’s bill shows that it has failed to pay the license tax assessed against it for the year beginning May 1, 1901, and ending May 1, 1902; that the auditor has notified it of the amount and time of pa3unent'of said tax; that it has notified the auditor that it declines to pay said tax because the act imposing it is unconstitutional and void; and that the auditor has notified it that it will be included in the list of delinquent corporations which he is required to publish in a newspaper and that it will be certified to the governor and secretary of State for the action of the attorney general, looking to the absolute forfeiture of its charter.
It is contended by counsel for the appellee that the decree of the circuit court, sustaining the demurrer and dismissing the bill is right; first .because the bill shows no ground for relief; second, because the circuit court had no jurisdiction of the bill; and third, because the act of the legislature in question is clearly constitutional. There is no reason why this Court may not pass upon all these grounds in determining whether it will affirm or reverse the decree. If the court below had granted the relief
Appellant relies upon Douglas v. Harrisville, 9 W. Va. 162; Corrothers v. Board of Education, 16 W. Va. 527; Railroad Co. v. Miller, Auditor, 19 W. Va. 408, holding that a court of equity will enjoin the collection of an illegal tax when the case made by the bill presents special circumstances, bringing the case under some recognized head of equity jurisdiction, such as that the enforcement of the tax would lead to a multiplicity of suits, produce irreparable injury, or cast a cloud upon the title of the complainant to real estate, but that it will not do so upon the sole ground that the tax is illegal. The appellant does not sue on behalf of itself and other taxpayers. There is no allegation in the bill that anybody is likely to be affected by the collection of this alleged illegal tax except the plaintiff therein. It is perfectly clear that nobody but the State can proceed against it for such collection. In other words, no county, school district or municipal corporation in the State is entitled to, or can claim, any part of said tax. So the appellant cannot be subjected to but one proceeding, one suit, for its collection. In this respect
In view of these principles it cannot be said that the bill states a case for equitable relief, if it were conceded that the tax is illegal. It does not show the probability of a multiplicity of suits in any way affecting it or its property. Nor is it pretended that the collection of the tax, conceding it to be illegal, would result in irreparable injury to it. Nor does it appear that it has a foot of real estate in the State of West Virginia upon the title to which this tax might be a cloud. Nor does it set forth facts which bring it within any of the recognized principles of equity jurisdiction.
Another objection to the bill is that it. does not tender nor offer to pay such tax upon its franchise as the court can see that it ought to pay. It claims to be, and undoubtedly is, a resident corporation. It is chartered under the laws of this'State. It is a citizen of this State, although its principal office, place of business and chief works arc in the state of New York. Its designation in the statute as a non-resident corporation, is only a name given it to distinguish it from other resident corporations which maintain their principal places of business and chief works within the State, for the sole purpose of determining whether it shall pay a higher or a lower rate of taxation prescribed by the statute. Being a resident corporation it is undoubtedly liable to pay some tax. It is not contended in the argument that it would not be liable to pay the lower tax imposed upon the other class of residenUcorporations. The steps to be taken by the auditor, hereinbefore detailed, and which the appellant seeks to enjoin, affect both classes of corporations and arc intended to forfeit their charters. To unqualifiedly prevent the auditor from taking these steps, preliminary to the forfeiture of its charter for the non-payment of taxes and penalties, would relieve it from the payment of any taxes. So, it seems that, aside from the well known and well settled principle that a party asking equity must do equity, the appellant here was bound to
It is also claimed that section 35 of Article VI of the Constitution of this State providing that: “The State of West Virginia shall never bo made defendant in any court of law or equity,” effectually precludes the entertainment of this bill, for the reason that a suit against the auditor in reference to this tax is a suit against the State. If the appellant were entitled to any relief upon the case m'áclo in its bill, this position could hardly be considered tenable in the light of the decision of the Court in Railroad Co. v. Miller, holding that “although the state cannot be sued, yet an injunction will lie against the auditor of the State to restrain him from the performance of a mere ministerial duty.” It cannot seriously be contended that the duties required of the auditor, looking to the forfeiture of the charter of the appellant company, are anything more than mere ministerial acts, preliminary, although necessary, to the institution of a judicial proceeding for the final and absolute forfeiture of the charter. Although it is said that, after the proclamation of the governor, the charter of such corporation shall be absolutely void and of no effect, the statute further provides for relief from such forfeiture and the matter is not final between the State and the company until the forfeiture is judicially declared and the power to redeem finally cut off. But the effect of the acts done by the auditor cannot determine the character of the act. The statute vests no discretion whatever in him, judicial or otherwise. It simply minutely prescribes his duties and requires him to perforin them, itself pronouncing the force and effect of these acts. However, since the decison in the case of Railroad Co. v. Miller, the Supreme Court of the United States, In re Ayers, 123 U. S. 443, has given the subject exhaustive consideration and
“The court does not intend do infringe upon the principle which justifies suits against individual defendants who, under the color of the aitthority of unconstitutional state legislation, are guilty of personal trespasses and wrongs; nor to forbid suits against officers in their official capacity either to arrest or direct their official action by injunction or mandamus, where such suits arc authorized by law, and the act to bo done or omitted is purely ministerial, in the performance or omission of which the plaintiff has a legal interest.” Without entering upon any discussion of the material distinction between this case and that of Railroad Co. v. Miller, it is manifest, and must be held, that this case does not fall within the exceptions noted in the Ayer’s Gasa. The act of the auditor sought to be enjoined does not amount to a trespass or wrong to be done against the appellant, nor is the suit brought by it, to arrest the ministerial act of the auditor, one authorized bjr any provision of law. While the auditor is the nominal party, it is perfectly clear that the State is the real and substantial party to the controversy. The auditor has no personal interest in it whatever and a decree enjoining him in this particular would be a decree against the State, prohibiting the execution of the law, designed not only to produce State revenue, but also to control and govern corporations created by the State. In this view of the matter, the case seems to fall within
The position of the appellant, on the main question is that a corporation, being an artificial person, dwelling not in its ware houses, its depots or its ships, having its domicile in the state of its creation, irrespective of the residence of its officers or the place where its business is transacted, and the state of its creation having no power to confer upon it the right to do business in any other state, the state has no right or power to impose, upon a corporation which has its office and principal works outside of the state, a greater tax than it imposes upon another corporation of the same kind or class which has its principal place of business and chief works within the state. Appellant admits the right of the State to classify corporations for the purpose of taxation, but it insists that the classification here made in respect to it and other corporations similarly situated, is illegal and not based upon any solid ground or real distinction, and is, therefore, in violation of the last clause of said section 1 of Article X of the Constitution of this State. It very properly claims to be a West Virginia corporation, and that is admitted by counsel for the auditor.
Counsel for the appellee say that there is a very material distinction bctAvcen the physical and the legal existence of a cor: poration and that the’ legislature, in marking that distinction by its classification of them into resident and non-resident domestic corporations, has taken' its stand upon firm and substantial ground. Corporations which have their principal places of business and chief works outside of the State pay no taxes in this State upon their property. The manifest purpose of the legislature, in making this distinction, is to make all corporations, organized by its permission, stand as nearly as possible upon the same footing in respect to the amount of taxes paid by them in the State. There is but one way in which that can be done, and that is by imposing upon corporations, having no property in the State, an adequate franchise tax and making the existence of the corporation depend upon the payment of that tax. The property of the corporation being wholly without the State cannot be reached by any ordinary State process or proceedings to subject it to the payment of a property tax. The State has but one
Prior to 1885 no such distinction as this was made by the laws of this State. All corporations chartered here paid the same license tax and transacted their business wherever they pleased. Under the law of comity, existing in all states of the Union and in all foreign countries, except where abrogated.by positive law, West Virginia corporations might transact their business anywhere, and still remain West Virginia corporations. It is true, that in many states, by constitutional provision and legislation, the law of comity has been greatly qualified. Many of the states imposed restrictions by taxation and otherwise upon corporations other than those created by themselves, seeking to do business within their limits, and’make compliance with all their regulations and conditions precedent to the right of such foreign corporations to do business within the State. It is argued here that the State, having no power to grant to one of its corporations-the right to do business in another state, has no right nor power to impose a tax upon such privilege as it attempts to bestow by authorizing such corporation to. keep its principal place of business or chief works outside of the State. This contention is unsound for the reason that the State, in so doing, docs not grant nor attempt to grant any such privilege. It is merely dealing'with its own creatures, and distinguishing between those of them which substantially confine themselves, in the transaction of their business, to the limits of the State, and those which
It is not quite accurate to say that the franchise of a corporation is its privilege to do a certain kind of business or to do business in a particular place. It covers a great deal more than that. Morawetz on Private Corporations at s. 922 says: “When the legislature grants a charter of incorporation, it confers upon. the grantees of the charter the right or privilege of forming a corporate association, and of acting within certain limits in a corporate capacity, and this right or privilege is called a corporate franchise.” At s. 923 Morawetz says: “What is called the franchise of forming a corporation is really but an .exemption from a general rule of the common law prohibiting the formation of corporations.” At s. 648 he says, “When the legislature incorporates an association for the purpose of carrying on a particular business in . a particular ' manner, it thereby grants permission to the association to act in a corporate capacity for the purpose of prose
It is true that Morawetz, at s. 938 says: “From the nature of a franchise it follows that it can have no force beyond the jurisdiction of the state which granted it;” and also at s. 959: “It is a fundamental principle that the laws of a state can have no binding force, proprio vigore, outside.the territorial limits and jurisdictions of the State enacting them. Hence, it follows that a state cannot grant to any person the right to exercise a franchise in a foreign state or country.” But it is also true that at s. 958 it is said: “A state cannot, by chartering a corporation, confer upon it a legal right to act within the jurisdiction of another state; but the legal right to act in a foreign state may always be extended to the corporation by the laws of such foreign state. By the common law rule, in force throughout the United States, each state extends to all duly incorporated foreign corporations the legal right to carry on business within its jurisdiction. It may, therefore, be said to be a general rule, that a corporation can legally carry on its business in the usual way and by the usual agencies wherever it may find it convenient and profitable to do so.” At s. 962 it is said, “This law of comity among the states is merely the common law of each state, and as such it is obligatory upon the courts.” Story’s Conflict of Laws, 36 and 37, says, “In the silence of any positive rule affirming or denying or restraining the operation of foreign laws, courts of
The classification of corporations complained of was made in 1885. All corporations chartered prior to that time, under the law of comity, might transact their business and keep their principal places of business, chief works and property outside of the state unconditionally. Upon what principle of law can it be said that the State of West Virginia did not .have the power in 1885 to say that hereafter no corporation which proposes to locate its principal place of business and chief works without this State shall be chartered, or that any corporation, hereafter chartered, which shall remove its chief office and principal works beyond the territorial limits of the State shall thereby forfeit its charter? Corporations being mere artificial persons which the legislature has the right to call into existence or not to create at. all, why may it not impose any restrictions or conditions it pleases upon their creation, or annex any condition subsequent for the purpose of forfeiting their charters upon their failure to comply with such conditions ? Who can inquire into the reasons which the legislature shall deem sufficient for imposing such conditions and restrictions? In the interest of the State’s own development, the legislature may deem it proper to say that every corporation created by it shall maintain its plant, its prin
Passing now from the contention of counsel for appellant, that the State, by conferring upon its permission to keep its principal place of business and chief works without the State gave it nothing in exchange for the taxes imposed, the next inquiry is whether the classification of corporations in that respect for the purpose of taxation is in violation of the last clause of section 1 of Article X of the Constitution. From what has already been said it must be apparent to all that there is a material and substantial, and not a mere fanciful, distinction between these two classes of corporations. One class pays taxes upon its franchise and also upon its property, both to the State and to the counties, districts, cities and towns in which their property is located. The other class pays no taxes upon any property, but only upon its franchise. If, therefore, the franchise tax upon both classes were the same, there would be a vast difference in the burden of taxation resting upon the two classes of corporations as regards
Little is presented here, by way of argument, to show that there is any violation of the provision of the Constitution of the United States, prohibiting any state from passing any law impairing the obligation of a contract. This corporation obtained its charter from the state after this classification had been made. Since it obtained its charter, the State has increased the annual license tax upon it. So it only amounts to a question of whether the State has the right to increase a tax of that kind. Where a certain tax is imposed on a corporation by its charter, the legislature does not thereby disable itself from imposing upon it a different or more onerous tax in the future. Thomp. Corp. s. 5572. In this connection it is contended that the payment by this corporation of the same tax paid by resident corporations is of the essence of the contract. This is clearly a misconception, for, as has been shown, at the time this corporation obtained its charter, it was required to pay five times the amount of license tax imposed upon'resident corporations. But it cannot be said that there is any contract about it. Nothing in the law, either expressly or impliedly, holds out any intimation that the rate of taxation will not be changed in the future. If the State can limit its power of taxation by contract, as it has been said that it can, as where it exempts a corporation from taxation by way of encouraging it- to undertake great enterprises of the quasi public nature, there is clearly no contract here. Another principle of law in this connection is that all such contracts, when they do exist, are strictly construed. Thomp. Corp. s. 5571..
Therefore, the decree of the circuit court, sustaining the demurrer and dismissing the bill, is right and must be affirmed.
Affirmed.