Hancock v. Singer Manufacturing Co.

62 N.J.L. 289 | N.J. | 1898

Lead Opinion

The opinion of the court was delivered by

Van Syckel, J.

This controversy relates to the imposition of an assessment, amounting to the sum of $4,209.30, levied by the state board of assessors, for the year 1897, upon the Singer Manufacturing Company, under the Corporation Tax act of 1884 as amended in 1892. Gen. Stat., p. 3336, § 260.

It is called a franchise tax, and is laid upon the entire capital of the company less $814,000, the assessed value of its real and personal property in this state.

The defendant company is a manufacturing corporation, chartered by special act of the legislature of this state, in 1873 (Pamph. L., p. 971), with a capital stock of $10,000,000.

The exemption of the company from liability to this tax rests upon the provisions contained in the sixth section of its charter, which reads as follows:

“ That whenever five hundred thousand dollars shall have been paid in, said corporation may organize and proceed to business under this act, and shall immediately thereafter file with the secretary of state of this state a certificate of such payment and organization, whereupon and not until then shall this act take effect; and if and so long as the said corporation shall invest and keep invested in real estate within this state the sum of five hundred thousand dollars, the real and personal property of the said corporation not actually in fact within the State of New Jersey, and the stock of the said corporation held or owned by any of its stockholders shall not be liable to any tax or impost whatsoever.”

Previous to its incorporation in'this state, the company was incorporated under the laws of the State of New York, where it had a large factory. It also had a factory in Glasgow, Scotland, one in Austria, and another in the State of Indiana.

Upon the grant of its charter by this state, the New York factory was abandoned, and the business removed to Elizabeth, New Jersey, where a large factory was erected, giving employment to over four thousand men.

The property of the company invested in manufacturing in this state, more than one-half of which is real estate, exceeds in value $1,000,000.

The question to be solved is whether the sixth section of the charter of this company constitutes an irrepealable contract with the state, and if it does, whether the imposition of •this tax violates the contract.

The sixth section contains all the elements of a contract. There are present a subject-matter, parties and a consideration. On the one side is a complete performance, and on the other acceptance.

That it must be regarded as a contract under our adjudications there can be no question. State v. Branin, 3 Zab. 484; State v. Berry, 2 Harr. 80; Camden and Amboy Railroad Co. v. Hillegas, 3 Id. 11; Bridge Co. v. Hoboken Land and Improvement Co., 2 Beas. 81; Mount Pleasant Cemetery Co. v. Newark, 23 Vroom 539.

The stringency with which this rule is applied is illustrated in the opinion of the late Chief Justice in the case last cited.

Is this contract irrepealable ?

If the sixth section of the charter of the company contains the entire contract, it is unassailable by state legislation. Both the federal and state constitutions inhibit the passage of any law by the state impairing the obligation of a contract.

The state attempts to justify this tax by reading into the charter of the Singer company the sixth section of the act of 1846 (Pamph. L., p. 16), which is as follows:

“The charter of every corporation which shall hereafter be granted by or created under any of the acts of the legislature shall be subject to alteration, suspension and repeal in the discretion of the legislature.”

For many years after the passage of this act it was uniformly held by the courts of this state that the sixth section of the act of 1846 was to be literally read into every charter thereafter granted by the legislature, thereby rendering every such charter subject to repeal or alteration at legislative discretion. Such was the judgment of this court in Morris and Essex Railroad Co. v. Commissioners of Railroad Taxation, 9 Vroom 472, decided in 1875. That case was removed to the Supreme Court of the United States and the decision of this court was reversed. New Jersey v. Yard, 95 U. S. 104. The federal court, in reversing, declared that a legislature could not bind its successors; that, notwithstanding the act of 1846, it was still competent for any legislature to make an irrepealable contract if it elected to do so, and that it was therefore a question in every case of a contract made by the legislature, whether that body intended that the right to change or repeal it should inhere in it, or whether, like other contracts, it was perfect and without the power of the legislature to impair its obligation.

The federal court held the contract under consideration in that case to be irrepealable because it could not be believed that it was the intent of either party to it that one should be held forever and the other merely at will, and it refused to read the act of 1846 into the contract because the contract was inconsistent with it.

The rule thus so explicitly laid down by the federal court has since been accepted as the law of this court. State Board v. Morris and Essex Railroad Co., 20 Vroom 193. Unless, therefore, an intention can fairly be drawn from the terms of this contract, as agreed upon by the parties, to reserve to the state the right to repeal the contract at will without the consent of the company, there can be no departure from it.

There is nothing in the language of this contract which gives the slightest foundation for the suggestion that the state reserved the right to deprive the company at will of the benefit it was to receive under the agreement after it had fully performed on its part.

The undertaking is express that, if and so long as the company shall invest and keep invested $500,000 in real estate in this state, the exemption shall continue. There is no uncertainty in that respect. It excludes most clearly the idea that the act of 1846 was to be deemed a part of the Singer charter.

It cannot be conceived that either the state or the company deliberately entered into a contract by which it was understood and intended that the state should be at liberty.fo deprive the company of the benefit to be derived’ from it as soon as the company had performed on its part. Such a proposition could not have been seriously made by the state nor for a moment entertained by the company.

The terms of the contract and the circumstances attending it repel the assumption that the entire engagement is not expressed in the sixth section of the charter.

When a contract is made the good faith of the state must-be preserved and the contract performed according to a reasonable and just interpretation of it.

The company was induced to remove its works from the State of New York and to erect a large and expensive factory in this state by this agreement to limit the power of the state to subject it to taxation, and it will be derogatory to the state to resort to any subterfuge or narrow and sharp construction in order to evade the effect of the contract.

It may be well to observe here that it could not have been supposed by those who voted for the constitutional amendments of 1875, that it was intended to bestow upon the legislative branch of the state government the power to disregard and violate the contracts into which the state had previously entered. It would be a reflection upon the integrity of those who framed the amendments, to infer such a power from any language contained in them. That no such power resides in the lawmaking power by force of the constitutional amendments of 1875 was manifestly the opinion of this court in Mount Pleasant Cemetery Co. v. Newark, 23 Vroom 539. So free from doubt was this question' regarded that the distinguished Chief Justice who delivered the opinion of the court in that case did not even suggest that it was a question worthy to be considered.

The contract must be regarded as irrepealable. The real question in the cause is, what is its true meaning and its just construction ?

The exemption is “ that the real and personal property of the company not actually and in fact within the State of New Jersey, and the stock of the said corporation held or owned by any of its stockholders, shall not be liable to any tax or impost whatsoever.”

It has been the accepted law of this state since 1852 that an enactment which exempts a corporation or its property from taxation also exempts the shares of its stock held by its stockholders. State v. Branin, 3 Zab. 484; State v. Bentley, Id. 532; State v. Powers, 4 Id. 400.

In the case last cited Chief Justice Green declared that this principle must be considered as clearly settled. It was the conceded law of the state at the time the contract with the Singer company was concluded, and has not been challenged until the present controversy arose.

It had the sanction of the federal courts and was pronounced to be the law by the highest legal tribunals in many of the states. Gordon v. Appeal Tax Court, 3 How. 133; Farrington v. Tennessee, 95 U. S. 679; Bank v. Tennessee, 104 Id. 493.

Conceding this to be the law, it must logically result that an express exemption of the shares of a corporation from taxation will also exempt the company, unless it can be maintained that a burden cast upon the company is not a burden upon the shares of the company which represent its property.

In the case cited from 3 How. 133, upon which Chief Justice Green based his decision in the Branin case, the legislature had extended the charters of certain Maryland banks, upon their having subscribed for the stock of a turnpike company, and in the act of extension had pledged the faith of the state not to impose any further tax or burden upon them during the continuance of their charters. This was held to protect the stockholders against a tax upon the stock of the banks in their hands.

The court said : “Does the contract exempt the respective capital stocks of the banks, as an aggregate, and the stockholders from being taxed as persons on account of their stock ? We think it does both. The aggregate could not be taxed without its having the same effect upon the parts that a tax upon the parts wmuld have upon the whole.”

That is a self-evident proposition, and it is equally clear that no sane person would regard as of any value an exemption of the shares of a corporation, if the state was left free to impose taxation at its will upon the corporation itself.

In either case the tax is in fact exacted from the stockholders ; they are the company.

In Mayor of Baltimore v. Baltimore and Ohio Railroad Co., 6 Gill 288, the charter of the company provided that the shares of capital stock of the company should be personal property and exempt from the imposition of any tax or burden. This was held to exempt the company as well as the stock from taxation.

The court said : “ The design contemplated by the legislature in the insertion of this clause of exemption in the act of assembly was to confer a certain substantial, not a nominal,, benefit on the stockholders and to induce capitalists to risk their money in a novel and hazardous enterprise. To impute to the legislature, in the case before us, an intention to exempt the shares of the stock from taxation and at the same time to reserve the right to tax everything which constituted it a stock and gave to it its value, would be gratuitously to cast an imputation upon the legislature inconsistent with every principle of judicial courtesy.”

This is precisely what this court has been urged to do in this case.

In like cases of exemption of shares in’ the hands of stockholders in other states the courts have been equally pronounced in declaring that if the -company itself was held to be subject to taxation, the contract would be “ a piece of folly and the promised exemption a delusion.” Scotland Co. v. Missouri Railway Co., 65 Mo. 123; Grand Gulf Railroad Co. v. Buck, 53 Miss. 246 ; Hannibal Railroad Co. v. Shacklett, 30 Mo. 550; New Haven v. City Bank, 31 Conn. 106.

The exemption granted to the Singer company is far broader than that in any case to which the attention of the court has been directed.

There is not only an express exemption of the stock of the corporation in the hands of stockholders, but there is an express limitation upon the right to tax the company itself, by which the extent- of the state’s right is defined. “The real and personal property of the company not actually in fact within the state is not liable to any tax or impost whatsoever.”

This contract was made long after the decisions before cited from 3 Vroom, and long before the decision of Justice Peckham in 161 U. S., in which he expressed himself -as unwilling to adopt the previously-declared construction of Justice Swayne, that an exemption of the shares exempted the company.

The language of the contract was fitly chosen to exclude any claim that the company was to be wholly exempt from taxation. The provision that the real and personal property of the company not actually in fact within the state shall be exempt implies the reservation of a right to tax the real and personal property which is within the state. The apparent purpose and entire effect of the language used is to enable the state to tax property within its borders. The statute was drawn to secure to the state the benefit of taxing the property which the company, for the grant of its- franchises, agreed to hold within the state. Such property, real and personal, must, under our constitutional provision, be assessed for taxes like other real and personal property, and not otherwise.

More comprehensive language to assure absolute immunity from the burden now sought to be laid upon it could not be employed.

The state pledged exemption not from taxation only, but from any imposition whatsoever.

Much of the brief on the part of the state is devoted to proving that, at the time the Singer charter was granted, the accepted meaning of the word “ impost” was “ a tax or tribute or levy upon goods brought from out of the state or country into it,” and the familiar rule was invoked that after a practical construction has been given to language by judicial decision, it will be presumed that it has been adopted with the meaning so given to it.

If this meaning is given to “ impost,” the charter must be read as follows:

“ So long as $500,000 shall be invested in real estate within this state, the real and personal property of the corporation not actually in fact within the state, and the stock of said corporation held or owned by any of its stockholders, shall not be liable to any tax or duty upon any property which it shall bring from out of this state into the state.”

It is apparent that such an interpretation of this language is in contravention of the expressed intention of the parties to the contract. Property out of the state is to be non-taxable, but as soon as it is brought into the state it is made subject to imposition in language in respect to which there is no uncertainty.

This narrow and restricted meaning given to the word “impost” would lead to an absurd result and is manifestly inadmissible.

In Pacific Insurance Co. v. Soule, 7 Wall. 433, Mr. Justice Swayne says: “ Impost is a duty on imported goods and merchandise. In a larger sense, it is any tax or imposition.” And again, “that duties aud imposts were probably intended to comprehend every species of tax or contribution not included under the ordinary terms, taxes and excises.”

We are confirmed in our view expressed in 29 Vroom that the word “impost,” as used in the Singer charter, includes every kind of enforced contribution to the public treasury.

What the corporators evidently apprehended, and what the charter in express words guards against, is the laying of an imposition of any nature upon the shares of capital stock as well as upon the real and personal property of the company outside of this state.

The charter couples real and personal estate in the exempting clause, and while the situs of personal property for taxation is the domicile of the owner, the idea of imposing in this state a direct tax upon the real estate of the Singer company lying.in Scotland, in Austria and in other places outside of this state, has never been suggested in the wildest scheme for raising public revenue, and it surely did not enter into the consideration of the parties in this contract for immunity from taxation.

It is not conceivable that either the state or the company supposed that this charter simply gave the company a pledge that its property, real and personal, outside of the state should not be subject to direct tax, reserving to the state unlimited power to tax the capital of the company and thereby tax that property by indirection.

The manifest object was to restrain the state from levying' au indirect imposition upon the property of the company outside the state in the mode now resorted to or in any other way. The language is most aptly chosen to protect the company.

The imposition resisted by the company in this case is laid upon the entire capital stock of the company of $10,000,000, less the value of its real and personal property in this state, and is in effect as much an impost ou property out of this state as if it was put directly upon the property itself and not upon the capital which stands for and represents it. It is an attempt to accomplish by indirection what it is stipulated shall not be done. It is an effort to levy á franchise tax out of the many millions of dollars of its capital invested by the company in real and personal property outside of this state.

The act of 1884 (Pamph. L., p. 232) is entitled “An act to provide for the imposition of state taxes upon certain corporations and for the collection thereof.”

In that act this imposition is called a yearly license fee or tax.

In a supplement passed to tke act- of 1884 (Pamph. L. 1891, p. 150) it is styled “a tax.”

In a further supplement passed in 1892 (Pamph. L., p. 136) it is called “ an annual license fee or franchise tax.”

It is wholly immaterial what name may be given to it. The fact that it ie called a “license fee” or “franchise tax” cannot validate it. It is levied under an act passed “to authorize the imposition of state taxes,” and it is none the less an interdicted imposition, and none the less a tax because it is given a new name.

Although under our adjudications it is not a tax on property in a sense which brings it within article 4, section 7, paragraph 12 of our state constitution, it is a tax on the capital stock of the corporation. Otherwise the act would be manifestly void for want of a title expressing its object, and the state would be deprived of all its revenue under the act of 1892. The franchise of the company is the right to hold property and exercise its corporate privileges. The Supreme Court of the United States has decided that where a corporation is exempted from taxation, it is not subject to a tax on its franchise. Wilmington Railroad Co. v. Reid, 13 Wall. 264.

All the rights and privileges which the company is empowered to exercise were granted to it by its charter upon the terms therein specified. Those terms cannot be changed or altered without the consent of both parties to the charter contract. The right to make further exactions from the company under any pretext involves the power on the part of the state legislature to render the grant to the company futile and. of no value, by impositions'of like'charactér, to such an extent that the business of the company cannot be prosecuted with profit to the shareholders. That an impost laid upon the entire capital stock is a burden on each share into which such capital stock is divided, in the hands of its several holders, is too clear to be doubted. The proposition that an imposition may be laid upon the aggregate of the capital stock, which is expressly forbidden to be levied upon the several parts which constitute the whole thereof, is so absolutely devoid of merit that it cannot be assented to!

Thus far the discussion has related to the correct interpretation of this contract, as if it were a novel question submitted now for the first time for adjudication. A reference to our own judicial decisions will show ihcontrove'rtibly that at the time the Singer charter was granted the words “shall not be liable to any tax or impost whatsoever” (the language of the exempting clause) hád received a judicial construction which must now be accepted as its true meaning in this contract, leaving no place for further interpretation.

As long ago as 1839 the Supreme Court, in State v. Berry, 2 Harr. 80, construed a provision in the charter of the Paterson and Hudson River Railroad Company, “ that no further or other tax or impost shall be levied or assessed upon said company.”

The same language was again submitted to the Supreme Court for construction in the case of Camden and Amboy Railroad Co. v. Hillegas, 3 Harr. 11.

In these cases the Supreme Court declared that this language “ does not exempt the franchises or privileges of the company merely from taxation, but it exempts the company generally from all other taxation to which their property, in common with the property of individuals, would have been subject without such special exemption.”

These adjudications were fully concurred in and approved by the Court of Errors and Appeals in Gardner v. State, 1 Zab. 557, and in the more recent case in this court of State Board v. Morris and Essex Railroad Co., 20 Vroom 193.

After our court of last resort had decided that the language contained in the charter of the Paterson and Hudson River railroad, and like language in the charter of the Camden and Amboy railroad, deprives the state of the right to impose a franchise tax upon either of those companies, this contract with the Singer company was made, in which not only the same language was used, but it was made even stronger in favor of the company by adding the word “ whatsoever” — the Singer company “shall not be liable to any tax or impost whatsoever” — manifestly intending to exclude any possible burden on the company except the one previously specified.

It is manifest that both the legislature, when it granted the charter, and the company to which it was granted, understood, from the prior decisions of our courts, that the exempting language was intended to secure exemption from a franchise tax. To affirm the contrary is to assert that the language of the contract was used in a sense the opposite of that which both parties are presumed to have known was its declared and accepted meaning in the law.

The parties to the contract must be held to have adopted this language with the meaning which had been given to it previously by our highest court, and that is decisive of this controversy; it is not open to question.

The company cannot be brought within the operation of the act of 1892 without impairing the obligation of its contract with the state.

In Shelby County v. Union Bank, 161 U. S. 149, Mr. Justice Peckham, who delivered the opinion of the court, refused to adopt the view expressed by Mr. Justice Swayne in Farrington v. Tennessee, supra, and that case is chiefly relied upon as' a reason for renewing this controversy. The case has no controlling pertinency to the present discussion for two reasons:

First. The language construed by Mr. Justice Peckham was as follows: The charter of the company provided “ that it should pay to the state an annual tax of one-half of one per cent, on each share of capital stock, which shall be in lieil of all other taxes,” and he held that while it limited the amount of tax on each share of stock in the hands of shareholders it did not exempt the corporation. That charter provision differs from the Singer charter in the important respect that the latter not only exempts the shares of stock but it also contains an express limitation on the right to tax the company. From the language used and from that limitation the implication arises in favor of the company’s immunity.

Second. The clause construed by Mr. Justice Peckham had not, as in the Singer case, prior to its incorporation in the company’s charter, been given a definite, established and well-understood meaning by judicial decision in the state where the controversy arose. But if any substantial basis could be found upon which to rest the claim of the state to lay this contested burden upon the company, the state is precluded by the previous judgment of this court from the further litigation of this subject.

A like tax in all respects was laid by the state upon the Singer company in 1891.

The right of the state to levy that tax was controverted by the company, and the case was brought into this court for judgment. It was twice argued before this court by eminent counsel, and considered with great deliberation and care. The decision of this court, reported in 29 Vroom 633, is that the charter inhibits the imposition of this tax upon the company. That decision was concurred in by every member of this court (consisting of eleven judges) who heard the arguments in the case. TTo application for rehearing was made, and that judgment stands as the law of this court and of this case.

It is a judgment between the same parties, in regard to the same subject, involving the construction of the same contract, and presenting precisely the same questions both of law and fact, which have been agitated in this case.

In New Orleans v. Citizens’ Bank, 167 U. S. 398, the Supreme Court of the United States said :

“ No principle of the law is more inflexible than that which 'fixes the absolute conclusiveness of such a judgment upon the parties and their privies. Whether the reasons upon which it was based were sound or not, and even if no reasons at all were given, the judgment imports absolute verity, and the parties are forever stopped from disputing its correctness. The estoppel extends to every material allegation or statement which, having been made on one side and denied on the other, was at issue in the cause, and was determined therein.

“ It follows, then, that the mere fact that the demand in this case is for a tax for one year, and the demands in the adjudged cases were for taxes for other years, does not prevent the operation of the thing adjudged, if, in the prior cases, the question of exemption was necessarily presented and determined upon identically the same facts upon which the right of exemption is now claimed.”

Such is the language of the highest federal court in a tax case, and that its authority should not be doubted is the dictate both of reason and sound policy.

In the case reported in 29 Vroom the conditions and questions to be solved were identical with those here presented, the only difference being that in this case the tax is for a subsequent year. Unless the question involved is res adjudieata, it can never become so; the unsuccessful litigant may year after year continue to vex his adversary and the court with the same questions which have been decided.

The attempt now to reopen questions which have been once adjudged by this court, by trying to enforce a subsequent tax of the same character, should not be countenanced. It is contrary to the traditions of this court; no precedent can be found for it from the foundation of this court to the present time.

The judgment of this court must be regarded as a finality. It is established to review the decisions of inferior courts and discontented suitors cannot invoke its aid to review and set aside its own deliberate judgments.

The questions sought to be reopened in this case should be regarded as closed and no longer a subject of controversy between these parties, and in accordance with the former judgment of this court the judgment of the Supreme Court setting aside the tax against the company should be affirmed.

Yredenbtjrg-h, J.

My reasons for voting to affirm the judgment setting aside the tax in question are founded especially upon the following considerations, viz.: There was certainly one intent of the parties to the above-quoted contract of 1873 about which there is no room for debate, namely, that no real or personal property of this company, when situated outside of the state, should be liable to taxation by the state, and my point is that the present exaction of a per centum upon the amount of the issued capital stock of the company is a form of taxation of such property — that the state is attempting to accomplish by indirection what it cannot do directly. It seems to me, to use the language of authority, that “ a tax upon an ineideni to a prohibited thing is a tax upon the thing itself, and that if there is a want of power to tax the thing itself there is an equal want of power to tax the incident,” the broad principle being that the law always regards substance and not form.

It is to be observed that in 1873 the term “real and personal” property of a person or corporation was commonly believed to embrace all property that was legally possible to be subjected to taxation against such person under our constitution, It was not until about the year 1884 that a new species of revenue taxation, which Mr. Justice Field, lately sitting in the Supreme Court of the United States, in the income tax case of Pollock v. Farmers’ Loan and Trust Co., 157 U. S. 592 (1894), called a species of excise tax, was adopted in this state. His language was this: “ Excises are a species of tax consisting generally of duties laid upon the manufacture, sale or consumption of commodities within the country or upon certain callings or occupations, often taking the form of exactions for licenses to pursue them.”

The act of 1892 in question denominates the present exaction a “ license fee or franchise tax,” and it is imposed for the purpose of revenue upon the occupation of the company, generally and without restriction to any locality. It is not a tax assessed upon any basis of valuation of the property of the company, but is arrived at annually by the mere multiplication of the amount of the company’s issued capital stock by the arbitrary per centum fixed in the act.

It appears by the evidence taken in these proceedings that the extra-territorial property of the Singer company has largely increased since 1873, and now consists of serving machine factories and their contents, located in Scotland, Austria, Canada, Illinois and Indiana, from the sales of the products of which and of the goods there manufactured, in addition to those of their factory in this state, the business of the company is carried on and their annual earnings and dividends, if any, are realized. This annual license fee or franchise tax is certainly a tax upon the general business of the company. Mr. Justice Bradley, in Leloup v. Mobile, 127 U. S. 645, said: “We fail to see how a state can tax a business occupation when it cannot tax the business itself. Of course the exaction of a license tax as a condition of doing any particular business is a tax on the occupation, and a tax on the occupation of doing a business is surely a tax on the business.”

Undoubtedly, upon the company’s failure to pay the tax in question in this suit, its charter would be liable to forfeiture at the instance of the Attorney-General. The payment is, in all respects, compulsory. So that in fixing the scope of the contract the question becomes narrowed to this: Is an annual tax on the business of the company in effect a tax upon the property, with and from the use alone of which that business is done? I find a line of cases holding that “where the business or occupation consists in the sale of goods, the license tax required for its pursuit is, in effect, a tax upon the goods themselves.” It was so decided in the case of Welton v. State of Missouri, 91 U. S. 275. There the validity of a license tax which had been exacted by the State of Missouri from dealers in goods which were not the product or manufacture of that state was in question, and the Supreme Court of the United States held that such an exaction must be regarded as a tax upon the goods themselves. So in Cook v. Pennsylvania, 97 U. S. 566, it was held that a tax upon the amount of sales of goods made by an auctioneer was a tax upon the goods sold. So in Brown v. Maryland, 12 Wheat. 419, 444, it was held that the tax on the occupation of an importer was the same as a tax on imports.

The language of Chief Justice Marshall, in this case, is particularly significant in this connection. He said: “It is impossible to conceal from ourselves that this is varying the form without varying the substance. It is treating a prohibition which is general as if it were confined to a particular mode of doing the forbidden thing. All must perceive that a tax on the sale of an article imported only for sale is a tax on the article itself.”

In Almy v. California, 24 How. 169, it was held that a duty on a bill of lading was the same thing as a duty on (he article which it represented. In Railroad Co. v. Jackson, 7 Wall. 262, it was held that a tax upon the interest payable on bonds was a tax, not upon the debtor but upon the security. And in the latest deliverance of the Supreme Court of the United States on the subject., upon the re-argument of the income tax cases, reported in 158 U. S. 601, it was held, after the most careful consideration, that the taxes on the rents and income of real estate are equally as direct taxes as the taxes on the real estate itself, and that the taxes on the income of personal property, are equally as direct taxes as the taxes on the personal property itself, the very point of the decision being that there was no legal difference or distinction between taxing property and taxing its income or earnings.

The language of Chief Justice Fuller (157 U. S. 581), in his opinion, is that “ an annual tax upon the annual value or annual user of real estate appears to us the same in substance as an annual tax on the real estate, which would be paid out of the rent or income.” And in Iron City Bank v. Pittsburg, 37 Pa. St. 343, the Pennsylvania Supreme Court said, “to tax the business which capital performs is to tax the capital. This is as certainly true as that taxation of capital is a burden on the business in which it is engaged.”

Under the tax classification adopted by this court in the case of Standard Underground Cable Co. v. Attorney-General, 1 Dick. Ch. Rep. 270, the assessment in question, speaking in a strict constitutional sense, must be defined to be a franchise tax as distinguished from a property tax. This,' as a legal definition, must be accepted as correct, but while a franchise tax is not one levied directly upon property, and is not, therefore, to be named a “ property tax,” it is, when imposed in substantial sums for purposes of revenue, as in the present instance, a tax burden upon the income of property. Unless we follow the name and shadow merely, and lose sight of the substance of things, the intent of the parties in the use, at the close of the exemption clause, of the comprehensive words, viz., “ shall not be liable to any tax or impost whatsoever,” is as clearly expressed as if they had instead appended thereto the words “ whether such tax or impost be ascertained in the form of an assessment upon the value of such property or in the form of a franchise tax fixed by a percentage upon the capital.” In either case the governmental burden to be borne by the company and paid out of the earnings of the property for the privilege of using it to carry on its extra-territorial business will be increased, and its net earnings decreased to that extent, in disregard of the real intent and just expectation of the contracting parties.

Now, the State of New Jersey solemnly agreed not to tax the real and personal property of this company not actually in fact within the state, and yet, after long years of acquiescence in the system of property taxation then in vogue, have devised a new experiment of taxation under which, while in the matter of form, indeed, that real and personal property is not made liable by any assessment against it, yet, in the matter of substance the annual income and earnings of that property is to be reached and consumed by the aid of the multiplication table and an arbitrary per centum of the capital stock. Does not this law of 1892, therefore, impair that contract of 1873? The general rule of interpretation of such contracts, having the approval of very high authority, was adopted by this court, in 1890, in the case of Mount Pleasant Cemetery Co. v. Newark, 23 Vroom 539, 541. Chief Justice Beasley, quoting Judge Cooley with approval, then said : “Any law which enlarges, abridges or in any manner changes the intention of the parties discoverable in it, necessarily impairs the contract itself, which is but the evidence of that intention ; the manner or degree in which this change is effected can in no respect influence the conclusion.” I think that this law of 1892 thus tested cannot stand the test. The exaction annually of this license fee of $4,212 by the compulsory power of the state, though not in form a tax upon the property of this corporation outside of this state, is, in fact, a burden upon the annual earnings of that property, and must of necessity be paid out of them either in whole, or, if not, certainly in large part, and thus falling on them is, in a manner, as I have above argued, a tax upon that property, and to such extent, at least, “ abridges ” the intention of the parties. The action of the state’s taxing department in levying this tax is not intended to be criticised. It is exercising its right, through its proper officers, of collecting its tax revenues required for the conduct of its affairs. It is met in this effort by a contract of exemption made by the legislature of 1873, a most unwise and impolitic bargain, tending to derange and confuse the tax system of the state and striking a serious blow at its finances. Nevertheless, as it seems to me, this concededly irrepealable contract is binding not only in law, but especially “ in foro conscientice ” upon this.court of final resort. As the substantive intention of the parties to that contract is, in the view I have above taken, clearly to exempt this property from taxation in every form, and as the history of this litigation shows that this court has already unanimously held to that effect, I think all attempts now to enforce the payment of the tax proposed are oppressive and unconscionable.

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Dissenting Opinion

Dixon, J.

(dissenting). In view of the opinion of this court in Singer Manufacturing Co. v. Heppenheimer, 29 Vroom 633, a vote to reverse the judgment now before us needs explanation, for according to that opinion the judgment should be affirmed. Had the judgment authorized by that, opinion been entered of record, and the record been introduced into this cause by pleading or as evidence, it would have been conclusive of the controversy, since the real parties, the state and the Singer company, and the subject-matter, the effect of the sixth section of the company’s charter, are the same now as then. But as no such judgment appears, the dispute cannot be deemed res judicata; only the opinion can have force, and that on the doctrine of stare decisis. Even on that footing, however, it is our duty to follow it, unless there be very cogent reasons to the contrary and a clear manifestation of error. 1 Kent Com. 476.

Accepting this as the test, my mind is constrained not to follow that opinion.

The question at issue is one of the utmost importance. The opinion, conceding the intention of the legislature to impose on this company the same franchise tax as on other like corporations, denies the power of the legislature to do so— yea, goes even deeper and denies the power of the very sovereignty of the state itself, acting upon the fundamental right to make and amend its constitution, to subject this corporation to the same burdens as other similar bodies must bear. A conclusion such as this should be reached only for reasons which are indubitable or acquiesced in only on authority which is imperative.

A perusal of the opinion will indicate that it rests mainly on the proposition that, according to former adjudications in this state (State v. Branin, 3 Zab. 484; State v. Bentley, Id. 532 ; State v. Powers, 4 Id. 400), the exemption of a corporation from tax exempted the shares of its stock. On this was jrredicated the so-called converse, that an express exemption of the shares will also exempt the company; and the court, finding in the charter a clear exemption of the stock, thence inferred a general exemption of the corporation. The basis of the conclusion was the authority of prior decisions.

An examination of those decisions will show that they also depend largely on authority, the authority of an opinion delivered in the Supreme Court of the United States upon a question finally reviewable in that tribunal. This will appear by the following quotations from the opinion of Chief Justice Green in State v. Branin, 3 Zab. 493: “The terms of the contract on the part of the state are that no other tax or impost shall be levied or assessed upon the said company. Does this exemption extend to the interest of the individual stockholders in the property of the company ? If this were a new question, I should have some difficulty in arriving at the conclusion that the shares of the individual stockholders were, by virtue of the contract, exempt from taxation, on the grounds that, by the terms of the contract, the exemption is strictly limited to the body corporate; that the property of the individual stockholder is not identical with the property of the corporation and not within the terms of the exemption; that in a public grant nothing passes by implication, the contract in all cases of doubt being taken most strongly in favor of the public and against the grantee, and especially as the fact of giving such construction operates to limit the taxing power of the state. But this question appears to have been decided in favor of the exemption of the stockholder from taxation, under a similar legislative provision, by the Supreme Court of the United States in the case of Gordon v. Appeal Tax Court, 3 How. 133. It was held in that case that an exemption of certain banks from taxation exempted the stockholders of the banks. * * * As the question is one of constitutional law which lies peculiarly within the jurisdiction of that court in the last resort, there is an obvious propriety in adopting their conclusion.”

The same case in 3 How., entitled Gordon v. Appeal Tax Court, is cited as controlling by the other judges, and on this authority rest the earlier decisions in this state.

But in Shelby County v. Union, &c., Bank, 161 U. S. 149, the federal Supreme Court pointed out that the decision in the Gordon ease was due to its very special circumstances, and declared as a principle well established that there is a clear distinction between the capital stock of a corporation and the shares of stock of such corporation in the hands of its individual stockholders, and that so separate are these properties and so distinct in their nature that the taxation of the one property is not the taxation of the other. Thereupon the court referred with approval to the case of Union Bank v. State, 9 Yerg. 490, where it was held that, notwithstanding an exemption by the charter of the capital stock of the bank, the state might tax the shares of stock in the hands of individuals, and formally adjudged that a contract exempting from taxation the shares of stock in the hands of individual stockholders did not exempt from taxation the capital stock of the corporation, its surplus or accumulated profits.

Thus, we see that the court which decided the Gordon case has repudiated the doctrine which it was thought to maintain, and by solemn judgment has condemned as unsound the supposed converse of that doctrine which formed the staple of this court’s opinion.

The case of Shelby County v. Union, &c., Bank was decided March 2d, 1896, but was not known of by this court when, shortly afterwards, the opinion in Singer Manufacturing Co. v. Heppenheimer was announced. Had this court then learned, as we now have learned, that the tribunal, whose authority had been deemed the all-sufficient support for the principle invoked, utterly refused to sanction the principle, but proclaimed and enforced its opposite, it is safe to say the case in hand would have been differently dealt with, even if on other grounds the same conclusion had been reached. In resting that conclusion on authority there was manifest error, and I therefore think the rule of stare decisis does not preclude me from considering the present judgment as res nova.

The true test to be applied in examining the validity of a claim of exemption from taxation was declared by Chief Justice Green in language already quoted. In Chicago, Burlington and Keokuk Railroad Co. v. Guffey, 120 U. S. 569, 575, Mr. Justice Harlan declared it in these words: “ It is the settled doctrine of this court that an immunity from taxation by a state will not be recognized unless granted in terms too plain to be mistaken.” And in Bank of Commerce v. Tennessee, 161 Id. 134, 146, Mr. Justice Peckham said : “Taxes being the sole means by which sovereignties can maintain their existence, any claim on the part of anyone to be exempt from the full payment of his share of taxes on any portion of his property must on that account be clearly defined and founded on plain language. There must be no doubt or ambiguity in the language used upon which the claim to the exemption is founded. It has been said that a well-founded doubt is fatal to the claim; no implication will be indulged in for the purpose of construing the language used as giving the claim for exemption where such claim is not founded upon the plain and clearly-expressed intention of the taxing power.”

Another general proposition may be premised in the words of Chief Justice Waite (Tennessee v. Whitworth, 117 U. S. 129, 136): “In corporations, four elements of taxable value are sometimes found — ;-first, franchises; second, capital stock in the hauds of the corporation; thi?'d, corporate property; and fourth, shares of the capital stock in the hands of the individual stockholders.”

Guided by these lights, I turn to the exemption now under examination. It is thus expressed: “ So long as the said corporation shall invest and keep invested in real estate within this state the sum of five hundred thousand dollars, the real and personal property of the said corporation not actually in fact within the State of New Jersey, and the stock of the said corporation held or owned by any of its stockholders shall not be liable to any tax or impost whatsoever.”

There is here an exemption of part of the third element— corporate property — and of all of the fourth element, shares held by stockholders, as classified by Chief Justice Waite. It is impossible to contend that any exemption of the other elements, the franchises and the capital stock in the hands of the corporation, is expressly granted, or to deny that a claim to such exemption must rest on an implication which at best is doubtful, and therefore inadmissible. Such, to' my mind, is the simple solution of the question at issue, when we are freed from the notion that an exemption of shares involves an exemption of the company.

But, even on the supposition that a mere exemption of the shares, standing alone, creates an exemption of the corporation and its property, I do not think such an exemption can be derived from the express terms of this charter, for the express exemption of the corporate property not within this state indicates that the exemption of the shares in this case was not understood as implying an exemption of the company or its property. The course of thought suggested by reading the charter is that, first, the legislature considered what immunity should be granted to the corporation itself, and thereupon determined that the real and personal property of the company not actually within the state should not be liable to any tax or impost whatsoever, and secondly, it considered what immunity should be granted to the stockholders, and determined that their shares of stock should be likewise exempt.

In the former opinion of this court it is said that the express exemption of the corporate property outside of the state was inserted in order that the real and personal property of the company in the state might be taxed here; that that was its apparent purpose and entire effect. "With deference, I cannot but think that this is a very strange construction. It means that the legislature, understanding one clause of the charter to import a universal exemption, determined to narrow its scope by granting a further exemption. If the legislature had thought that an exemption of stock implied an exemption of the company and its property, and had intended to preserve only a right to tax the property in this state, how much simpler and more natural would have been an expressed exemption of the stock in the hands of the stockholders, with a proviso that that should not imply an exemption of the property within the state. Then it could have been reasonably argued that the legislature contemplated the exemption itself as one that might cover the corporation and its property, and the proviso "was designed to limit its effect. But to discern that train of thought in the form of words employed in this charter is quite beyond my power of insight.

It is further insisted that the real and personal property of the company not actually within, the state could not be subjected to direct taxation by the authority of this state, and therefore the exemption granted must have been designed to prevent any indirect taxation thereon; and since the-present-tax, if exacted, must come out of the mass of the company’s property, it is an indirect tax upon the property outside of the state, and so violates the terms of the exemption.

So far as concerned the personal property of the corporation outside of the state, it would certainly be, on general principles, subject to the state’s power of taxation, and the framers of this exemption may have doubted whether the state’s power might not also reach the real property of its own creatures, and therefore have coupled both classes of property in the" same provision. At any rate, there is nothing uuusual in an unnecessary precaution. But, however this may be, the things exempted are property, and if the present tax be prohibited it must be because it is a tax on property. If that be its nature it does not need so much argument to prove its illegality, for, by our constitution, property when taxed must be taxed according to its true value, and, confessedly, this impost is not graduated by that standard. But, under the decisions of this court not questioned, the tax or fee now resisted is not within the constitutional provision, because it is not a tax on property. Standard Cable Co. v. Attorney-General, 1 Dick. Ch. Rep. 270; Tidewater Pipe Co. v. Assessors, 28 Vroom 516; affirmed on error, 30 Id. 269. - There is, of course, a sense in which every tax or governmental charge requiring the payment of money is an imposition upon property, for every such requisition, whether it be a property tax, or a stamp duty, or a poll tax, or a license fee, must be met out of property. But by a tax upon property is meant only such a tax as is assessed either on property, as are generally our real estate taxes, or on the owner because of his property, as are our personal estate taxes. If the present .charge is not a tax on property in either sense, within the constitutional injunction, which should be construed liberally, it cannot be a tax or impost on property, within the exemption, which must be construed strictly, and unless it be a tax or impost on property it is not affected by the exemption.

But even if this claim that something beyond property taxes is prohibited, it would be satisfied to all reasonable intents, under the present taxing act, by deducting from the amount of the company’s capital stock on which the license fee is computed, the value of the company’s real and personal property not actually in fact within this state. Such a deduction, on this hypothesis, ought to have been made in the Supreme Court in accordance with the act of March 23d, 1881 (Gen. Stat., p. 3404), instead of the reversal of the entire charge.

One other point deserves mention, not perhaps for its intrinsic merit, but because of the earnestness with which it is pressed. It is said this charter was accepted by the company in reliance upon the decisions of our Supreme Court above mentioned, and in the belief that under them the company secured immunity from all taxation except that which might be levied on its property within the state; consequently it is asserted the effort of the state to collect the present charge is a breach of faith.

The groundlessness of the suggestion that this charter was-framed with reference to those under consideration in the-reported cases will plainly appear on comparing its provisions with theirs. The charter construed in State v. Branin enacted1 that the company should pay to the state a certain sum for each passenger and each ton of freight transported, and that no other tax or impost should be levied or assessed upon the-company; the charter construed in State v. Bentley enacted that the company should pay to the state annually a tax of one-half of one per centum on the cost of the road, and that' no other tax or impost should be levied or assessed upon the company; and the charter construed in State v. Powers enacted that all the lands, tenements, hereditaments, good,s and chattels to-the society belonging should be free and exempt from all taxes, charges and impositions whatsoever under the authority of this state, whether for state or for county uses or for any -other use whatsoever. On these provisions the court held that the shares in the hands of stockholders were not taxable. There is no similarity between the language of those charters and that of the Singer company. In each of the earlier charters we find' a general exemption of the company or its property and no-reference whatever to the stock in the hands of stockholders in the Singer charter we have no exemption of the company itself, a very limited exemption of the company’s property and an express exemption of the shares of stock in the hands of stockholders. In each one of the earlier charters there-exists also a provision for a definite mode of taxation, so that if the maxim “ expressio unius exclusio alterius est” were-applied every other mode would be prohibited, while here no particular mode of taxation is prescribed but definite kinds-of exemption are granted, so that the application of the maxim forbids the claim of any further exemption and leaves the range of taxation unimpaired. It appears incredible that the phraseology of the Singer charter was adopted on the faith of a meaning ascribed to the charters construed in the reported cases. Had these earlier decisions been in the minds of the parties and their purpose been to secure through them for this charter the significance now set up, the plain statement would uudoubtedly have been that the property of the company actually within the state should be subject to taxation, but that no other tax or impost whatsoever should be levied or assessed upon the company.

Instead of charging upon the state a breach of faith for its attempt to exact this license fee, it would be much more reasonable to charge such a breach against the company for asserting the unalterability of its exemption granted in 1873, in view of the act of February 14th, 1846 (Pamph. L., p. 16), and the decision of this court in 1867 (Warren Railroad Co. v. Person, 3 Vroom 566), that by force of that act there was; in legal effect, incorporated in every charter granted after 1846 a provision that it should be subject to alteration, suspension or repeal, in the discretion of the legislature.

But I do not consider the question of good faith on either side to be involved. The state demands of the company that it shall bear the same burden as other similar corporations, and the company denies the legality of the demand. Whether the demand is legal or not, is the sole controversy, and the decision turns on the true meaning and force of the company’s charter. On that and that only do I predicate my vote to reverse the present judgment.

For affirmance land concurrence in opinion of Van Syckel, J.) — The Chancellor, Chief Justice, Depue, Ludlow, Van Syckel, Adams, Bogert, Hendrickson, Nixon. 9.

For affirmance — Vredenburgi-i. 1.

For reversal — Collins, Dixon. 2.