270 N.W. 427 | Iowa | 1936
The 46th General Assembly of Iowa enacted a law known as the "Chain Store Act of 1935" which became effective as a law on May 8, 1935, by publication, as provided by law. (Chapter 75, Laws 46th General Assembly; also appears as Chapter 329-G1, Sections 6943-g1 to 6943-g20, inclusive, Code of Iowa, 1935.) The plaintiff, Tolerton Warfield Company, a corporation, with its principal place of business at Sioux City, Iowa, engaged in the business of operating a chain of grocery stores under the name of "Council Oak Stores", fifty of which are located in the state of Iowa, and one other store or service station, or a total of 51 stores in this state, on the 17th day of June, 1935, brought this action in equity on its own behalf and on behalf of all other persons or groups acting as a unit as defined by said law, praying for an order restraining and enjoining the Iowa State Board of Assessment and Review and its individual members and officers, and Leo J. Wegman, Treasurer of the State of Iowa, from the collection of said tax, asking that a temporary writ issue until the case could be determined on its merits, and that upon final hearing the court is asked to determine that said act is unconstitutional as violative of
(a) Article I, section 6, and Article III, section 30 of the Constitution of the State of Iowa;
(b) Article III, section 26, Article III, section 29 of the Constitution of the State of Iowa;
(c) Fourteenth Amendment to the Constitution of the United States.
On July 1, 1935, interveners, R.T. Stoup and George J. Schaefer, a copartnership, operating a chain of three cafes in Sioux City, Iowa, under the firm name and style of Stoup Schaefer, joined with plaintiff in asking the same relief. On July 10, 1935, on stipulation of parties, the court entered an *910 order requiring the State Treasurer to segregate and hold said fund or tax collected intact and apart from other funds belonging to the state, pending the determination of the suit and until further order of the court, meanwhile payment of the tax to be without prejudice to any of the parties. On August 21, 1935, answer was filed, admitting certain allegations of the petition and specifically denying said act was unconstitutional. Trial to the court was begun on October 21, 1935, and continued from day to day until concluded, and the cause was submitted, and on November 9, 1935, the court entered of record his written findings and conclusions, holding the act valid, and on November 20, 1935, decree was entered of record accordingly, from which findings, conclusions and decree of the court plaintiff and interveners have appealed to this court.
The issues as set forth in appellants' brief are as follows:
"I. It is vague, incomplete, defective, unworkable and incapable of enforcement in that;
"(a) It is impossible to determine what constituted a `Chain Store', as set out in Section 2 (g); and
"(b) It is impossible to determine whether the tax is intended to be cumulative or non-cumulative, under Section 4 (a).
"II. The Act denies equal protection of the laws, as defined by the Fourteenth Amendment of the United States Constitution, and Article I, Sections 1 and 6, and Article III, Section 30 of the Constitution of the State of Iowa, by reason of:
"(a) An unreasonable classification on the basis of:
"(1) The form of business organization, in that it distinguishes between voluntary and integrated chains.
"(2) The nature of the articles dealt in, exempting such as farm products, coal, ice, lumber, grain, feed and building materials.
"(3) Whether a restaurant is connected or not connected with a hotel.
"(4) Whether a business is located in an incorporated or unincorporated town and all stores are within six miles of each other.
"(b) An unreasonable classification, on the basis of:
"(1) A graduated per centum of gross sales within the doctrine of Stewart Dry Goods Company v. Lewis, 79 L. Ed. 1054; 55 S. Ct. 525. *911
"III. The Act is confiscatory and in violation of Article I, Sections 1 and 6, and Article III, Section 30 of the Constitution of the State of Iowa."
In passing upon the constitutionality of an act of the legislature, certain well-defined principles must be kept in mind. These are familiar to the legal profession and have been so often stated that we will not repeat them. They may be found in the following authorities: Tenth Amendment, U.S. Constitution; McGuire v. Railway,
[1] The Iowa Chain Store Tax Act just underwent its first constitutional test through the Federal District Court, composed of three judges, (Great Atlantic Pacific Tea Co. v. Valentine, 12 Fed. Supp. 760) with the result that section 4 (b) of the act was declared unconstitutional as violative of the 14th Amendment to the Federal Constitution, and a similar provision (Section 6, Article I) of our State Constitution. This decision was affirmed by the Supreme Court of the United States (57 S. Ct. 56, 81 L. Ed. ___) upon authority of Stewart Dry Goods Co. v. Lewis,
[2] This leaves little of a legal, controversial nature for this court's determination. The unit tax provisions contained in section 4 (a) of the act must be upheld as a valid exercise of the power of the legislature in imposing an occupational tax on persons engaged in a particular system of doing business. State Board of Tax Commissioners v. Jackson,
In the case State ex rel. Welsh v. Darling,
"Classification, to meet the requirements of the Constitution, must be based upon something substantial — something which distinguishes one class from another in such a way as to suggest the reasonable necessity for legislation based upon such classification. (Citing a long list of cases) * * * Necessarily, therefore, the legislature exercises a wide discretion in the determination of classifications as a basis of legislative enactments."
The same rule with reference to classification of property for taxation is recognized in the Jackson case, supra, wherein the United States court says:
"The power of taxation is fundamental to the very existence of the government of the states. The restriction that it shall not be so exercised as to deny to any the equal protection of the laws does not compel the adoption of an iron rule of equal taxation nor prevent variety or differences in taxation, or discretion in the selection of subjects, or the classification for taxation of properties, businesses, trades, callings, or occupations. Bell's Gap R. Co. v. Pennsylvania,
That the chain store system of conducting a business has superior advantages over other methods is quite evident from the rapidity in growth of the system.
"The reason for it must therefore be substantial, and if it be so universal in the practice of the business it would seem not unreasonable if it be adopted as the basis of governmental action." Metropolis Theatre Company v. Chicago,
Many of the differences and superior advantages between this method of conducting business and the ordinary independent store, the large department stores and even the so-called voluntary chains, are pointed out in the cases above cited and such differences appear from the evidence in the instant case. It is also shown that these advantages are more pronounced in some respects as the number of units increase, and in this, basis is found for graduating the unit tax upward with the increase in the number of stores. Fox v. Standard Oil Company,
"A chain, as we have seen, is a distinctive business species with its own capacities and functions. Broadly speaking, its opportunities and powers become greater with the number of the component links, and the greater they become, the more far-reaching are the consequences, both social and economic. For that reason, the state may tax the large chains more heavily than the small ones, and upon a graduated basis, as indeed we have already held. (Citing cases.) Not only may it do this, but it may make the tax so heavy as to discourage multiplication of the units, to an extent believed to be inordinate, and by the incidence of the burden develop other forms of industry. (Citing cases.)"
The same principles apply to exemptions. All that is required to satisfy the law is that all owners of chain stores similarly situated be treated alike.
The provisions of this act applying to exemptions were fully *914 considered by the three-judge Federal District Court in the Great Atlantic Pacific Tea Co. case, supra, and Judge Dewey, in discussing the exemptions said:
"Can there be found in the businesses that are exempted a reasonable distinction from those that are taxed, or can a state of facts reasonably be conceived to sustain the classification with these exemptions? * * * Witnesses for the defendants have pointed out their reasons for believing that the chain stores exempted, including hotels, do not possess all the advantages enjoyed by the chains of the classes represented by claimants and interveners and have given their opinions as to certain economic and social differences. Also that hotel restaurants should be considered as integral parts of the hotel, maintained principally for the convenience of guests and not in competition with chain restaurants. These are debatable questions that may have been considered by the legislature. We are content with the finding that the chain stores exempted sell in general a different line of merchandise or service than do the complainants or interveners, and that the amount of any goods sold by the latter in competition are negligible in size or amount. * * * If the legislature can lay a license tax on a certain kind of business, it may group certain lines and omit others. * * * We are satisfied that the exemptions do not create an arbitrary classification for the imposition of an occupational tax or license, and do not violate constitutional limitations, either of state or nation."
The rule is well established that legislation is not arbitrary if any state of facts reasonably can be conceived that would sustain it. Rast v. Van Deman L. Co.,
[3] Appellants' contention that there is such uncertainty and ambiguity in the language of the act, as to what constitutes a chain store, and as to whether or not the tax is intended to be accumulative, as to render the act unworkable and therefore void, is not without some merit. In attempting to avoid evasion of the law the definitive provisions of the act are somewhat involved and far from models of clarity of expression. Appellants are not in a position to raise this question, however, as they allege in the petition and concede in proof that they are operating chain stores as defined by the act. As to whether or not the graduated unit tax is intended to be accumulative must be determined from a consideration of the entire act, keeping in mind the purpose of the act to impose an occupation tax upon persons engaged in operating a system of chain stores in this state, the rate of tax to be determined on a graduated scale according to the number of stores or links in the chain. We think it may fairly be said to appear that instead of increasing the tax upon each additional store in excess of one, the legislature saw fit to apply the same rate per store until the number exceeded ten, and to step up the rate at each multiple of ten until the number went beyond fifty and to apply the same rate to all within each bracket of ten, and to all above fifty the same rate, regardless of how far the number of units might exceed fifty. The intent and purpose of the legislature in this respect could have been much more clearly expressed, but when we consider the aim and purpose of the legislature, we find no such uncertainty as would warrant the court in holding the law invalid on this ground. A law should not be held invalid as unworkable because of uncertainty of meaning, unless there is no other reasonable alternative.
The decree of the trial court insofar as it holds subdivision (b) of section 4 of said act valid is therefore reversed. The holding of this portion of the act invalid does not affect the remainder of the act. Davidson Bldg. Co. v. Mulock,
PARSONS, C.J., and MITCHELL, ANDERSON, KINTZINGER, RICHARDS, DONEGAN, ALBERT, and STIGER, JJ., concur. *917