Standard Under-Ground Cable Co. v. Attorney General

• Citation: 19 A. 733,46 N.J.E. 270
• Parties: STANDARD UNDER-GROUND CABLE CO. v. ATTORNEY GENERAL.
• Decision Date: 26 March 1890
• Court: United States State Supreme Court (New Jersey)

19 A. 733

46 N.J.E. 270

STANDARD UNDER-GROUND CABLE CO.

v. ATTORNEY GENERAL.

Court of Errors and Appeals of New Jersey.

March 26, 1890.

Appeal from court of chancery.

On appeal from order of injunction obtained by the attorney general against the Standard Under-Ground Cable Company.

A. Q. Keasbey & Sons, for appellant. The Attorney General, pro se.

KNAPP, J. The proceeding which gives rise to this appeal was had under the seventh section of the act of the legislature approved April 18, 1884, entitled "An act to provide for the imposition of state taxes upon certain corporations, and for the collection thereof." The provision of that section is "that, in addition to other remedies for the collection of such tax, [taxes imposed under that act,] it shall be lawful for the attorney general, either of his own motion or upon request of the state comptroller, whenever any tax due under this act from any company shall have remained in arrears for a period of three months after the same shall have become payable, to apply to the court of chancery, by petition in the name of the state, on five days' notice to such corporation, * * * for an injunction to restrain such corporation from the exercise of any franchise or the transaction of any business within this state until the payment of such tax, and interest due thereon, and the costs of such application. * * * The said court is hereby authorized to grant such injunction if a proper case appear; and upon the granting and service of such injunction it shall not be lawful for such company thereafter to exercise any franchise or transact any business in this state until such injunction be dissolved." The decretal order appealed from awarded such injunction against the appellant for failure to pay a tax of one-tenth of 1 percent, on its capital stock, imposed by the state board of assessors under the provisions of the fourth section of said act, upon the appellants as a manufacturing corporation not carrying on its business in this state. The act, as its title imports, had for its object the imposition of a license or franchise tax upon certain of the corporations of this state. The first section directs the tax against certain corporations doing business in this state. It embraces telegraph, telephone, cable, electric light, and certain express companies; every gas, palace, parlor, or sleeping car company; every oil or pipe line company; and every fire, marine, life, or accident insurance company. The second section requires statements to be made to state officers by the corporations named in section 1 of certain data to serve as bases for assessments. The fourth section directs the rate of taxation to be levied against the corporations specified in the first section, and then further provides that "all other corporations incorporated under the laws of this state, and not hereinbefore provided for, shall pay a yearly license fee or tax of one-tenth of one per centum on the amount of the capital stock of such corporation: provided, that this act shall not apply to railway, canal, or banking corporations, or to savings banks, cemeteries, or religious corporations, or purely charitable or educational associations, or manufacturing companies or mining companies carrying on business in this state."

The appellant is a corporation incorporated under the laws of this state. It is a manufacturing company. It has an office in this state, and procures from other manufacturing corporations in the state much of the material used by it; but the manufacture of its special product, into which these materials enter, is carried on in the state of Pennsylvania. It must therefore, under the rulings in this court, be held to be a company not transacting its business in this slate, within the meaning of this law. Glucose (Jo. v. State, 43 N. J. Eq. 280, 5 Atl. Rep. 803. But it is objected that this law, if it be construed so as to uphold the tax against the appellant, is violative of that provision of the amended constitution of this state found in article 4, § 7, par. 12, which provides that "property shall be assessed for taxes under general laws, and by uniform rules, according to its true value." The tax, payment of which is sought to be enforced by this proceeding, does not fall within that constitutional provision. The power of the legislature to impose taxes on persons, property, business, and franchises is unlimited, save, only, by such restrictions upon the exercise of that power as are found in the organic law, or such as are inherent in the nature of the subject. The fault of this position is the assumption that this tax is one upon property. Such, manifestly, is not the case. The law in question imposes a tax on certain corporations by way of a license for exercising corporate franchises. It is declared to be such tax by the act; and, although it is laid on this class of corporations with respect to the capital stock, the tax possesses the legal quality of a license or franchise tax. Evening Journal Ass'n v. State Board of Assessors, 47 N. J. Law, 36; Cooley, Tax'n, (2d Ed.) 379, and cases cited. Upon the power of the legislature to impose such a tax, there exists no restriction in our constitution. As a license or franchise tax, it is not within the equality clause of the constitution referred to. In those states in the Union having constitutional provision requiring equality in the taxation of property, it is uniformly held that such provisions do not abridge or apply to the legislative power of indirect taxation, by taxes on franchises, privileges, trades, and occupations. Id. 176 et seq., and cases cited. State Board of Assessors v. Railroad Co., 48 N. J. Law, 146, 347, 4 Atl. Rep. 578.

It is next insisted that this law is void because it is a regulation of commerce between the states, and an infringement upon the exclusive power of congress over that subject, under the provisions of the federal constitution. This position seems to be based on two grounds: First, that all corporations holding a franchise from one state, and performing their functions in another, are engaged in interstate commerce; and, second, that the business of this particular corporation, namely, the manufacture of electric cables, is itself internal commerce. These grounds impress me only by their novelty. Our general laws for the organization of corporations permit companies to transact their business in other states. It certainly has not been supposed that the exercise of this right put them beyond the reach of taxation everywhere, or brought them into any relations whatever with the provision in the federal constitution referred to. No case is cited giving the slightest countenance to the notion that to hold a charter from one state, when the corporate property is located or corporate business transacted in another state, relieves the corporation in both or either state from taxation in any form which the legislative power may, under its state constitution, adopt; nor any case in which these conditions are given the slightest consequence in ascertaining the limit of the state power to tax either the property of the corporation where such property has its sites, or its franchises in the state which granted them. Under the point that the appellant is engaged in, or is an instrument in, interstate commerce, cases in the federal courts...