Air-Way Elec. Appliance Corp. v. Archer

Citation279 F. 878
Decision Date11 February 1922
Docket Number193.
PartiesAIR-WAY ELECTRIC APPLIANCE CORPORATION v. ARCHER, Treasurer of State of Ohio, et al.
CourtU.S. District Court — Southern District of Ohio

Tracy Chapman & Welles, of Toledo, Ohio, and L. F. Sater, of Columbus, Ohio, for plaintiff.

John G Price, Atty. Gen., and Ray Martin and John M. Parker, Sp Counsel, all of Columbus, Ohio, for defendants.

Before DONAHUE, Circuit Judge, and SATER and PECK, District Judges.

PER CURIAM.

The court, as constituted for the hearing of this cause, was assembled, in accordance with the provisions of section 266 of the federal Judicial Code (Comp. St. Sec. 1243), to determine whether a temporary injunction should issue on account of the alleged invalidity of certain statutory enactments by the General Assembly of Ohio.

The plaintiff, a Delaware corporation for profit, created in July, 1920, is engaged at Toledo, Ohio, in the manufacturing business. Its authorized capital stock consists of 400,000 shares of common non-par stock, one-half of which is denominated common stock, and the residue, as is permitted by section 8728-- 1, Ohio G.C., is known as founders' stock. It began to do business in Ohio August 1, 1920, and thereafter was duly admitted into the state for that purpose. The Ohio statute first recognizing corporations with no par value stock was passed by the General Assembly April 16, 1919 (108 O.L. pt 1, p. 507), section 11 of such act being designated section 8728-- 11 of the General Code. That section was repealed, and an amended section 8728-- 11 substituted in its stead, by the act of February 4, 1920 (108 O.L. pt. 2, p. 1287). The amended section was repealed by the enactment of April 28, 1921 (109 O.L., p. 273), and its place was taken by the present section 8728-- 11, which section by appropriate reference is also amendatory of section 5503. The recital in the notice given to plaintiff that the fee or tax of $20,000 levied against it for the privilege of exercising its franchises in Ohio for the fiscal year beginning July 1, 1920, was charged under section 5503, is therefore unimportant, although the rate at which the fee or tax was computed is that fixed by the present section 8728-- 11.

Under section 5499, a foreign corporation for profit doing business in the state, and owning and using a part or all of its capital or plant in the state, is annually, within the month of July, required to make a verified report, in writing, on a prescribed form, to the tax commission, showing, among other things, the amount of its capital stock subscribed, issued, and paid up, the character of its business, and the places in which it is conducted, the name and location of its office or offices, and of its officer or officers, the value of the property owned and used by it in the state, where such property is situated, and the value of its property owned and used outside of the state, and where such property is located. Sections 5499, 5500, 5501. From such report and other pertinent facts coming to its knowledge, the tax commission, on the first Monday in September, determines the proportion of the company's authorized capital stock represented by its property and business in the state, and on the first Monday of October certifies the amount of such proportion to the auditor of state. Section 5502.

On or before October 15 the auditor is required, by the present section 8728-11, to charge, under section 5503, for collection from such company for the privilege of exercising its franchises in the state, a fee of three-twentieths of 1 per cent. upon the proportion of the authorized preferred stock represented by property owned and used and business transacted in the state, and 5 cents per share upon the proportion of the number of shares of authorized common stock represented by property owned and used and business transacted therein. The fee is payable on or before the following December 1. Section 5503. The fees, taxes, and penalties required to be levied are made a first and best lien on all the corporation's property. Section 5506. The penalties which may be inflicted for nonpayment of the sum assessed are a fine for each day's delinquency (section 5507), the cancellation of the corporation's authority to do and an injunction against its doing business within the state (sections 5509, 5512), and ouster by quo warranto proceedings from exercising its privileges and franchises in Ohio.

The plaintiff executed its verified report on July 30, 1921, and filed the same with the tax commission on August 1. Its report shows that, of the 400,000 shares of authorized stock, 40,475 shares of so-called founders' stock and 10,010 shares of common stock had been subscribed for and issued; that the actual value of its property, including its real estate of the value of $29,500, is $458,278.56, which sum is also the total value of its property owned and used in Ohio; that the amount of business transacted in Ohio in the 11 months of its operation was $250,594.58; that the value of its property owned and used outside of Ohio is nothing; that all of its business had been 'handled in Ohio'; and that all of its property is taxed in Ohio-- the assessed value for taxation being $213,240. Plaintiff charges injunctive relief should be granted because the fee or tax assessed against it constitutes a cloud upon the title to its property, is erroneously computed, excessive, confiscatory, and based on enactments (especially sections 5503 and 8728-- 11) which create a classification which is unreasonable, arbitrary, unsubstantial and discriminatory against foreign as compared with domestic corporations, which are in conflict with the provisions of the state Constitution prohibiting the enactment of retroactive laws (section 28, art. 2), the equal protection clause (section 2, art. 1, Bill of Rights), and the uniform taxation rule (article 12, Sec. 2), and which are also violative of the commerce clause of the federal Constitution, the due process of law and the equal protection clauses of the Fourteenth Amendment and also the clause prohibiting the making and enforcement of laws which abridge the privileges or immunities of citizens of the United States.

At the threshold is the question as to whether the sum charged against plaintiff was imposed under a retroactive law and is therefore illegal, for the reason that section 28, art. 2, of the Constitution of Ohio declares:

'The General Assembly shall have no power to pass retroactive laws, or laws impairing the obligation of contracts.'

The act embracing the present section 8728-- 11 was approved by the Governor on May 14, 1921, and filed with the secretary of state on May 17. Section 1c, art. 2, of the state Constitution provides that 'no law passed by the General Assembly shall go into effect until ninety days after it shall have been filed by the Governor in the office of the secretary of state, ' excepting, by the terms of section 1d, 'laws providing for tax levies, appropriations for the current expenses of the state government and state institutions, and emergency laws necessary for the immediate preservation of the public peace, health or safety, shall go into immediate effect. ' The act contains no emergency clause, and does not purport to be and is not an emergency law. The basis for the computation of the plaintiff's franchise tax or fee is the proportion of the authorized stock, preferred and common, represented by property owned and used and business transacted in the state at the close of June 30. If the act became effective when it was filed with the secretary of state on May 17, the computation of the sum charged against the plaintiff must be according to the present section 8728-- 11. Dodge v. Nevada Nat. Bank, 109 F. 726, 730, 48 C.C.A. 626 (C.C.A. 9). If the act did not become effective until 90 days subsequent to such filing-- i. e., until August 15--the tax or fee assessed should be reckoned at the much lower rate prescribed by the act of February 4, 1920; else a tax would be retroactively imposed on subject-matter not theretofore liable to the same. Dodge v. Nevada Nat. Bank, supra; Smith v.

Dirck, 283 Mo. 188, 223 S.W. 104, 11 A.L.R. 510; Wagoner v. Evans, 170 U.S. 588, 18 Sup.Ct. 730, 42 L.Ed. 1154; Burgess v. Salmon, 97 U.S. 381, 24 L.Ed. 1104; Metz v. Hagerty, 51 Ohio St. 521, 38 N.E. 11; Cincinnati v. Seasongood, 46 Ohio St. 296, 21 N.E. 630; Drexel & Co. v. Commonwealth, 46 Pa. 31; Young v. Town of Henderson, 76 N.C. 420.

A tax may be laid for the double purpose of regulation and revenue. Adler v. Whitbeck, 44 Ohio St. 539, 572, 9 N.E. 672; Fritsch v. Board of Commissioners of Salt Lake City, 15 Utah, 83, 95, 47 P. 1026; Parish of E. Feliciana v. Levy, 40 La.Ann. 332, 4 So. 309. It may also be exacted for the privilege of exercising corporate franchises in the state and for general revenue (State v. Ferris, 53 Ohio St. 314, 329, 41 N.E. 579, 30 L.R.A. 218; Ashley v. Ryan, 49 Ohio St. 504, 525, 31 N.E. 721; Gundling v. Chicago, 177 U.S. 183, 189, 20 Sup.Ct. 633, 44 L.Ed. 725; the enactment of laws providing for excise and franchise taxes being authorized by section 10, art. 12, of the state Constitution. If the statute of 1921 was enacted as a revenue measure, as well as to fix the charge against foreign corporations for the privilege of exercising their franchises in the state, it then falls within the terms of section 1d, art. 2, and became effective on May 17. Section 8728-- 11 and sections 5503 and 5516, which are a part of the Ohio Tax Commission Act, mention the sum to be charged as a fee. Other sections of such act characterize such sum as a fee or tax. See sections 5505, 5506, 5509, 5511, 5512.

The terms 'fee' and 'tax' were, in the legislative mind, convertible and equivalents. It is...

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4 cases
  • Schlosser v. Welsh, 66.
    • United States
    • United States District Courts. 8th Circuit. United States District Courts. 8th Circuit. District of South Dakota
    • 19 Febrero 1934
    ...Ed. 150; Porter v. Investors' Syndicate, 286 U. S. 461, 52 S. Ct. 617, 76 L. Ed. 1226; Air-Way Electric Appliance Corp. v. Archer (D. C). 279 F. 878. It is equally well settled, however, that, where the legislative stage has passed and the judicial stage has been reached, the above rule doe......
  • City Ry. Co. v. Beard
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    • United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio
    • 2 Octubre 1923
    ......When. Airway Electric Appliance Corp. v. Archer (D.C.) 279 F. 878 (a three-judge case), ......
  • Adair v. Miller
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    • 25 Noviembre 1922
    ......Nevada Nat. Bank, 109. F. 726, approved in Air-way Electric Appliance. Corporation v. Archer, 279 F. 878. ......
  • United States v. Gurley
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • 28 Febrero 1922

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