Atlantic Refining Co v. Commonwealth of Virginia

• Decision Date: 08 November 1937
• Docket Number: No. 1,1
• Citation: 82 L.Ed. 24,302 U.S. 22,58 S.Ct. 75
• Parties: ATLANTIC REFINING CO. v. COMMONWEALTH OF VIRGINIA. Re
• Court: U.S. Supreme Court

302 U.S. 22

58 S.Ct. 75

82 L.Ed. 24

ATLANTIC REFINING CO.

v COMMONWEALTH OF VIRGINIA.

No. 1.

Reargued Oct. 11, 1937.

Decided Nov. 8, 1937.

Messrs. T. Justin Moore and Lewis F. Powell, Jr., both of Richmond, Va., for appellant.

Messrs. Abram P. Staples, of Roanoke, Va., and W. W. Martin, of Richmond, Va., for the Commonwealth of Virginia.

Mr. Justice BRANDEIS delivered the opinion of the Court.

The Atlantic Refining Company is a Pennsylvania corporation engaged in refining and selling gasoline and petroleum which it markets throughout the United States and in foreign countries. In 1929 the year's sales aggregated more than $153,000,000. Prior to 1930 the company had never applied for permission to do business in Virginia. It had not done any intrastate business there; and had no property or place of business within the State. It had done some interstate business, but had not paid, or been requested by the State to pay, either an entrance fee or taxes. In January, 1930, the company applied to the State Corporation Commission for a certificate of authority to do intrastate business. Its net assets were then $132,196,275; its authorized capital $100,000,000; its issued capital $67,049,500. The Commission granted the certificate; but, as prescribed by chapter 53, p. 79, § 38a of the Act of Assembly of Virginia, 1910; Tax Code of Virginia (Michie, 1930, p. 2185) § 207, set forth in the margin,¹ exacted for the privilege $5,000 as an entrance fee. Payment was made under protest. Having duly claimed that by requiring it the statute violated the Federal Constitution, the company requested refund of the amount paid. The Commission refused to make the refund; the highest court of the State affirmed its order, 165 Va. 492, 183 S.E. 243; and the case is here on the company's appeal.

Answering the company's statement under rule 12 (28 U.S.C.A. following section 354), the Commonwealth opposed our taking jurisdiction. Its objection was that the appeal presented no substantial federal question, since, in 1918, the validity of the statute was challenged under similar circumstances and sustained by a unanimous Court in General Railway Signal Co. v. Virginia, 246 U.S. 500, 38 S.Ct. 360, 62 L.Ed. 854; and, in 1928, was again sustained by a per curiam opinion, in Western Gas Construction Co. v. Virginia, 276 U.S. 597, 48 S.Ct. 319, 72 L.Ed. 723. The company asks us to overrule these decisions, contending that they are inconsistent with other and later cases. It asserts that in sustaining the Virginia statute this Court followed views expressed in Baltic Mining Co. v. Massachusetts, 231 U.S. 68, 87, 34 S.Ct. 15, 58 L.Ed. 127; and that the doctrine of the Baltic Case has since been repudiated, in Alpha Portland Cement Co. v. Massachusetts, 268 U.S. 203, 218, 45 S.Ct. 477, 481, 69 L.Ed. 916, 44 A.L.R. 1219, and Cudahy Packing Co. v. Hinkle, 278 U.S. 460, 466, 49 S.Ct. 204, 206, 73 L.Ed. 454. Consideration of the jurisdiction of this Court was postponed to the hearing on the merits.

By the statute foreign corporations are divided, for the purpose of fixing the amount of the entrance fee, into twelve classes. The fee for the lowest class—those whose authorized capital stock is $50,000 or less—is $30. The fee for the highest class—those whose authorized capital stock exceeds $90,000,000—is $5,000. The company does not object to the subject or the occasion of the exaction. Its objection is solely to the measure. Its claim is that the statute imposes an unconstitutional condition because it determines the amount of the fee by the amount of the company's authorized capital. The contention is that a fee so determined necessarily burdens interstate commerce, denies due process, and denies equal protection of the laws.

Unlike the cases in which the doctrine of unconstitutional conditions has been applied, the condition here questioned does not govern the corporation's conduct after admission. But it may be assumed that the rule declared in Terral v. Burke Construction Co., 257 U.S. 529, 42 S.Ct. 188, 66 L.Ed. 352, 21 A.L.R. 186, is applicable also to conditions to be performed wholly before admission; and that the $5,000 must be refunded if its exaction involved denial of any constitutional right. For we are of opinion that in refusing to grant the authority to carry on local business except upon payment of the $5,000 no constitutional right of the company was violated.

First. Virginia recognized the constitutional right of the company to carry on interstate business without paying an entrance fee. On the other hand, the company conceded that the Federal Constitution does not confer upon it the right to engage in intrastate commerce in Virginia unless it has secured the consent of the State. Compare Hemphill v. Orloff, 277 U.S. 537, 548, 48 S.Ct. 577, 579, 72 L.Ed. 978. Whether the privilege shall be granted to a foreign corporation is a matter of state policy. Virginia might refuse to grant the privilege for any business, or might grant the privilege for some kinds of business and deny it to others.² It might grant the privilege to all corporations with small capital while denying the privilege to those whose capital or resources are large. It might grant the privilege without exacting compensation; or it could insist upon a substantial payment as a means of raising revenue.

As the entrance fee is not a tax, but compensation for a privilege applied for and granted, no reason appears why the State is not as free to charge $5,000 for the privilege as it would be to charge that amount for a franchise granted to a local utility, or for a parcel of land which it owned. If Virginia had the power to charge $5,000 for the privilege, the particular measure applied by the Legislature in arriving at that sum would seem to be legally immaterial; and the company is in a position like that of the taxpayer in Castillo v. McConnico, 168 U.S. 674, 680, 18 S.Ct. 229, 232, 42 L.Ed. 622, of whom it was said: 'His right is limited solely to the inquiry whether, in the case which he presents, the effect of applying the statute is to deprive him of his property without due process of law.' The validity even of a tax 'can in no way be dependent upon the mode which the state may deem fit to adopt.' Home Insurance Co. v. New York, 134 U.S. 594, 600, 10 S.Ct. 593, 595, 33 L.Ed. 1025. 'The selected measure may appear to be simply a matter of convenience in computation * * * and if the tax purports to be laid upon a subject within the taxing power of the state, it is not to be condemned by the application of any artificial rule.' Kansas City, Fort Scott & Memphis Ry. Co. v. Botkin, 240 U.S. 227, 233, 36 S.Ct. 261, 262, 60 L.Ed. 617. Compare Ray Consolidated Copper Co. v. United States, 268 U.S. 373, 376, 45 S.Ct. 526, 527, 69 L.Ed. 1003; New York v. Latrobe, 279 U.S. 421, 427, 49 S.Ct. 377, 379, 73 L.Ed. 776, 65 A.L.R. 1341.

Second. Even if the Federal Constitution conferred upon every foreign corporation the right to enter any State and carry on there a local business upon paying a reasonable fee, there is nothing in the record to show that the $5,000 charged is more than reasonable compensation for the privilege granted. The payment required is a single, nonrecurrent charge—a payment in advance for a privilege extending into the long future. No matter how large the company's local business may be, no matter how much, or how often, its issued capital may be increased, no additional entrance fee is payable. The value of such a privilege cannot be gauged by the sales expected in the year 1930.³ They may increase rapidly from year to year. The corporation with $132,196,275 assets in 1930 may have more than double the amount a decade later. Nor is it unreasonable to base the fee upon the amount of the capital authorized at the time of the application, instead of charging a fee based upon the amount of the capital then issued, or upon the amount of assets then owned, and exacting later additional fees if, and when, more capital stock is issued or more assets are acquired. By fixing the fee in accordance with the capital authorized at the time of the application for admission, the State relieves itself of the necessity of keeping watch of changes in the future in these respects.

Third. It is contended that a fee measured solely by the amount of the corporation's authorized capital stock necessarily burdens interstate commerce. In support of that contention it is said that the authorized capital stock represents property located in forty-seven States and several foreign countries used in both interstate and foreign commerce. But this is not true. Authorized capital has no necessary relation to the property actually owned or used by the corporation; furthermore, the fee for which it is the measure represents simply the privilege of doing a local business. Because the entrance fee does not represent either property or business being done, it is immaterial that in fixing its amount no apportionment is made between the property owned or the business done within the State and that owned or done elsewhere.

The entrance fee is obviously not a charge laid upon interstate commerce; nor a charge furtively directed against interstate commerce; nor a charge measured by such commerce. Its amount does not grow or shrink according to the volume of interstate commerce or the amount of the capital used in it. The size of the fee would be exactly the same if the company did no interstate commerce in Virginia or elsewhere. The entrance fee is comparable to the charter, or incorporation, fee of a domestic corporation—a fee commonly measured by the amount of the capital authorized.⁴ It has never been doubted that such a charge to a domestic corporation whatever the amount is valid, although the company proposes to engage in interstate commerce and to acquire property also in other States. No reason is suggested why a different rule should be applied to the entrance fee charged...