Chicago, M., St. P. & P.R. Co. v. Harmon
| Decision Date | 17 January 1931 |
| Docket Number | 6705. |
| Citation | 295 P. 762,89 Mont. 1 |
| Parties | CHICAGO, M., ST. P. & P. R. CO. v. HARMON, Secretary of State. |
| Court | Montana Supreme Court |
Appeal from District Court, Lewis and Clark County; A. J. Horsky Judge.
Action by the Chicago, Milwaukee, St. Paul & Pacific Railroad Company against W. E. Harmon, as Secretary of State.Judgment for plaintiff, and defendant appeals.
Affirmed as modified, and remanded, with direction.
L. A Foot, Atty. Gen., T. H. MacDonald and L. V. Ketter, Asst Attys.Gen., for appellant.
Murphy & Whitlock, of Missoula, and H. H. Field, of Chicago, Ill., for respondent.
The plaintiff, a Wisconsin corporation, having paid under protest certain fees demanded of it by the secretary of state, upon the filing of its first annual report, as required by law, brought action to recover the amount so paid.To the complaint filed, the defendant interposed a demurrer, which was overruled, and thereupon the defendant answered, admitting the facts alleged, but raising questions of law.A demurrer to this answer was sustained, and judgment in favor of the plaintiff followed.Defendant has appealed from the judgment.
The fees in suit were demanded pursuant to the provisions of chapter 95, Laws of 1925, which are, in part, as follows:
Section 3 provides the manner of computing the authorized capital stock employed in this state.
at the time of filing its articles.
The undisputed allegations of the complaint are as follows: The plaintiff filed a certified copy of its articles of incorporation in the office of the secretary of state in June, 1927, and paid a filing fee of $50.Its authorized capital stock then, and at all times herein mentioned, aggregated 5,021,721 shares, of which 2,923,804 were preferred stock of a par value of $100 per share, and 2,097,971 were common stock of no par value.At the time of filing its articles, plaintiff owned no property in, and was transacting no business within, the state of Montana, but at the beginning of the following year it acquired all of the property of the Chicago, Milwaukee & St. Paul Railway Company, a complete railway line extending from Chicago to Seattle, fully equipped, and thereafter operated the railway and engaged in both interstate and intrastate business within Montana.
In February, 1929, plaintiff filed with the secretary of state its first annual report, as required by chapter 95, Laws of 1925, above, containing all the information thereby required.This report shows that less than half of the plaintiff's "authorized stock" had been theretofore issued.On filing the report, plaintiff tendered to the secretary of state a filing fee of $5, which was refused; demand being made for the payment of $7,705.57, being the "additional fee" for which provision is made in section 4 of the act above, computed as required by section 3, less the $50 fee paid at the time of filing plaintiff's articles of incorporation.In order to avoid the penalties provided by section 6 of the act, on failure to pay such "additional fee,"plaintiff paid the full amount demanded, under protest, and commenced this action to determine the validity of the charge made.
It is conceded that the fee is correctly computed and was due at the time it was paid, provided the state can lawfully impose such a fee upon this plaintiff; in other words, Is chapter 95, Laws of 1925, a valid enactment with respect to the plaintiff corporation, or, as to plaintiff, is it void by reason of some contravening prohibition of the Constitution of the United States, on which plaintiff is entitled to rely?
The position of defendant is that the fee demanded was but an "entrance fee" payable for the privilege of coming into the state for the transaction of business, analogous to that considered in People ex rel. D. W. Griffith, Inc., v. Tax Commission, 249 N.Y. 369, 164 N.E. 253, as to which class of fees, as distinguished from a franchise or excise tax, the measure of the burden rests in the discretion of the state, under the ruling in Hanover Insurance Co. v. Harding,272 U.S. 494, 47 S.Ct. 179, 182, 71 L.Ed. 372, 49 A. L. R. 713.
While our statute bears some analogy to that considered in the Griffith Case, there is a marked distinction between the two.The New York statute clearly provides for an "entrance fee" based on the percentage of the stock of a corporation "employed in the state," the amount of which is determined by the volume of business done during the first year after entry, but a single fee, the computation of which is, for the purpose of intelligent action, deferred for the period of one year.
Here plaintiff's articles of incorporation were filed pursuant to the mandate of section 6651,Revised Codes 1921, and, at the time of such filing, plaintiff's "entrance fee" was due and payable and was paid.Had the property and business conditions of the corporation remained without change, no further fee would have been exacted under the provisions of chapter 95, Laws of 1925.The fee protested is, as designated in the act, an "additional fee" to be computed and exacted whenever an annual report of a corporation doing business in the state shows an increase in property owned and business done within the state.It is, in its nature, no different from the fee for which provision was made in section 165,Revised Code 1907, on the filing of a certificate of increase in capital stock, or in case of alteration or amendment of the charter or articles of incorporation of any foreign corporation doing business in this state, or of increasing its capital stock, or continuing its corporate existence (section 4413, subd. 7,Rev. Codes 1907).It differs from the ordinary franchise or annual tax, in that it is added to the original "entrance fee" and is in the nature of a condition subsequent imposed upon a foreign corporation at the time of its entry, which may or may not thereafter attach.
However, we deem it unnecessary here to determine whether the fee exacted should be classed as an admission fee, a franchise fee, or an annual fee.It is true that, in the Hanover Insurance Co. Case, although the fee there considered was an annual tax on "net receipts," Mr. Chief Justice Taft indulged in certain pronouncements respecting the right of a state to exercise its discretion in declaring on what conditions it would permit a foreign corporation to enter its jurisdiction.These pronouncements are based upon the following general principles:
A corporation, being but a creature of statute, can have no actual existence outside the state of its creation ( Augusta Bank v. Earle,13 Pet. 519, 10 L.Ed. 274), and can do business in a sister state only by reason of comity between the states (American Christian Union v. Yount,101 U.S. 352, 25 L.Ed. 888).It is not a "person," within the meaning of section 2, article 4, of the Constitution of the United States, the privilege and immunity clause (Pembina Mining Co. v. Pennsylvania,125 U.S. 181, 8 S.Ct. 737, 31 L.Ed. 650); and, while it is considered a person or citizen within the meaning of the equal protection clause (section 1, Fourteenth Amendment), it cannot invoke the equal protection clause until after it has been duly admitted to do business in the state(Blake v. McClung,172 U.S. 239, 19 S.Ct. 165, 43 L.Ed. 432).Therefore, generally speaking, with reference to the position of the corporation only, a state may exercise its discretion in either excluding foreign corporations of a given class, or imposing conditions upon its admission which the corporation must meet or forego its intent to enter the state for the purpose of conducting business therein.Waters-Pierce Oil Co. v. Texas,177 U.S. 28, 20 S.Ct. 518, 44 L.Ed. 657;People of the State of New York v. Roberts,171 U.S. 658, 19 S.Ct. 70, 43 L.Ed. 323.
However as stated by the learned Chief Justice in the Hanover Insurance Co. Case, on which the defendant relies: ...
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