Davis v. Wallace

Decision Date09 January 1922
Docket NumberNo. 329,329
Citation257 U.S. 478,42 S.Ct. 164,66 L.Ed. 325
PartiesDAVIS, Director General of Railroads, et al. v. WALLACE et al
CourtU.S. Supreme Court

Messrs. C. W. Bunn, D. F. Lyons, and M. L. Countryman, all of St. Paul, Minn., for appellants.

Mr. George E. Wallace, of Bismarck, N. D., for appellees.

Mr. Justice VAN DEVANTERdelivered the opinion of the Court.

This is a suit by the Director General of Railroads and five railroad companies to enjoin the collection of a special excise tax assessed against each of the companies for the years 1918 and 1919 under a statute of North Dakota, c. 222,Laws 1919, which declares:

'Every corporation, joint-stock company or association, now or hereafter organized under the law of any other state, the United States or a foreign country, and engaged in business in the state during the previous calendar year, shall pay annually a special excise tax with respect to the carrying on or doing business in within the state bears to its total business or association, equivalent to 50 cents for each $1,000.00 of the capital actually invested in the transaction of business in the state: Provided, that in the case of a corporation engaged in business partly within and partly without the state, investment within the state shall be held to mean that proportion of its entire stock and bond issues which its business within and without the state, and where such within and without the state, and where such business within the state is not otherwise more easily and certainly separable from such entire business within and without the state, business within the state shall be held to mean such proportion of the entire business within and without the state, as the property of such corporation within the state bears to its entire property employed in such business both within and without the state; provided, that in the case of a railroad, telephone, telegraph, car or freight-line, express company or other common carrier, or a gas, light, power or heating company, having lines that enter into, extend out of or across the state, property within the state shall be held to mean that proportion of the entire property of such corporation engaged in such business which its mileage within the state bears to its entire mileage within and without the state.The amount of such annual tax shall in all cases be computed on the basis of the average amount of capital so invested during the preceding calendar year: Provided, that for the purpose of this tax an exemption of $10,000.00 from the amount of capital invested in the state shall be allowed: Provided, further, that this exemption shall be allowed only if such corporation, joint-stock company or association furnish to the Tax Commissioner all the information necessary to its computation.'

Each of the five railroad companies was subjected in the usual way to a full property tax on all of its property within the state, and that tax is not here in question.The suit relates only to the special excise tax.

The companies were all organized under the laws of states other than North Dakota and all own lines of railroad extending from other states into or through that state.These lines were under federal control, and operated by the Director General during the years for which the excise tax was assessed.

The taxing officers at first assessed the tax for the year 1918 against these companies by using in its computation the mileage ratio prescribed in the second proviso of the statute; but this court held that the tax so assessed was an unwarranted interference with interstate commerce and a taking of property without due process of law.Wallace v. Hines, 253 U. S. 66, 40 Sup. Ct. 435, 64 L. Ed. 782.Thereupon the taxing officers assessed the tax for that year, and also for 1919, by using in its computation the ratio specified in the last preceding clause of the statute—that is to say, a ratio fixed by contrasting the value of the company's railroad within the state with the value of its entire railroad within and without the state.

In the District Court the validity of the tax assessed on the new or substituted basis was challenged on the grounds (a) that as to railroad companies whose lines lie partly within and partly without the statethe statute does not authorize or sanction a tax assessed on that basis; (b) that the statute imposes the tax only as a special excise on doing business in the state, and these companies were not thus engaged during the years for which the tax was assessed, their railroads being then under federal control and operated exclusively by the Director General; and (c) that an excise tax assessed against these companies on the new or substituted basis operates necessarily to burden interstate commerce and to take property without due process of law, and so is in conflict with the commerce clause of the Constitution and the due process clause of the Fourteenth Amendment.

At an early stage in the suit three judges granted an interlocutory injunction against the enforcement of the tax; but on the final hearing, which was on bill and answer, a decree was entered dismissing the bill on the merits.The plaintiffs then sought and were allowed a direct appeal to this court under section 238 of the Judicial Code(Comp. St. § 1215).

The case made by the bill involved a real and substantial question under the Constitution of the United States and the amount in controversy exceeded $3,000, exclusive of interest and costs, so the case plainly was cognizable in the District Court.In such a...

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73 cases
  • First Nat. Bank of Turtle Lake v. Bovey, Shute & Jackson, Inc.
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    • North Dakota Supreme Court
    • Diciembre 30, 1922
    ...proces of law. (3) That it denies the mortgagor or owner of the property equal protection of the law, the law itself being only a penalty to compel the payment of the debt. In the case of J. C. Davis, Director General of Railroads, v. Wallace, 257 U. S. 478, 42 Sup. Ct. 164, 66 L. Ed. 325, decided at the October, 1921, term of the Supreme Court of the United States, the court said: “The case made by the bill involved a real and substantial question under the Constitution of the United...
  • Douglas v. Noble
    • United States
    • U.S. Supreme Court
    • Febrero 19, 1923
    ...statute would, of course, violate the due process clause of the Fourteenth Amendament. Its construction is a question of state law. Since the case is here on appeal from a federal court, we must condider it. Darvis v. Wallace, 257 U. S. 478, 42 Sup. Ct. 164, 66 L. Ed. 325. But in passing upon such questions we follow applicable decisions of the highest court of the state. Fallbrook Irrigation District v. Bradley, 164 U. S. 112, 154, 17 Sup. Ct. 56, 41 L. Ed. 369. The statutory provisions...
  • Milliken v. Stone, 114.
    • United States
    • U.S. Court of Appeals — Second Circuit
    • Enero 10, 1927
    ...from making arrests and instituting prosecutions, whereas here it is sought to command the government officials to arrest and prosecute. Smith v. Kansas City, 255 U. S. 180, 41 S. Ct. 243, 65 L. Ed. 577, and Davis v. Wallace, 257 U. S. 478, 42 S. Ct. 164, 66 L. Ed. 325, involved suits to restrain an affirmative action under statutes of the United States. In Truax v. Raich, 239 U. S. 33, 36 S. Ct. 7, 60 L. Ed. 131, L. R. A. 1916D, 545, Ann. Cas. 1917B, 283, an injunction...
  • Forshey v. Principi
    • United States
    • U.S. Court of Appeals — Federal Circuit
    • Abril 01, 2002
    ...391, 58 S.Ct. 334, 82 L.Ed. 319 (1938) ("Because of the federal question raised by the bill of complaint, the District Court had jurisdiction to determine all the questions in the case, local as well as federal."); Davis v. Wallace, 257 U.S. 478, 482, 42 S.Ct. 164, 66 L.Ed. 325 (1922) ("[T]he jurisdiction of that [district] court, and ours in reviewing its action, extends to every question involved, whether of federal or state law...."); Greene v. Louisville & Interurban R.R. Co.,...
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1 books & journal articles
  • How Many Times Was Lochner-era Substantive Due Process Effective? - Michael J. Phillips
    • United States
    • Mercer Law Reviews Mercer University School of Law
    • Invalid date
    ...216 U.S. 146, 162-64 (1910), which used the Commerce Clause to strike down a state license tax on foreign corporations, the Court specifically stated that it was not applying due process or equal protection. Davis v. Wallace, 257 U.S. 478, 482-85 (1922), was not decided on constitutional grounds. Finally, I do not read Willcox v. Consolidated Gas Co., 212 U.S. 19, 55 (1909), in which the Court reversed a lower court decision invalidating a state gas rate determination,...