Gregg v. Sanford

• Decision Date: 02 January 1895
• Docket Number: 15.
• Citation: 65 F. 151
• Parties: GREGG v. SANFORD et al.
• Court: U.S. Court of Appeals — Third Circuit

65 F. 151

GREGG v. SANFORD et al.

No. 15.

United States Court of Appeals, Third Circuit.

January 2, 1895

W. U Hensel and Lyman D. Gilbert, for appellant.

George Tucker Bispham and B. H. Bristow, for appellees.

Before ACHESON, Circuit Judge, and BUTLER and WALES, District Judges.

ACHESON Circuit Judge.

The first question which we will consider is whether the Adams Express Company is subject to taxation under the several acts of assembly of the state of Pennsylvania recited in the bill namely of May 1, 1868, of April 24, 1874, of March 20, 1877 and of June 7, 1879, whereby an annual tax was imposed upon the 'capital stock' of all companies 'incorporated' by or under any law of the state of Pennsylvania, and of every company 'incorporated' by any other state and doing business in the state of Pennsylvania. It appears that the Adams Express Company was formed by certain individuals, by articles of agreement dated July 1, 1854, signed in the city of New York, where the principal office of the company was located, for the purpose of carrying on the express business for a limited period. The articles of association provide that the proportionate interests of the associated members shall be represented by shares of stock-- having, however, no par or fixed money value-- transferable on the books of the association; that the death of a shareholder shall not dissolve the association; that the business of the association shall be conducted by a board of managers, and its property held by three trustees. By statutes of the state of New York existing at the date of the formation of the Adams Express Company, it was enacted that any joint-stock company or association might sue or be sued in the name of the president or treasurer thereof, and that no suit should abate by their articles of association that the death of any stockholder or the assignment of his stock should not work a dissolution of the association, and to devolve upon any three or more of the 'partners' the sole management of their business. These statutes, however, declared that nothing therein contained should be construed to confer on joint-stock companies or associations any of the rights or privileges of corporations, except as therein specially provided. In the case of People v. Coleman, 133 N.Y. 279, 31 N.E. 96, the court of appeals of New York carefully considered the question whether the National Express Company, a joint-stock association of that state, having an organization similar to that of the Adams Express Company, was liable to taxation on its capital stock as a corporation. The court there held that, notwithstanding various legislative enactments extending the powers of joint-stock companies, and clothing them with many of the essential attributes possessed by and characteristic of corporations, the distinction between the two classes of organizations was still preserved, and a joint-stock company was not taxable upon its capital stock under the provisions of the statute of New York subjecting 'all moneyed or stock corporations deriving an income or profit from their capital or otherwise' to such a tax. This construction of the statutes of New York by the highest judicial tribunal of that state is conclusive here. Norton v. Shelby Co., 118 U.S. 425, 6 Sup.Ct. 1121; Stutsman Co. v. Wallace, 142 U.S. 293, 12 Sup.Ct. 227. We therefore may affirm confidently that the Adams Express Company was not incorporated by or under the laws of the state of New York. It is not pretended that it was constituted a corporation elsewhere. The answer expressly admits that it was not incorporated by or under any law of the state of Pennsylvania. Upon what principle, then, can it be held to be taxable under acts which impose a tax upon the capital stock of incorporated companies? In truth, the Adams Express Company was brought into being wholly by the contract of its individual members inter se, expressed in their articles of association, and was not of statutory origin. It is, we think, very clear that such a joint-stock association is not a corporation, but a partnership. This, as we have seen, has been adjudged by the court of appeals of New York. It is the settled rule in Massachusetts. Taft v. Ward, 106 Mass. 518; Railroad v. Pearson, 128 Mass. 445; Gleason v. McKay, 134 Mass. 419. The supreme court of the United States, in the case of Chapman v. Barney, 129 U.S. 677, 9 Sup.Ct. 426, distinctly laid down the same doctrine.

It will be perceived that the question before us is one of construction. By the express provisions of the acts of assembly here involved, a tax is imposed upon every 'company incorporated' by or under the laws of Pennsylvania, or by or under the laws of any other state. It is, however, certain that the Adams Express Company is not incorporated. It is, therefore, without the terms of the acts. There is no language whatever in any of these acts to bring within their operation an unincorporated joint-stock company. This the legislature of Pennsylvania has recognized; for the act of June 1, 1889, imposes for the future an annual tax upon the capital stock of 'every corporation, joint-stock association and limited partnership whatsoever, now or hereafter incorporated or organized by or under any law of this commonwealth, or of any other state, * * * doing business in this commonwealth. ' We find no decision by the courts of Pennsylvania giving any countenance whatever to the idea that a voluntary association, such as the Adams Express Company, is to be deemed a corporation. The case of Coal Co. v. Rogers, 108 Pa.St. 147, relates to a class of artificial persons formed under the act of June 2, 1874, and thereby clothed with every essential attribute of a corporation at common law, and scarcely differing therefrom except in name. Nor can we accept as sound the argument based on section 13 of article 16 of the constitution of Pennsylvania, which article imposes restrictions and liabilities upon, and reserves legislative control over, private corporations, but does not relate to the subject of taxation. That section reads thus:

'The term 'corporations,' as used in this article, shall be construed to include all joint stock companies or associations having any of the powers or privileges of corporations, not possessed by individuals or partnerships.'

The definition of the term 'corporations' here, it will be perceived, is expressly confined to that particular article of the constitution, and the section does not at all sanction, but rebuts, the suggestion that the term 'corporations,' as used in general legislation, is to be construed as covering joint-stock companies or associations.

We discover nothing in the ruling of the supreme court of Massachusetts in Oliver v. Insurance Co., 100 Mass. 531, or in the ruling of the supreme court of the United States in that case upon error (Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566), -- especially in view of the later above-cited decisions of those courts,-- to excite any doubt as to the correctness of our conclusion here. The Massachusetts statute expressly applied to every 'insurance company incorporated or associated under the laws of any government, or state other than one of the United States'; and the Liverpool Company, although organized under a deed of settlement, had been invested by several acts of parliament with all essential rights of a corporate nature, and was empowered to act independently of the rules which govern an ordinary partnership. As, therefore, it came within the express terms of the Massachusetts statute, and had been permitted by the comity of the state to exercise its functions therein, it was held that no exemption from regulations appropriate to the action of the collective body could be claimed on account of the citizenship or nationality of individual members of the association. We fully concur with the court below in the opinion that the Adams Express Company was not chargeable with taxes under the acts of assembly in question, and that in proceeding to settle an account for taxes against the company from May 1, 1868, to the first Monday of November, 1868, and for each succeeding year thereafter down to the first Monday of November, 1888, together with a superadded penalty of 20 per cent. for default, amounting in all to the sum of $61,749.99, the defendant below, D. McM. Gregg, auditor general of Pennsylvania, acted without any lawful authority.

But it is objected that this was substantially a suit against the state of Pennsylvania, within the inhibition of the eleventh amendment to the constitution of the United States. We have seen, however, that the taxes which the defendant sought to impose upon the Adams Express Company were not authorized by the state. The defendant, therefore, while claiming to act in his official capacity, was really proceeding without any legal warrant. This case, then, belongs to that class of suits which have been sustained against individuals who, under color of state authority, have been guilty of, or threatened to inflict, personal trespasses and wrongs. In Cunningham v. Railroad Co., 109 U.S. 446, 452, 3 Sup.Ct. 292, 609, the general subject was discussed; and, recognizing the jurisdiction of the court in cases of this kind as resting on a sure foundation, the court said:

'Another class of cases is where an individual is sued in tort for some act injurious to another in regard to person or property, to which his defense is that he has acted

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