Horn Silver Min Co v. People of State of New York

• Decision Date: 29 February 1892
• Parties: HORN SILVER MIN. CO. v. PEOPLE OF STATE OF NEW YORK
• Court: U.S. Supreme Court

143 U.S. 305

12 S.Ct. 403

36 L.Ed. 164

HORN SILVER MIN. CO. v. PEOPLE OF STATE OF NEW YORK.

February 29, 1892.

The defendant below, the plaintiff in error here, the Horn Silver Mining Company, is a corporation created under the laws of the territory of Utah. The present action is brought by the people of the state of New York, upon the allegation that it was doing business within the state in 1881 and 1882, to recover certain taxes alleged to be chargeable on its 'corporate franchise or business' for those years, and the penalty prescribed for their non-payment in each year.

By the act of the legislature of New York, approved May 26, 1881, amending a previous act providing for levying taxes for the use of the state upon certain corporations, joint-stock companies, and associations, it was declared that every corporation, joint-stock company, or association then or thereafter incorporated or organized under any law of the state, or of any other state or country, and doing business in the state, with certain specified exceptions not important in this case, should be subject to a tax 'upon its corporate franchise or business,' to be computed in a mode specified, which was by a certain percentage upon its capital stock measured by the dividend on the par value of that stock, or, where there were no dividends, or its dividends were less than a certain percentage upon the par value of the capital stock, then according to a certain percentage upon the actual value of the capital stock during the year.

The complaint in the action alleges the facts necessary to charge the corporation under this act for both years; that the amount of tax due pursuant to its provisions for the year ending on the 1st day of November, 1881, was $7,500, and the additional sum of $1,500 as a penalty for the delay of the company in paying the tax for two years after it became due; and that the amount of taxes due for the year ending on the 1st day of November, 1882, was $30,000, with the further sum of $3,000 as a penalty of 10 per centum for the delay of the defendant in paying the same.

The defendant answered the various allegations of the complaint, denying them so far as they charge liability the people of New York, and setting up that it had been at all times a manufacturing corporation organized and existing under the laws of Utah; that it had never exercised any franchises or powers under the laws of New York; that its capital stock of $10,000,000 was issued in payment for real estate in Utah and Illinois, which consists entirely of mining property and improvements thereon, and a refinery; that during the years ending November 1, 1881 and 1882, it carried on in the state of New York the business of manufacturing bars of silver from Utah and Illinois into standard bars; that said business constituted but a small portion of its entire business, and was the only business carried on in the state of New York, except its financial business and correspondence; that its capital stock was only partially employed in New York; and that it paid taxes both in Utah and in Illinois. It insisted that the statute upon which the action was brought, was invalid and in operative as to it because of the facts set forth, and because it established an unjust and unequal system of taxation, and fixed the amount of tax wholly without regard to the extent of the corporate franchises exercised by it in the state, and withour regard to the amount of business done within the state, or the amount of capital employed or the amount of its capital stock held in the state, and the extent of the protection and benefits derived from its laws and agencies, and because it sought to tax property and persons not within the jurisdiction of the state or in any way subject to its authority, and violated the principles of equality and uniformity. It also insisted that the taxation attempted was, in effect, the taking of private property without just compensation, the denial to defendant of the equal protection of the laws, and a regulation of commerce among the several states, and taxing property and business without the jurisdiction of the state of New York. By consent of parties, the case was referred to a referee to hear and determine all the issues of law and fact therein. The referee found that the defendant was a corporation created and organixed under the laws of the territory of Utah, and was at all times mentioned in the complaint doing business in the state of New York, and liable to be taxed on its corporate business under the provisions of section 3 of the act of New York above cited. He also found, in substance, that the stock and capital of the defendant were properly appraised, and the amount of the tax was assessed in conformity with the provisions of that act, and that, accordingly, the sums above mentioned, amounting to $41,250, were due; and he directed a judgment to be entered therefor in favor of the plaintiff.

The referee also found that the defendant paid taxes, both in the territory of Utah and in the state of Illinois, in the years 1881 and 1882, and that the greater part of its business was out of the state of New York, as well as the greater part of the capital used in its business.

Upon the findings of the referee judgment was entered in the supreme court of the state for the amount reported, and the case, being taken to the court of appeals, was there affirmed. 11 N. E. Rep. 155. Being then remitted to the supreme court, and entered there, the case was brought, on a writ of error, to this court.

Julien T. Davies and Edward L. Short, for plaintiff in error.

[Argument of Counsel from pages 308-312 intentionally omitted] Chas. F. Tabor, Atty. Gen., for the People.

Mr. Justice FIELD delivered the opinion of the court.

A corporation being the mere creature of the legislature, its rights, privileges, and powers are dependent solely upon the terms of its charter. Its creation (except where the corporation is sole) is the investing of two or more persons with the capacity to act as a single individual, with a common name, and the privilege of succession in its members without dissolution, and with a limited individual liability. The right and privilege, or the franchise, as it may be termed, of being a corporation, is of great value to its members, and is considered as property separate and distinct from the property which the corporation itself may acquire. According to the law of most states, this franchise, or privilege of being a corporation is deemed personal property, and is subject to separate taxation. The right of the states to thus tax it has been recognized by this court and the state courts in instances without number. It was said in Delaware Railroad Tax, 18 Wall. 206, 231, that 'the state may impose taxes upon the corporation as an entity existing under its laws, as well as upon the capital stock of the corporation or its separate corporate property. And the manner in which its value shall be assessed, and the rate of taxation,...