John Stanton v. Baltic Mining Company

• Decision Date: 21 February 1916
• Docket Number: No. 359,359
• Parties: JOHN R. STANTON, Appt., v. BALTIC MINING COMPANY et al
• Court: U.S. Supreme Court

240 U.S. 103

36 S.Ct. 278

60 L.Ed. 546

JOHN R. STANTON, Appt.,

v BALTIC MINING COMPANY et al.

No. 359.

Argued October 14 and 15, 1915.

Decided February 21, 1916.

Mr. Charles A. Snow for appellant.

No appearance for appellees.

Mr. John R. Van Derlip filed a brief as amicus curioe.

[Argument of Counsel from pages 104-106 intentionally omitted] Mr. Chief Justice White delivered the opinion of the court:

As in Brushaber v. Union P. R. Co. 240 U. S. 1, 60 L. ed. ——, 36 Sup. Ct. Rep. 236, this case was commenced by the appellant as a stockholder of the Baltic Mining Company, the appellee, to enjoin the voluntary payment by the corporation and its officers of the tax assessed against it under the income tax section of the tariff act of October 3, 1913 (38 Stat. at L. 166, 181, chap. 16). As to the grounds for the equitable relief sought in this case so far as the question of jurisdiction is concerned are substantially the same as those which were relied upon in the Brushaber Case, it follows that the ruling in that case upholding the power to dispose of that controversy is controlling here, and we put that subject out of view.

Further, also, like the Brushaber Case, this is before us on a direct appeal prosecuted for the purpose of reviewing the action of the court below in dismissing on motion the bill for want of equity.

The bill averred: 'That, under and by virtue of the alleged authority contained in said income tax law, if valid and constitutional, the respondent company is taxable at the rate of 1 per cent upon its gross receipts from all sources, during the calendar year ending December 31, 1914, after deducting (1) its ordinary and necessary expenses paid within the year in the maintenance and operation of its business and properties, and (2) all losses actually sustained within the year, and not compensated by insurance or otherwise, including depreciation arising from depletion of its ore deposits to the limited extent of 5 per cent of the 'gross value at the mine of the output' during said year.' It was further alleged that the company would, if not restrained, make a return for taxation conformably to the statute, and would pay the tax upon the basis stated without protest, and that to do so would result in depriving the complainant as a stockholder of rights secured by the Constitution of the United States, as the tax which it was proposed to pay without protest was void for repugnancy to that Constitution. The bill contained many averments on the following subjects, which may be divided into two generic classes: (A) Those concerning the operation of the law in question upon individuals generally and upon other than mining corporations, and the discrimination against mining corporations which arose in favor of such other corporations and individuals by the legislation, as well as discrimination which the provisions of the act operated against mining corporations because of the separate and more unfavorable burden cast upon them by the statute than was placed upon other corporations and individuals,—averments all of which were obviously made to support the subsequent charges which the bill contained as to the repugnancy of the law imposing the tax to the equal protection, due process, and uniformity clauses of the Constitution. And (B) those dealing with the practical results on the company of the operation of the tax in question, evidently alleged for the purpose of sustaining the charge which the bill made that the tax levied was not what was deemed to be the peculiar direct tax which the 16th Amendment exceptionally authorized to be levied without apportionment, and of the resulting repugnancy of the tax to the Constitution as a direct tax on property because of its ownership, levied without conforming to the regulation of apportionment generally required by the Constitution as to such taxation.

We need not more particularly state the averments as to the various contentions in class (a), as their character will necessarily be made manifest by the statement of the legal propositions based on them which we shall hereafter have occasion to make. As to the averments concerning class (B), it suffices to say that it resulted from copious allegations in the bill as to the value of the ore body contained in the mine which the company worked, and the total output for the year of the product of the mine after deducting the expenses as previously stated; that the 5 per cent deduction permitted by the statute was inadequate to allow for the depletion of the ore body, and therefore the law to a large extent taxed not the mere profit arising from the operation of the mine, but taxed as income the yearly product which represented to a large extent the yearly depletion or exhaustion of the ore body from which, during the year, ore was taken. Indeed, the following alleged facts concerning the relation which the annual production bore to the exhaustion or diminution of the property in the ore bed must be taken as true for the purpose of reviewing the judgment sustaining the motion to dimiss the bill.

'That the real or actual yearly income derived by the respondent company from its business or property does not exceed $550,000. That, under the income tax, the said company is held taxable, in an average year, to the amount of approximately $1,150,000, the same being ascertained by deducting from its net receipts of $1,400,000 only a depreciation of $100,000 on its plant and a depletion of its ore...