Looney v. Crane Co

Decision Date03 May 1916
Docket NumberNo. 16,16
PartiesLOONEY, Attorney General of Texas, v. CRANE CO
CourtU.S. Supreme Court

[Syllabus from pages 178-180 intentionally omitted] Mr. Benj. F. Looney, Atty. Gen., and Mr. C. M. Cureton, of Austin, Tex., for appellant.

[Argument of Counsel from pages 180-183 intentionally omitted] Mr. Joseph Manson McCormick, of Dallas, Tex., for appellee.

Mr. Chief Justice WHITE delivered the opinion of the Court.

Chartered in 1865 by the Legislature of Illinois, the Crane Company had its domicile and principal establishment at Chicago. It carried on its chartered business of manufacturing and dealing in hardware, railway supplies, building materials, agricultural implements, etc., not only in Illinois but in other states, by the shipment of merchandise on orders obtained through the solicitation of its agents and sent to Chicago for execution, or orders sent to Chicago through the mail. The company, moreover, established agencies in other states to which goods were also shipped from Chicago or from other points where they were bought and shipment directed, from which agencies such goods were sold and delivered either in the original or broken packages as was most convenient. Such agencies also became supply depots from which interstate commerce was carried on by filling orders received from other states.

In the state of Texas for the purpose of facilitating the carrying on of its business by all the methods stated, the company acquired real estate at Dallas, and built a depot or warehouse, and also had a warehouse at another place in the state.

In 1889 Texas enacted a statute entitled, 'An act to require foreign corporations to file their articles of incorporation with the Secretary of State, and imposing certain conditions upon such corporations transacting business in this state. * * *' Acts of 1889, p. 87. This act not only compelled the filing of the charter with the Secretary of State, but exacted for a permit to do business a minimum charge of $25 based upon $100,000 of capital stock and an increased amount predicated upon capital stock until the exaction amounted to $200, which was the limit, and the permit which was authorized to be issued by the Secretary of State was limited to ten years' duration. The tax imposed therefor, if the permit was enjoyed for the stated period, could not in any event exceed $20 a year, whatever might be the amount of capital stock of the corporation

As early as 1893 what was denominated a franchise tax was provided, imposing upon each and every domestic as well as foreign corporation having a permit the duty of paying $10 a year. Acts of 1893, p. 158. In 1897 this described franchise tax was modified. Acts of 1897, p. 168. As to domestic corporations, while retaining the minimum charge of $10, the maximum was raised to $50. And as to foreign corporations the minimum was raised from $10 to $25 and the maximum limit was removed by fixing percentages of charges upon the capital stock increasing without limitation. Without in detail following the legislation as to taxes denominated as franchise from the date stated down to the period when this suit was commenced, it suffices to say that the tax itself was preserved with some increases in the bases upon which it was to be calculated; but in 1907 it was enacted both as to domestic and permitted foreign corporations that in case the capital stock of a corporation 'issued and outstanding, plus its surplus and undivided profits, shall exceed its authorized capital stock,' the franchise tax should be calculated upon the aggregate of such amounts, thereby increasing to that extent the levy. Acts of 1907, p. 503; Revised Statutes (1911) art. 7394.

The authorized capital stock of the Crane Company was $17,000,000, which was paid up and issued and just prior to the institution of this suit the surplus and undivided profits of the company amounted to $8,129,000. The total assessed value in Texas of its real estate, money there employed and merchandise there held amounted to $301,179. The company's gross receipts and gross sales in all its business in all the states for the year 1913 amounted to $39,831,000, of which only $1,019,750 had any relation to the state of Texas and nearly one-half of this amount was the result of transactions purely of an interstate commerce character arising from the sale and shipment of goods from other states to purchasers in Texas who ordered them and from the shipment from Texas to other states for the purpose of filling orders sent from such states.

The Crane Company was assessed and paid taxes in Texas as other taxpayers on its real estate, its money on hand in Texas and its stock in trade in that state. In 1905, having filed its articles of incorporation with the Secretary of State, it paid the permit tax of $200 for the ten-year period as prescribed by the permit act of 1889. From 1904 down to and including 1914 the company paid the yearly franchise tax, the amount increasing from $480 in 1904 to $1,948 in 1914, the increase presumably resulting from the increase of rate of such tax by the legislation which we have indicated and from the fact that by the amendment of the act of 1907 the surplus and un- divided profits of the company became susceptible of being taken into view in addition to its authorized capital stock.

In the same year in which the legislation was enacted providing for the taxation on the basis of surplus and undivided profits for the purpose of the franchise tax there was also enacted a law vastly increasing the amount of the permit tax. Acts of 1907, S. S., p. 500; Revised Statutes (1911) art. 3837. We say vastly increasing because, although the standard for the levy of that tax, the authorized capital stock, was retained, the maximum limit which was $200 for ten years under the previous law was removed and the percentages of levy on the authorized capital stock were so augmented that the permit for which the company paid to the Secretary of State $200 for ten years in 1905 under the new law would have required the company to pay in order to do business in the state the sum of $17,040.

Shortly before its existing permit for ten years taken in 1905 expired the company commenced the present suit in the court beolw against the Secretary of State and the Attorney General to enjoin the enforcement by them of the statutes embracing the permit tax and the franchise tax on the grounds that both were repugnant (a) to the commerce clause of the Constitution of the United States because imposing a direct burden on interstate commerce; (b) to the due process clause of the Fourteenth Amendment because constituting a taking of property; and (c) to the equal protection clause of the Fourteenth Amendment based upon what were urged to be discriminatory provisions in the acts. The parties having been fully heard on an application for an interlocutory injunction on the pleadings and by affidavits from which the case as we have stated it indisputably results by a court organized under the act of Congress of June 18, 1910 (36 Stat. 557, c. 309, § 17; Judicial Code, § 266 [Comp. St. 1916, § 1243]), the in- terlocutory injunction was granted and the enforcement of the laws restrained, the matter being now before us on an appeal from such order. (D. C.) 218 Fed. 260.

Passing the contention as to the denial of the equal protection of the laws, which as we shall see it is unnecessary to consider, we come to dispose of the two other contentions, that is, the direct burden on interstate commerce and the want of due process.

It may not be doubted under the case stated that intrinsically and inherently considered both the permit tax and the tax denominated as a franchise tax were direct burdens on interstate commerce and moreover exerted the taxing authority of the state over property and rights which were wholly beyond the confines of the state and not subject to its...

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