Montgomery Ward & Co. v. Becker

• Decision Date: 21 February 1934
• Citation: 69 S.W.2d 674,334 Mo. 789
• Parties: Montgomery Ward & Company, Incorporated, on Behalf of Itself and All Other Foreign Corporations Licensed and Doing Business In Missouri, Whose Rights Are Affected in a similar Manner, Appellant, v. Charles U. Becker, Charles U. Becker, as Secretary of State, Larry Brunk, as Treasurer of the State, Stratton Shartel, as Attorney-General of the State; Dwight H. Brown, as Secretary of State, Richard R. Nacy, as Treasurer of the State, Roy McKittrick, as Attorney-General of the State
• Court: Missouri Supreme Court

69 S.W.2d 674

334 Mo. 789

Montgomery Ward & Company, Incorporated, on Behalf of Itself and All Other Foreign Corporations Licensed and Doing Business In Missouri, Whose Rights Are Affected in a similar Manner, Appellant, v. Charles U. Becker, Charles U. Becker, as Secretary of State, Larry Brunk, as Treasurer of the State, Stratton Shartel, as Attorney-General of the State; Dwight H. Brown, as Secretary of State, Richard R. Nacy, as Treasurer of the State, Roy McKittrick, as Attorney-General of the State

Supreme Court of Missouri

February 21, 1934

Rehearing Overruled February 21, 1934.

Appeal from Cole Circuit Court; Hon. Nike G. Sevier, Judge.

Reversed and remanded.

Jones Hocker, Sullivan, Gladney & Reeder, Fordyce, White, Mayne & Williams, Borders, Borders & Warrick, Sid C. Roach and Vincent L. Boisaubin for appellant.

(1) Where the authorized capital stock of a foreign corporation exceeds its issued stock, a statute which bases a tax on said authorized capital stock operates to tax business and property outside the State, in violation of the commerce clause and due process clause of the Constitution. Air-Way Elec. Appliance Corp. v. Day. Treasurer, 266 U.S. 81; Looney v. Crane, 245 U.S. 187; Cudahy v. Hinkle, 278 U.S. 464; State ex rel. v Dammann, 224 N.W. 139; O'Gara Coal Co. v. Emmerson, 156 N.E. 814; Badger v. Crockett, 259 P. 921; Minneapolis Steel & Mach. Co. v. Crockett, 263 P. 926; Perkins Mfg. Co. v. Jordan, 254 P. 551; Railroad Co. v. Harmon, 295 P. 762. (2) A state cannot validly enact a statute requiring the waiver of constitutional rights as a condition to doing business within the State; and a statutory requirement subjecting the foreign corporation to a tax on its interstate commerce or property outside the State, as such a condition, is unconstitutional. Sioux Remedy Co. v. Cope, 235 U.S. 203; Hanover Ins. Co. v. Harding, 272 U.S. 507; Terral v. Burke Const. Co., 257 U.S. 529; Western Union Tel. Co. v. Kansas, 216 U.S. 1; Loonev v. Crane, 245 U.S. 179; International Paper Co. v. Massachusetts, 246 U.S. 142; Air-Way Elec. Co. v. Dav, 266 U.S. 71; Railroad v. Harmon, 295 P. 765; O'Gara Coal Co. v. Emmerson, 156 N.E. 820. (3) Once admitted to do business in a state, a foreign corporation is entitled to the benefits of the equal protection clause, and a tax which denies it that right is unconstitutional. A statute which bases the tax on authorized stock as a price for the privilege of doing business is not a reasonable measure of the value of the privilege. It is arbitrary and discriminatory and hence violates the equal protection clause of the Constitution. Air-Way Elec. Appliance Corp. v. Day, 266 U.S. 83; Roberts & Schaeffer Co. v. Emmerson, 271 U.S. 53; Hanover Ins. Co. v. Harding, 272 U.S. 494; State ex rel. Borden Co. v. Dammann, 224 N.W. 139; O'Gara Coal Co. v. Emmerson, 156 N.E. 814; Badger v. Crockett, 259 P. 921; Minneapolis Steel & Mchy. Co. v. Crockett, 263 P. 926; Perkins Mfg. Co. v. Jordan, 254 P. 551; Railroad v. Harmon, 295 P. 762; State v. Axel Meadows Realty Co., 150 S.E. 378; Northwestern Nat. Ins. Co. v. Lee, 49 F.2d 274. (4) Baltic Mining Co. v. Massachusetts, 231 U.S. 68, is no longer the law. The test is not "how much" the interstate commerce is burdened, but whether there is any legitimate basis for the tax. If the tax in fact operates to burden interstate commerce, or to tax property outside the jurisdiction of the taxing state, the tax is illegal and the statute unconstitutional. Baltic Mining Co. v. Massachusetts, 231 U.S. 68; Alpha Portland Cement Co. v. Massachusetts, 268 U.S. 218; Cudahy v. Hinkle, 278 U.S. 466; Minneapolis Steel & Mchy. Co. v. Crockett, 263 P. 927.

Roy McKittrick, Attorney-General, and Edward C. Crow, Assistant Attorney-General, for respondents.

(1) The Act of 1931 applies only to foreign corporations authorized to do business in Missouri and who increase their capital stock after being first duly licensed to conduct business in this State. Sess. Laws of Mo. 1931, p. 298. (2) Section 4598, as it appears in Reversed Statutes 1929, was intended to and does apply only to foreign corporations seeking an initial permit to begin business in Missouri. Likewise, Section 9792, Revised Statutes 1919, (which appears now in its amended form as Section 4598, Revised Statutes 1929) applied only to foreign corporations seeking permit to begin business in Missouri. Sec. 4598, R. S. 1929; Sec. 9792, R. S. 1919. (3) The Act of 1931 of the Missouri General Assembly given the interpretation put thereon by Secretary of State, Honorable Charles U. Becker, and applied to the increase in authorized capital stock of appellant is in our opinion a violation of the commerce clause, the due process clause of the Fourteenth Amendment and the equal protection clause of the Constitution. Western Union Co. v. Kansas, 216 U.S. 2; United States v. Railroad Co., 282 U.S. 329; Anglo-Chilean Nitrate Sales Co. v. Alabama, 288 U.S. 229; Airway Electric Appliance Co. v. Day, 266 U.S. 82, 69 L.Ed. 176. (4) Appellant cannot question constitutionality of Section 4598, Revised Statutes 1929, because appellant under the record herein is unaffected by said section. In re Tartar, 278 Mo. 356; 12 C. J. 768.

OPINION

Hays, J.

On a hearing had upon an agreed statement of facts the Circuit Court of Cole County rendered its decree dismissing the bill brought by the plaintiff against the Secretary of State, the State Treasurer and the Attorney-General, to enjoin the collection of a privilege fee, or tax, as imposed by the Secretary of State upon the plaintiff, a corporation of the State of Illinois. The case is here on plaintiff's appeal.

The facts alleged in the bill are conceded by the defendants in the agreed statement to which reference has been made. So this appeal involves the sole question of the applicability of one statute (Sec. 4598, R. S. 1929) and the validity of another (Laws 1931, pp. 297-298, relating to foreign corporations only), in pursuance of both of which such tax was attempted to be imposed.

In our statement of facts which follows we draw very largely from the statement as printed in plaintiff's brief. The Secretary of State, in imposing the fee, relied in part upon said Section 4598 (Laws 1927, pp. 390, 392, slightly modifying R. S. 1919, sec. 9792). Prior to 1927, in order to obtain a permit to do business in this State, a foreign corporation was required to pay a fee measured by the proportion of its capital stock represented by its property situated in Missouri and its business transacted in the State. By the Act of 1927 the Legislature changed Section 9792, Revised Statutes 1919, and provided that a foreign corporation applying for a license must pay a fee based upon the proportion of its authorized capital stock represented by its property and business in this State. The important modification was the added word "authorized." And this act, without change, was carried into the revision of 1929 and is now Section 4598 mentioned above. Said Act of 1931, supra, undertook to require every foreign corporation already licensed to do business in the State to do these things:

1. To file certified copies of all amendments to its charter.

2. To file an affidavit of its principal agent, whenever requested by the Secretary of State, showing the proportion of its authorized capital stock which is represented by its property located and business transacted in Missouri at any time after its qualification.

3. In the event the affidavit shows that the proportion of its authorized capital stock so represented has been increased since its qualification or since its last payment of qualification taxes, the corporation shall pay an additional tax based on all such increase as is required of domestic corporations when increasing capital stock, i. e., $ 5 for each $ 10,000 of such increase.

Failure to comply with any of the provisions of the act incurs the following penalties: (a) Forfeiture of charter or franchise to do business in the State, and (b) denial of the right to sue in the courts of the State.

The Secretary of State, in January, 1932, assuming to act under this statute and also under said Section 4598, requested the plaintiff to comply with said statutory provisions by filing an affidavit as specified therein. The plaintiff complied under protest. The affidavit so filed showed the capital structure of plaintiff's property and assets as of December 31, 1930. Pursuant to this affidavit and with the knowledge that plaintiff had long since become initially qualified and was afterward authorized to use $ 5,889,165 of its authorized capital stock in its business conducted in Missouri, the Secretary of State determined the proportion of plaintiff's authorized capital stock now represented in Missouri to be $ 21,581,784, which was an increase of $ 15,692,619, and on which increase the fees were $ 5 for each $ 10,000 or part thereof and $ 1.25 for issuing certificate of increase. He accordingly demanded of plaintiff an additional tax of $ 7,850 and $ 1.25 for issuing the certificate of increase.

The capital structure of plaintiff had been changed from time to time prior to December 31, 1930, but as of that date, and ever since then, the total authorized capital stock of plaintiff was and now is 6,205,000 shares of which but 4,770,004 were issued and outstanding. All of the stock was of no par value, but of an actual value of $ 25.83 a share. As of the year ending December 31, 1930 plaintiff's total property located and business transacted everywhere was $ 417,167,514, while its property located and business transacted in Missouri was $ 14,509,620. The amount of the tax demanded ($ 7,850) was arrived at in the following manner: The Secretary of State put upon the total number of authorized...