Morenci Copper Co. v. Freer

• Decision Date: 30 November 1903
• Citation: 127 F. 199
• Court: U.S. District Court — Southern District of West Virginia
• Parties: MORENCI COPPER CO. v. FREER, Atty. Gen.

127 F. 199

MORENCI COPPER CO. v. FREER, Atty. Gen.

United States Circuit Court, S.D. West Virginia.

November 30, 1903

It appears from the bill that the Morenci Copper Company is a joint-stock company, incorporated May 29, 1899, under the laws of West Virginia, and having its principal place of business or chief works outside the said state of West Virginia. Its authorized capital was $1,000,000. At the time of its incorporation the franchise or license taxes of corporations were governed by Code W.Va. 1899, c. 32, Sec 86, which provided that corporations having their principal place of business or chief works within the state should pay a license tax of $10 per annum, and those having such principal place of business without the limits of the state should pay an annual license tax of $50. Further provisions of law made the nonpayment of such license taxes for a certain length of time a cause for forfeiture of the charter of such defaulting corporation. Code W.Va. 1899, c. 32, Sec 88. On February 18, 1901, the Legislature of West Virginia passed an act amending certain of the legislation applicable to corporations and entitled 'An act to provide additional revenue for the state by increasing the license taxes on corporations and joint-stock companies' (Acts 1901, p. 93, c. 35). This act made many and various changes in the laws relating to corporations, but, in so far as this case is concerned, the important features of the act consisted in the amendment of sections 86-92 of chapter 32 of the Code of West Virginia of 1899. These changes, important in the consideration of this case, consisted, in effect, of the following modifications of existing law: (1) Providing that hereafter the amount of license tax of corporations shall be based upon the authorized capital, instead of being a fixed and arbitrary sum. (2) Providing process of law for the recovery by the state of unpaid license taxes. (3) Providing more specific methods for the forfeiture of the charters of corporations for failure to pay their license taxes, and the judicial determination of such forfeiture in a suit or proceeding to be instituted by the Attorney General 'in the name of the state of West Virginia. ' Chapter 32, Sec. 90, as amended by Act Feb. 18, 1901, p. 93, c. 35. It is now contended in the bill that this legislation is in violation of the federal constitution in the following particulars: (1) That the said enactment impairs the obligation of the contract evidenced by the complainant's charter; (2) that the act denies to complainant the equal protection of the laws.

Cleon Moore, Geo. A. McGlone, Edmund R. Dodge, and Charles J Faulkner, for plaintiff.

Romeo H. Freer, Atty. Gen., in pro. per.

KELLER District Judge (after making the foregoing statement).

In order that we may have clearly before us the claims of complainant, let us look at the material conditions as they existed when complainant received its charter, and as they exist under the present legislation. First, then, we have, in the Constitution of West Virginia, the following provisions Article 10, Sec. 1: 'Taxation shall be equal and uniform throughout the state, and all property, both real and personal, shall be taxed in proportion to its value, to be ascertained by law. No one species of property from which a tax may be collected, shall be taxed higher than any other species of property of equal value; but property used for educational, literary, scientific, religious or charitable purposes; all cemeteries and public property may, by law, be exempted from taxation. The Legislature shall have power to tax by uniform and equal laws, all privileges and franchises of persons and corporations. ' Article 11, Sec. 1: 'The Legislature shall provide for the organization of all corporations hereafter to be created, by general laws uniform as to the class to which they relate; but no corporation shall be created by special law. ' At the time complainant received its charter, corporations having their chief works within the state were required to pay an annual license tax of $10, while those having their chief works without the state (to which class complainant belonged) were required to pay an annual license tax of $50. We thus see that even at this time a distinction was made between the two classes of domestic corporations known in the act of 1901 as 'resident' and 'nonresident' corporations, but each class paid an arbitrary license tax, regardless of its capital, volume of business, or any other question; large and small corporations being required to pay the same license tax.

Coming now to the present legislation, we find that, while now, as formerly, a distinction is made between the license tax to be paid by 'resident' and 'nonresident' corporations, a further classification is made in each class, based upon the amount of the capital authorized by the charter, and this further classification affects as well 'resident' as 'nonresident' domestic corporations. The act has had the effect of increasing the license tax upon all 'resident ' domestic corporations except those having a capital of $10,000 or less, and has had the effect of reducing the license tax upon all 'nonresident' domestic corporations having a capital of $25,000 or less from $50 to $20. It has left the license tax upon such corporations having a capital of more than $25,000, and not more than $100,000, as it was under the former act, and has increased, by a graduated scale, in accordance with the capital, the license tax on corporations of this class having a capital of more than $100,000. It is claimed in the bill that this legislation violates the Constitution of the United States in a twofold way: First, as impairing the obligation evidenced by the charter of incorporation, into which, it is asserted, the law providing the amount of license tax to be assessed entered, thus violating article 1, Sec. 10, subsec. 1, of the Constitution of the United States; second, as denying to complainant the equal protection of the laws, thus violating, it is claimed, the last clause of the first section of the fourteenth amendment to the Constitution of the United States.

The case now comes before me upon demurrer to the bill, and counsel on both sides have submitted briefs setting forth their several contentions. At the outset I may say that the legislation herein attached has already received the construction of the Supreme Court of Appeals of the state of West Virginia in the case of Copper Co. v. Scherr, Auditor, 50 W.Va. 533, 40 S.E. 514, and in that case the court held, inter alia, as follows:

'Sections 86 and 87 of chapter 35 of the Acts of the Legislature of 1901 (should be sections 35 and 36), classifying corporations chartered under the laws of this state, and designating those having their principal places of business or chief works outside of the state as nonresident corporations, and imposing upon them a greater license tax than upon those having their principal place of business and chief works within the state, does not, in so classifying them and discriminating, violate section 1 of article 10 of the Constitution of this state, nor clause 1 of section 10 of article 1 of the Constitution of the United States, nor the fourteenth amendment of the Constitution of the United States, and is therefore valid, and the charge of such greater tax upon such nonresident corporations legal.'

So far as this interpretation affects the question of the constitutionality of this legislation under the Constitution of the state of West Virginia, it is conclusive; but, while it is entitled to great respect and weight in the consideration of this court in relation to the federal questions alleged to arise under the bill herein, it is not conclusive as to them, and the court is under the necessity of considering the points raised by the demurrer to the bill independently.

As was said by the Supreme Court of the United States in the case Ex parte Tyler, 149 U.S. 187, 13 Sup.Ct. 791, 37 L.Ed. 697:

'The courts of the United States have always recognized the importance of leaving the powers of the state in respect to taxation unimpaired. Where the questions involved arise under the state Constitution and laws, the decisions of the highest tribunal are accepted as controlling. Where the Constitution and laws of the United States are drawn in question, the courts of the United States must determine the controversy for themselves.'

The points raised by the defendant's demurrer are as follows: First. The bill to state a case which entitles the plaintiff to the relief sought. Second. This court has no jurisdiction of the bill. Third. The act of Legislature in question is not in violation of any provision of the Constitution of the United States.

The bill in this case is designed to enjoin the defendant, as attorney general, from instituting any suit or proceeding in the name of the state of West Virginia for the forfeiture, by judicial determination, of complainant's charter. It appears by the bill that no license tax whatever has been paid by the complainant for the years 1901 and 1902, and it is contended that, until such tax as is due, or the court can clearly see ought to be paid, has in fact been paid or tendered without demanding a receipt in full, a court of equity will not grant an injunction to prevent the collection of taxes, and by a parity of reasoning will not interfere to prevent a decree of forfeiture. The sole allegation made by complainant is the illegality of the increase in its license tax made by the act of 1901, and with this is coupled the admission that no part of the tax assess under that act has been paid to tendered. I am inclined to think that the payment (or at least the tender to the proper officer, and...