Sperry & Hutchinson Co. v. Blue

• Decision Date: 13 November 1912
• Docket Number: 1,094.
• Citation: 202 F. 82
• Parties: SPERRY & HUTCHINSON CO. v. BLUE, State Tax Com'r.
• Court: U.S. Court of Appeals — Fourth Circuit

202 F. 82

SPERRY & HUTCHINSON CO. v. BLUE, State Tax Com'r.

No. 1,094.

United States Court of Appeals, Fourth Circuit.

November 13, 1912

John Hall Jones, of New York City (T. C. Townsend, of Charleston W. Va., on the brief), for appellant.

William G. Conley, of Charleston, W.Va. (Fred. O. Blue, of Phillippi W. Va., on the brief), for appellee.

Before GOFF, Circuit Judge, and BOYD and ROSE, District Judges.

ROSE District Judge.

The complainant is a New Jersey corporation. It is engaged in the trading stamp business. It will be referred to as the Stamp Company. The respondent is the State Tax Commissioner of West Virginia. He will be called the Commissioner.

In the court below the Stamp Company sought to have the Commissioner enjoined from enforcing against it a state law imposing a license tax upon persons or corporations engaged in the trading stamp business. The amount of this tax is $500 for each county in which the business is carried on. In any case in which the state imposes an occupation tax, the city of Charleston is authorized by law to levy for municipal purposes a like amount on any one following such occupation within the corporate limits. Charleston has availed itself of this permission. In consequence state and city together exact of the Stamp Company $1,000 per annum for the privilege of carrying on business in that place.

In its bill of complaint the Stamp Company says that these exactions, though made in the guise of taxes, are not intended to raise revenue, but to prevent the carrying on of the trading stamp business. It alleges that such business is a legitimate one; that the Legislature cannot directly forbid it; that what the Legislature cannot do directly it may not accomplish by indirection. To the Stamp Company's bill the Commissioner demurred. The demurrer was argued before Circuit Judge Pritchard and District Judges Keller and Dayton. It was sustained. The Stamp Company elected to stand on the bill without seeking to amend it. It was thereupon dismissed. The appeal to this court followed.

The eleventh paragraph of the bill of complaint reads as follows:

'Complainant further alleges that the State Tax Commissioner of West Virginia on or about the 20th day of April, 1908, notified complainant that it would have to pay the state license tax of $500 for conducting its business in said county of Kanawha, and thereafter, by agreement with said State Tax Commissioner, complainant filed in the circuit court of Kanawha county a bill in equity praying that the sheriff of Kanawha county be restrained and enjoined from taking any action to enforce said state license tax for said county on the ground that said license tax law was unconstitutional. To this bill a demurrer was filed. The judge of said court sustained the demurrer, and complainant appealed to the Supreme Court of Appeals of West Virginia, which affirmed the decision.'

The Commissioner says that this allegation shows that in a proceeding to which both the Stamp Company and himself were parties the issue here raised had been previously adjudged against it by a court of competent jurisdiction, whose judgment in the premises still stands unreversed and unmodified.

The Stamp Company does not question that in contemplation of law the parties to this case and to that in the state court are identical. Its counsel, however, contended that the Constitution and the legislation of Congress recognize the possibility that state courts may not always hold the scales of justice even between a citizen of their own state and a citizen of another state. The Commissioner is a citizen of West Virginia. It is a corporation of another state. It claims that it has a right to its day in the federal court. In its view it is immaterial that it has already had a day upon the same issue in the state court, and that in that court judgment has gone against it. It says that this court must hear its complaint no matter what the state court did with that complaint when previously made to it. That we may not do. The same contention here made was set up in the case of Mitchell v. First National Bank of Chicago, 180 U.S. 481, 21 Sup.Ct. 421, 45 L.Ed. 627. The Supreme Court there answered it by saying:

'It is said that the question here presented was one of general jurisprudence involving the rights of citizens of different states, and that the Circuit Court was not bound to accept the views of the state court, but was at liberty, indeed, under a duty, to follow its own independent judgment as to the legal rights of the parties. Burgess v. Seligman, 107 U.S. 20 (2 Sup.Ct. 10, 27 L.Ed. 359). If it were true that the question was in whole or in part one of general law, the thing adjudged by the state court when properly brought to the attention of the Circuit Court would still be conclusive between the same parties or their privies. Whatever may be the nature of a question presented for judicial determination-- whether depending on federal, general, or local law-- if it be embraced by the issues made, its determination by a court having jurisdiction of the parties and of the subject-matter binds the parties and their privies so long as the judgment remains unmodified or unreversed.'

The Stamp Company says that the judgment in the state court is not binding here because it was upon a demurrer, and not after hearing upon the merits. 'A judgment on demurrer is as conclusive as one rendered upon proof. ' Northern Pacific Ry. Co. v. Slaght, 205 U.S. 130, 27 Sup.Ct. 445, 51 L.Ed. 738. The bill of complaint in this case says that the bill in the state court expressly alleged that the act here attacked was unconstitutional. Whether the act was constitutional upon any state of facts which the Stamp Company could truthfully allege could be as accurately determined upon a demurrer to a well-drawn bill as at a hearing upon the proofs. That being the case, 'the same legal consequences followed from' the judgment upon it. Northern Pacific Ry. Co. v. Slaght, supra.

In the argument at this bar the Stamp Company said that the demurrer was sustained in the state court because the bill therein did not show some of the facts set forth in the bill now before this court. Even so, 'the general rule of the extent of the bar is not only what was pleaded or litigated, but what could have been pleaded or litigated. ' Northern Pacific Ry. Co. v. Slaght, supra. The Stamp Company in argument claims that it could not have pleaded in the state court many of the facts set forth in the bill in the case at bar because those facts were not then known to it. Moreover, it says that it could not then have had knowledge of them because they happened since the beginning of the proceedings in the state court. When it filed its bill in the state tribunal, it had been in business in West Virginia but a short while. It could not, it contends, then have alleged the relation borne by the tax to the profits realized from its business or realizable therefrom. In strictness it is unnecessary to consider whether, if such contention were well founded, the decree in the state court would be a bar to the proceeding here. This case is being heard on demurrer. No such explanation of the insufficiency of the state court bill is made in that in this court. The record before us tells us nothing more than that in the state court the Stamp Company alleged that the act imposing the license tax was unconstitutional; that the bill was demurred to; that the court of first instance sustained the demurrer and dismissed the bill; and that the Supreme Court of the state affirmed its decree. No clearer instance of res adjudicata as to the constitutionality of the act could be easily stated than that which appears on the face of the bill in this case. The opinion of the Supreme Court of West Virginia will be found reported under the title of Sperry & Hutchinson Co. v. Melton, 69 W.Va. 124, 71 S.E. 19, 34 L.R.A. (N.S.) 433. It is said that it there appears that the action of the lower court in sustaining the demurrer to the bill was affirmed merely because that bill did not contain allegations found in the pending one. The record does not contain the pleading which the highest court of West Virginia said disclosed no sufficient ground for relief. It is therefore not before us. The Commissioner in an appendix to his brief has, however, reproduced it. If we are free to consider it at all, it appears that there are allegations found in it which are not in the bill in the present case. For the most part, however, whatever is charged in one and not in the other might have been stated in either.

The Supreme Court of Appeals understood the bill before it as alleging that the Stamp Company if it was required to pay the tax could not carry on its business in Charleston, Kanawha county, at a profit. What that bill said was that the Stamp Company's total receipts from its business in that county was or would be $7,500. If it paid the tax, its expenditures would be $7,665. With the bill in the pending case were filed certain exhibits. From them it appears that in a period of a little over three years the Stamp Company's receipts in Charleston aggregated $19,800.54, its expenditures $21,291.40. Of these expenditures $1,500 were on account of the tax now assailed, and an additional $1,000 on account of the municipal tax levied by an ordinance of the city of Charleston. These figures do not differ widely enough from those before the state court to justify us in assuming that had they been before that court its conclusion would have been different from that at which it in fact arrived. The figures in the exhibits when analyzed do not show that the tax is prohibitory. During the part of the calendar year 1908 in which it was carrying on business in...