Underwood Typewriter Co. v. Chamberlain

• Decision Date: 15 December 1917
• Citation: 92 Conn. 199,102 A. 600
• Court: Connecticut Supreme Court
• Parties: UNDERWOOD TYPEWRITER CO. v. CHAMBERLAIN, State Treasurer.

102 A. 600

92 Conn. 199

UNDERWOOD TYPEWRITER CO.

v. CHAMBERLAIN, State Treasurer.

Supreme Court of Errors of Connecticut.

Dec. 15, 1917.

Appeal from Superior Court, Hartford County; Lucien F. Burpee and Edwin B. Gager, Judges.

Action by the Underwood Typewriter Company against Frederick S. Chamberlain, State Treasurer, to compel repayment of a tax. Judgment for defendant, and plaintiff appeals. Error and judgment reversed, with direction to overrule defendant's demurrer to plaintiffs claims of relief.

Eugene D. Boyer, of New York City, and Arthur L. Shipman, of Hartford, for appellant.

George E. Hinman, Atty. Gen., James E. Cooper, of New Britain, and Charles W. Cramer, of Portland, for appellee.

WHEELER, J. The single ground of the appeal is the alleged error in sustaining the demurrer to the claims of relief. The complaint alleges that the plaintiff is a corporation organized under the laws of Delaware and engaged in manufacturing and in the sale and rental of its products and merchandise in Connecticut, but that the greater part of its business in Connecticut is in the performance of its agreements for sale and leases made in other states and foreign countries; that by far the larger part of its capital and assets are invested and located outside this state and used for its interstate commerce business; that the greater portion of its earnings and income is derived from such interstate commerce and is received, held, and possessed outside this state. It further alleges that chapter 292 of the Public Acts of 1915 provides that each company carrying on business in this state shall "pay a tax annually to the state upon the net income for its fiscal or calendar year next preceding * * * upon which income such company is required to pay a tax to the United States"; that in the case of a company carrying on business outside the state and deriving profits principally from the sale or use of tangible personal property such proportion of the net income shall be apportioned to this state "as the fair cash value of its real estate and tangible personal property in this state on the date of the close of the fiscal year of such company in the year next preceding is to the fair cash value of its entire real estate and tangible personal "property then owned by it"; that section 23 imposes upon the tax commissioner the duty of determining the tax laid on each company and of mailing a statement of such tax to each company, and it provides that the tax shall be payable on or before the 1st day of August in each year, and if unpaid after the 1st day of August, after ten days' notice and demand by the treasurer, there shall be added 5 per cent. to the amount of the tax and interest at the rate of three-fourths of 1 per centum per month upon such tax, and "such tax, if unpaid, shall constitute a lien upon the real estate of such company within this state" and be in force from the filing of a certificate in the land records; that the tax commissioner prior to July 1, 1916, acting under this act, apportioned the sum of $629,668.50 of the applicant's net income on which the tax was imposed by the United States for the year ending December 31, 1915, as the portion of its income for that year upon which it should pay to the state such tax, and thereupon assessed against this applicant 2 per cent. of such income amounting to $12,593.37.

Acting under protest the plaintiff, in order to prevent the imposition of the penalty of the act and without waiving its right to claim that no such tax was due or collectible from it by the state, and that the requirement for such return was unconstitutional, made and filed such return and on July 29, 1916, paid said tax under protest and to prevent irreparable injury through the enforcement of the penalties and coercive features of the act.

The complaint further alleges that the sum determined as the net income upon which this tax is computed is in excess of 47 per cent. of the total income earned and received by the plaintiff, and the greater portion was earned and received without the state and in conducting its interstate business, and not over $10,160.27 thereof was earned or received in its business carried on in Connecticut. Upon these facts the plaintiff claimed relief by way of a judgment (1) that the act in so far as it attempts to tax the plaintiff is in violation of the United States Constitution and void, (2) directing the treasurer of Connecticut to repay to it the amount of such tax, with interest.

The defendant demurred to the claims of relief principally upon three grounds: (1) Sections 27 and 28 of the act under which the plaintiff's action was brought do not give the court jurisdiction. (2) The plaintiff cannot seek the remedy provided by the act whose validity it assails. (3) The plaintiff upon the facts paid the tax voluntarily, and hence cannot claim the act to be unconstitutional.

The plaintiff says in its brief that:

"The ultimate question in the case is whether or not part 4 of chapter 292 of the Public Acts of 1915 is constitutional, or does invade the exclusive power of the federal Congress over interstate commerce, or violate the Fourth, Fifth, and Fourteenth Amendments to the Constitution."

The demurrer does not raise this question, but limits its contentions to an attack upon the right of the plaintiff to maintain its appeal because of its own conduct in paying the tax and of the limited scope of the remedy provided by the act upon which the plaintiff predicates its action.

1. If the plaintiff with full knowledge of the facts paid this tax voluntarily, he cannot recover it, even though the tax were invalid and paid under protest. Sheldon v. South School District, 24 Conn. 88, 91. The tax in question was paid "under protest in order to escape irreparable injury through the enforcement of the penalties and coercive features of the act," the complaint alleges. The admissions of the demurrer go no further than the terms of the act. The tax would become due under the act on or before August 1st. Ten days thereafter and upon notice and demand of payment by the treasurer, 5 per centum of the unpaid tax would automatically be added to it and interest at the rate of three-fourths of 1 per centum per month upon such tax from the date the tax became due would be added. Further, the unpaid tax became a lien upon the real estate of the company within the state from the time the tax became due and was unpaid and from the filing of a certificate signed by the treasurer in the land records of the town. Since the filing of the certificate might be contemporaneous with the date when the tax became due and unpaid, the company was in danger of having this lien placed upon its property from such date.

The company was confronted with this situation: Though it contested the validity of the tax successfully it could not prevent the filing of the lien upon its property. And if it were unsuccessful, no matter what...