American Smelting & Refining Co. v. Lindsley - 204 U.S. 103 (1907)
U.S. Supreme Court
American Smelting & Refining Co. v. Lindsley, 204 U.S. 103 (1907)
American Smelting and Refining Company v. Lindsley
Argued December 20, 21, 1906
Decided January 7, 1907
204 U.S. 103
Although a state may impose different liabilities on foreign corporation than those imposed on domestic corporation, a statute that foreign corporations pay a fee based on their capital stock for the privilege of entering the state and doing business therein and thereupon shall be subjected to all liabilities and restrictions of domestic corporations amounts to a contract with foreign corporations complying therewith that they will not be subjected during the period for which they are
admitted to greater liabilities than those imposed on domestic corporations, and a subsequent statute imposing higher annual license fees on foreign than on domestic corporations for the privilege of continuing to do business is void as impairing the obligation of such contract as to those corporations which have paid the entrance tax and received permits to do business; nor can such a tax be justified under the power to alter, amend, and repeal reserved by the state constitution. So held as to Colorado Statutes of 1897 and 1902.
30 Colo. 275 reversed.
The writ of error in this case brings up for review the judgment of the Supreme Court of Colorado which affirmed the judgment of the trial court forfeiting the right of the plaintiff in error, hereinafter called the corporation, to do business as a foreign corporation within the state until a certain tax therein adjudged to be due should be paid. The corporation refused to pay the tax, and thereupon, at the instance of the district attorney and the attorney general of the state, a proceeding in the nature of quo warranto against the corporation was commenced for the purpose of obtaining a forfeiture of the franchise of the corporation for its failure to pay the "annual state corporation license tax." The defense set up that the tax was a violation of the federal Constitution as impairing the obligation of a contract, and in other particulars named. Upon the trial, the court found that there was due to the State of Colorado the sum of $4,000, being the amount of the annual tax due by reason of the statute, which was held valid. A decree was thereupon entered, forfeiting the right of the corporation to do business within the limits of the State of Colorado until the tax was paid, and it was "absolutely and wholly deprived of all rights and privileges within the State of Colorado until such tax is paid." Upon appeal to the supreme court of the state, this judgment was affirmed, and the corporation then sued out this writ of error.
The corporation was incorporated April 4, 1899, in New Jersey, and it is permitted by its articles of incorporation to do business in other states, and to carry on a general ore reduction, milling, mining, and other business mentioned in such
articles. On April 28, 1899, it duly made application to the proper state authorities of Colorado for permission to enter and transact business in that state under the laws thereof. At this time, its capital stock was $65,000,000, divided into shares of the par value of $100 each. Subsequently, and on April 8, 1901, its capital stock was increased to $100,000,000, and the certificate of such increase was duly filed in Colorado. Section 499, Mills Annotated Statutes of Colorado, after making provision for the performance of certain conditions by a foreign corporation entering the state, continued:
"And such corporation shall be subjected to all the liabilities, restrictions, and duties which are or may be imposed upon such corporations of like character organized under the general laws of this state, and shall have no other or greater powers."
Section 500 of the same statute provided that a foreign corporation must file in the office of the secretary of state a copy of its charter, or, if incorporated under a general corporation law, a copy of such certificate of incorporation, and such general corporation law, duly certified. Section 1 of chapter 51 of the Session Laws of Colorado for 1897 provided that every foreign corporation should pay to the secretary of state, for the use of the state, a fee of $10 if the capital stock did not exceed $50,000. If in excess of that sum, the corporation was to pay
"the further sum of fifteen cents on each and every thousand dollars of such excess, and a like fee of fifteen cents on each thousand of the amount of each subsequent increase of stock. The said fee shall be due and payable upon the filing of certificate of incorporation, articles of association, or charter of said incorporation, joint stock company, or association, in the office of the Secretary of State, and no such corporation, joint stock company, or association shall have or exercise any corporate powers or be permitted to do any business in this state until the said fee shall have been paid, and the Secretary of State shall not file any certificate of incorporation, articles of association, charter, or certificate of the increase of capital stock, or certify or give any certificate to
any such corporation, joint stock company, or association, until said fee shall have been paid to him."
By § 10 of chapter 52 of the Session Laws of Colorado for 1901, it was provided that no foreign corporation could
"exercise any corporate power or acquire or hold any real or personal property, franchises, rights, or privileges, or do any business or prosecute or defend in any suit in this state until it shall have received from the Secretary of this state a certificate setting forth that full payment has been made by such corporation, joint stock company, or association of all fees and taxes prescribed by law to be paid to the Secretary of State, and every such corporation, joint stock company, or association shall pay to the Secretary of State for each such certificate a fee of five dollars."
In accordance with the provisions of section 1 of the Laws of 1897 above mentioned, the corporation paid, upon filing its certificate, April 28, 1899, to the Secretary of State, for the use of the state, $9,792.50 on its original capitalization, and on May 17, 1901, the further sum of $5,250 upon its increase of capital stock to $100,000,000. Thereupon the Secretary of State issued a certificate, stating the filing of the proper papers with him, and further stating that,
"pursuant to the provisions of section 10 of said act, (1901) I hereby certify that the said company has made full payment of all fees prescribed by law to be paid to the Secretary of State and due at the time of the issuing of this certificate, and is hereby authorized to exercise any corporate powers provided for by law."
This was given under the hand and official seal of the Secretary of State, and was dated on the twenty-first day of May, 1901. There were at this time no other statutes providing for the payment of any charges, fees, or taxes for coming into and doing business in the State of Colorado.
The corporation, upon entering the state in 1899 under its permission to enter and transact business therein, immediately commenced to erect a plant for the purpose of carrying on its business as a corporation, and before the commencement
of these proceedings, it had invested for that purpose in the state sums amounting to more than $5,000,000. At the time the corporation was permitted to enter and carry on its business in the state, the statute of Colorado provided that the term of life of corporations formed under the laws of that state should be twenty years. After the corporation had been doing business for some three years, and on March 22, 1902, the Legislature of Colorado passed an act in relation to taxes. Session Laws of Colorado for 1902, 43, 160, etc.
Section 64 of that act provided that all domestic corporations should thereafter and on or before the first day of May of each year, or at the time of obtaining such charter or certificate of incorporation, pay "an annual state corporation license tax," to the auditor of the state, of two cents upon each one thousand dollars of its capital stock.
Section 65 provides that every foreign corporation which had theretofore obtained
"the right and privilege to transact and carry on business within the limits of the State of Colorado shall, in addition to the fees and taxes now provided for by law, and as a condition precedent to its right to do any business within the limits of this state, pay annually . . ."
a state license tax of four cents upon each one thousand dollars of its capital stock.
Section 66 provided that every corporation which should fail to pay the tax provided for in sections 64 and 65 supra, should forfeit its right to do business within the state until the tax was paid, and should be deprived of all rights and privileges, and the fact of such failure might be pleaded as an absolute defense to any and all actions, suits, or proceedings, in law or in equity, brought or maintained by or on behalf of such corporations, in any court of competent jurisdiction within the limits of the state, until such tax was paid.
This corporation refused to pay, and the state, through its District Attorney and Attorney General, commenced this suit for the purpose of forfeiting its right to remain in that state unless and until it paid the money under the statute of 1902.