If several railroad corporations, each existing under the laws
of separate states, consolidate into one corporation, a statute of
one of the states imposing a charge upon the new consolidated
company of a percentage on its entire authorized stock as the fee
to the state for the filing of the articles of consolidation in the
office of the secretary of the state, without which filing it could
not possess the powers, immunities, and privileges which appertain
to a corporation in that state, is not a tax on interstate commerce
or the right to carry on the same, or the instruments thereof, and
its enforcement involves no attempt on the part of the state to
extend its taxing power beyond its territorial limits.
A state, in permitting a foreign corporation to become one of
the constituent elements of a consolidated corporation organized
under its laws, may impose such conditions as it deems proper, and
the acceptance of the franchise implies a submission to the
conditions without which the franchise could not have been
obtained.
The Wabash, St. Louis and Pacific Railroad Company, which owned
and operated lines running through the States of Ohio, Indiana,
Illinois, Missouri, and Michigan, having defaulted in the payment
of interest on its bonds, foreclosure proceedings were commenced in
the federal courts for the sale of its property. Subsequently a
committee was entrusted with the duty of buying in the property.
After purchase by the committee, the property in the several states
was transferred to companies incorporated in those states. The
following were the companies thus organized, and to whom the
necessary transfers were, respectively, made:
In Ohio: The Toledo and Western; capital stock, $700,000.
In Michigan: The Detroit and State Line Wabash; capital stock,
$300,000.
In Indiana: The Wabash Eastern, of Indiana; capital stock,
$9,000,000.
Page 153 U. S. 437
In Illinois: The Wabash Eastern, of Illinois; capital stock,
$12,000,000.
In Missouri: The Wabash Western; capital stock, $30,000,000.
Thereafter, these several companies were consolidated into one.
Section 148
a of the Revised Statutes of Ohio contains,
among other provisions, the following:
"The Secretary of State shall hereafter charge and collect the
following fees for official services:"
"1. For filing the articles of incorporation of any corporation
whose capital stock is ten thousand dollars or under, ten dollars;
of a corporation whose capital stock is over ten thousand dollars,
one-tenth of one percent upon the authorized capital stock of such
corporation."
"2. For filing a certificate of increase of the capital stock of
any corporation having a capital stock where the amount of the
increase is ten thousand dollars or under, ten dollars; where the
amount of increase is over ten thousand dollars, one-tenth of one
percent upon the proposed amount of increased capital."
"3. For filing articles of agreements of consolidation of
corporations having a capital stock, the following fees shall be
collected by the Secretary of State: said articles of agreements of
consolidation shall be treated as the articles of incorporation of
the new consolidated corporations created by such articles or
agreements of consolidation, and the fees for filing such articles
or agreements of consolidation shall be the same in each case as is
hereinbefore set forth for the filing of articles of incorporation
of a corporation having the same amount of capital stock as is
provided for by the articles or agreements of consolidation for the
new consolidated corporation, created by any such articles or
agreement of consolidation, and in fixing the amount of such fees,
no credit shall be allowed for fees previously paid by any of the
constituent corporations, parties to such consolidation, but the
same shall be determined solely by the amount of capital stock of
the new corporation created by such articles or agreements of
consolidation."
By another provision of the Revised Statutes of Ohio, the
Page 153 U. S. 438
fees to be collected under the foregoing law were required to be
paid by the Secretary of State into the Treasury.
The plaintiffs in error presented their articles of
consolidation, for filing, to the Secretary of State, and tendered
$700, that being one-tenth of one percent on the capital stock of
the Toledo and Western Railroad, the only Ohio corporation which
had entered into the consolidation. The secretary refused to file
the proffered articles for that amount, and demanded $52,000, or
one-tenth of one percent of the par value of the entire stock of
the consolidated corporation. This amount was paid under protest,
and suit was at once brought to recover all the excess paid over
and above the $700 originally tendered, upon the ground that such
excess had been collected without warrant of law; that it
constituted a tax for the general purposes of revenue, and
therefore its exaction was contrary to the Constitution and laws of
the State of Ohio; and, moreover, that its enforcement would
violate the Constitution of the United States, because it would be
an attempt on the part of the State of Ohio to lay a burden on
interstate commerce, or the instruments of such commerce, and to
give an extraterritorial force to its taxing power.
Pending the controversy, an injunction issued restraining the
Secretary of State from covering into the state treasury the sum
which had been paid him under protest. The cause was ultimately
taken to the Supreme Court of the State of Ohio, and by that court
the judgment which maintained the validity of the charge was
affirmed. The plaintiffs in error thereupon brought the cause here
for review.
Page 153 U. S. 440
MR. JUSTICE WHITE, after stating the case, delivered the opinion
of the court.
With the question whether the sum paid was authorized by the
Ohio statutes, or constituted a fee, a license, or a tax, under the
Ohio laws and Constitution, we are not concerned. The writ of error
brings before us only the federal question.
Watson v.
Mercer, 8 Pet. 88;
Barbier v. Connolly,
113 U. S. 27. Nor
does the determination of the federal question render it necessary
to define the nature of the charge imposed, for whether this charge
be viewed as a tax, a license, or a fee, if its exaction violated
the interstate commerce clause of the Constitution of the United
States or involved the assertion of the right of a state to
exercise its powers of taxation beyond its geographical limits, it
was void, whatever might be the technical character affixed to the
exaction.
The purpose of the tender of the articles of consolidation to
the Secretary of State was to secure to the consolidated company
certain powers, immunities, and privileges which appertain to a
corporation under the laws of Ohio. The rights thus sought could
only be acquired by the grant of the State of Ohio, and depended
for their existence upon the provisions of its laws. Without that
state's consent, they could not have been procured. Revised
Statutes of Ohio, sections 3239, 3382, 3384
b, amended by
Act of April 11, 1890, 87 Ohio
Page 153 U. S. 441
Laws 183. Hence, in seeking to file its articles of
incorporation, the company was applying for privileges, immunities,
and powers which it could by no means possess save by the grace and
favor of the Constitution of the State of Ohio, and the statutory
provisions passed in accordance therewith. At the time the articles
were presented for filing, the statute law of the state charged the
parties with notice that the benefits which it was sought to
procure could not be obtained without payment of the sum which the
Secretary of State exacted. As it was within the discretion of the
state to withhold or grant the privilege of exercising corporate
existence, it was, as a necessary resultant, also within its power
to impose whatever conditions it might deem fit as prerequisite to
corporate life. The act of filing, constituting, as it did, a claim
of a right to the franchise granted by the state law, carried with
it a voluntary assumption of any burden with which the privilege
was accompanied, and without which the right of corporate existence
could not have been procured. We say "voluntary" assumption
because, as the claim to the franchise was voluntary, the
assumption of the privilege which resulted from it partook
necessarily of the nature of the claim for corporate existence.
Having thus accepted the act of grace of the state and taken the
advantages which sprang from it, the company cannot be permitted to
hold on to the privilege or right granted and at the same time
repudiate the condition by the performance of which it could alone
obtain the privilege which it sought.
That the right to be a state corporation depends solely upon the
grace of the state, and is not a right inherent in the parties, is
settled. Thus, in
California v. Pacific Railroad Co.,
127 U. S. 1,
127 U. S. 40,
speaking through Mr. Justice Bradley, the Court said:
"A franchise is a right, privilege, or power of public concern
which ought not to be exercised by private individuals at their
mere will and pleasure, but should be reserved for public control
and administration. . . . Under our system, their existence and
disposal are under control of the legislative department of the
government, and they cannot be assumed or exercised without
legislative authority. . . .
Page 153 U. S. 442
No private person can take another's property, even for public
use, without such authority, which is the same as to say that the
right of eminent domain can only be exercised by virtue of a
legislative grant. This is a franchise. No persons can make
themselves a body corporate and politic without legislative
authority. Corporate capacity is a franchise. The list might be
continued indefinitely."
In
Home Insurance Co. v. New York, 134 U.
S. 594, through MR. JUSTICE FIELD, we said:
"The right or privilege to be a corporation, or to do business
as such body, is one generally deemed of value to the corporation
or it would not be sought in such numbers as at present. It is a
right or privilege by which several individuals may unite
themselves under a common name and act as a single person, with a
succession of members, without dissolution or suspension of
business, and with a limited individual liability. The granting of
such right or privilege rests entirely within the discretion of the
state."
These citations only reiterate principles established beyond
controversy by a series of decisions.
Bank of
Augusta v. Earle, 13 Pet. 519;
Lafayette
Insurance Co. v. French, 18 How. 404;
Paul v.
Virginia, 8 Wall. 168;
Ducat v.
Chicago, 10 Wall. 410.
Nor is the question at issue affected by the fact that some of
the constituent elements which entered into the consolidated
company were corporations owning and operating property in another
state. The power of corporations of other states to become
corporations or to constitute themselves a consolidated corporation
under the Ohio statutes, and thus avail of the rights given
thereby, is as completely dependent on the will of that state as is
the power of its individual citizens to become a corporate body, or
the power of corporations of its own creation to consolidate under
its laws.
Bank of Augusta v. Earle, supra; Insurance Co. v.
French, supra; 75 U. S.
Virginia, 8 Wall. 168,
75 U. S.
181.
In the latter case, speaking through MR. JUSTICE FIELD, we
observed:
"Now a grant of a corporate existence is a grant of special
privileges to the corporators, enabling them to act
Page 153 U. S. 443
for certain designated purposes as a single individual, and
exempting them (unless otherwise specially provided) from
individual liability. The corporation, being the mere creation of
local law, can have no legal existence beyond the limits of the
sovereignty where created. As said by this Court in
Bank of
Augusta v. Earle, '[i]t must dwell in the place of its
creation, and cannot migrate to another sovereignty.' The
recognition of its existence, even by other states, and the
enforcement of its contracts made therein depend purely upon the
comity of these states -- a comity which is never extended where
the existence of the corporation or the exercise of its powers are
prejudicial to their interests, or repugnant to their policy. . . .
At the present day, corporations are multiplied to an almost
indefinite extent. There is scarcely a business pursued requiring
the expenditure of large capital or the union of large numbers that
is not carried on by corporations. It is not too much to say that
the wealth and business of the country are to a great extent
controlled by them. And if, when composed of citizens of one state,
their corporate powers and franchises could be exercised in other
states without restriction, it is easy to see that with the
advantages thus possessed, the most important business of those
states would soon pass into their hands. The principal business of
every state would in fact be controlled by corporations created by
other states."
It follows from these principles that a state, in granting a
corporate privilege to its own citizens, or, what is equivalent
thereto, in permitting a foreign corporation to become one of the
constituent elements of a consolidated corporation organized under
its laws, may impose such conditions as it deems proper, and that
the acceptance of the franchise in either case implies a submission
to the conditions without which the franchise could not have been
obtained. In
Paul v. Virginia, supra, the Court said:
"Having no absolute right of recognition in other states, but
depending for such recognition and the enforcement of its contracts
upon their assent, it follows as a matter of course that such
assent may be granted upon such terms and conditions as those
states may think proper
Page 153 U. S. 444
to impose. They may exclude the foreign corporation entirely.
They may restrict its business to particular localities, or they
may exact such security for the performance of its contracts with
their citizens as in their judgment will best promote the public
interest."
In the case of
Railroad Co. v.
Maryland, 21 Wall. 456, considering a grant by the
State of Maryland to a railroad company of a right to build a
branch from Baltimore to Washington upon condition that the company
should pay semiannually to the state one-fifth of the amount
received from the transportation of passengers over the road
authorized, the court spoke as follows:
"The state could have built the road itself and charged any rate
it chose, and could thus have filled the coffers of its treasury
without being questioned therefor. How does the case differ, in a
constitutional point of view, when it authorized its private
citizens to build the road and reserved for its own use a portion
of the earnings? We are unable to see any distinction between the
two cases. In our judgment, there is no solid distinction. If the
state, as a consideration of the franchise, had stipulated that it
should have all the passenger money, and the corporation should
have only the freight for the transportation of merchandise, and
the corporation had agreed to those terms, it would have been the
same thing. It was simply the exercise by the state of absolute
control over its own property and prerogatives."
And the contention that the charge imposed a burden upon
interstate commerce was thus answered:
"It may incidentally affect transportation, it is true, but so
does every burden or tax imposed on corporations or persons engaged
in that business. Such burdens, however, are imposed
diverso
intuitu, and in the exercise of an undoubted power. The state
is conceded to possess the power to tax its corporations, and yet
every tax imposed on a carrier corporation affects more or less the
charges it is compelled to make upon its customers. So the state
has an undoubted power to exact a bonus for the grant of a
franchise payable in advance or
in futuro, and yet that
bonus will necessarily affect the charge upon the public which the
donee of the franchise will
Page 153 U. S. 445
be obliged to impose. The stipulated payment in this case,
indeed, is nothing more or less than a bonus."
In
Ducat v. Chicago, supra, the Court said:
"The only difference between the statute of Virginia and that of
Illinois is that the later is more onerous to the companies than
the former. The difference is in degree, not in principle."
That was a case in which an insurance company was not only
required to comply with the general law of the State of Illinois,
but also to pay a portion of its premium to the City of Chicago as
a condition of doing business therein.
The case of
Philadelphia Fire Association v. New York,
119 U. S. 110,
involved the validity of a tax imposed by the State of New York on
an insurance company which had been incorporated in Pennsylvania.
Mr. Justice Blatchford, in delivering the opinion of the Court,
said:
"This Pennsylvania corporation came into the State of New York
to do business, by the consent of the state, under this act of
1853, with a license granted for a year, and has received such
license annually, to run for a year. It is within the state, for
any given year, under such license, and subject to the conditions
prescribed by statute. The state, having the power to exclude
entirely, has the power to change the conditions of admission at
any time, for the future, and to impose as a condition the payment
of a new tax or a further tax as a license fee. If it imposes such
license fee as a prerequisite for the future, the foreign
corporation, until it pays such license fee, is not admitted within
the state or within its jurisdiction. It is outside at the
threshold, seeking admission, with consent not yet given."
Indeed, the cases illustrating this doctrine are too numerous
for review, and need only be referred to.
Society
for Savings v. Coite, 6 Wall. 594;
Provident
Institution v. Massachusetts, 6 Wall. 611 611;
Hamilton Co. v.
Massachusetts, 6 Wall. 632;
State Tax
on Railway Gross Receipts, 15 Wall. 284;
Railroad Co. v.
Peniston, 18 Wall. 5;
Delaware Railroad Tax
Case, 18 Wall. 206;
State Railroad Tax
Case, 92 U. S. 575;
Philadelphia & Southern Steamship Co. v. Pennsylvania,
122 U. S. 326;
California v. Pacific Railroad, 127 U. S.
1;
Home
Page 153 U. S. 446
Insurance Co. v. New York, 134 U.
S. 594;
Maine v. Grand Trunk Railway,
142 U. S. 217.
The question here is not the power of the State of Ohio to lay a
charge on interstate commerce or to prevent a foreign corporation
from engaging in interstate commerce within its confines, but
simply the right of the state to determine upon what conditions its
laws as to the consolidation of corporations may be availed of.
Considering, as we do, that the payment of the charge was a
condition imposed by the State of Ohio upon the taking of corporate
being or the exercise of corporate franchises, the right to which
depended solely on the will of that state, and hence that liability
for the charge was entirely optional, we conclude that the exaction
constituted no tax upon interstate commerce, or the right to carry
on the same, or the instruments thereof, and that its enforcement
involved no attempt on the part of the state to extend its taxing
power beyond its territorial limits.
Judgment affirmed.
