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
Page 204 U. S. 104
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
Page 204 U. S. 105
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
Page 204 U. S. 106
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
Page 204 U. S. 107
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.
Page 204 U. S. 111
MR. JUSTICE PECKHAM, after making the foregoing statement,
delivered the opinion of the Court.
It is conceded that the corporation has paid all its
indebtedness for taxes or otherwise to the State of Colorado,
except the amount demanded under the above-mentioned law of 1902,
and that it has obeyed all the laws of the state with that
exception. It is urged, however, upon the part of the corporation
that, by its admission into the state with its right to do business
therein by the payment of the amount of money required for such
purpose under the then-existing law, a contract between the state
and itself was thereby made that it should be permitted to remain
therein during the term of life which the state by law allowed to
corporations created by it (which was twenty years) without being
again subjected to further exactions of money for what it had once
paid for --
viz., the right to remain and transact
business in that state. Undoubtedly, if the corporation violated
the laws of the state properly applicable to it, or if otherwise it
gave just cause for its expulsion, it could not insist upon such a
contract as a defense.
It is also conceded on behalf of the corporation that it is not
entitled to any exemption from taxes which the State of Colorado
can properly impose upon persons or corporations within her
borders.
Having obtained permission to enter the state and do business as
above mentioned, the question, aside from that of the
Page 204 U. S. 112
extent of the term, is whether any contract between the state
and the corporation arose under these laws and the facts above
mentioned.
In 1899, when this (foreign) corporation applied for a permit to
enter and do business in the state, the laws of Colorado only
granted such application on the payment of a certain fee named in
the statute of 1897, which was payable upon filing its certificate
of incorporation in the office of the Secretary of State of
Colorado, and until that payment was made and the certificate
filed, no such corporation was permitted to have or exercise any
corporate powers, nor was it permitted to do any business in the
state. Section 30 of the act of 1901 provided that, upon payment of
all taxes, etc., due under the law, the Secretary of State was to
issue a certificate acknowledging the fact, for which the
corporation was to pay a stated fee, and until the certificate was
received from the Secretary of State by the corporation, it should
not exercise any corporate powers or do any business in the state,
as provided for by the act of 1897.
The result of these statutes was that the foreign corporation,
upon filing the proper papers and paying the statutory fees and
obtaining the certificate to that effect from the Secretary of
State, obtained the right to enter and do business in Colorado. The
act of 1901 did not increase the amount of the exaction for
entering and doing business in the state, but simply provided for a
certificate, acknowledging payment, from the secretary, and it
imposed the payment of a small fee for such certificate. The right
obtained was a right to enter the state and do business therein as
a corporation. It was also subject by statute to the liabilities,
restrictions, and duties which were or might thereafter be imposed
upon domestic corporations of like character. Domestic corporations
at that time had the right to a corporate existence of twenty
years.
These provisions of law, existing when the corporation applied
for leave to enter the state, made the payment required,
Page 204 U. S. 113
and received its permit, amounted to a contract that the foreign
corporation so permitted to come in the state and do business
therein, while subjected to all, should not be subjected to any
greater liabilities, restrictions, or duties than then were or
thereafter might be imposed upon domestic corporations of like
character.
A provision in a statute of this nature subjecting a foreign
corporation to all the liabilities, etc., of a domestic one of like
character must mean that it shall not be subjected to any greater
liabilities than are imposed upon such domestic corporation. The
power to impose different liabilities was with the state at the
outset. It could make them greater or less than in case of a
domestic corporation, or it could make them the same. Having the
general power to do as it pleased, when it enacted that the foreign
corporation, upon coming in the state, should be subjected to all
the liabilities of domestic corporations, it amounted to the same
thing as if the statute had said the foreign corporations should be
subjected to the same liabilities. In other words, the liabilities,
restrictions, and duties imposed upon domestic corporations
constitute the measure and limit of the liabilities, restrictions,
and duties which might thereafter be imposed upon the corporation
thus admitted to do business in the state. It was not a mere
license to come in the state and do business therein upon payment
of a sum named, liable to be revoked or the sum increased at the
pleasure of the state, without further limitation. It was a clear
contract that the liabilities, etc., should be the same as the
domestic corporation, and the same treatment in that regard should
be measured out to both. If it were desired to increase the
liabilities of the foreign, it could only be done by increasing
those of the domestic, corporation at the same time and to the same
extent.
Such being the contract, how long was it to last? Only until the
state chose to alter it? Or was it to last for some definite time,
capable of being ascertained from the terms of the statutes as they
then existed? It seems to us that the
Page 204 U. S. 114
only limitation imposed is the term for which the corporation
would have the right to continue in the state as a corporation. One
of the restrictions as to domestic corporations is that which
limits their corporate life to twenty years, unless extended as
provided by law. The same restriction applies to the foreign
corporation.
Iron Silver Min. Co. v. Cowie, 31 Colo. 450.
Counsel for the state concedes that the corporation was admitted
for a period of twenty years, but subject to the power of the state
to tax. Curing that time, therefore, the contract lasts. This is
the only legitimate, and we think it is the necessary, implication
arising from the statute.
This is not an exemption from taxation; it is simply a
limitation of the power to tax beyond the rate of taxation imposed
upon a domestic corporation. Instead of such a limitation, the act
of 1902, already referred to, imposes a tax or fee upon or exacts
from the foreign corporation double the amount which is imposed
upon or exacted from the domestic one. The latter is granted the
right to continue to do business upon the annual payment of two
cents upon each one thousand dollars of its capital stock, while
the former must pay four cents for the same right. This cannot be
done while the right to remain exists. It is a violation of the
obligation of an existing valid contract.
Home of
the Friendless v. Rouse, 8 Wall. 430.
Nor is this a case where the power given by the state
constitution to the general assembly to alter, amend, or annul a
charter is applicable. The act does not alter the charter or annul
or amend it. It simply increases the taxation which, up to the time
of its enactment, had been imposed on all foreign corporations
doing business in the state.
A discussion as to the name or nature of the tax imposed by the
act of 1902 or the former acts is wholly unimportant with reference
to the view we take of this case. After the payment of the money
and the receipt of the permit to enter and do business in the
state, the corporation could not, as we
Page 204 U. S. 115
have said, be thereafter further taxed than was the domestic
one. The tax on the latter under that act is the same in substance
and effect as that upon the foreign corporation, but it is for only
one-half thereof in amount. The domestic must pay "an annual state
corporation license tax," while the foreign corporation must pay "a
state license tax" annually. The means of enforcing payment are not
different, and such means are stated in section 66 of the act of
1902.
Whatever be the name or nature of the tax, it must be measured
in amount by the same rate as is provided for the domestic
institution, and, if the latter is not taxed in that way, neither
can the state thus tax the foreign corporation.
It is unnecessary to refer to the many cases cited by both
parties hereto. Some of them refer to the question as to the nature
of such a tax, while others decide, upon the facts appearing in
them, whether there was a contract or not. As already stated, the
name of the tax or its kind is not important so long as it is plain
that the act of 1902 increases the liabilities of the foreign
corporation over those which obtain in that of the domestic. And in
regard to the cases of contract, while the principle that a
contract may arise from a legislative enactment has been reiterated
times without number, it must always rest for its support in the
particular case upon the construction to be given the act, and in
this case we are not greatly aided by the former cases regarding
taxation and legislative contract. We may, however, refer to the
following out of many cases regarding contracts as to taxation:
Miller v. New
York, 15 Wall. 478;
New York, Lake Erie &
Western Railroad Co. v. Pennsylvania, 153 U.
S. 628;
Powers v Detroit &c. Railway Co.,
201 U. S. 543.
Holding that the act of 1902 impaired the obligation of the
contract existing between the corporation and the state, and is
therefore void as to the corporation, it becomes unnecessary to
decide the other questions discussed at the bar.
The judgment of the Supreme Court of Colorado is reversed,
Page 204 U. S. 116
and the case remanded to that court for further proceedings not
inconsistent with this opinion.
Reversed.
THE CHIEF JUSTICE, MR. JUSTICE HARLAN, MR. JUSTICE HOLMES, and
MR. JUSTICE MOODY dissent.
