1. A merchant whose business had been conducted through salesmen
in a city and elsewhere in the state, alleging that a state law
imposing a statewide license tax on each salesman or graduated
local tax in cities was in denial of equal protection of the laws,
brought suit in a federal court to enjoin the enforcement of the
law, naming as sole defendant a city officer whose authority to
enforce it was confined to his particular city.
(1) That the matter in controversy did not embrace the right to
restrain enforcement of the law by other officers in other places
in the state, and that the collateral effect of the decree, by
virtue of stare decisis,
upon other and distinct
controversies with other officers could not be considered in
ascertaining whether the jurisdictional amount was involved, even
though their decision might turn on the same question of law. P.
292 U. S.
(2) Evidence of injury to the plaintiff's business outside of
the city, and of the cost of licenses for doing it, must therefore
be disregarded in determining the amount in controversy. P.
292 U. S.
2. In an injunction suit in a federal court challenging the
constitutionality of a state law which imposes license taxes on
plaintiff's salesmen and subjects them to arrest and fine for
nonpayment, the issue being confined to the right of the state to
collect the taxes and not extending to the method of enforcement,
the amount in controversy is the amount of the taxes due from
plaintiff or demanded of him, and does not include the penalty or
loss of business which payment of the tax would avoid. P.
292 U. S.
3. The inability of a taxpayer to litigate the validity of a tax
without risk of irreparable injury to his business, which is ground
for invoking the equitable jurisdiction of a federal court, affords
no measure of the value of the matter in controversy. P.
292 U. S.
4. The policy of Congress to narrow the jurisdiction of federal
courts in suits between citizens of different States or based on
federal questions calls for strict construction of the statute in
determining the value of the matter in controversy. P. 292 U. S.
5. The power reserved to the states, under the Constitution, to
provide for the determination of controversies in their courts may
Page 292 U. S. 264
restricted only by the action of Congress in conformity with the
judiciary sections of the Constitution. P. 292 U. S.
6. Due regard for the rightful independence of state government,
which should actuate federal courts, requires that they
scrupulously confine their own jurisdiction to the precise limits
which the statute has defined. P. 292 U. S.
7. In suits to enjoin the collection of a tax payable annually
or the imposition of penalties in case it is not paid, the sum due
or demanded is the matter in controversy, and the amount of the
tax, not its capitalized value, is the measure of the
jurisdictional amount. P. 292 U. S.
67 F.2d 554 reversed.
Appeal from the affirmance of a decree against Healy, a police
officer, perpetually enjoining him from making arrests,
prosecuting, or otherwise interfering with the plaintiff or his
dealers in the City of Manchester for failure to pay license taxes
imposed by a New Hampshire "Hawkers & Peddlers" law.
MR. JUSTICE STONE delivered the opinion of the Court.
This case comes here on appeal from a decree of the Court of
Appeals for the First Circuit, affirming a decree of the District
Court for New Hampshire, which enjoined appellant, the chief of
police for the City of Manchester, from enforcing the Hawkers' and
Peddlers' Act, Chapter 102, New Hampshire Laws of 1931, as an
infringement of the Fourteenth Amendment. An appeal taken directly
to this Court from the District Court, three judges sitting, was
dismissed for want of jurisdiction here, since, in the lower court,
appellee had waived his prayer for temporary relief. 289 U.S. 701;
see Smith v. Wilson, 273 U. S. 388
273 U. S.
Page 292 U. S. 265
The Act, effective April 14, 1931, requires payment of an annual
license tax or fee for every hawker or peddler, defined to be
"any person, either principal or agent, who goes from town to
town or from place to place in the same town selling or bartering,
or carrying for sale or barter or exposing therefor, any goods,
wares or merchandise."
The tax is $50 for a statewide license. Local licenses are
obtainable at a rate graduated according to population. That for
Manchester is stated to be $85 for each license. Violation of the
act is punishable by a fine of not more than $200. Appellee's chief
ground of attach upon the statute, sustained by both the courts
below, is that it denies the equal protection of the laws by
excepting from its operation certain classes of hawkers and
peddlers in which appellee and his agents are not included.
The bill of complaint alleges that, until the effective date of
the Act, appellee, a resident of Massachusetts, was engaged in
Manchester and elsewhere in New Hampshire in the distribution of
vacuum cleaners through their sale and delivery to purchasers by
traveling salesmen; that the business was conducted in such a
manner as to subject the salesmen to the tax, which they were
unwilling or unable to pay, and that their arrest and prosecution,
which appellant threatens if they continue to sell without paying
the tax, would destroy appellee's business. The value of his
business and his loss on account of the enforcement of the act are
each alleged to be more than $3,000. Appellant's answer and motion
to dismiss the cause as not within the jurisdiction of the District
Court admit the facts stated in the complaint, so far as now
material, except that they deny the allegation that the matter in
controversy exceeds $3,000, the jurisdictional amount.
On this issue, a trial was had in the course of which evidence
was given to show the extent of appellee's business
Page 292 U. S. 266
in Manchester and elsewhere in New Hampshire and in adjoining
states, and the profits derived from it in New Hampshire both
before and after the enactment of the taxing statute. No
interlocutory injunction was sought, and, after the effective date
of the statute, appellee changed the method of doing his business
in New Hampshire in a way to avoid the necessity of a license,
sales being made by sample, with later delivery by shipping the
merchandise directly to the purchaser from outside the state. The
business was carried on in this manner in 1931 at a loss. It
appeared that the total number of salesmen employed in conducting
appellee's business in Manchester during 1931, when the statute was
enacted, was six, and that, in earlier years, a larger number had
been employed. During those years, from twenty-two to twenty-seven
salesmen were employed elsewhere in the state.
It is appellee's contention that the matter in controversy is
either the tax which he would be required to pay annually in order
to continue his business in New Hampshire or his right to conduct
the business there without payment of the tax, and that the value
of each exceeds $3,000. He argues upon the evidence that the
expenditure for payment of the tax which he would be obliged to
bear in order to continue his business in Manchester is at least
$350 per annum, and that the capitalized value of this expenditure
would exceed $3,000.
The District Court concluded that, as the tax which would be
imposed for the conduct of appellee's business in Manchester would
amount to at least $300 per annum, its capitalized value, which
would exceed $3,000, satisfies the jurisdictional requirement. The
Court of Appeals thought that the matter in controversy was
appellee's right to do business throughout the state, which it
valued at more than $3,000.
It is conceded that the authority of appellant, as chief of
police, to make arrests for violation of the statute is
Page 292 U. S. 267
restricted to the City of Manchester. The bill of complaint does
not allege, nor does appellee assert, that appellant will cause the
arrest of his salesmen or otherwise interfere with them or with his
business outside the city. The controversy here is that defined by
the pleadings, see Smith v. Adams, 130 U.
, 130 U. S. 175
and the matter in controversy does not embrace more than the right
asserted to restrain appellant from compelling compliance with the
statute in Manchester by criminal prosecutions. Appellee neither
asks, nor could he properly be awarded, a decree in the present
suit restraining enforcement of the law by police officers
elsewhere, and the collateral effect of the decree, by virtue of
upon other and distinct controversies may
not be considered in ascertaining whether the jurisdictional amount
is involved, even though their decision turns on the same question
of law. Lion Bonding & Surety Co. v. Karatz,
262 U. S. 77
262 U. S. 85
Colvin v. Jacksonville, 158 U. S. 456
New England Mortgage Co. v. Gay, 145 U.
; Vicksburg, S. & P. R. Co. v. Smith,
135 U. S. 195
Gibson v. Shufeldt, 122 U. S. 27
Elgin v. Marshall, 106 U. S. 578
If the threatened action of appellant is not restrained, the
consequence will be either the payment of the tax by appellee or
the suppression of his business in Manchester because of his
failure to pay it. Hence, we disregard evidence of injury to
appellee's business outside the city and of the cost of licenses
for doing it, and confine ourselves to the inquiry whether his
right to do the business in Manchester or the tax which must be
paid for doing the business there is the matter in controversy, and
whether the record shows that its value does not exceed $3,000.
That the issue between the parties is the right of the state to
collect the tax cannot be gainsaid. There is no question of the
authority of a state to suppress the conduct of a business for the
nonpayment of an exaction lawfully imposed upon it, or of the
Page 292 U. S. 268
to suppress the business here, by threat of criminal prosecution
of the salesmen, if this tax is valid. The dispute as to the
lawfulness of the tax is the controversy which alone gives vitality
to the litigation. Once that is resolved, no other issue survives
It has been said that it is the value of the "object of the
suit" which determines the jurisdictional amount in the federal
courts, Mississippi & Missouri R.
Co. v. Ward,
2 Black 485; Packard v.
Banton, 264 U. S. 140
264 U. S. 142
But this does not mean objects which are merely collateral or
incidental to the determination of the issue raised by the
pleadings. The statute itself does not speak of objects of the
suit. It confers jurisdiction only if "the matter in controversy
exceeds . . . the sum or value of $3,000." It has never been
thought that the federal courts have jurisdiction of suits to
restrain the collection of a property tax or other money exaction
of less than the jurisdictional amount assailed as
unconstitutional, merely because the penalty for nonpayment, which
has not been incurred, exceeds that amount. Atlantic Coast Line
Ry. Co. v. Railroad Comm'n,
281 F. 321. The tax, payment of
which is demanded or resisted, is the matter in controversy, since
payment of it would avoid the penalty and end the dispute.
See Ross v.
3 How. 771, 44 U. S. 772
Whether and in what manner the penalty for nonpayment may be
enforced in the event the tax is valid are but collateral and
incidental to the determination whether payment may be exacted.
Only when the suit is brought to restrain imposition of a penalty
already accrued by reason of failure to comply with the statute or
order assailed can the penalty be included as any part of the
matter in controversy. See McNeil v. Southern Ry. Co.,
202 U. S. 343
Kansas City Southern Ry. Co. v. Ogden Levee Dist.,
637; compare Barry v. Edmunds, 116 U.
Page 292 U. S. 269
The case of a tax or fee exacted for the privilege of doing a
particular business presents no different considerations. Where a
challenged statute commands the suppression or restriction of a
business without reference to the payment of any tax, the right to
do the business or the injury to it is the matter in controversy.
Scott v. Donald, 165 U. S. 107
see Bitterman v. Louisville & Nashville Ry. Co.,
207 U. S. 205
Hunt v. New York Cotton Exchange, 205 U.
; Gallardo v. Questell,
29 F.2d 897.
] But the possible
suppression of the business here, through the prosecution of those
who conduct it, is but the threatened consequence or penalty for
nonpayment of the challenged tax. It is true that, where there is
no method at law to test the legality of a tax without risk of
incurring a penalty, the imminence of the penalty may involve such
a threat of irreparable injury as to satisfy the requirements of
equity jurisdiction. See Matthews v. Rodgers, 284 U.
, 284 U. S. 526
But the inability of a taxpayer to litigate the validity of a tax
without risk of irreparable injury to his business, which is ground
for invoking the equity powers of a federal court, affords no
measure of the value of the matter in controversy. Atlantic
Coast Line Ry. Co. v. railroad Comm'n, supra.
The disputed tax
is the matter in controversy, and its value, not that of the
penalty or loss which payment of the tax would avoid, determines
the jurisdiction. See Washington & Georgetown R. Co. v.
District of Columbia, 146 U. S. 227
compare Elliott v. Empire Natural Gas Co.,
4 F.2d 493.
Not only does the language of the statute point to this
conclusion, but the policy clearly indicated by the successive acts
of Congress regulating the jurisdiction of federal courts supports
it. Compare Davis v. Mills,
99 F. 39, 40. From the
beginning, suits between citizens of different
Page 292 U. S. 270
states, or involving federal questions, could neither be brought
in the federal courts nor removed to them, unless the value of the
matter in controversy was more than a specified amount. Cases
involving lesser amounts have been left to be dealt with
exclusively by state courts, except that judgment of the highest
court of a state adjudicating a federal right may be reviewed by
this Court. Pursuant to this policy, the jurisdiction of federal
courts of first instance has been narrowed by successive acts of
Congress which have progressively increased the jurisdictional
amount. [Footnote 2
] The policy
of the statute calls for its strict construction. The power
reserved to the states under the Constitution to provide for the
determination of controversies in their courts may be restricted
only by the action of Congress in conformity to the judiciary
sections of the Constitution. See Kline v. Burke Construction
Co., 260 U. S. 226
260 U. S.
-234. Due regard for the rightful independence of
state governments, which should actuate federal courts, requires
that they scrupulously confine their own jurisdiction to the
precise limits which the statute has defined. See Matthews v.
at 284 U. S. 525
compare Elgin v. Marshall, 106 U.
The contested license fees must be paid annually as a condition
precedent to doing the business. But it does not follow that
capitalization of the tax is the method of determining the value of
the matter in controversy. The bill of complaint does not allege,
nor can it be assumed, that the appellant will act to compel
compliance with the statute by appellee in future years for which
no tax is yet payable, or that the appellee will seek to continue
his business in Manchester indefinitely in the future, or that
Page 292 U. S. 271
the taxing act will be continued on the statute books,
unmodified either as to the amount of the tax or the features to
which the appellee objects. These, or like considerations, have led
to the conclusion that, in suits to enjoin the collection of a tax
payable annually or the imposition of penalties in case it is not
paid, the sum due or demanded is the matter in controversy, and the
amount of the tax, not its capitalized value, is the measure of the
jurisdictional amount. Washington & Georgetown R. Co. v.
District of Columbia, supra; Holt v. Indiana Manufacturing
Co., 176 U. S. 68
176 U. S. 72
Citizens' Bank v. Cannon, 164 U.
; see Atlantic Coast Line v. Railroad
Commission, supra; Vicksburg, S. & P. Ry. Co. v. Nattin,
58 F.2d 979; cf. Wright v. Mutual Life Insurance Co. of New
19 F.2d 117; Elliott v. Empire Natural Gas Co.,
A different question is presented where the matter in
controversy is the validity of a permanent exemption by contract
from an annual property tax, Berryman v. Whitman College,
222 U. S. 334
222 U. S. 348
see Riverside & Atlantic R. Co. v. Riverside,
736; or the validity of an order of a state commission directing a
railroad to construct and maintain an unremunerative spur track.
Western & Atlantic R. Co. v. Railroad Comm'n,
261 U. S. 264
261 U. S. 267
There, the value of the matter drawn into controversy, the contract
providing permanent immunity from taxation, or the order to
maintain a permanent structure for an unlimited time is more than a
limited number of the annual payments demanded. Compare
Glenwood Light & Water Co. v. Mutual Light, Heat & Power
Co., 239 U. S. 121
such a case, the burden which rests on a defendant who challenges
the plaintiff's allegation of the jurisdictional amount, see
Hunt v. New York Cotton Exchange, 205 U.
, 205 U. S. 333
may well not be sustained by the mere showing that the annual
payment is less than the jurisdictional amount.
Page 292 U. S. 272
Here, the record shows affirmatively, see Vance v. W. A.
Vandercook Co. (No. 2), 170 U. S. 468
that the total amount of the tax demanded, or which may be
demanded, within any time reasonably required to conclude the
litigation, is less than the jurisdictional amount; that any action
by appellant to compel compliance by appellee or his salesmen with
the taxing act in future years is at most conjectural, and that the
effect of any decree rendered in the present suit upon the tax for
other years, or with respect to appellee's business outside the
City of Manchester is collateral to the present controversy. The
decree will be reversed, with instructions to the district court to
dismiss the cause for want of jurisdiction.
These and other authorities are discussed in 34 Col.L.Rev.
The amount originally fixed by § 11 of the Judiciary Act of 1789
at $500, exclusive of costs, 1 Stat. 78, was increased to $2,000,
exclusive of interest and costs by Act of March 3, 1887, 24 Stat.
552, and to $3,000, exclusive of interest and costs, by the Act of
March 3, 1911, 36 Stat. 1091; see
28 U.S.C. § 41(1).