Compañia Gen. de Tabacos de Filipinas v. Collector of Internal Revenue, 279 U.S. 306 (1929)

The stipulated facts are: That petitioner, a foreign corporation, was licensed to do business in the Philippine Islands and there maintained its principal office and did most of its business; that it owned in the Islands various sugar and oil mills and tobacco factories and was there engaged in buying, selling and exporting these products; that, acting through its Philippine branch, petitioner from time to time during 1922 exported from the Philippine [p. 308] '308 OCTOBER TERM, 1928.

1. In an action against a railroad company to recover damages for personal injuries alleged to have resulted from negligence in the operation of its train, it is competent for the defendant to show, in [p. 311] 310 Syllabus.

Respondent in No. 456 brought suit in the Circuit Court of Jackson County, Missouri, to recover for personal injuries alleged to have been caused by the negligent operation of one of petitioner’s trains. The suit in No. 455 was brought in the same court by the husband of respondent in No. 456, to recover for the loss of her services. Both cases were removed to the District Court for Western Missouri, where they were tried together. Judgment there on a verdict for respondents was affirmed by the Court of Appeals for the Eighth Circuit. 27 F. (2d) 699. This Court granted certiorari October 15, 1928, 278 U. S. 590, the order allowing the writ directing [p. 313] that the argument in this Court “ be limited to the question whether the alleged misconduct of counsel for the plaintiffs in their arguments to the jury was so unfairly prejudicial to the defendant as to justify a new trial.”

The second counsel for respondents, whose argument followed that of petitioner’s counsel and his disclaimer [p. 315] already mentioned, was permitted, over objection and exception, to say to the jury:

“ ‘ The vilest defense made in this case, a defense which would bar that girl from all society, intimated in this case that she had the syphilis. That is the defense in this case, that she had the syphilis.’ And then proceeded to dilate on and exploit this text. We find no justification for this assumption, or for the verbal pyrotechnics that counsel were permitted to indulge in over the objections of the attorneys for the defendant. The defense put no witnesses on the stand to controvert the plaintiff’s evidence that the plaintiff did not have syphilis. The only evidence counsel for the plaintiff cites as justifying their argument was the cross-examination of some of plaintiff’s witnesses; but an affirmative defense of this character can not ordinarily be proved by cross-examination. Moreover, defendant’s interrogatories along this line were no more than a continuation of similar questions propounded on the direct examination. We therefore deem it proper to [p. 316] observe that this line of argument was likely to create prejudice, and did not aid the court or jury in the performance of their duties.”

Examination of the record discloses that counsel for petitioner took the initiative in attempting to develop, by cross-examination of respondents’ witnesses, evidence whose only apparent purpose was to support this defense, and this course was continued by him through a considerable portion of the trial. He first directed the inquiry to the symptoms of respondent which, if they existed, would have indicated that she was suffering from the disease. He first brought out that she had been subjected by her own physicians to the Wasserman test. But whatever motive inspired this course of conduct, it was evident that this line of defense came to nothing. The [p. 317] cross-examination developed little of moment and no witnesses were called by petitioner to support it. At the close of the case it was apparent that the attempted or suggested defense that respondent’s condition was due to syphilis was without substance, and it was formally abandoned by petitioner’s counsel in his address to the jury.

Respondents urge that the objections were not sufficiently specific to justify a reversal. But a trial in court is never, as respondents in their brief argue this one was, “ purely a private controversy ... of no importance to the public.” The state, whose interest it is the duty of court and counsel alike to uphold, is concerned that every litigation be fairly and impartially conducted and that verdicts of juries be rendered only on the issues made by the pleadings and the evidence. The public interest requires that the court of its own motion, as is its power and duty, protect suitors in their right to a verdict uninfluenced by the appeals of counsel to passion or prejudice. See Union Pac. Ry. Co. v. Field, 137 Fed. 44, 15; Brown N. Swineford, 44 Wis. 282, 293. Where such paramount considerations are involved, the failure of counsel to particularize an exception will not preclude this Court from [p. 319] correcting the error. Brasfield v. United States, 272 U. S. 448, 450.

5. In a suit for personal injuries, resulting from a defect in the condition of a passenger car, the doctrine of res ipsa loquitur cannot be invoked against an initial carrier, where the accident, out of which the cause of action arose, occurred after the car in which [p. 321] 320 Argument for L. & N. R. Co.

1. The Southern insists that the case as to it should have been dismissed on its exception for want of jurisdiction of the person of the corporation upon a suit in Louisiana on a cause of action arising outside that state. A foreign corporation is amenable to suit to enforce a personal liability if it is doing business within the [p. 325] jurisdiction in such manner and to such extent as to warrant the inference that it is present there. Lafayette Insurance Co. v. French, 18 How. 404; Mutual Life Ins. Co. v. Spratley, 172 U. S. 602; St. Louis Southwestern Ry. v. Alexander, 227 U. S. 218. Even when present and amenable to suit it may not, unless it has consented, Pennsylvania Fire Ins. Co. v. Gold Issue Mining Co., 243 U. S. 93; Smolik n. Phila. & Reading Coal Co., 222 Fed. 148, be sued on transitory causes of action arising elsewhere which are unconnected with any corporate action by it within the jurisdiction. Old Wayne Mut. Life Ass’n v. McDonough, 204 U. S. 8; Simon n. Southern Ry. Co., 236 U. S. 115.

It is urged by the Southern that compliance with the Louisiana statute requiring a foreign corporation doing business within the state to designate an agent to receive service of process is, under the state decisions, a consent to suit only upon causes of action arising out of business conducted within the state, Watkins v. North American Land & Timber Co., 106 La. 621; Delatour & Marmouget v. Southern Ry. Co., 4 La. App. 658; Buscher v. Southern Ry. Co., 4 La. App. 653; see Missouri Pac. R. R. Co. v. Clarendon Boat Oar Co., 257 U. S. 533, which, it is insisted this is not, and that in any case, in the absence of an authoritative decision by the state court, this Court will give a like effect to the designation under the statute. Mitchell Furniture Co. v. Selden Breck Const. Co., 257 U. S. 213. For present purposes we may assume that the effect of the designation of the statutory agent by the Southern is, as the state decisions cited seem to show, that a cause of action arising wholly outside and wholly unconnected with any act or business of the corporation within the state may not be sued upon there, and we address ourselves to the question, decisive of this branch of the case, whether the Southern, being present within the state of Louisiana, is amenable to suit, on this cause [p. 326] of action as one arising out of business done within the state, or from such action of the corporation within the state as to subject it to liability there.

But the sale in Louisiana of the ticket for transportation over the Southern was made by the Louisville & Nashville under the filed joint tariff as the agent and for account of the Southern. In its legal effect it was the act of the Southern within the jurisdiction by which its obligation to respondent on the contract of carriage over its own lines became complete. It was out of this [p. 328] action within the state that the present obligation of the Southern arose, although the alleged breach of it occurred elsewhere.

In the absence of express language limiting the authority of the designated agent, there would certainly be no [p. 329] ground for assuming that the consent extends to causes of action growing out of some of its acts within the jurisdiction and not others—that respondent here might maintain an action if the ticket had been sold at the office of the Southern, but not if sold at the office of its authorized agent in the same city. Once established that the foreign corporation is within the state for purposes of suit, its presence for that purpose would seem to be co-extensive with its presence for the purpose of carrying on any corporate transaction within the jurisdiction and, granted the former, its liability to suit on causes of action growing out of the latter should follow. To say that not every corporate act within the jurisdiction is sufficient to establish its presence there for the purpose of suit is very different from saying that a suit founded upon such an act may not be maintained there, once its presence and consent to suit are established.

2. The requested instruction to the jury of the Louisville & Nashville, which was refused, and the actual charge complained of, related to the alleged joint liability of the petitioners. The complaint contained no allegation that respondent’s injury was due to the negligence of the Louisville & Nashville. He contented himself with alleging and proving at the trial the accident and injury while he was traveling over the line of the Southern on a through ticket purchased of the Louisville & Nashville. As already indicated, it appeared that the Louisville & Nashville had no control of the train after [p. 330] it left its own tracks and each carrier furnished its own locomotive power and train crew. Each inspected, cleaned, washed and repaired the equipment of the train. It also appeared that the ticket sold by the Louisville & Nashville contained a clause reading: “In selling this ticket and checking baggage thereon the selling carrier acts only as agent and is not responsible beyond its own line.” The through tariff filed by petitioners with the Interstate Commerce Commission under § 6 of the Interstate Commerce Act, February 4, 1887, c. 104, 24 Stat. 379, 380, as amended by Act of February 28, 1920, c. 91, 41 Stat. 456, 483, contained a similar provision.

The income tax laws do not profess to embody perfect economic theory. They ignore some things that either a theorist or a business man would take into account in determining the pecuniary condition of the taxpayer. They do not charge for appreciation of property or allow a loss from a fall in market value unless realized in money by a sale. United States v. >8. & White Dental Co., 274 U. S. 398, 401. A stockholder does not pay for accumulated profits of his corporation unless he receives a dividend. That is the general principle upon which these laws go. It is true that they allow for obsolescence of buildings, &c., where the loss is of materials, not of money; but there as elsewhere the loss must be actual and present, not merely contemplated as more or less sure to occur in the future. If the taxpayer owns the property the loss actually has [p. 336] taken place. But with Wiener it had not, and it might never fall on him, as was pointed out by the District Judge. Some of the leases were assigned and others surrendered to the lessor. In such cases it would be a mere speculation to suppose that depreciation was taken into account in the transactions. Probably other and dominant considerations induced the acts. The event showed that in those cases there was no true basis for Wiener’s claim.

In Lynch v. Alworth-Stephens Company, 267 U. S. 364, a statutory provision for deducting from gross income a reasonable allowance for depletions of mines was held applicable to a lessee bound to mine a minimum tonnage and to pay a stated royalty. In such a case the whole value of the lease is in the right to remove the ore, that is to destroy as rapidly as may be the real object of the lease. But in the case of a house or shop the value is not in the right to destroy and the destruction is only an undesired, gradual and subordinate incident of the use. The diminution in the value of a mine to the lessee is conspicuous, necessary, and intended, and is the very source of the gross income of [p. 337] 333 Syllabus.

These are suits brought by dealers in eye glasses for an injunction prohibiting the enforcement of chapter 379 of the New York Laws of 1928, which amends the Education Law by inserting two sections, of which the material portion makes it unlawful to sell at retail in any store or established place of business ‘ any spectacles, eye glasses, or lenses for the correction of vision, unless a duly licensed physician or duly qualified optometrist, certified under this article, be in charge of and [in] personal attendance at the booth, counter or place, where such articles are sold in such store or established place of business.’ The complainants moved for a preliminary injunction, a statutory court of three judges was convened and after a hearing the injunction was refused and the bills were dismissed on [p. 339] the ground that no cause of action was shown. 29 F. (2d) 762.

that the subject of the Act was not adequately expressed because a tax on stock dividends is one upon capital, while the title specified only the income tax. But in our opinion that is too strict a construction. Provisions in substance the same as that above quoted are found in many state constitutions. The purpose is to prevent the inclusion of incongruous and unrelated matters in the same measure and to guard against inadvertence, stealth and fraud in legislation. When bills conform to such requirements, their titles serve conveniently to apprise legislators and the public of the subjects under consideration. Courts strictly enforce such provisions in cases that fall within the reasons on which they rest. But, as freedom required or convenient for the effective exertion of the legislative power ought not unnecessarily or lightly to be interfered with, the courts disregard mere verbal inaccuracies, resolve doubts in favor of validity, and hold that, in order to warrant the setting aside of enactments for failure to comply with the rule, the violation must be substantial and plain. Louisiana v. PUsbury, 105 U. S. 278, 289. Montclair v. Ramsdell, 107 U. S. 147, 153. Read v. Plattsmouth, 107 U. S. 568, 578. City of South St. Paul v. Lamprecht Bros. Co., 88 Fed. 449, 451. Johnson v. Harrison, 47 Minn. 575. Cooley’s Constitutional Limitations (7th ed.) p. 202 et seq. Sutherland, Statutory Construction (2d ed.) §§ 111, 115-118. The Philippine income tax law was passed before our decision in Eisner v. Macomber, supra. The Revenue Acts of 1916 and 1918, after which that measure was patterned, treated stock dividends as income. It was then well known by those giving attention to that sort Qf taxation that Congress treated stock dividends as taxable income. The inclusion of such distributions within the meaning of “income ” as used in taxing statutes was not calculated or likely to mislead. The title was sufficient to notify legislators and others interested that the bill might include [p. 345] and tax stock dividends. Tax Commissioner v. Putnam, 227 Mass. 522, 531. And that form of property was not so unrelated to the subject of the bill as expressed in the title that its inclusion was within the mischief which the quoted provision of the Organic Act was intended to prevent. The point cannot be sustained.