Hawley v. City of Malden, 232 U.S. 1 (1914)

VOL. CCXXXII—1 (1) p. 2While it would be an advantage to the country and to individual

Independently of the Fourteenth Amendment, a state law which attempts to tax property situated in another State is void on general principles, as the State can have p. 3no jurisdiction over such property. Hayes v. Pacific Mail S. S. Co., 17 How. 596; St. Louis v. Ferry Co., 11 Wall. 423; State Tax on Foreign-Held Bonds, 15 Wall. 300; Morgan n . Parham, 16 Wall. 471; Louisville Ferry Co. v. Kentucky, 188 U. S. 385; Union Transit Co. v. Kentucky, 199 U. S. 194,204; Del., Lack. & W. R. R. v. Pennsylvania, 198 U. S. 341; Metropolitan Life Ins. Co. v. New Orleans, 205 U. S. 395; West. Un. Tel. Co. v. Kansas, 216 U. S. 1; So. Pacific Co. v. Kentucky, 222 U. S. 63, 74.

Deposits of money and certain forms of credit may be so localized as to be subject to taxation in the State where the deposits are made or the credits given, New Orleans v. p. 5S tempel, 175 U. S. 309; Blackstone v. Miller, 188 U. S. 189; Assessors v. Comptoir National, 191U. S. 388; Metropolitan Ins. Co. v. New Orleans, 205 U. S. 395, but whether such credits are also taxable as technical debts in the State of the creditor’s domicile, is doubtful. Liverpool Ins. Co. v. Assessors, 221 U. S. 346.

A similar rule has been laid down in the decisions of the courts of many other States. State v. Kidd, 125 Alabama, 413; Greenleaf v. Morgan County, 184 Illinois, 226; Seward v. Rising Sun, 79 Indiana, 351; Griffith v. Watson, 19 Kansas, 23; Appeal Tax Court v. Gill, 50 Maryland, 377; Bacon v. Commissioners, 126 Michigan, 22; Ogden v. St. Joseph, 90 Missouri, 522; State v. Branin, 23 N. J. L. 484; State v. Bentley, 23 N. J. L. 532; Worth v. Ashe County, 82 N. Car. 420; Worthington v. Sebastian, 25 Oh. St. 1; Bradley v. Bauder, 36 Oh. St. 28; Lander v. Burke, 65 Oh. St. 532; McKeen v. Northampton County, 49 Pa. St. 519; Whitesell v. Same, id. 526; Dyer v. Osborne, 11 R. I. 321; Union p. 7Bank v. State, 9 Yerg. (Tenn.) 490; Nashville v. Thomas, 5 Coldw. (Tenn.) 600.

The property taxed in the case at bar consists of shares of the capital stock of foreign corporations, as to which see Tennessee v. Whitworth, 117 U. S. 129; New Orleans v. p. 8Houston, 119 U. S. 265, 277; Union Transit Co. v. Kentucky, 199 U. S. 194, 205.

It is conceded that the objection that the statute authorizing the tax [Rev. Laws (Mass.), c. 12, §§ 2, 4, 23] denies to the plaintiff in error the equal protection of the p. 9laws is not well taken; but it is contended that the shares were not within the jurisdiction of the State and hence that the enforcement of the tax constitutes an unconstitutional deprivation of property.

The power thus challenged, as the state court points out, has been continuously exercised by the State of Massachusetts for more than three-quarters of a century. Substantially the same statutory provision, derived from an earlier enactment, is found in Rev. Stats. (Mass.), c. 7, § 4, and its constitutionality has been sustained by repeated state decisions. Great Barrington v. County Commissioners, 16 Pick. 572; Dwight v. Mayor & Aidermen of Boston, 12 Allen, 316; Frothingham v. Shaw, 175 Massachusetts, 59, 61. And other States through a long period of years have asserted a similar authority. Union Bank of Tennessee v. State, 9 Yerg. (Tenn.) 490; McKeen v. County of Northampton, 49 Pa. St. 519; Whitesell v. Same, id. 526; State v. Branin, 23 N. J. Law, 484; State v. Bentley, id. 532; Worthington v. Sebastian, 25 Oh. St. 1; Bradley v. Bauder, 36 Ohio St. 28; Dyer v. Osborne, 11 R. I. 321; Seward v. Rising Sun, 79 Indiana, 351; Ogden v. St. Joseph, 19 Missouri, 522; Worth v. Ashe County, 90 N. Car. 409; Jennings v. Commonwealth, 98 Virginia, 80; Appeal Tax Court v. Gill, 50 Maryland, 377; State v. Nelson, 107 Minnesota, 319; Bacon v. State Tax Commissioners, 126 Michigan, 22; State v. Kidd, 125 Alabama, 413; Commonwealth v. Lovell, 125 Kentucky, 491; Stanford v. San Francisco, 131 California, 34; Judy v. Beckwith, 137 Iowa, 24; Greenleaf v. Morgan County, 184 Illinois, 226. It is well settled that the property of the shareholders in their respective shares is distinct from the corporate property, franchises and capital stock, and may be separately taxed (Van Allen v. Assessors, 3 Wall. 573, 584; Farrington v. Tennessee, 95 U. S. 679, 687; Tennessee v. Whitworth, 117 U. S. 129, 136, 137;.New Orleans v. Houston, 119 U. S. 265, 277); and the rulings in the state cases which we have p. 10cited proceed upon the view that shares are personal property and, having no situs elsewhere, are taxable by the State of the owner’s domicile, whether the corporations be foreign or domestic.

It is said that the question of the constitutional validity of such taxation has not hitherto been raised definitely in this court and has not been directly passed upon. There is no doubt, however, that the existence of the state authority has invariably been assumed. In Sturges v. Carter, 114 U. S. 511, the action was brought to recover taxes imposed under the law of Ohio upon shares of stock owned by a resident of Ohio in the Western Union Telegraph Company, a New York corporation. The right of the State to tax the shares was not questioned and as it was found that a statutory exemption which was relied upon in defense did not apply, the recovery of the tax was sustained. Again, in Kidd v. Alabama, 188 U. S. 730, it was not disputed that the State was entitled to tax shares owned by its citizens in foreign corporations. The argument was that the statute in that case created an unconstitutional discrimination and, this point being found to be without merit, the tax was upheld. In Wright v. Louisville & Nashville R. R. Co., 195 U. S. 219, the question was whether shares of stock in a railroad corporation of another State, which were owned by a Georgia corporation were taxable under the constitution and laws of Georgia. The State’s power to tax the shares was not denied, so far as the Constitution of the United States was concerned, but it was contended that this power had not been exercised. The constitution of Georgia provided that all taxation should “be uniform upon the same class of subjects, and ad valorem on all property subject to be taxed within the territorial limits of the authority levying the tax,” and should be levied and collected under general laws. The general tax act had authorized a tax on all of the taxable property of the State. It was clear that the p. 11State had directed shares in foreign corporations to be taxed, provided these could be considered to be “property subject to be taxed within the territorial limits” of the taxing authority. And such shares when held by a resident being deemed to fall within this description, it was decided that the state officer was entitled to collect the tax. “Putting the case at the lowest,” said the court (p. 222), “the above cited section of the constitution was adopted in the interest of the State as a tax collector, and authorizes, if it does not require, a tax on the stock.” So also, in Darnell v. Indiana, 226 U. S. 390, the authority of the State to tax the shares of its citizens in foreign corporations was recognized, the tax being sustained against objections urged under the commerce clause, Art. I, § 8, and the equal protection clause of the Fourteenth Amendment.

Undoubtedly, the State in which -a corporation is organized may provide, in creating it, for the taxation in that State of all its shares whether owned by residents or non-residents. Corry v. Baltimore, 196 U. S. 466. This is by virtue of the authority of the creating State to determine the basis of organization and the liabilities of shareholders. Id., 476,477; Hannis Distillery Co. v. Baltimore, 216 U. S. 285, 293, 294. So, by reason of its dominant power to provide for the organization and conduct of national banks, Congress has fixed the places at which alone shares in those institutions may be taxed. Rev. Stat., § 5219. Whether, in the case of corporations p. 13organized under state laws, a provision by the State of incorporation fixing the situs of shares for the purpose of taxation, by whomever owned, would exclude the taxation of the shares by other States in which their owners reside is a question which does not arise upon this record and need not be decided. No such provision is here involved, and the present case must be determined by the application of the established principle which has been stated.

While regulations to insure careful driving over city streets may be proper, they should, when interstate traffic is involved, be entirely reasonable. Qucere whether a requirement that only citizens of the United States, or those who have declared their intention to become p. 15such, can be licensed is not unnecessarily burdensome in a city such as New York.

The board of aidermen could not exact a license fee for the use of the streets by any class of the public having p. 19the right to use the same. New York v. N. Y. City R. Co., 138 App. Div. 131, 136; aff’d 203 N. Y. 593; Chicago v. Collins, 175 Illinois, 445, 454; Harder's Storage Co. v. Chicago, 235 Illinois, 58, 84.

The ordinances are not a tax laid upon interstate p. 23commerce. See §§ 300, 379, c. 7, Code of Ordinances of the City of New York (Cosby’s).

This suit was brought to restrain the enforcement against the Adams Express Company of a group of ordinances of the Board of Aidermen of the City of New York upon the ground that, as applied to that Company, these ordinances constitute an unconstitutional interference with interstate commerce and deny to it the equal protection of the laws. The ordinances are contained in p. 24Chapter 7 of the Code of Ordinances adopted in the year 1906 as amended (Cosby’s Edition, 1911), and the material sections together with portions of the context are set forth in the margin.1

§ 330. Every vehicle of whatever construction kept or used for the conveyance of baggage, packages, parcels and other articles within or through The City of New York for pay, shall be deemed a public express, and the owner thereof shall be deemed a public expressman, and the term expressman shall be deemed to include any common carrier of p. 26with provision for renewal at one-half these rates (§ 308). Every person driving a licensed “express” is to be 11 licensed as such driver, and every application for such license shall be indorsed, in writing, by two reputable

§ 374. The Mayor shall have power to appoint inspectors in the Bureau of Licenses to see that the provisions of this ordinance are fully and properly complied with; and all licensed vehicles and places of business shall be regularly inspected, and the result of such inspection shall be indorsed on the official license therefor, together with the date of inspection and the signature of the inspector, and all inspections shall be regularly reported to the Bureau of Licenses. (Id., § 57.) p. 27residents of The City of New York testifying to the competence of the applicant” (§ 315). Every vehicle “kept or used for the conveyance of baggage, packages, parcels and other articles within or through The City of New

The Adams Express Company, an unincorporated association organized under the laws of New York, has been engaged in interstate commerce, as a common carrier of packages, since the year 1854. It transacts its business in many States; and in the City of New York it handles daily about 50,000 interstate shipments, employing 341 wagons and 68 automobiles. About one-half of these wagons are stabled in Jersey City. Its shipments from New York City to the south and west are hauled to Jersey City and there loaded on express cars of the Pennsylvania Railroad; those destined to points east are taken to the terminal in New York City of the New York, New Haven and Hartford Railroad; and there is also traffic for points on the New York, Ontario and Western Railroad, and tributary thereto, which is carried to the terminal of that road at Weehawken, New Jersey. Shipments received from out of the State for delivery in New York City are taken by the Company’s vehicles to the consignees either directly from these railroad terminals or through intermediate distributing offices. The Company also p. 29does a local business in the City of New York and, in addition, receives packages for transportation between that city and such points within the State of New York as are on the line of the New York, New Haven and Hartford Railroad. The interstate business, however, in the number of packages, comprises ninety-eight per cent, of the total business transacted in New York City, and, it being impracticable to effect a separation, the local and the other intrastate shipments are handled in the same vehicles, and by the same men, that are employed in connection with the interstate transportation. It was not until recently that the City sought to compel the Company, in the transaction of this business, to comply with its license ordinances, although there have been ordinances requiring licenses for both express wagons and their drivers for over fifty years (Kent’s ed. (1856); Valentine’s ed. (1859), pp. 374, 375; Shepard & Shafer’s ed. (1881), §§380-386; Laird’s ed. (1894), §§380-386; Percy & Collins’ ed., §§497-504). The provisions here involved (except § 315) received their present form in 1899. (Ord. app. May 22, 1899, ante, p. 25, note.) It is conceded that the Company has never been compelled to obtain a license for the conduct of its interstate express business, and that its wagons and drivers employed therein have never been licensed, except “that for several years last past about 40 licenses for wagons and drivers have been taken out.” The evidence shows that in 1908 an arrangement was made, by way of compromise, that the forty licenses should be issued (twenty having been taken out the year before). The Company agreed to this number, without prejudice, asserting that it was larger in proportion to the total number of wagons than the local business warranted and also that the latter was merely incidental to the interstate business and hence not subject to the license requirements. In the fall of 1910, however, at a time when the business of the Company was interrupted p. 30by a strike of its drivers, and it was endeavoring to replace those who had stopped work, the City through its officers undertook to enforce the ordinances with respect to all the wagons and drivers of the Company, threatening to arrest unlicensed drivers of unlicensed wagons notwithstanding they might be engaged in interstate transportation and to remove, if necessary, unlicensed wagons from the streets. This was the occasion of the present suit.

In restraining the enforcement of §§ 305 and 306, as stated, we think that the court was right. In the absence of a controlling state decision construing the group of ordinances in question and the statute authorizing the City to license businesses (Greater New York Charter, § 51), we are not satisfied that they were designed, despite the broad definition contained in § 330, to apply to interstate business. The practical construction which they received before the present controversy arose is very persuasive to the contrary (City of New York v. New York City Ry. Co., 193 N. Y. 543, 549; United States v. Hermanos, 209 U. S. 337, 339). But, if the above-mentioned sections are p. 31to be deemed to require that a license must be obtained as a condition precedent to conducting the interstate business of an express company, we are of the opinion that so construed they would be clearly unconstitutional. It is insisted that, under the authority of the State, the ordinances were adopted in the exercise of the police power. But that does not justify the imposition of a direct burden upon interstate commerce. Undoubtedly, the exertion of the power essential to assure needed protection to the community may extend incidentally to the operations of a carrier in its interstate business, provided it does not subject that business to unreasonable demands and is not opposed to Federal legislation. Smith v. Alabama, 124 U. S. 465; Henning ton v. Georgia, 163 U. S. 299; N. Y., N. H. & H. R. R. Co. v. New York, 165 U. S. 628; Lake Shore & M. S. Ry. Co. v. Ohio, 173 U. S. 285. It must, however, be confined to matters which are appropriately of local concern. It must proceed upon the recognition of the right secured by the Federal Constitution. Local police regulations cannot go so far as to deny the right to engage in interstate commerce, or to treat it as a local privilege and prohibit its exercise in the absence of a local license. Crutcher v. Kentucky, 141 U. S. 47, 58; Robbins v. Shelby County Taxing District, 120 U. S. 489, 496; Leloup v. Mobile, 127 U. S. 640, 645; Stoutenburgh v. Hennick, 129 U. S. 141, 148; Rearick v. Pennsylvania, 203 U. S. 507; International Text Book Co. v. Pigg, 217 U. S. 91, 109; Oklahoma v. Kansas Natural Gas Co., 221 U. S. 229, 260; Buck Stove Co. v. Vickers, 226 U. S. 205, 215; Crenshaw v. Arkansas, 227 U. S. 389; Minnesota Rate Cases, 230 U. S. 352, 401. As was said by this court in Crutcher v. Kentucky, 141 U. S. p. 58, “a state law is unconstitutional and void which requires a party to take out a license for carrying on interstate commerce, no matter how specious the pretext may be for imposing it.”

The requirements of §§ 305 and 306, with the schedule p. 32of fees in § 308, cannot be regarded as imposing a fee, or tax, for the use of the streets; if they were such, the question would at once arise as to the validity of the discrimination involved in such an exaction. Nor can they be considered as a regulation in the interest of safety in street traffic. Other ordinances provide for the “ rules of the road” to which wagons of express companies, as well as those of other persons, are subject (Code of Ordinances, chap. 12). The sections now under consideration constitute a regulation of the express “business.” Article I is entitled “Business Requiring a License”; §305, containing the enumeration, provides that “the following businesses must be duly licensed” and § 306, that “no person shall engage in or carry on any such business without a license therefor” under a stated penalty {ante, p. 24, note). The right of public control, in requiring such a license, is asserted by virtue of the character of the employment, but while such a requirement may be proper in the case of local or intrastate business, it cannot be justified as a prerequisite to the conduct of the business that is interstate. Not only is the latter protected from the action of the State, either directly or through its municipalities, in laying direct burdens upon it, but, in the present instance, Congress has exercised its authority and has provided its own scheme of regulation in order to secure the discharge of the public obligations that the business involves. Act of June 29, 1906, c. 3591, 34 Stat. 584; Adams Express Co. v. Croninger, 226 U. S. 491, 505; United States v. Adams Express Co., 229 U. S. 381.

It would seem to follow, necessarily, that the annual license fees prescribed by § 308 {ante, p. 25, note) cannot be exacted, so far as the interstate business is concerned. They cannot be regarded as coming within the category of inspection fees, which are sustained when fairly commensurate with the cost of local supervision of such matters as are under local control (JVestern Union Tel. Co. v. p. 33New Hope, 187 U. S. 419, 425; Atlantic &c. Tel. Co. v. Philadelphia, 190 U. S. 160, 164). The provisions of § 308 are inseparably connected with those of §§ 305 and 306. The sums fixed “for each express wagon” and “for each driver” measure the amount to be exacted for the granting of the license required for the carrying on of business. And it is difficult to see how the payment can be enforced as to the interstate business if the taking out of the license therefor cannot be compelled.

Section 315 provides for separate licenses for drivers. We may assume the propriety of suitable provision to ensure careful driving over the city streets and the existence of ample power to meet this local necessity. It is also clear that regulations for this purpose, when the movement of interstate traffic is involved, should be entirely reasonable and should not arbitrarily restrict the facilities upon which it must depend. If the provision of §315 could be regarded as severable from the requirement of a license for the conduct of business, we should still have great difficulty in sustaining it as a reasonable reguvol . ccxxxn—3 p. 34lation with regard to drivers employed in the interstate transportation which has been described. Reading § 315 in connection with § 307, as we understand the City contends it should be read, no driver can be licensed except a citizen of the United States or one who has regularly declared intention to become a citizen, and the assurance of his qualifications does not depend simply upon the applicant’s ability to meet appropriate tests so as to satisfy the official judgment but the application must be accompanied by the indorsement in writing of two reputable residents of the city testifying to his competence. When the importance to the entire country of promptness and facility in the conduct of the business of the express companies in New York City, and the obvious convenience of their being able to secure drivers in Jersey City as well as in New York, are considered, the provision would seem to be unnecessarily burdensome. We are not called upon, however, to decide this point. Section 315 relates exclusively to drivers of a “licensed hack or express.” There is no such provision as to drivers of wagons generally. While the driver’s license is separate, the ordinance refers only to such drivers as are employed in the business for the carrying on of which a license may be required. Whatever might otherwise be the City’s power as to the regulation of drivers, this provision cannot be divorced from the license scheme of which it is a part.

We conclude that the complainant was entitled to an injunction restraining the enforcement of the ordinances in question against the Company with respect to the conduct of its interstate business and its wagons and drivers p. 35232 U. S. Argument for the United States Express Company.