Opinion — Davis v. Wallace

AO oe hy,

OE SEPP RAE ERE RE A DORIVARDE “CPEB ESI RAIRIAT LS EL Ce EIT RT CRG ba Atkin

DAVIS, DIRECTOR GENERAL OF RAILROADS,

ET AL. v. WALLACE ET AL.

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

—

FOR THE DISTRICT OF NORTH DAKOTA.

No. 329. Argued December 16, 1921.—Decided January 9, 1922.

. Where the case as made by the bill involves a real and substantial

question under the Constitution and the requisite jurisdictional

amount, the jurisdiction of the District Court, and of this court

upon a direct review of its action, extends to all other questions

involved, whether of federal or state law, and enables the court to

rest its judgment on the decision of such of the questions as in its

opinion effectually dispose of the case. P. 482.

2. Equity will enjoin collection of an illegal tax in the absence of an

adequate and certain remedy at law. P. 482.

3. The Act of North Dakota, Laws 1919, c. 222, which lays an excise

on foreign corporations of a percentage of their capital actually in-

vested in the transaction of business in the State, provides that,

for one engaged in business within and without the State, in-

vestment within the State shall mean that proportion of its entire

stock and bond issues which its intrastate business bears to its total

business; that where the business within the State is not otherwise

ataetiadinnetinieaainie imma ant Le ee ounspeacuneen —_

—_ Pe hi LV Rann diles Ne Seren ie ieTlee

DAVIS v. WALLACE. 479

478. Opinion of the Court.

easily and certainly separable, it shall be held to mean such pro-

portion of the entire business as the property of the corporation

within the State bears to its entire property, and that, in the case

of a railroad or other specified public service corporation, whose

line extends into the State from without, property within the State

shall mean the proportion of the entire property of the corporation

which its mileage within the State bears to its entire mileage. Held,

that the mileage basis (declared unconstitutional in Wallace v.

Hines, 253 U. 8. 66), was intended to be the exclusive basis for

computing the assessments of such a railroad company, and that

assessments based on the ratio of the value of its railroad within

the State to that of its entire railroad were not authorized by the

statute. P. 482.

4. The unconstitutionality of an excepting provision in a statute does

not enlarge the scope of its other provisions. P. 484.

Reversed.

AppEAL from a decree of the District Court, after a final

hearing on bill and answer, dismissing a bill filed by the

Director General of Railroads and five railroad companies

to enjoin the collection of a special excise tax sought to be

imposed under North Daketa Laws, 1919, c. 222.

Mr. Charles W. Bunn, with whom Mr. E. C. Lindley,

Mr. M. L. Countryman and Mr. D. F. Lyons were on the

brief, for appellants.

Mr. George E.. Wallace for appellees.

Mr. Justice Van DevanTer delivered the opinion of |

the court.

This is a suit by the Director General of Railroads and

five railroad companies to enjoin the collection of a spe-

cial excise tax assessed against each of the companies for

the years 1918 and 1919 under a statute of North Dakota,

c. 222, Laws 1919, which declares:

“Every corporation, joint-stock company or associa-

tion, now or hereafter organized under the law of any ©

other State, the United States or a foreign country, and |

mig ait pies ‘ ti ake 8g pA ue las tian A he HTN ST IE

480 OCTOBER TERM, 1921.

Opinion of the Court. 257 U.S.

engaged in business in the State during the previous cal-

endar year, shall pay annually a special excise tax with

respect to the carrying on or doing business in the State

by such corporation, joint-stock company or association,

equivalent to 50 cents for each $1,000.00 of the capital

actually invested in the transaction of business in the

State; provided, that in the case of a corporation engaged

in business partly within and partly without the State,

investment within the State shall be held to mean that

proportion of its entire stock and bond issues which its

business within the State bears to its total business within

and without the State and where such business within the

State is not otherwise more easily and certainly separable

from such entire businéss within and without the State,

business within the State shall be held to mean such pro-

portion of the entire business within and without the

State, as the property of such corporation within the

State bears to its entire property employed in such busi-

ness both within and without the State; provided, that in

the case of a railroad, telephone, telegraph, car or freight-

line, express company or other common carrier, or a gas,

light, power or heating company, having lines that enter

into, extend out of or across the State, property within

the State shall be held to mean that proportion of the

entire property of such corporation engaged in such busi-

ness which its mileage within the State bears to its entire

mileage within and without the State. The amount of

such annual tax shall in all cases be computed on the

basis of the average amount of capital so invested during

the preceding calendar year; provided, that for the pur-

pose of this tax an exemption of $10,000.00 from the

amount of capital invested in the State shall be allowed;

provided, further, that this exemption shall be allowed

onl; if such corporation, joint-stock company or associa-

tion furnish to the Tax Commissioner all the information

necessary to its computation.”

DAVIS v. WALLACE. 481

478. Opinion of the Court.

Each of the five railroad companies was subjected in

the usual way to a full property tax on all of its property

within the State, and that tax is not here in question.

The suit relates only to the special excise tax.

The companies were all organized under the laws of

States other than North Dakota and all own lines of rail-

road extending from other States into or through that

State. These lines were under federal control and oper-

ated by the Director General during the years for which

the excise tax was assessed.

The taxing officers at first assessed the tax for the year

1918 against these companies by using in its computation

the mileage ratio prescribed in the second proviso of the

statute; but this court held that the tax so assessed was

an unwarranted interference with interstate commerce

and a taking of property without due process of law. /

Wallace y. Hines, 253 U. 8. 66. Thereupon the taxing ~

officers assessed the tax for that year, and also for 1919, |

by using in its computation the ratio specified in the last ©

preceding clause of the statute—that is to say, a ratio ©

fixed by contrasting the value of the company’s railroad ©

within the State with the value of its entire railroad ©

within and without the State. 4

In the District Court the validity of the tax assessed on ©

the new or substituted basis was challenged on the ©

grounds (a) that as to railroad companies whose lines lie ©

partly within and partly without the State the statute |

does not authorize or sanction a tax assessed on that |

basis; (b) that the statute imposes the tax only as a spe-

cial excise on doing business in the State, and these com- |

panies were not thus engaged during the years for which |

the tax was assessed,—their railroads being then under |

federal control and operated exclusively by the Director )

General; and (c) that an excise tax assessed against these |

companies on the new or substituted basis operates neces- |

sarily to burden interstate commerce and to take property |

482 OCTOBER TERM, 1921.

Opinion of the Court. 257 U.S.

without due process of law, and so is in conflict with the

commerce clause of the Constitution and the due process

clause of the Fourteenth Amendment.

At an early stage in the suit three judges granted an

interlocutory injunction against the enforcement of the

tax; but on the final hearing, which was on bill and an-

swer, a decree was entered dismissing the bill on the

merits. The plaintiffs then sought and were aliowed a

direct appeal to this court under § 238 of the Judicial

Code.

The case made by the bill involved a real and substan-

tial question under the Constitution of the United States

and the amount in controversy exceeded three thousand

dollars, exclusive of interest and costs, so the case plainly

was cognizable in the District Court. In such a case

the jurisdiction of that court, and ours in reviewing its

action, extends to every question involved, whether of

federal or state law, and enables the court to rest its judg-

ment or decree on the decision of such of the questions as

in its opinion effectively dispose of the case. Field v. Bar-

ber Asphalt Paving Co., 194 U. 8. 618, 620; Siler v. Louis-

ville & Nashville R. R. Co., 213 U. S. 175, 191; Louisville

& Nashville R. R. Co. v. Gorrett, 231 U. 8. 298, 303;

Greene v. Louisville & Interurban R. R. Co., 244 U.S.

499, 508.

As respects the right to sue in equity, it is enough to say

that in this case we find the sarne absence of an adequate

and certain remedy at law that was found in Wallace v.

Hines, supra, where the right to invoke the aid of a court

of equity was sustained.

The first of the objections made to the tax is that it was

assessed on a basis which the statute does not authorize

or sanction. Of course, if this be so the tax must fall, and

the other objections need not be considered. The statute

does not prescribe a single or unvarying basis whereon

the tax shall be assessed, but designates several bases and

OD ALIENS: LAA LAR NEALE LEE AA ABE SID LIE AEP ALLEL AMAL AILSA BSN fre toe vee AM tevin We Dew betes TF

DAVIS v. WALLACE. 483

478. Opinion of the Court.

defines the particular situation in which each shall be ap-

plied. Where the business of the corporation is wholly

within the State the tax is to be computed according to

the “capital actually invested” in the business. Where

the business is partly within and partly without the State

the computation is to be based on a proportion of the

company’s “entire stock and bond issue”, which is to be

taken as representing the “investment within the State.”

But the proportion is to be determined by standards

which vary materially. In one situation it is to conform

to the ratio of the company’s business within the State to

its total business, and in another to the ratio of the com-

pany’s property employed in its business within the State

to its entire property employed in its business wherever

conducted. In the instance of railroad companies and

other public utility corporations having lines partly with-

in and partly without the State the statute specially pro-

vides that it shall conform to the ratio of the company’s

mileage within the State to its entire mileage. This

special provision is embodied in a proviso or excepting

clause which comes immediately after the clause relating

to other corporations and reads as follows:

“, . . provided, that in the case of a railroad, tele-

phone, telegraph, car or freight-line, express company or

other common carrier, or a gas, light, power or heating

company, having lines that enter into, extend out of or

across the State, property within the State shall be held

to mean that proportion of the entire property of such

corporation engaged in such business which its mileage

within the State bears to its entire mileage within and

without the State.”

This provision shows that the legislature intended by it

to put the corporations which it describes in a separate

class for the purposes of the tax, to require as to them

that the tax be computed and assessed on the special

basis there prescribed, and to exempt them from the bases

484 OCTOBER TERM, 1921.

Opinion of the Court. 257 U.S.

applicable to other corporations. That intention hardly

could have been more clearly expressed.

True, this provision was held in Wallace v. Hines,

supra, to be in conflict with constitutional limitations and

indefensible as respects the railroad companies now be-

fore us; but that does not make the provision any the

less a key to the intention of the legislature, or enable

the taxing officers to subject these corporations to other

provisions from which the act as a whole shows the legis-

lature intended to except them.

Where an excepting provision in a statute is found un-

constitutional, courts very generally hold that this does

not work an enlargement of the scope or operation of

other provisions with which that provision was enacted

and which it was intended to qualify or restrain. The

reasoning on which the decisions proceed is illustrated in

State ex rel. McNeal v. Dombaugh, 20 Ohio St. 167, 174.

In dealing with a contention that a statute containing an

unconstitutional proviso should be construed as if the re-

mainder stood alone, the court there said: “This would be

to mutilate the section, and garble its meaning. The

legislative intention ‘must not be confounded with their

power to carry that intention into effect. To refuse to

give force and vitality to a provision of law is one thing,

and to refuse to read it is a very different thing. It is by

a mere figure of speech that we say an unconstitutional

provision of a statute is ‘stricken out.’ For all the pur-

poses of construction it is to be regarded as part of the

act. The meaning of the legislature must be gathered

from all they have said, as well from that which is ineffec-

tual for want of power, as from that which is authorized

by law.”

Here the excepting provision was in the statute when it

was enacted, and there can be no doubt that the legisla-

ture intended that the meaning of the other provisions

should be taken as restricted accordingly. Only with that

—

NORTH DAKOTA v, CHICAGO & N.W. RY. CO. 485

478, Syllabus.

restricted meaning did they receive the legislative sanction

which was essential to make them part of the statute law

of the State; and no other authority is competent to give

them a larger application. Had they been enacted with-

out the excepting provision and had it been embodied in

a subsequent amendatory act a different situation would

be presented—one in which that provision would have

no bearing on the meaning or scope of the others—-be-

cause an existing statute cannot be recalled or restricted

by anything short of a constitutional enactment. This

was recognized in 7'ruax v. Corrigan, ante, 312, where,

when an amendatory exception proved unconstitutional,

we held that the original statute stood wholly unaffected

by it.

From what has been said it follows that to sustain the

tax in question we should have to hold that the taxing

officers, on finding that it could not constitutionally be

assessed on the basis specially prescribed in the statute,

were at liberty to assess it on another and different basis

which the statute shows was not to be applied to corpora-

tions of the class to which these railroad companies be-

long. Of course we cannot so hold.

We are accordingly of opinion that the first objection

to the tax is well taken, and therefore that the tax is

invalid and its collection should be enjoined.

Decree reversed.