Appellees Brief — Teamsters v. United States
Supreme Court brief1934
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INDEX — | Page
PRELI M INARY 8, EE ARTE TE ROTEL hl ek, a 5
CITATION OF REPORT OF DISTRICT CoURT’s OPINION... 5
STATEMENT eee ee eee
: ‘am ;
SR a a ee
POINT ONE — The case is one of when the tee.
Court had jurisdiction, and is deine ‘Section 266. of
the Judicial Cade.......:... ponenne cancel paes Lecceatinataceatene aD 16
ie POINT Two — The case is. within, the equity jmrisdiction
of the Court. Sap iniesdoaee aes atan Y* iene eee 17-20
POINT THREE — The | Florida Statute with on to
stamp taxes on transfers ‘of stocks is not’ subject
to the construction placed: thereon by the Florida
“Comptroller . St resins icssesonc-pneaeca i ieelectneks 21-37
POINT Four— The Florida Act, if. TS: as con- -
tended for by the Appellant, is violative of the Con .
“stitution: of the United States ,, inches 38-46
“POINT: FIvE— The Flonjda Act, if construed as.on-
tended for by the Appellant, is violative‘of the’ eal
stitution of the State of Florida:. ae 47-50
LAST POINT — The ‘decree of: the: ‘District Court* should
be airmed ay
Pa e om . ey
APPENDIX >. ELON EARN CON LOE ROI
(Italics ours, except whére otherwise indicated). ”
r p ae ‘ .
. ee ‘ . 4 " . ”
2
Se AUTHORITIES Page
CASES CITED:
Allgeyer v. Louisiana, 165 U. S. 578.2... -42, 43
- Bickell v. Lee, Comptroller, 5 F. Supp. 720... 5, 40
Bowers v. New York & A. _—e: Co., 273
U. 3. 366... scpaiapemabsnecoavenee icleedaasedieeassnsiiamaninsiphoel 27
- Brewster v. Gage, 280 U. S. $27... Sh al iit aakances ...89
Camp Phosphate Co. v. Allen, 77 Fla. 341, 81
Sou. Rep. 503... Da obo CREOLE
City of Hutchinson v. Beckham, us. F. 399
Rs I scenes ningsinsnnnsneens Talelinehans paucaat 13, 17
BEE a II, ER WRUNERy Ba csesccncceccnesccnsssnsscnnscemnnnnsece 17
-Ex parte Young, 209 U.S. 123... Geaaea 17, 20, 46
First Nat. Bank v. Maine, 284 U. S. 312... Al
Fisher v. Brucker, 41 F..(2d) 774 (D. C., Mich.) 15
Fisher v. Brucker, 49 F. (2d) 759 (C: C. A. 6th). 15
Frick v. Pennsylvania, 268 U. S. 486... 40
Graham v. West Tampa, m7 Fla. 605, 71 See. Re.
_ Grandin Farmers’ Co-op. Elevator Co. v. Langer,
5 F. Supp. 425 (D. C., N. D.)-_ ae eee ariel a
Graniteville Mfg. Co. v. - Query, 283 U: S.
(TS NESSES lek Pa RSC 15, 35, 36, 39
Graniteville Mfg..Co. v. Query ©. C., 8. C.)
I cogs ha iiss cna Sanesneneenennnrehnecancons a
Greene v. Louisville & I. R. Co., 244 U. 8.499. ame |
Henrietta MMils v. Rutherford County, 281 U. S. 121. 17
In Re Paul’s Estate, 165 N. Y. S. (Surr,) 413__......_.39
Jewel Tea Co. v. Lee’s Summit, Mo., 198 F/532
i. <i, Bee) .............- Seiad erechiea ac aaeahasiall dassscbimclaanel 13
Jordan v. Duval County, 68 Fla. 48, 66 Sou. Rep. 298.48
Louisville & Nashville R. Co. v. — 98 Fla.
~ 123 Sou. Rep. 145... ipbieianaiecbtebionaensacins fanensnin ee
McCormick & Co. v. Srews, 52 F, (24) 934
(C. a aia AU Geisaecscaciccopustaacedncctpsnieesticn acer achsanete aceite olezaoia 16
- Nelson v. Watson (Florida, not yet reported) eae 25, 26
Ogden v. Armstrong, eS ee ee
_ People ex rel Hatch v. Reardon, 204 U. S. 152.37, 39 -
People ex rel Hatch v. Reardon, 184 N. ‘Y. 431,
' ? FTN. E, Rep. 970_....... au 37, 39, 48 ©
People ex rel Hatch v. Reardon, 97 N. Y. S. 535
(App. SENT EAS Rae Ree SD.R Ne EN Lcohoaphasedl 39, 48
St. Louis*Cotton Comp. Co. v. Arkansas, 260 |
Pe nest aniccciissetarsegteciine 42, 44, 48
Schlosser v. Welsh, 2 Sey 12
Schwab v, Doyle, 258 U. S. 529... ‘cia
Smjth v. Chase, Sheriff, 91 Fla. 1044, 109 Sou.
ERS ERR SRE ENR Seg Mee see ire iT ec Aa 49
Sparkman v. State, 71 Fla. 210, 71 Sou. Rep. 34... 48
State ex rel. Packard v. Cook ee , 146
Sou. Rep. 223. Ce Le ETE RNS
State ex rel ih v. ok UEP , 152
Sou. Rep. 432 Boeket hae 25, 26
Union Pac. Ry. Co. v. Chapin, 113 U. S. 516... a
Walter C. Hardesty, Inc. v. Town of Holly Hill,
100 Fla. 1130, 131 Sou. Rep. 134. 49°
Ware & Leland v. Mobile County, 209 U. S. 405... 45
Western Union Teleg. Co. 'v. Foster, 247 U.S. 105,44 |
CONSTITUTIONAL PROVISIONS CITED:
Constitution of Florida, Declaration of Rights,
Sa SNR EN a CER TR OEM er FN MONEY 47
. Article ITI, Sec. 16. Jesh Rena inadacaieadiedsniecuipintosanstiie ts 49
pA, NCD ane nana ee ROOMS! 47
Constitution of the United States, Article I,
Be ea een crccgnninieditineinioninapaclineansemetnnnasserbencanninnal 38
Article XIV, Sec. 1 of Amendments to Con- ;
stitution ipiiaishi dabei aaieinbohineiesebaiigucapicmnnpenimael 38
EO ITE , ROPES: Sal es . ii .
.
PUGET GIS EO OYA WALLA AE LOO IES OO
Pi) OR IN
i aid FIOM Re aS,
eager ger An At nies”,
°
PET Me yet"
_ STATUTES CITED:
Laws of Florida, 1931 Ex. Sess. Chapter Sees... 57
(cited numerous places throughout the brief)
New York Tax Law, § 270.0. a, i
U. S. C., Title 26, § 901-.... sehine iat ahi ae 30, 39 .
U. S.-C., Title 28, S 43, Bebdiy. 24... 12
U.S. C., Title 28, § 380; Judicial Code, § 266 -...... 6
. (cited numerous places through the brief)
U. &. C., Bittle SB, § VSS. eens 5
MISCELLANEOUS: :
Internal Reveune News, Vol. 5, No. 11, p. Seats =39——
Internal Revenue Regulations.71, Article 34... 39
Internal Revenue Regulations 71, Article 35... =» --——« 34
Internal Revenue Regulations 71, Article 36_.____ 30
Opinions of the Attorney General of New York
per Idee, page fee.
%
IN THE SUPREME COURT OF THE UNITED STATES
October Term, 1943
No. 944
J. M. LEE, as Comptroller off “the State of Florida,
ar,
Vv.
JOHN P. BICKELL, GEORGE B. BUCHANAN,
ALFRED W. MANSFIELD, ET AL, Eo wht
Appellees.
On Appeal from the District Court of the United States, |
in and. for the Northern District of ree.
' BRIEF FOR APPELLEES
Preliminary Statement
This case was advanced on motion of the Appellant under
28 USCA § 768, and counsel received ten days’ advance
_ notice of the assignment of the case for. argument May 9,
_ 1934. As this brief is being drafted, less than one week before
date of argument, we have not received a copy of the brief
which will be filed on behalf of the Appellant.. That fact is
»mentioned in ofder that the Court may know the circum-
stances under which this brief was prepared, and thus make
‘due allowance for the form in which the questions are
treated, which necessarily is somewhat different from that
which would be-employed in answering the Appellant’s brief.
Citation of Report of Opinion of the District Court
In 5 F. Supp. 720 (Advance Opinions, Vol. 5—No. 12, of
March 26, 1934) there is reported the opinion rendered. by
the District Court in. connection with the granting of the .
inter locutory injunction herein. ©
EA ARIMA A EK art UE Me MOE or MOR toh
§ :
Statement of the Case
On December 11, 1933, the Appellees as plaintiffs, non-—
residents of Florida, constituting the members of the broker-
age firms of Thomson & McKinnon and Fenner, Beane &
Ungerleider (now Fenner & Beane), filed their bill in equity
against J. M. Lee, as Comptroller of the State of Florida, in
the District Court of the United States, in and for the
Northern District of Florida, and thereby sought to restrain
certain threatened enforcement and operation of the Florida
Documentary Stamp Tax Act, Chapter 15,787, Laws of
Florida 1931, Ex. Sess., by restraining the Comptroller in -
such enforcement of the Act, on the ground, among others, *:
that same violated certain specified provisions of the Consti-
tution of the United States. (R.. mes
‘On presentation of ‘the bill to the late Honorable Wm. B.
Sheppard, Judge of the District Court, an order was made |
December 11, 1933, granting a temporary restraining order
to be effective until the hearing and determination of sthe
interlocutory injunction prayed for, directing the defendant
to show cause why an interlocutory injunction should not
issue, and calling to his assistance to constitute a three-
us Judge Court under Section 266 of the Judicial Code, the
Henerable-Nathan P. Bryan, Judge of ‘the United States
Circuit Court ‘of Appeals for the Fifth Circuit, and the Hon-
orable Alexander Akerman, Judge of the District Court of
the United States, in and for the Southern District of Flor-
ida. (R. 1p. ) F C}
After due notice to the defendant and to the Governor and
the Attorney General of Florida (Ri-4#5), ‘the plaintiffs
pressed their ‘application ‘for interlocutory injunction and
submitted and argued the same before the three-Judge. Court
on December 21, 1933, at Pensacola, Florida, following which .
the Court’s above mentioned opinion was made and the inter-
jocutory injunction granted. (R. 53- 54.) Thereafter the
cause was heard by said Court in Pensacola on March 10,
1934, on a final hearing at which the cause was presented
and argued on the Stipulation of Facts (R. 59-91). On that
day the Court made its final decree in the case granting
_— ”
"~ ¢ .
’ .
the permanent injunction as prayed for in the bill, in which
it adopted as facts of the case those set forth in the Stipula-
tion and those found in its previous opinion, and adopted
“as its conclusions of law those set ‘forth in said previous
opinion, excepting the language of the previous opinion in
_ which the Court had taken the view that the Act applied to-
‘a certain. marginal customer’s agreement, as to which the
previous opinion was not followed in the final. decree.
Therefore, for the facts of this case; notwithstanding such “
statement thereof as may be contained in.a Statement of the
Case in the brief for Appellant, we respectfully refer the
Court to the facts as stated in the District Court’s opinion
and in the Stipulation of Facts. ;
BRIEF OF ARGUMENT.
a
| ‘POINT ONE—The case’ is one of which sthe Federal ‘Court
3 had jurisdiction, and is ‘within Section 266 of the Judi-
: cial Code. :
4 Schlosser v. Welsh, 5 F. don 993. .
City of Hutchinson v. Beckham, = F. 399 C. A. .
2 8th).
‘ Jewel Tea Co. v. Lee's Summit; Mo., 198°F. 532 (D.
} C., Mod.
: ~ Grandin. Farmers’. em Elevator Co. v. wiicipite 5
3 F. Supp. 425. (D: C., N. Dak.)
a . Fisher v. Brucker, 41 F. (2d) 774 (D. C., Mich.) .
- Louisville & Nashville Railroad Co. v. Garrett, 231
; U.S. 298.
4 Graniteville Mfg. Co. v. Query, 283 U. S. 376.”
| McCormick & Co. v. Brown, 52 F. (2d) 934 (C.C. A.
; 4th).
j POINT TWO—The case is within the — jurjedidtion of
3 the Court.
4 + Dows v. Chicago, 11 Wall. 108. «
y . Union Pacific Ry. Co. v. Cheyenne, 113 U. S. 516:
: Ogden v. Armstrong, 168 U. S. 224.
Ex parte Young, 209 U. S. 123. ©
Greene v. Louisville & I. R. Co., 244 U.S. 499. .
Henrietta Mills v. Rutherford County, 281 U.S. 121. «
City of Hutchinson v. Beckham, 118 F. 399 (C. C. A.
; 8th). ae
OR ne oe) eT, ee
é tee
POINT. THREE—The Florida statute with respect, to stamp g
taxes on transfers of stocks is not subject to the con-
‘struction placed thereon by the Florida Comptroller.
| State ex rel. ee v. Cook, (Fla.), 146 Sou. Rep.
223.
Nelson w. Watson (not yet reported).
' State ex rel. Rogers v. Sweat, uiseiis -152 Sou. Rep.
432.
Schwab v. Doyle, 258 U. S. 529.
Bowers v. New York & A. Lighterage Co., 273 U. S.
346. ‘
“~
sr
Pndwniter Vv. Gum. 280 U. S. 327;
' Graniteville Mfg. Ge. v. Query, 283 U. S. 376."
People ex rel. Hatch v. Reardon, 204 U. S. 152 (and
184N. Y. 431,°77 N.: E, Rep. 970).
‘%
ie
POINT FOUR—The Florida Act, if ‘construed as contended
_ for by the Appellant, is violative, of the Constitution of
the United States.
. The taxation would deprive. Appellees of DropaRy ‘with-' °
out due process of law.
In re. Paul’s Estate, 165 N..Y. S. (Surr.) 413.
People ex rel. Hatch v. Reardon, 204 U. S. 152.
Graniteville Mfg. Co. v. Query, 283 U. S. 376.
Frick v. Pennsylvania, 268 U. S. 486. —
First National Bank v. Maine, 284 U. S. 312.
. The taxation would deprive Appellees of liberty without
due process. of law.
Allgeyer v. Louisiana, 165 U. S. 578.
St. Louis Cotton Compress Co. v. Arkansas, 260 U.
S. 346.
. The taxation web constitute a burden on interstate
- commerce.
Western Union Teleg. Co. v. Foster, 247 U. S. 105.
Ware & Leland v. Mobile County, 209 U. S. 405.
. The Act is void by reason of its excessive -criminal
penalties:
Ex parte Young, 209 U. S. 123.
POINT FIVE—The Florida Act, if : esi as contended
for’ by the Appellant, is violative of the Constitution of
the State of Florida.
1. The taxation would deprive Appellees - of liberty and
propérty without due: process of law.
2. The Act is a denial of the State constitutional guaranty |
x
of equal rate of ‘taxation.
St. Louis Cotton Compress Co. v. Arkansas, 260 U. S.
346. 3
People ex rel. Hatch v. Reardon, 184 N. Y. 431, TT
N. E. Rep. 970 (and 97 N. Y. S. 535).
Jordan v. Duval County, 68 Fla. 48, 66 Sou. Rep. 298.
ee
* €y
~ 10
Graham v. West Tampa, 71 Fla. 605,71 Sou. Rep. 926.
Sparkman v. State, 71 Fla. 210, 71 Sou. Rep. 34.
‘Camp Phosphate Co. v. Allen, 77 Fla. S41, 81 Sou..
Rep. 503.
. Louisville & N. R. Co. v. Amos, 98 Fla. 350, 128 Sou.
‘ | Rep. 745. |
‘Walter C. Hardesty, Inc. v. Town of Hally Hill, 100
Fla. 1130, 181 Sou. Rep. 134.
3. The Act contains more than one subject and the subject
of the Act is not expressed in the title.
Smith v. Chase, Sheriff, 91 Fla. 1044, 109 Sou. Rep. ee
94. | | 2
i7*y
a.
/~pomnt — ) * _
. The case was one of which the Federal District Court had
jurisdiction rat Oa a case in which the interlocutory Gg *
injunction appl&ation and final hearing were required ——
to be presented to the statutory three-judge court under
Section 266 of the F ederal Judical Code.
The statement of points upon. which! Deidians t tulad to
rely (R. 100-103) does not refer directly to this point,: but
the Tenth, Eleventh and Twelfth Points are of a general
nature, to the effect that the Court erred in granting the
permanent injunction, and in not dismissing the bill, and *
in granting the final decree, under which the questions raised
by this ua may be argued by Appellant.
‘As shown by Paragraph 2 of the bill (R. 8) ‘the basis of
Federai jurisdiction there alleged was that the cause is one
of a civil nature in equity, wherein the amount in contro-
' versy, exclusive of interest and costs,,exceeds the sum and
_ value ef $3,000.00, and which arises under the Constitution
of the United States; and in which there is diversity of
citizenship.
The diversity of citisonship:j is disclosed by Paragraph 1,,
of the bill (R. 6-8). This is supported by Paragraph 2 of «.
‘the Stipulation. of Facts (R. 60), to the effect that all. of
the plaintiffs are citizens and residents of states and coun- -
tries other than the State of Florida, and by the defendant’s
admission in Paragraph 1 of his answer (R. 40), that he
is a citizen of the State of,Florida, and resides in the- City_of
- Tallahassee in said Statey(in the Northern vemrel Judicial
District of the ee, :
The provisions of the Constitution of the United States
upon whjch the rights of the plaintiffs are predicated, are
specifically alleged in Paragraph 16 of the bill (R. 21).
That the constitutional or Federal questions raised are sub-
stantial is evident from the circumstances of the case, the
“allegations of the bill and the ruling and action of the Dis-
“trict Court thereon. ©.
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It further appears from the bill that the object sought to
be accomplished by the suit was that the freedom and liberty
of the plaintiffs to conduct their said businesses should re-
main unhampered and unmolested by the allegedly uncon-
‘stitutional taxation. By thus seeking redress from depriva-
-Ition, under color of the State statute, of their rights, privi-
leges and immunities secured to them in such respect by the
» Constitution of the United States, they presented a cause of
which the Federal District Court had jurisdiction, irrespec-
tive of the amount in controversy. (28 USCA, § 41, Subdi-
vision 14.)
An instance of a recent application of the ground of juris-
- diction last mentioned, which was made bya three-Judge
Court convoked in South Dakota, is Schlosser v. Welsh, 5 F.
’ Supp. 993, 996 (Advance Opinions, Vol. 5—No. 15, of April
.16, 1934). :
The requisite amount in controversy, however, affirma-
- tively appears. In addition to the formal allegation thereof,
as contained in said Paragraph 2 of the bill, it was shown
- by Paragraphs 19, 20, 21 and 22 of the bill (R. 23-24) that
the.suit Was one in which the platntiffs were seeking to save
theirs Florida businesses .from extinguishment, and that the
existence of .such businesses and the value thereo® to the
plaintiffs were at stake, and that such value was greatly in.
excess of the jurisdictional amount. Relying*on these fea-
tures as constituting and determining the amount in contro-
versy, the bill made no allegations with respect to the amount
of the taxes involved in the case. With leave of the Court, an
amendment to the bill was filed (R. 51-52), by which it was.
alleged that-more than $3,000.00.in amount of taxes was
involved as to éach of the plaiytiff paythership firms, and that
the-value of the business and property which the original_bill
alleged would. be lost through the enforcement of the Act
would amount to more than, $3, 000. 00 as to om of the
plaintiffs, %
‘If the taxes which are sought to be collected, and the col-
lection of which is prevented by the, injunction, constitute
the amount in controversy, then by ‘such amendment it is
13
shown that the requisite jurisdictional amount is present.
In addition to that, however, there is the value of thebusi-
“nesses of the plaintiff firms and the injury which they would
sustain through the enforcement of the tax, likewise alleged.
in a sufficient amount, which is the true value or amount
im controversy in a case of this kind.
City of Hutchinson v. Beckham, 118 F. 399 (C. C. A.
8th). ; ;
, Jewel Tea Co. v. Lee’s Summit, Mo., 198 F. 532 (D. Cc...
~ .¢Mo.).
Grandin Farmers’ Co-op. Elevator Co. v. Langer, 5 F.
Supp. 425 (D. C., N. Dak.)
In Grandin Farmers’ Co-op. Elevator Co. v. Langer, supra,
an interlocutory injunction was granted by a three-Judge
Court convoked under Section 266 of the Federal Judicial
Code, on application of a number of owners and operators
- of grain elevators, restraining officers of the State of North
Dakota from enforcing a statute of that State affecting their
business, and which was claimed to be in violation of the
Federal Constitution. It was there contended by the defend-
‘ants that the sufficient jurisdictional amount was not made_
to appear. The Court, however, took the view that the object
of the suit was to protect the business which would be
affected by- enforcing the statute in the manner complained |
of, and bottomed its opinion on that pnt upon numerous
decisions. of this Court, as shown in Me following quoted
language, appearing on Page 426: ?
“The bill asserts that the action involves more than’
$3,000 exclusive of interest and costs. It is obvious that
what the complainants seek to protect is the right to -
operate their elevators and to conduct their: business
free of the restrictions complained of. The value of that
right is the amount in controversy. :
““Complainant sets up a right to maintain and oper- .
_ ate its plant and conduct its business free from wrong-
ful interference by defend&nt. This right ‘is alleged to
be of a value in excess of the jurisdictional amount, and
at the hearing no question seemq to have been made but
AM Si Rite nT RVG Re
PAR A BES BF sae A .
’
sisiied hast cits baie Pla
14
that it has such value. The relief sought is the protec-
tion of that right, now and in the future, and the value
of that protection is determinative of the jurisdiction.’
Glenwood Light & Water Co. v. Mutual Light, Heat
-& Power Co., 239 U. S.-121, 126, 36 S. Ct. 30, 32, 60
L. Ed. 174. See, also, Scott v. Donald, 165 U. S. 107,
115, 17°S. Ct. 262, 41 L. Ed. 648} McNeill v. Southern
Railway Co., 202 U.S. 548, 558, 26 S. Ct. 722, 50 L. Ed.
1142; Hunt v. N. Y. Cotton Exchange, 205 U. S. 322,
336, 27 S. Ct. 529, 51 L. Ed. 821; Bitterman v. Louis-
ville & Nashville R. R., 207 U. S. 205, 225, 28 S. Ct.
91, 52 L. Ed. 171, 12 Ann. Cas. 693; Berryman v. Board
of Trustees of Whitman College, 222 “‘U. S. 334, 345,
32 S. Ct. 147, 56 L. Ed. 225.”
By the Stipulation of Facts (R. 60-61) it is” established
that the taxes involved in this case amount to more than .
$3,000.00 as to each of the plaintiff partnership firms and
also that the value of the business of each firm which by
Paragraphs 19, 20, 21 and 22 of the original bill, it is alleged —
will be lost through enforcement of the Act in the respects
. complained of, is in excess of the jurisdictional amount: —
Furthermore, by Paragraph 5 of the Stipulation (R. 61) it
is stated to be the testimony of the plaintiffs in this case
that the enforcement of the Act, as threatened, will result
in injury in excess of the jurisdictional amount to each of
the plaintiff firms, and by a preliminary paragraph in the
Stipulation (R. 59)-it is agreed that the matter in the Stipu-
lation set forth as the “testimony” of a party shall constitute
evidence in the case. There is no stipulated fact or other
evidence -to contradict or detract from the “testimony” just
mentioned. It appears, therefore, that the required amount .
-in controversy is affirmatively shown by the bill as amended,
‘and proved beyond question by the Stipulation of Facts. -
The case is one which,’under Seetion 266 of the Judicial
Code, required the application for an interlocutory injunc-
tion and final hearing to be heard by a three-judge statutory
Court, as therein provided for. The object of the suit was
to restrain the action of a State officer, to-wit: the defendant
_Comptroller of the State of Florida, in the enforcement: of
y,
»
, 16
a State taxation statute (Chapter 15787, Laws of Florida,
1931, Ex. Sess.) on the ground, among others, of its uncon-
stitutionality under the United States Constitution. .
The nature of the contention of unconstitutionality as made
in the bill was that the statute, properly construed, did not
impose a tax on the papers and documents as to -which it -
was sought to be enforced, and that if construed as imposing
such tax, the statute abridged Federal constitutional privi-
leges and immunities of the plaintiffs. The ground of uncon-
stitutionality of a State statute was presented in the identical
manner in the case of Fisher v. Brucker, 41 F. (2d) 774, in
a suit to restrain enforcement of a Michigan inheritanée
tax upon a certain subject of taxation. There a statutory
court under Section 266 of the Judicial Code expressly found
_ that the case was one within the Federal statute and granted
the relief sought. While the Fisher case was not appealed
~ to the Supreme Court, it was through inadvertence appealed ~
to the Circuit Court of Appeals, out of which Court it was ~
dismissed (49 F, (2d) 759) upon that Court viewing the
case as one properly within Section 266, and, therefore,
-appealable to the Supreme Court.
It is significant that in the Fisher case the basis upon
which the injunction was granted was that the statute prop-
erly construed did not impose a tax on the subject in ques-
tion, and, therefore, that the constitutionality question was
hot inquired into. The Court discussed that feature of the
‘case and followed the decision of this Court to such effect in
Louisville & Nashville Railroad Co. v. Garrett, 281 U. S.
— 298, 303, 304, where this Court held that in a case before a
three-judge Court under Section 266 of the Judicial Code, -
the Court had jurisdiction to determine local questions as
well as the Federal constitutional question.
Also, in Graniteville Mfg. Co. v..Query, 283 U. S. 376, this
Court affirmed a decree of such a statutory three-judge Court
in part granting an injunction resttaining enforcement of a
stamp tax statute of the State-of South Carolina on certain
promissory notes made outside that State. An examination
of the opinion in that case rendered by the District Court
(44 F. (2d) 64) discloses’ that there, as in this case, the
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GSR Ae OS | ACRES
Se idie al at Pains
siti Ln tc sist baad
seitaesd baxiss
16
contention was that the notes were not within the taxing
statute, but that if the Act were construed to tax — it
was then eens unconstitutional.
The applicability of Section 266 of the Judicial Code to
-this caSe is further shown by the fact that under the Florida
statute the State Comptroller is set up as the administrator ~
of the Act, and is, therefore, the equivalent of an admini-.
strative board under the statute, whose orders as complained
_ of herein were sought to be enjoined. In McCormick & Co.
v. Brown, 52 F. (2d) 934, the Circuit Court of Appeals of
the Fourth Circuit, in deciding that a ‘Single District Judge
was without jurisdiction to entertain a cause on application
for injunction by reason of the applicability and. require-
ments of Section 266 of the Judicial Code; held that a single
individual charged with.the.administration of a statute, was
the: equivalent of an administrative board or commission,
_ the meaning of Section 266, saying (at page 937):
f / “And it is settled that a court of three judges is re-
/ quired not only when the constitutionality of the state
statute is involved, but also when the constitutionality
of an order of a state administrative board or com-
mission, purporting t@ be authorized by state statute,
is drawn into question. A single individual, such as the
prohibition commissioner of the State of West Virginia,
may constitute a state administrative board or commis- |
ston within the meaning of the act.”
17
POINT TWO.
The case presented by the bill was one within the ey
jurisdiction ef the Court.
In the Statement of the Points upon which the Appellant
will rely (R. 100), the first point assigned is that the District
~ Court: failed to find that the plaintiffs had d complete and —
adequate remedy at law ‘for redress against enforcement, of
the Act complained of. We anticipate that Appellant’s con-
tention there will be that because an action may lie to re-
cover a tax illegally imposed and collected, there was no
equity on which the relief sought in this suit could be granted.
While mindful of the many authorities which state the
general rule to be that a Court of equity: will not restrain
collection of taxes on the ground: of their illegality or uncon-
stitutionality, and recognizing the pelicy upon which such -
rule is founded; nevertheless, we contend it is equally clear
and well settled that where such equitable relief is sought,
under circumstances which bring the case under a recog-
nized head of equity jurisdiction, as;where the threatened
injury would result in a multiplicity of suits, or otherwise
.would cause irreparable damage and injury, equitable relief
will be granted. The basis. of the suit and the ground of
its equity in such a case is not the illegality or unconstitu-
tionality of the tax, but the basis of-the suit is the effect
of the taxation, which through the multiplicity of suits
and the irreparable injury gives rise to the cause of action
upon which the relief is sought.
Dows v. Chicago, 11 Wali. 108.
Union Pacific Ry. Co. v. Cheyenne, 118 U. S. 516.
Ogden ». Armstrong, 168 U. S. 224.
Ex parte Young, 209 U. S. 123.
Greene v. Louisville & I. R. Co., 244 U. S. 499.
Henrietta Mills v. Rutherford County, 281 U. S. 121.
City of Hutchinson v. Beckham, As F. 399 si A. wR.
The showing made here was that under the Comptroller’s
construction, the nature of the tax complained of was such
that it would require a tax payment in the form of the affix-
ere
wl. NON NN Zk oe are NN a gy: omelet eae oe
18
be]
ation and cancellation of documentary stamps on’ some pa-
pers connected with each purchase or sale of stock made
on a foreign stock exchange, where the purchase or sale
originated in a Florida-branch office of the brokerage firms;
that hundreds: of such transactions are handled daily by
each of the firms; that the threatened imposition of the tax:
would cause serfous impairment if not complete destruction
- of the Florida business; that the penalty @r each violation
“would be a fine’ not to exceed $200. 00, or imprisonment not
to exceed ninety (90) days, or both, in the discretion of the
‘ Court; and that each transaction would constitute a separate
yolation.
- Under those circumstarices, it is evident that the enforce- |
ment of the Act would cause irreparable injury to the ap-
-pellee brokers through a loss of business not in anywise
measurable by the amount of the taxes themselves. An action
to recover back certain of such taxes which had been paid,
coyld in no sense be an adequate or full or complete remedy
for the impairment and loss of business which meanwhile
would occur, because of the deterring effect of, the require-
ment to continue the payment of such taxes during the year
or more which it. might take to recover in such an action.
Therefore, it is no help for the Comptroller to say (R. 74)
that if an action at law were brought to recover back taxes
paid, the taxes which should be collected by him during the
pendency of such action would be held available for return
depending upon the outcome of the case.
Furthermore, it is apparent that a multiplicity of suits
would be required to recover taxes paid, in that before any
action could be completed for recovery of taxes which had
been paid prior to its commencement, more taxes wouJd have
been paid necessitating a further suit, and so on in an end-
less’chain of litigation.
‘The Appellant may refer to the statement in paragraph
30 of the Stipuation (R. 75) to the effect that stamps may
be purchased in quantities in advance of their use, as a
circumstance for refuting the holding of the District Court
(R. 56) that the payment of each tax under the Act is a
separate transaction, as a result of which recovery of pay-
.
ww
fs)
Hptsenrteccse
2
19
ments at law would require multiplicity of suits. That the
purchase of stamps in advance of their use is not a payment
of taxes under the Act is a proposition too obvious to re-
quire reenforcement by argument. Certainly, one whe pur-
chased such stamps and still retained them in his possession
could not maintain an action to recover their price. The tax
is paid. when .a stamp is affixed and cancelled on some docu-
ment taxable under the Act, or claimed by the taxing offi-
cials to be taxable thereunder, = °
Pak
Eg
An wibitittonad sia of equity, resulting from. the circum-
stances of the case, is that the penalties provided for the
violations, of which there would be hundreds daily; would ‘
-make it impossible for the appellee brokers to maintain their
business in the Florida offices with any degree of efficiency,
if at all, in that their employees would be subject to multiple
arrests, prosecutions, fines and imprisonments. It is no an-
swer to that to say (as the Comptroller in his answer and in
the Stipulation of Facts (R. 75) has said) that enforcement
’ of the Act would not be carried out in an unreasonable, arbi-
trary or oppressive manner, since the very duty imposed
upon him by the statute to administer and enforce the same
would, under any conscientious. ,and proper discharge of his
duties in that respect, compel ‘an enforcement of the viola-
tions which could not fail to have the result indicated.
It is to be noted that here the Comptroller did not offer to
waive payment of such taxes as would become payable,
pending an action brought to recover back certain taxes as a
test of the legality and constitutionality thereof. Therefore,
if the appellee brokers had paid certain taxes and filed an
action to recover them as having been illegally and unconsti-. -
tutionally collected, they would have been faced with the
dilemma of violating the law by failing to comply with the
statute in the many daily transactions which would occur
during the pendency of @he action, with the result that if
unsuccessful they or their employees would find themselves
subject to an accumulation of penalties which, if enforced
7 ‘against them, could result in sentence of imprisonment for
hundreds of years and for payment of fines ranging into.
hundreds of thousands bf dollars, or they could pay, or re-
We a Gt
PET te? nem, 2 he SCOT
e - 20
quire their customegs to pay, the separate tax on all of the
ensuing and subseqUent transactions, which procedure would
result in the loss of business for which the return of the
particular tax money sued upon and even of that paid subse-
quently thereto, could in no measure compensate them or
afford any full or “oes redress. . See Ex parte Young,
supra, 209 U.S. 123.
f Sa.
21
POINT THREE.
The Florida statute with respect to stamp taxes on trans-
fers of stocks is not subject to the construction placed
thereon by the Florida Comptroller.
In the, Appellant’s statement of the points on which he
intends to rely, the Second, Third, Fourth, Fifth, Sixth and
Seventh Points (R. 100-101) are to the effect that the Dis-
- trict Court erred in enjoining the Appellant from enforcing
the tax statute as to particular papers or documents which
- in such points are described’ by reference to the Stipulation
of Facts.
’ As we view the case, the controlling questions affect alike
each of the papers or documents referred to in the Appel-
lant’s Points Two to Seven, inclusive, and they will, there-
fore, be dealt with together in this brief.
The statute in. full is attached as an Appendix to this
brief. Reference is now made thereto to show that by Sec-
tion One. it imposes an excise.tax on certain acts and on cer-
tain documents, and by Schedule A of Section One the vari-
ous subjects of the excise tax are set forth in separate para-
graphs. In the first paragraph of Schedule A it is specified: . |
that the tax shall be upon certain documents, to-wit, bonds
and like certificates of indebtedness which are issued in
the State. In the second paragraph the excise tax is imposed
on certificates of stock which are issued in the State. The.
third paragraph of Schedule A (and that is the one under - ©
which the tax contended for by the-Comptroller here is pre-
sumed by him to be imposed) an excise tax is placed upon
the sale and transfer of stocks. In‘the fourth paragraph the .
tax is extended to promissory notes, non-negotiable notes,
written obligations to pay money and assignments of salar-
ies, wages or other compensation, and as to those particular
items, the tax is made to apply to such as are made, executed,
sold, delivered, transferred or assigned in the State. Further
paragraphs impose fhe tax on instruments transferring an
interest in real estate, on certain corporation voting proxies,
and on powers of: attorney.
te as A ae ones ee Are
4
® 22
The third paragraph of Schedule A, relating to transfers
of stocks, properly construed, imposes an excise tax on stock
eries of ***” can mean only that such memoranda in certain
instances shall be the vehicle for the stamp, which is the tax
imposed on ‘the transfers to which the memoranda relate.
’ For instance, it is provided thgt where the evidence of
transfer is shown only by the books of the corporation, the
stamp shall be placed ‘on the books, but corporation books
as such are not made the subject of an excisé.tax under the
Act. It is only when the’ book becomes an evidence and the
only evidence of a stock transfer that the stamp must be
placed on the book, thus taxing the transfer. Similarly, it
is provided that where the change of ownership is by trans-
-. fer of the certificate itself, the stamps shall be placed on the
certificate. In the instance of a transfer of the certificate
which is thus stamped, there might be any number of inci-
dental memoranda or papers which would refer to the
transfer, and yet no provision is made by the Act for a
separate excise tax on them.
°
_ Finally, the Act wwevides that where the transfers are
made in two particular manners (“in case of an agreement
tq sell or where the transfer is made by delivery of the cer-
tificate assigned in blank”) the seller must deliver to the
buyer a bill or memorandum of sale.and the stamp shall be
affixed to that bill or memorandum of sale. It is provided
that such a bill or memorandum of sale (that is the one re-
quired in the two instances mentioned) shall, contain certain
‘ information, to-wit: the date thereof, the name of the seller,
the amount of the sale, and the matter or thing to which ‘it,
- refers. Thus it appears that the occasions on which a bill
‘transfers, and its mention of “memoranda of sales or deliv- .
or memorandum of sale is to bear the stamp are those in- *
stances where, because the transfer is by a certificate as-
signed in blank, or is by a contract to sell, the lack of tangible
evidence of the taxable transfer creates the necessity for
requiring ‘such transfer to be accomplished. by an obvious
and formal memorandum of sale which can best evidence
those particular transfers, and, therefore,. form the vehicle
to onan the stamp, and thus enable the administrator of
a ae
7
*
7
2B: .
, ‘
i ; e 2 Ya
2 - . al *
ae ~ _ ee vee . .” x
eel F e
. \ 4
“Al = : : ’
the Act to more e efficiently enforce the same. It ~ oe
that when a memorandum of sale is so stamped, the tax
imposed is the excise tax on the transfer, the transfer being
the taxable event.
The limit which -necessity places on. the length of this *’ Q
brief prevents us from outlining in detail the stock transfer
~-¢ransactions conducted by the. appellee brokers on the New
*
York Stock Exchange and the other Exchanges outside the
State of Florida on which such transfers are made by them >
for their Florida customers. The facts relating thereto are —
set forth in detail in the Stipulation of Facts. The nature
of the business generally is shown by paragraph 1 of. the
Stipulation (R. 59-60). The manner of handling suchtrans-
actions on the New York Stock Exchange is shown by“para-
graph 6 of the Stipulation (R. 61) to be substantially similar
to that employed by Appellees on other Stock Iixchanges.
- The procedure for a purchase of stock on. the New York _
Stock Exchange, for a Florida customer, is set forth in &.
detail in paragraph 7 of the Stipulation (R. 62- 65), and as . °
to a sale of stock, in paragraph 8 a ¢€R. 66-68).
We yespectfully direct the Court’s attention, however, to.
certain of the facts as contained in said Stipulation, namely,
‘that all purchases and sales are made at the customer’s risk
and for his account by the brokers acting as the representa- ;
tive of the customer, and whether thé’broker is called “brok-
er” or “agent”. is immaterial since thé:detailed statement of -
the transactions shows*that the representation is in fact
one of agency, wherein in making a sale or purchase for the
customer on the foreign exchange, thé broker acts as agent
for the customer who is his undisclosed principal, and- there. f
(outside the State of Florida) contracts for the sale‘or pur-
~ chase of stock, and completes the transaction, dealing with
another broket or brokerage firm, who in turn is acting as
an agent for an undisclosed principal. All transactions are
completed by payment and delivery, made outside the State
‘of Florida. In. the transactions in question, in the case of
a purchase of stock for a Florida customer, no purchase
’ thereof is made in the State of Florida. In the case-of a sale
of steck: for a Florida customer, no contract: for its sale is
es =—_
Ets
799 9 a sera
.
Paw x »
oe
Tt AND CRAP pe te
; °
RR a) in ga iep detache etd can ntodubiten
x
24
mode in the State of Florida, and no sale, or delivery to the
purchaser thereof, is made in the State of Florida,
The Appellant will contend that the various ‘incidental ‘
memoranda exchanged between the ctistomer’ and the em-
ployees of the Florida” branch offices of the appellee firms,
which refer or relate to purchases or sales of stock made
for them without the State, are taxable under the above .
specified portion of the statute, notwithstanding that the
Appellant no doubt will concede that the extra-territorial
transfer is not taxable under the-Act. More.specifically stated,
the position of the Appellant in this case will be that regard-
less of the fact that the transfer of stock is one made out-
side the State, and, therefore, not within the reach of the
excise tax Act, those written communications between the _
broker and customer, whith are only incidental to the for-: - -
eign transfer, should be construed to be memoranda of a sale,
“or memoranda of delivery, and as — separate ‘subjects
of the excise tax.
The unsoundness of: that position is demonstrateéd first,
by the wording of the Act as pointed‘out above;-secondly, by
the concession which the Appellant has made in paragraph
17 of the Stipulation of Facts (R. 70) that not more than
one of such papers or “memoranda” would be taxable, though
a number of them might be utilized in connection with a
foreign purchase or sale, for upon his conceding that point,
-it becomes apparent that it is the transfer that is the basis -°
of the tax, and the Appellant, thereby: in effect concedes that
the nature of the incidental papers is not the: basis for a tax
.on them; thirdly, by the fact that no one of such incidental
papers would be taxable, even under the Appellant’s con- .
struction, unless the purchase or por Hind to which it
relates is actually consummated; fourthly, because the
amount of the tax which the Comptroller would impose on —
such incidental papers would depend not upon what might-
be contained: thereon, but upon the number and face value
of the shares of stock sold or purchased outside the State;
and finally, because such a construction of the statute, even
if the view be taken‘ that it is possible of that construction, °
would be forced and strained and an interpretation resolving
25
a.patent ambiguity unaided by any indication that such was
‘ the objective intent of the Legislature. a :
The statute has been before. the Supreme Court of Flor-
ida for construction in a limited number of cases.
SS LOOLL IEA fete ea
“4 a oD ep
_ State ex rel. Packard v. Cook, ea Fm.,......... a.
~ Rep. 223 (1933).
Nelson v. Watson (decided Newensher 28, 1933, opin-
ion not yet reported). . a
. State ex'rel. Rogers v. Sweat, Fla... 152 Sou. -
Rep. 432 (1934).
These have’ not involved the paragraph relating to stock
transfers. They leave no doubt, however, as to the prin- |
‘ciples which shall be applied in construing the Act, and .°
they are clear that if the wording of the Act casts doubt q
upon the taxability of an instrument, that doubt must be
resolved in favor of exemption, that a tax cannot be im-
posed thereunder ih the absence of. clear language for the >
purpose, and that the person upon whom it is sought to
impose the burden of a tax Shall be given the benefit of
any doubt in that regard.
In State ra ve Packard v. Cook, supra, 146 Sou. Rep.
'» 223, the Court was concerned with an ambiguity as to the
taxability of a written assignement of wages of. less than
$100.00 in amount, under the fourth paragraph of Sche-
dule A taxing promissory notes, non-negotiable notes,
written obligations to pay money, etc. The Florida Court, .
speaking through Mr. Chief Justice Davis, there said at
Page 224: , Be
' “At the outset, it must be conceded that the correct
rule of construction to be applied in such controver-
‘sies is that, if there is any doubt as to the liability of
_ an instrument to taxation under the act, the construc-
tion is in favor of exemption, because a tax cannot be
imposed without clear and express words for that pur-.
pose. United States v. Isham, 17 Wall. 496,21 L.Ed. |
728, ~ . .
9
rewire rs pres
nena ANDY - oe cated
oe t }
“The well-established rule is that, where there is
an ambiguity in the language of a statute imposing a
| tax, and that ambiguity raises a doubt as to the legis-
7 lative intent, the persons upon whom it is sought to
a impose the burden are to be given the benefit of the
a, doubt, because a tax, to be sustained in any given
26
ft case, must come clearly within the letter of the stat-
; ute. Edwards, Internal] Revenue Collector, v. Wabash
i Ry. Co. (C. C. A.) 264 F. 610; 33 C. J. 285; 25 R.C. -
. L: 1092. See, also, State v. panetainy, 84 Fla. sat
94 So. 660.”
In the Nelson v. Watson case the Florida Court held a
certain document taxable as being a written obligation to
pay money under the fourth paragraph of Schedule A.
In the third case, State ex rel. Rogers v. Sweat, supra,
the Court held that the Act did not tax assignments of
mortgages when the certificate of indebtedness was other-
_ wise shown in a separate instrument. There again the {
’ question concerned written obligations to pay money,
taxed under the fourth paragraph of Schedule A. As to
the recognized rule of construction applicable to this par-
ticular statute, however, the Court in an opinion by Mr.
: Justice Buford, at Page 4383, said: . | °
5 “Tt is: condeded that the well-established rule is
j that where there is an ambiguity in the language of
Ries a statute imposing a tax and that ambiguity raises a
% doubt as to. the legislative intent, the persons upon
whom it is sought to impose the burden are to be given
the benefit of the doubt because a tax to he sustained
in any given case must come clearly within the letter
of the statute. See Edwards, Internal Revenue Col-
‘lector, v. Wabash R. R. Co. (C. C. A.) 264 F.610:33 ° -
C. J. 285; 25 R. C. L. 1092; and State v. Beardsicy,
84 Fla. 109, 94 Sou. 660. See, also, Nelson v..Watson
(Fla.) So. , decided November 28, 19338.’’. «
Wn SL ier Bled 0
SN ee. SR NT CTRL Many oo Sa en
The foregoing is in accord with the rule of construction
. as applied under such circumstances by this Court. © @
Shier ale tet 3 a Rtas De"
27
)
Schwab v. Doyle, 258 U.S. 529, 536. B..
Bowers v. New York & A. Lighterage Co., 273 U. 8.846; :
350, : -s
The case of Schwab v. Doyle, supra, involved. a Federal ,
estate tax. The Court, in referring to the construction
"urged by the defendant Collector of Internal Revenue,
there said (258 U.S. at 536) :
“But granting the contention of the’ defendant has
plausibility, it is to be remembered that we are deal-
ing with a tax measure and whatever doubts exist
must be resolved against it.”
The particular incidental papers or “memoranda” ‘as to
which the enforcement of the Act is threatened, as speci-
fied in Appellant’s Second to Seventh Points (R. 100- ane
are as follows:
Exhibit 3 to the Stipulation of Facts (Appellant’s Point.
Two) is shown on Page:78 of the Record. This is a tele-
graphic notice sent by the New York office of an appellee...
brokerage firm to éts Florida branch office, showing the
consummation of a,purchase of stock on an order or, re-
quest of a Florida customer. The nature and function of
_ that notice is shown by the Stipulation, sub- paragraphs
(f) and (g) of paragaph 7 (R. 63-64), to be a message
sent by the Florida branch office over the firm’s private
, Wire, advising or confirming that the transaction was
theretofore completed on the New York Stock Exchange,
and it is‘shown that in some instances the written message
isnot given to the eeeee.
Exhibit 6 to the itnetatton of Facts (A ppellant’s Point |
Three) appears on Page 79 of the Record. This is shown
by sub-paragraph (n) of paragraph 7 of the Stipulation
(R. 65) to be a form of receipt which the New York office
mails to the Florida customer with stock which they have
purchased and are forwarding to him, and which the cus-
tomer is requested to sign and return by mail to the New
York office of the firm. Our position there is that such
receipt has no direct connection with the purchase of stock
aN
PRR TE ASO BST PENI ee ey
eae ry
os —
a
28
e which was previously made for the customer outside the
4 . State, and that the broker receives delivery in New York
as the agent for the customer, and in forwar ding the same
to the customer the broker, that is, the customer’s agent, |
: is merely perforniing messenger service.
Exhibit 7 to the Stipulation of Facts (Appellant’s Point
Four) appears on Page 80 of the Record. This is shown
by sub-paragraph (b) of paragraph 8 of the Stipulation
'(R. 66) to be an order or request of a Florida customer
te the appellee brokers to sell certain stock for him on
the New York Stock Exchange. By reference to the full
q - explanation of such an order as made in the case of a pur-
- chase (R. 62) it appears that it is nothing more than a
“e delegation of authority to the brokers to sell the stock for
the customer, if a sale is. possible of execution. on ‘the terms
specified, and’ is a direction which may or may not bring
3 about a sale of the stock; that in the event a sale results
~~ = therefrom the contract for the sale and the sale itself both
take place outside the State of Florida at a time subse-
quent to the authorization; and that it is not essential that
the order be written or in any particular form. An order
made orally will serve the purpose.
Exhibit 9 to the Stipulation of Facts (Appellant’s Point .
Five) is shown on Page 81 of the Record. This appears
by sub-paragraph (f) of paragraph 8 of the Stipulation —
(R. 66-67) to be a telegraphic communiéation from the
‘New York office of the brokers to the Florida branch of-
fice conveying the information that a requested:sale of
stock for a Florida customer has been made on the New
York Stock Exchange. This paper, as‘in the case of Ex-
hibit, 3 discussed above, may or may not be ‘delivered to
the customer, who sometimes is notified orally or by tele-
phone or not notified at all through the branch office. The
Stipulation shows that formal notice of the transactions is |
always mailed from the New York office of the firm to the
Florida customer on the day that the transactions take
place. (R. 67).
Rxhibit 12 to the Stipulation of Facts. (Appellant’s
Bi ices:
—
‘
. ,
— sesame sy
‘
29
»
Point Six) is shown on Page 82 of the Record. This is
shown by paragraphs 9 and 10 of the Stipulation (R. 68-,
69) to be a form of the receipt which is given by a Florida
-. branch office to-a customer who deposits money or stocks
with the appellee brokers through a branch office. It is
the Appellant’s contention that when such receipt is given
for a deposit of stocks it is taxable under the Act as a.
“memorandum of delivery.” We submit that the relation
between the parties, as shown by the Stipulation of Facts,
precludes any such construction, in that the manual de-
livery of the stocks by a principal to his agent to be dealt
with by the agent for the principal is not a transfer of title
thereto. . ‘
Exhibit 14 to the e Stipulation of Facts (Appellant’s Point
Seven) appears on'Page 84 of the Record, and is shown by
paragraphs 12, 14 and 16 of the Stipulation. (R. 69- 70) to.
~™be an example of the record of trades of a Florida custo-
mer, which is kept in a Florida branch office. -The Stipu-
lation discloses that the purchases and sales indicated
thereon are those which the firm has made on the custo-
mer’s behalf outside the State of Florida; that the com-
plete record of all transactions. and debit and credit itenis,
with balances computed daily, is kept in the New York
offices of the firms,.according to- which all statements and
.remittances are: made, whereas the corresponding Florida
approximations are for the convenience of the branch of-
fice operatives and of the customer, to the extent that such ”
- records of the position and transactions of the customer .
may be relied on, subject to confirmation from the com-
plete records as kept in the New York offices of the firms.
It is obvious that these records of trades are notations
made after the foreign transaction has been made by the
broker for the custamer, and do not purport: to give the
names of the parties to whom the customer’s stock has
been sold or from whom stock has been purchased for the
customer, but are merely such notations with respect to
. transactions as the customer, .might jot down in a personal
hotebook for future reference. ;
z
The Appellants coubuattin here then will be that the
ote
Pidetctinwns.
30
various papers above described are taxabte as memoranda
of sales of stock or as memoranda of deliveries of stock,
but as above noted, they do not fit the description or fulfill
the purpose of the memoranda of sales which, by the Flor-
ida Act, are required to bear an excise tax as the tax on
the transfer to which they relate.
Statutes in other jurisdictions also impose a tax on mem-
oranda of sales. In the Federal statute (Sub-division 3 of
Schedule A of Section 800 of the Revenue Act of 1926 as
amended by the Revenue Acts of 1928 and 1932, U.S. C.,
- Title 26, §901) a tax is imposed on
“* *.* all sales, or agreements to sell, or memoranda
‘of sales or deliveries of, or transfers of legal title to .
any of the shares or certificates * * * whether made
upon or shown by the books of the corporaton or
other organization, or by any assignment in blank, or
by any delivery, or by any paper or agreement or
memorandum or other evidence of transfer or sale
* *
The meaning of “‘“memoranda of sales” as used in the above
- quoted provision appears clearly from Article 36 of Regu-
‘ lations No. 71 issued by the Bureau of Internal Revenue.
That reads as follows:
“Memoranda of sales. — Every person who makes
an agreement to sell or transfers title to shares of stock-
by delivery of certificates assigned in blank, including
every person who lends stock, shall, as a part of such
transaction, promptly make and deliver to the buyer
or borrower a bill or memorandum of such sale, agree-
ment to sell, or loan, duly signed by the seller or lend-
er or his agent, to which the requisite stamps shall be
affixed and canceled, which bill or memorandum
shall show the date of the transaction, the names of
the seller and buyer, or lender and borrower, and the
name and number of shares of stock, and the tax paid
thereon, and in the case of a transaction made on an
exchange shall bear a number upon the face thereof
e
31
and have printed or written in ink thereon the words
‘Subject to the Revenue Act of 1926, as amended, and
‘regulations made in accordance therewith.’ No more
than one such bill or memorandum made by the seller
or lender on any given date shall bear the same num-
ber. However, no single transaction or purchase or
sale that is-made upon an exchange by one member
to another member shall be required to be evidenced
by more than one stamped memorandum.”
As appears from the above provision of the Regulations
the Federal authorities refer to a memorandum of sale as
an instrument delivered by the seller to the buyer. Fur-
thermore the instrument is described as a “bill or mem-
orandum of sale,” just as in the case.of the Florida statute.
The Florida statute imposes a tax on “memoranda of
_ Sales or deliveries.” The Comptroller’s construction is
that this language is the equivalent of memoranda of sales
or memoranda of deliveries. In other words, the Comp-
troller contends that both memoranda of sales and mem-
ordnda of deliveries are taxable and he claims that a re-
ceipt for a, stock certficate is a memorandum of its delivery
which is subject to the tax. It is submitted: that this is a
strained and unjustified construction. As so construed the
statute would imposé a tax on a receipt for a stock cer-
tificate issued by a mere bailee or a messenger or any
other person who was intended to have temporary custody
of the certificate.
The Federal statute is in exactly the same language as
the Florida statute in this particular, iricluding the punctu- |
ation, the Federal statute imposing a tax on “memoranda
of sales or deliveries.” The Federal authorities do not -at-
tempt to tax a mere receipt for stock certificates under this
provision. An examination of the regulations and_ deci-
sions under the Federal statute make this abundantly
plain. ;
There has for years been a statute in the State of New
York in which almost the identical language is used. Sec-
lal
*
, be e
“Eg OD itis oe Te
32
tion 270 of the Tax Law of New York includes this lan-
guage:
“all sales, or agreements to sell, or memoranda: of
sales and all deliveries or transfers of shares or cer-
tificates of stock * * * in any domestic or foreign as-
sociation, company or corporation * * * whether made
upon or shown by the books of the association, coms
pany, corporation, or trustee, or by any assignment -
‘in blank, or by any delivery, or by any paper or agree-
ment or memorandum or other evidence of sale or
transfer, whether intermediate or final***.
‘te the Opinions of the’ alae General P of New York
‘for 1928 at page 125, a case was presente} under the New
York statute in which stock of a‘Canadian corporation
owned and possessed by a person in New York had been
sold to a Canadian purchaser on ‘a Canadian exchange.
Theseller assigned the‘certificates in blank in New York
for delivery to the purchaser in Canada. The certificates
were then delivered to a broker in New York to complete
the transaction. The Attorney General’s opinion !reads as
follows:
“The State Tax Commission asks my opinion as to
whether stock transfer tax becomes owing when stock
in a Canadian corporation, owned and possessed by
a person within this State, is assigned by him in blank
and delivered here to brokers for the purpose of de-
livery in Canada to a purchaser, pursuant to a sale
previously executed upon a Canadian exchange.
“In my opinion, Tax Law, section 270, does not im-
pose a tax upon such a transaction. :
“It is true that the mrevlsione of our statute taxing
‘deliveries’ and ‘transfers’ of stock are attended by
some very broad phrases, and are not necessarily lim-
ited, as to any delivery or transfer which is a step to
a gift or sale by International Paper Company v. State,
210 App. Div. 353, aff. 241 N. Y. 535 mem. Upon
-
a
. s ,
. .
5
! ° °
a
, 33. i
- .
_the present stabeinent of facts, however, the sale hav- §
ing been effected in Canada previous to the delivery
here, it seems that the brokers in this State perform -
‘no function other than might be performed by a mes-
senger or common carrier, and the only true delivery
7 is that in Canada. I am informed, and the fact is not
1: . without sorne slight persuasiveness, that until a few
months ago it was generally assumed = there was
no tax upon such transactions.”
‘The facts of the New York case, ahead by the Attor-
ney General’s Opinion just quoted from, exactly fit the sit-
uation ‘which occurs where a sale is made on the New
York*Stock Exchange for a Florida customer, who there- fs
after hands his stock to one of.-the appellee brokerage ~
firms to use in making the delivery to the purchaser re-
quired to be made in New York. Just as the New York
' Act could not be used to levy an excise on such “delivery”
of stock sent out of the State in connection with the sale
made outside of the State, the “delivery” by sending stock
from Florida to New York to be used in a sale delivery in
' that State, is not a taxable transaction under the Florida
Statute: That rule and construction, applying as it does--
to shipments of stock to foreign States where sales have’
been made, following the making of such sales, would ap--
ply all the more clearly to a shipment of stock to.a foreign
Exchange for the purpose of having it offered for sale, and
before any contract for sale or any sale had been made
° therefor. eons
It is submitted that the intent of the Florida statute is
to tax only transfers, sales and agreements to sell which
are made in Florida. This intent. appears from the lan-
guage of the statute which after: imposing a tax of 10c on
each $100.00 of face value of. shares with par’ value, pro-
vides: t
“and where such shares are without par or face value,
the tax shall be 10c on the transfer or sale or: agree-
ment to sell on desea share.”
af .
Se Oy st ee aS |) a ee ee ee ee CR ey tee ee pk SUS SN biotin
> .
34
The above quoted language clearly indicates an inten-
tion to tax only a transfer, a sale or an agreement to sell.
No other transaction is specified in the language imposing
the tax with respect to shares without par value and it
cannot be seriously contended that other tansactions were
intended to be taxable with respect to shares with par
value. The additional phrases used in the first part of the
paragraph, that is, memoranda or sales or deliveries, were
intended to be taxed: only when constituting a necessary.
part of a transfer, or a sale or an agreement to sell.
It is clear also that when the bill or memorandum of
sale as described in the’Florida statute has been duly
stamped, there is no further tax due. That this construc-
tion is placed on the Federal statute appears from Article
35 of Regulations No. 71 issued by the Bureau of Internal
Revenue. That article reads in part as follows:
“Sales or transfers not subject to tax. — the follow-
ing are examples of transactions not. subject to the
tax:
(a) The transfer of stock pursuant to a sale, where
the previous memorandum of sale has been duly
stamped.”
The true memorandum of sale,- where the appellee brok-
ers sell stock for a Florida customer, is the one which is
made .and delivered in New York in connection with a sale
‘of stock there. Exhibt 5 to the Stipulaton of Facts (R.
79) is an example of an actual memorandum of sale which
is called the ‘‘sales ticket,”’ to which there are-affixed and
cancelled, the stamps required by the New York and Fed-
eral excise taxes which are levied upon the stock transfer,
in connection with, the making of which such memorandum
or “‘sales ticket” is delivered in ;New York by the selling
broker. (R. 64 and 68).
The Florida statute was construed by the State officials
for nearly two years as imposing no tax under the circum-
stances involved in the example under consideration in this
—
35
memorandum. This appears from letters and telegrams
which passed between the former. Comptroller, Honorable
Ernest Amos, and Messrs. Shutts & Bowen, as attorneys
for one of the appellee firms, shortly after the Act senna
eeactive. - 26- aid and 85-91).
The interpretation placed upon a statute over a consid-
erable period of. time by administrative. officers charged
with its enforcement, is entitled to great weight in deter-.
mining the proper construction of the statute. In Brew-.-
ster v. Gage, 280 U. S. 327, 336, in a question arising under
the Federal Revenue Acts of 1918 and 1921, the Court *
Said:.
“It is the settled rule that the practical interpreta-
tion of an ambiguous or doubtful statute that has been
acted upon by officials. charged with its administra-
tion will not be disturbed except for weighty reasons.
Logan v. Davis,.233 U. S. 618, 627. Maryland Casual-
ty Co. v. United States, 251 U. S. 342, 349. Swendig .
v. Washington eer Power Co., 265 Sas S. — 331. si
From the contentions made in the Court below by coun-
_ sel for Appellant, we anticipate that they will argue here
that the case of Graniteville Mfg. Co. v. Query, 283 U. S.
376 (affirming 44 F. (2d) 64), supports their attempt to -
construe the third paragraph of Schedule A of the Florida
_ Statute as requiring stamps on the papers and memoranda
above mentianed made in the State of Florida’ which make
incidental reference to a foreign sale of stock.
In the Graniteville case it was held that promissory notes |
made by u South Carolina corporation in that State and
mailed to banks outside the State, to evidence loans to be
made thereon, were taxable under paragraph’ 4 of. Sche-
dule A of a South Carolina excise tax statute which, like
. the corresponding paragraph in the Florida statute, places
a tax on’promissory notes and other written obligations to
pay money. The Court held that the tax on promissory
notes was an excise levied with respect to the creation of
the instruments within the State.
[eR
Bh as
S|
ae
36 a c
Counsel for the Appellant in this case will argue that
the incidental papers relating to foreign stock sales are
papers made within the State, and that the application in
the Graniteville case given to the statute as to taxing the
promissory notes should be given to the:Florida statute with
reference to the Florida papers and memoranda which
. are incidental and collateral to the foreign stock saies. It
is a completé answer to that argument to point out that
while the fourth paragraph of the statute does levy an
excise on the making’ in Florida of. promissory notes and
certain other ‘obligations to pay money, the third para-
graph of Schedule A provides an excise tax of an entirely
different . character, to-wit, an excise on the transfer of
property ** and to call attention to the fact that the tax
sought to be imposed on these incidental and collateral
‘memoranda is conceded not to apply to more than one
subject which is connected with any foreign purchase or
sale. of stock, and that as sought to be imposed by the
Comptroller the taxability is made to depend upon the
fact of a foreign sale and the value and amount of the
stock sold. Moreover, in the Graniteville case the Court
distinguishes the tax as there placed on the making of
promissory notes,.from an excise tax ona property transfer
such as a sale of stocks. This is shown by the Court’s opin- -
ion, where, in specifying the nature of the excise tax ap-
plied to the making of promissory notes under the fourth
paragraph of Schedule A of the Act, it was said at Page
379:
“So laid,.the tax was not imposed upon property,
or upon the transfer of property, situated athe daoaen the
jurisdiction of the state * * *.”
As the Graniteville case o dealt with the nature of the tax
-as applied to promissory notes and obligations to pay mon-
ey, specified in the fourth paragraph of Schedule A, the
case did not purport to pass upon or designate.the type or
nature of tax imposed by the third paragraph of Schedule
A, relating to stock sales and transfers. For the use to
which the Appetlant seeks to put that authority, the de-
cision is inapplicable.
* ; .
an “
Be . . . : « i .
Bat oN F;
é : w
;
$7 ; | 2s fp 4
ee e :
c A’stock transfer tax provision of the New York State
law, which for purpose of, construction is the same as the
third paragraph of Schedule A of the Florida Act was di-
rectly under consideration in thé case of People ex rel.
Hatch v. Reardon, 204 U. S. 152, in which the New York.
Appellate Division and Court of Appeals and this Court
held that the tax imposed by that portion of the statute
was an.excise tax on the sale and transfer ‘of property.
The, question was,directly raised by the argument there’
* - made to the effect that the tax was a property tax. In the
opinion of the case in the New York Court of Appeals (184
‘N. Y. 431,77 N. E. 970) the point was discussed | asfollows _.
(p. 795 of N. E. Rep.) :
- “The wi however, is not on property, but on the sale
of property, or on a particular kind of contract when
made within this state. The certificate, itself, is not
liable for the tax, but the person selling it is. The tax is
not a lien on certificates, nor on shares, which may be
owned to any extent throughout the state, free from any : .
claim under the statute in question. Jt is the sale alone
that gives rise to the tax, which is imposed through the
command of the law to the seller to pay.the tax when
the contract to sell is: made, and it is enforced not by.
levy and sale, but by civil and penal a against -the
person of the seller.” vay
We, therefore, venveatialtee submit that the third para-
graph of Schedule A of the Florida statute simply creates
an excise tax upon the sale and transfer of stock, and that,
as the sales and purchases of stock which the appellee
brokers make on the New York and other foreign Stock
Exchanges for their Florida customers, are -transfers of
stock not made within the State, the taxable event does
not occur within her territorial jurisdiction, and that the
papers incidentally referring to such purchases‘and sales
and which, Appellant calls “memoranda” of sales and af
deliveries, are not subject to taxation under the Act.
.
° one ae
a
’
te
.
38
2 me 1 POINT FOUR.
The Florida Act, if construed as contended for by the
Appellant, is violative of the Constitution of the United
_ States.
The argument made iti this heading is applicable to
the stated points upon which the Appellant relies, which are
numbered Two to Seven, inclusive, in that those points assign
as error the restraining of the tax as to the various docu-
ments above discussed. The argument here made applies di-
_rectly to Appellant’s Eighth and Ninth Points (R. 102),
which attack the District Court’s ruling that the Comptrol-
ler’s construction would give the statute extra-territorial .
effect, and also may apply under the last three points which
Appellant relies on which attack the District Court’s decision
on broad and general grounds.
‘Jt is the contention of the ‘Appellees that the result of
construing the. statute, as.contended for by the Comptroller,
would render it repugnant to the First Section of Article
14 of the Amendments to the Constitution of the United
_States as depriving the Appellees of their liberty and prop-.
_erty without due process of law, and: by denying to them
within’the jurisdiction of the State of Florida the equal pro-
tection of the laws, and repugnant to the commerce clause
of the United States Constitution (Article I, Section 8,
Clause 3).
1. The taxation would deprive Appellees of property with-
out due process of law. It is clearly demonstrated by the
agreed facts here that all purchases and sales of stocks made
by ‘the Appellee brokers for their Florida customers take
place entirely outside of the State of Florida. All steps and
elements: essential to the transfers are foreign to the State.
Statutes such as the Florida Act in question have been
construed to have no extra-territorial effect. A similar New
York Act (Section 270 of the Tax Law of New York) was
given that construction.
_
39
. In re. Paul’s Estate, 165 N. Y. S. (Surr.) 418, (affirm-
ed without opinion by the Appellate Division, First De-
partment, 167 N. Y. S. 1117); -
People ex rel. Hatch v. Reardon, 204 U.S. 152, affirm-
ing the Court of Appeals, 77 N. E. 970,.which affirmed
‘the Appellate Division, 97 N. Y. S. 535. -
Likewise, a similar statute of South Carolina was so con-
strued in Graniteville Mfg. Co. v. Quéry, supra, 283 U. S.
376, where_it was held that the statute could not apply to
promissor¥wgotes which -~were made and delivered outside of
that State. =
The Federal statute levying an excise on sales and trans-
fers of Stocks (26 USCA § 901) has been construed by the
general counsel of the Bureau of Internal Revenue not to
apply to’sales of stock made outside of the-territorial juris-
diction of the United States. In the “Internal Revenue News,”
Vol. 5, No. 11, page. 15, issued by the Bureau of Internal
Revenue in the month of May, 1932, there appears an article
by Frank D. Strader of the Office of the General Counsel of
the Bureau. Mr. Strader refers to Article 34 of the Regula-
tions 71 and says:
“Under the above-cited regulations the bureau has
ruled that the assignment in blank and delivery of cer-
tificates of stock in Canada, where such stock is issued
by a domestic corporation, is not subject to the stamp tax
liability imposed by section 800, Schedule A-3, Title
VIII, revenue act of 1926. There is nothing in the law -
or regulations that imposes the tax on the mere sale
of corporate stock when ‘the transaction is effected
wholly outside of the jurisdiction of the United States.
However, where the sale occurs outside of the limits
of this country, but the transfer of the stock is made
_ upon the books of the corporation in the United States,
the transfer is thus brought within the jurisdiction of _.
the United States and becomes subject to tax.”
This construction, placed.on these earlier kindred acts,
which were models for the later Florida statute; alone would”
40
be sufficient to require a similar construction to be given
to the Florida Act. But more compelling in its effect, and
controlling on the point, is the underlying principle that a
state is without power to levy a property. tax on property
which is not within its jurisdiction, or to levy an excise tax .
on a taxable event which occurs outside of its: territorial
limits.
In this connection the District Court in its opinion rend-
ered in this case (R. 57) said:
“It is our opinion that all purchases and sales of stock
by the plaintiff brokerage firms for their Florida cus-
. tomers, whether the stock is bought outright by the cus-
tomer or upon a Margin, are transactions entirely com-
pleted outside of the State of Florida and that any mem-
oranda passing between the broker and the customer are
not such documents as are subject to taxation in Florida.
To hold such memoranda ‘of sales made without the
State to be subject to taxation would be giving. the
statute extra-territorial effect. People ex rel. Hatch v.
Reardon, 97 N. -Y. 8.535. For a state. to tax property
beyond its jurisdiction is a taking of property without
due process of law. Frick vs. Pennsylvania, 268 U. S.
473; First Nat. Bank vs. Maine, 284 U. S. 312.”
The cases cited by the District Court amply support.the hold-
ing there made.
In Frick v. Pennsylvania, 268 U. S. 486, (October 7
1924, No. 125), this Court said, at Page 492:
“The Pennsylvania statute is a tax law, not an escheat
law. This is made plain by its terms and by the opinion
' of the state court. The tax which it imposes is not a
property tax, but one laid on the transfer of property
on the death of the owner. This distinction is stressed
by counsel for the state. But, to impose either tax, the
state must have jurisdiction over the thing that is taxed;
and to impose either without such jurisdiction is mere
extortion, and in contravention.of due process of law.”
. wt painiimites se baled sinc
41 - a. .
The tax there was a succession tax. It is submitted that
.the analogy is complete and that a death transfer tax and
an excise tax on transfers of property inter vivos stand on
the same footing with respect to the lack of power of a state
to impose such tax on a foreign transfer.
In First National Bank v. Maine, 284 U. S. 312, among
other things, it was held that an inheritance or succession
tax was an excise tax which could not be imposed by more
than one state. The Court there said, at Page 322: |
“We decided, pp. 488-492, that the Pennsylvania tax,
in so far as it was imposed upon the transfer of tangible
personality, having an actual situs in other states, .was
in contravention of the due process clause of the 14th
Amendment. Upon a review of former decisions, it was
held (1) that the exaction of a tax beyond the power
of the state to impose was a taking of property in viola.
tion of the due process clause; (2) that while the tax
laws of a state may reach every object which is. under
its jurisdiction, they cannot -be given extra-territorial
operation ;***” . .
And further, at Page 328, the Court said:
“We conclude that shares of stock, like’the other in-
- tangibles, constitutionally can be subjectéd to a death
transfer tax by one state only.
“The question remains: In which state, among two
or more claiming the power to impose the tax, does the
taxable event occur?”
These authorities are controlling and easy of application
to the present case. It must be borne in mind that under the
facts in this case, with the single exception of the taxability
which is claimed by Appellant for a receipt given by the
brokers’ Florida employees to a: custémer, who hands them —
stock to be sold and as to which transaction our contention
is that no title transfer takes plack, taxability of the
various documents is entirely depenttert upon there being —
an actual sale or transfer of the stock outside of the State.
' Also, the Appellant concedes that where a sale is made out-
side of the State for a Florida customer in the manner shown
42
here, only one of the various documents which he contends
are taxable shall bear the tax. The tax is one the amount. of
which would be measured by the foreign transfer. These cir-
cumstances show beyond any question that the effect of the
taxation, if it could be imposed in the manner contended
for by the Appellant, would be the levying of an excise tax
by the State of Florida upon a taxable event occurring out-
side of its territorial limits, and a consequent taking of prop-
erty of the Appellees beyond the power of the State and,
therefore, without due process of law.
- 2. The tax levied under such circumstances would deprive ©
* Appellees of liberty without due process of law. The Consti-
tution guarantees to Appellees the right, privilege and liberty
to be free in the enjoyment of their faculties, including the
right to pursue their businesses and to enter .into all fon-
tracts which may be proper, necessary and essential to their -
carrying out to a successful conclusion their proper business
purposes. This liberty will be denied them if these papers
made in Florida, which have incidental-and collateral refer-
ence to contracts made for their customers,-: outside of. the
State of Florida for the sale of stock, and to. extra-terri-
torial sales and transfers of stock made on their behalf,
are construed to be subject to the excise tax under the
Florida, Act. a k,
Allgeyer v. Louisiana, 165 U. S. 578;
‘St. Louis: Cotton Compress Co. v. Arkansas, 260 U. S. -
346.
In the Louisiana and Arkansas. cases it was attempted
through a state statute to levy .a tribute on the making of
certain insurance contracts outside of those states. Here
the State of Florida through the interpretation of its stamp
tax law as placed thereon by its Comptroller acting as an
administrative board, is attempting to receive a tribute
upon contracts made outside of this State for the sale of
stock, and upon actual sales and transfers of stock which
are made and completed outside of this State. The hold-
ing in Allgeyer v.-Louisiana, supra, is conclusive on the
point that any incidental communications or memoranda
¢
Lk A
which may be written or used in the State, which are
merely incidental and collaterakto the foreign transaction,
cannot be made the object of taxation by virtue of and be-
cause of the foreign transaction.
The Court in the Allgeyer case, in the opinion by Mr.
Justice Holmes, said at Page 592: -
“In the privilege of pursuing an ordinary calling or
trade and of acquiring, holding, and selling property
must be embraced the right to make all proper con-
tracts in relation thereto, and although it may be con-
ceded that this right to contract in relation to persons
or property or to do business within the jurisdiction ©
of the state may. be regulated and sometimes prohib-
ited when the contracts or business conflict with the
policy of the state as contained in the statutes, yet the
power does not and cannot extend to prohibiting the
citizen from making contracts of the nature involved
in this case outside of the limits and jurisdiction of
the state, and which are also to be performed outside
of such jurisdiction; nor can the state legally prohibit
its citizens: from doing such an act as writing this let-
ter of -notification, even though the property ‘which;
is the subject of the insurance may at the time when
Such insurance attaches be within the limits of the
state. The mere fact that a citizen may be within the
limits of a’ particular state does not prevent his mak-
ing a contract outside its limits while he himself re-
mains within it. Milliken v. Pratt, 125 Mass. 374 (28
Am. Rep. 241); Tildon v. Blair, 88 U. S. 21 Wall 241
(22: 632). The contract in this case was thus made.
It was a valid contract, made outside of the state, to
be performed outside of the state, although the sub-
ject was property temporarily within the state. As
the contract was valid in the place where made and
where it was to be performed, the party to the con-
tract upon whom is devolved the right or duty to send
the notification in order that the insurance provided
-
for by the contract may attach to the property Speci- ,
fied in the shipment mentioned in the notice, must
44
Pood
if
have.the liberty to do that act and to give that notifi-
cation within the limits of the state, any prohibition
of the state statute to the contrary notwithstanding.
The giving of the notice is a mere collateral matter; it
is not the contract itself, but is an act performed pur-
suant to a valid contract which the state had no right .
or jurisdiction to prevent its citizens from making’ out-
side the limits of the state.
“* * * Any act of the state legislature which should
prevent the entering into such a contract, or the mail-
ing within the state of Louisiana, of such a notification
as is mentioned in this case, is an improper and illegal
interference with the ¢onduct of the citizen, although
residing in Louisiana, in his right to contrac and to
carry out the terms of a contract validly entered into
outside and a the jurisdiction of the state.”
‘The state restriction cum to be“imposed in the All-
geyer case was in the form of a penalty in a round sum
termed a fine. The later case cited, St. Louis Cotton Com-
press Co. v. Arkansas, supra, established that such.a re-
striction cannot be imposed in the form of a tax.
It is apparent, and a point to be noted in connection with
this case, that no question of state regulation or police
power control of matters or actions of persons is raised or -
urged as a basis for the appellant’s contention here re-
specting the Florida Act. ~
3. The tax would constitute a burden on interstate com-
merce.> The. business of the Appellees, as disclased in this
case, constitutes commerce between: the states. The tax
is sought to be imposed on the messages which are trans-
mitted by private telegraph wire between the New York
offices of the firms and their Florida branch offices.
The leased private wire is a facility which, if used ~
through the public telegraphic systems, could not be sub-
jected to such taxation.
- Western Union Teleg. Co. v. Foster, 247 U. S. 105.
- 45
We submit that where the Appellee brokerage firms,
through the facilities in question, secure the transmission
between states of. quotations, and other messages and
> ~ communications with reference to their business, such in-
formation and messages are an indispensable part of their
“business and constitute commerce between the states to
the same extent that ordinary messages by telephone
and telegraph companies are sé classed. |
\
\
Pirthermavs, the ess of stocks, as is done wi h re-
lation.to a portion of the business of the firms cond ected.
for their Florida customers, is interstate commerce. \We
take this ‘position notwithstanding the case of Ware & Le-
- land v. Mobile County, 209 U. S. 405, and the cases which
follow it, in which it was held that such brokerage busi-
_ ness with respect to trades in cotton and other commodity
_ futures, was not interstate commerce. ;
In a search which has been exhaustive, but which we
concede is by no means complete, we have not found any
case in point deciding whether or not such brokerage busi-
ness on trades of stacks listed on Stock Exchanges is inter-
state commerce. A clear distinction, however, which ex-
ists between the case of trading in stocks ‘and the case of
trading in commodity futures is that in the former the
trade or contract made on the floor of the Exchange is al-
ways followed promptly by ‘actual delivery, and tlere is
no dealing in or assignment of the contract for the delivery
of the stock, whereas, in the case of the commodity fu-
tures, the subject of trade, as a practical matter, is the
contract itself. It is-true that the commodity futures con-
tracts call for delivery at a future date, but the delivery.
called for is usually to take place at a distant date, and
the practice is to trade in the contracts themselves, by pur-
chase, sale or assignment thereof, an unlimited number
_ of times before the time. set for the actual delivery of the
commodity.
4, The Florida Act, as applied to the circumstances of
this case, is unconstitutional and void by reason of the ex- ©
cessive .penalties provided: therein.
Q
46
Under an analogous statute shown to have such an ef-
fect, this contention was successfully made in the case of
Ex Parte Young, 209 U. S. 123, and the statute was held
- to be unconstitutional and void in that case on that ground.
The case concerned railroad rates, and the penalty pro-
vided for disobedience of the Act-was a $5,000.00 fine, or
imprisonment in the state prison not exceeding. five. years,
or both. While the amount of the fine and the length of
imprisonment provided as penalties in that case were
greater than the ones provided in the Florida Act, the dif-
-ference is one only of degree, and we submit that the
amount of the fine and the length of the imprisonment
| ‘penalty provided for in the Florida Act are more than suf-
ficiently grave to bring this case squarely within the prin-
ciple as thus announced in Ex Parte Young, since in the
usual course of business of each of the Appellee firms, the
employees of their Florida offices could become subject
to daily fines exceeding, by conservative estimate, more
than $20,000.00, and imprisonment sentences totalling
more than ten years for each day’s ‘infringement.
~
AT
POINT FIVE.
The Florida Act, if construed as contended for by the .
Appellant, is violative of the Constitution of the State
of Florida.
_ The argument made under this heading is applicable: to
‘those points upon which the Appellant relies, which are
-specified above in the opening of the argument under our
Point Four.
We submit that’ if the construction contended for by the
.Appellant is given to the statute, it is thereby rendered un-
constitutional under the Constitution 6f the State of Florida
in the respects set forth below:
1.. The Act is a violation of the due process provision of
the Florida Constitution (Section 12 of the Declaration of
Rights of Florida), which guarantees that no person shall -
be deprived of life, liberty or property without due process
of law. What has been said above in POINT FOUR in dis-
cussing that question with reference to.the Federal Consti-
_ tution’is equally applicable here.
2. The Act thus construed is void as being in conflict. with
the First Section qf Anticle IX of the Constitution of Flor- ©
ida, which provides: A :
“The Legislature shall provide for a uniform and
equal rate of taxation,****; and shall prescribe such
~ regulations as shall secure a just valuation of all prop-
erty, both real and personal,***,”
To levy and collect: the taxes ort the construction contended
for by the Comptroller, where the only basis for such taxes
are the contracts, sales and transfers which are made and
take place outside ‘the State of .FJorida, by requiring the
placing of stamps on incidental and collateral ‘written records
of such foreign transfers, is the levying of a property tax on
such records, since there is no transaction within the State
of Florida subject to an excise tax in that connection. The
48
title of the Act is not controlling as to the nature of the tax.
St. Louis Cotton Compress Co. v. Arkansas, supra, 260
U. S. 346.
The tax sought to be collected, however, is one the amount
of which is not based upon. any intrinsic or other actual
value of the “memorandum” or “record” or paper on which
it is sought to enforce the placing of stamps, but isa tax
which, as to its amount, is. gauged by the kind and number
of shares or certificates of stock involved in a sale made out-
side the State of Florida, and ‘to which the writing or paper
in question incidentally makes reference. No further asgu-
ment or explanation is necessary to show that such a method
of valuation of a paper or writing is not a just valuation of
the property taxed, and is in utter disregard of the consti-
tutional guaranty of equal rate of taxation. That this is true
is shown by People ex rel. Hatch v. Reardon, supra, where in
the opinions of the New York Courts dealing with that case,
the Appellate Division. (97 N. Y. S. 535, 541) and the Court
of Appeals (77 N. E. Rep..970, 974), in distinguishing the
stock transfer tax.there from a property tax, took the view,
that as a property.tax it would be violative of the State con-
stitutional guaranty of equal rate of taxation by reason of
the valuation basis shown above.
The constitutional provisions for equal rate of taxation, |
and for just valuation by which the same is brought about
are’mandatory, and the disregard of ge ewe ange is,
under the decisions of the Florida Court, a& violation of the
State Constitution. |
Jordan v. Duval County, 68 Fla. 48, 66 Sou. Rep. 298.
Graham v. West Tampa, 71 Fla. 605, 71 Sou. Rep. 926.
Sparkman v. State, 71 Fla. 210, 71 Sou. Rép. 34.
Camp Rhosphate Co. v. Allen, 17 Pia. 341, 81 Sou.
Rep. 508. .
*
.
Louisville & N. R. Co. v. Amos, 98° Fla. 350, 123 Sou.
Rep. 745. .
See ee |
49
"Walter C: Hardesty, Inc. v. Town of Holly Hill, 100
Fla. 1130, 131 aay Rep. 134. —
3. The statute, if cviniennd as contended for by the Ap- .
pellant, likewise violates the Sixteenth Section of Article III
of the -Florida Constituti by which it is provided that
Acts of the Legislature shah embrace but one subject, and
matter properly connected t erewith, which subject shall
be briefly expressed in the title. The title of the Act is as
follows :-“
“An Act Levying and Imposing an Excise Tax on
Documents to Raise Revenue for the Support of the
State Government; and Prescribing Penalties for Fail-
ure to Pay oe Tax.”
_ It appears from the title that the- tax thereby imposed is
described as an excise tax. The application of this Act to
‘ sales and transfers made in the State of Florida is the levy-
ing of an excise tax as distinguished from property tax.
The Act thus imposes/an excise tax on the making of certain
documents and, by the third paragraph of its Schedule A,
on certain transfers.
Since the State is without power to levy an excise tax on
a transfer or transaction which does not take place within
its territorial limits, a tax imposed on some incidental fea-
ture of such a foreign transfer must be a property tax, if
it is a tax at all. To construe the third paragraph of Schedule
A of the Act to levy such a property tax, while other para-
graphs of the Schedule patently impose an excise tax, re-
sults in the Act embracing a plurality of subjects, in viola-
tion of the provision mentioned. In that event, as shown by |
the decision of the Florida Court, in Smith v. Chase, Sheriff,
91 Fla. 1044, 109 Sou. Rep. 94, the State constitutional pro-
vision is further violated by the consequent failuré of. the
title of the Act to disclose the subject thereof.
These local questions and questions of state constitution-
ality are proper subjects for consideration. and determination
in. this case, notwithstanding that the initial basis of its
50
jurisdictional position as a case for a statutory Court, under
Section 266 of the Judicial Code, is the question of Federal
constitutionality upon which the statute is attacked.
Louisville & Nashville Railroad Co. v. Garrett, supra, 231
U. S. 298, 303, 304. ; ae
. LAST POINT.
In conclusion, it is submitted that the decree of the District
Court should be affirmed.
Réspectfully submitted,
FRANK B. SHUTTS,
CRATE D. BOWEN,
‘CHARLES A. CARROLL,
_ Counsel for Appellees.
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