# Appellees Brief — Teamsters v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_0076%3A5 ## Record - **Collection:** Supreme Court brief - **Document type:** Appellees Brief - **Published:** January 1, 1934 - **Citation:** 291 U.S. 293 ## Text or t°) 7% © : ie o e ‘ ‘ - , . a zt , * . . a ” t — ww” .- a . ye s * . 4, % . 2 ° 0 / 6 * . ‘ ” Ryd ryr Sy. - et a’ : » sth ne 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. 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. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_0076%3A5. Public record. Not legal advice.