H. K. Mulford Co. v. Curry

This is an original petition addressed to this court for a writ of mandate, requiring the secretary of

“For filing and issuing a certified copy as required in section four hundred and eight of this code, corporations formed under the laws of another state, or of a territory, or of a foreign country, must pay the same fees as are paid by corporations formed under the laws of this state. ’’

The fees herein referred to are fixed by section 416 of the Political Code which declares:

“The secretary of state, for services performed in his office, must charge and collect the following fees: . . .

■ “4. For'filing articles of incorporation, if the capital stock amounts to twenty-five thousand dollars or less, fifteen dollars; if the capital stock amounts to over twenty-five thousand dollars, and not over seventy-five thousand dollars, twenty-five dollars; if the capital stock amounts to over seventy-five thousand dollars, and not over two hundred thousand dollars, fifty dollars; if the capital stock amounts to over two hundred thousand dollars, and not over five hundred thousand dollars, seventy-five dollars; if the capital stock is over five hundred thousand dollars, and not over one million dollars one hundred dollars; if ' the capital stock is over one million dollars fifty dollars additional for every five hundred thousand dollars or fraction thereof of capital stock over and above one million dollars; etc. ...”

Having further relation to the matter is an act entitled: “An act relating to revenue and taxation, providing for a license-tax upon corporations, and making an appropriation for the purpose of carrying out the objects of this act.” Section 2 of this act declares as follows:

“It shall be the duty of every corporation, incorporated under the laws of this state, and of every foreign corporation now doing business, or which shall hereafter engage in business in this state, to procure annually from the secretary

of state a license authorizing the transaction of such business in this state, and shall pay therefor a license-tax as follows:—

“When the authorized capital stock of the corporation does not exceed ten thousand dollars ($10,000) the tax shall be ten dollars ($10); when the authorized capital stock exceeds ten' thousand dollars ($10,000) but does not exceed twenty thousand dollars ($20,000) the tax shall be fifteen dollars ($15); when the authorized capital stock exceeds twenty thousand dollars ($20,000) but does not exceed fifty thousand dollars ($50,000) the tax shall be twenty dollars ($20); when the authorized capital stock exceeds fifty thousand dollars ($50,000) but does not exceed one hundred thousand dollars ($100,000) the tax shall be twenty-five dollars ($25); when the authorized capital stock exceeds one hundred thousand dollars ($100,000) but does not exceed two hundred and fifty thousand dollars ($250,000) the tax shall be fifty dollars ($50); when the authorized capital stock, exceeds two hundred and fifty thousand dollars ($250,000) but does not exceed five hundred thousand dollars ($500,000) the tax shall be seventy-five dollars ($75); when the authorized capital stock exceeds five hundred thousand dollars ($500,00) but does not exceed two million dollars ($2,000,000) the tax shall be one hundred dollars ($100); when the authorized capital stock exceeds two. million dollars ($2,000,000) but does not exceed five million dollars ($5,000,000) the tax shall be two hundred dollars ($200) ; when the authorized capital stock exceeds five million dollars ($5,000,000) the tax shall be two hundred and fifty dollars ($250). . . .

“The license-tax or fee hereby provided .authorizes the corporation to transact its business during the year. or for any fractional part of such year in which such license-tax or fee is paid.” (Stats. 1905, p. 493.)

The uncontroverted showing is that the petitioner is a foreign corporation, duly organized and existing under the laws of the state of Pennsylvania; it has an authorized and issued capital stock of one million dollars, and was organized for and is engaged in the business .of manufacturing and selling tablets, pills, triturates, fluid extracts, etc.; it was so engaged within the state of California before the passage of the license-law above quoted; its principal place of business is in Philadelphia, Pennsylvania; it maintains branch

By section 15 of article XII of the constitution of this state it is declared that “no corporation organized outside the limits of this state shall be allowed to transact business within this state under more favorable conditions than are prescribed by law to similar corporations organized under the laws of this state.”

Petitioner’s contention is that as to it, a foreign corporation, the exaction of these license-taxes is the imposition of a direct burden upon its interstate commerce in violation of the commerce clause of the constitution of the United States (Const. U. S., art. 1, sec. 8, subd. 3).

This court is forced to the conclusion that upon the authority of Western Union Tel. Co. v. Kansas, 216 U. S. 1 , [ 54 L. Ed. 355 , 30 Sup. Ct. Rep. 190 ] ; Pullman Co. v. Kansas, 216 U. S. 56 , [ 54 L. Ed. 378 , 30 Sup. Ct. Rep. 232 ] ; and Ludwig v. Western Union Tel. Co., 216 U. S. 146 , [ 54 L. Ed. 423 , 30 Sup. Ct. Rep. 280 ], this contention must be upheld.

The consequences which follow this conclusion have not been overlooked. They are far reaching and serious, affecting to no inconsiderable extent the revenue and the revenue laws of this state. The decisions of the supreme court of the United States in the last cited cases were rendered by a

The minutest investigation and the most careful consideration fail to disclose any ground upon which the case here at bar may be distinguished from those cited. . The legal parallelism between this case and that of Ludwig v. Western Union Tel. Co., 216 U. S. 146 , [ 54 L. Ed. 423 , 30 Sup. Ct. Rep. 280 ], is. perfect. Both corporations were engaged in

The parallelism between this case and the case ,at bar is, we repeat, so perfect, as to render futile any attempt to distinguish them and thus to save the California laws. This court is alive to the difficulties which the supreme court of the United States has frequently adverted to and which arise from the complexity of state laws that, with or without design, trespass upon the reserved rights of the United States in its . control of foreign and interstate commerce. It has full appreciation of the significance of the language of Chief Justice Marshall in Brown v. Maryland, 12 Wheat. (U. S.) 419, [ 6 L. Ed. 678 ] : “It may be doubted whether any of the evils proceeding from the feebleness of the federal government, contributed more to that great resolution which introtroduced the present system, than the deep and general conviction, that commerce ought to be regulated by Congress. It is not, therefore, matter of surprise, that the grant should be as extensive as the mischief, and should comprehend all foreign commerce, and all commerce among the states. To construe the power so as to impair its efficacy, would tend to defeat an object, in the attainment of which the American public took, and justly took, that strong interest which arose from a full conviction of its necessity.” It is just and right that the supreme court of the United States should sit as an ever watchful Warden of the Marches to rep él either unintentional trespass or deliberate invasion upon this most important domain.' It is but natural too, that in the multitude of forms in which the question arises and in' the multitude of cases through which it is presented, apparent 'inconsistencies of expression should be found and minds should differ over the' question whether any given state law does in effect exceed the powers of the state and invade the domain reserved exclusively to federal control. But over one question there can be no doubt, that in all this multitude of cases there is an absolute unanimity in the principle declared,—namely, that the state is without power to impose any burden or regulation

So much we think it proper to say in view of our further duty in pointing out for future legislative action the limitations upon the power of the state in dealing with foreign corporations.

The limitations upon the power of the state to forbid a corporation from doing a domestic business within its borders or to regulate the conduct of that business may be thus summarized: A corporation unless expressly forbidden so to do may acquire rights of contract and- property in a foreign jurisdiction. A state, however, may exclude absolutely a foreign corporation not engaged in interstate commerce but which proposes solely to engage in domestic business from doing such business within its limits and so may, of course, impose terms and conditions upon which alone such business may be commenced within its limits, provided no unconstitutional condition is made a part of any actual agreement (Southern Pacific Co. v. Denton, 146 U. S. 202 , [ 36 L. Ed. 942 , 13 Sup. Ct. Rep. 44 ]); when a foreign corporation has once engaged in domestic business within the state, the state may not exercise its powers of exclusion or regulation to the destruction of the property of the corporation or of its vested constitutional rights; and, finally, when such corporation is engaged both in interstate, as well as mint-state business, no fee' or regulation, though expressly directed to mint-state business will be upheld, if, in the view of the supreme court of the United States, such exaction or requirement imposes a burden upon the interstate business of such corporation. (Bank of Augusta v. Earle, 13 Pet. 579 , [ 10 L. Ed. 274 ] ; Horn Silver Mining Co. v. New York, 143 U. S. 305 , [ 36 L. Ed. 164 , 12 Sup. Ct. Rep. 403 ]; Southern Pacific Co. v. Denton, 146 U. S. 202 , [ 36 L. Ed. 942 , 13 Sup. Ct. Rep. 44 ] ; Waters-Pierce Oil Co. v. Texas, 177 U. S. 28 , [ 44 L. Ed. 657 , 20 Sup. Ct. Rep. 518 ] ; Security Mutual Life Ins. Co. v. Prewitt, 202 U. S. 246 , [6 Ann. Cas. 317, 50 L. Ed. 1013 , 26 Sup. Ct. Rep. 619 ] ; National Council v. State Council, 203 U. S. 151 , [ 51 L. Ed. 132 , 27 Sup. Ct. Rep. 46 ] ; United States ex rel. Attorney-General v. Delaware & Hudson Co., 213 U. S. 366 , [ 53 L. Ed. 836 , 29 Sup. Ct. Rep. 527 ]; Home Ins. Co.

Under these principles of law it is proper to point out that not only do these license-taxes fall with respect to foreign corporations engaged in interstate, as well as intra-state business in California, but of necessity fall as well with respect to domestic corporations engaged in such foreign business and having property without the state. (Galveston etc. Ry. Co. v. Texas, 210 U. S. 217 , [ 52 L. Ed. 1031 , 28 Sup. Ct. Rep. 638 ].) Since if a tax based on the total capital stock of a foreign corporation doing business within this state is a burden on interstate commerce, equally must it be so with a domestic corporation engaged elsewhere in interstate commerce and intra-state business and owning property without the state. The attention of the legislature is thus directed to the" fact that the law in question can apply only to domestic •corporations nowhere engaged in interstate business and to foreign corporations seeking to enter the state solely to do domestic business. For upon the right of a foreign corporation to enter the state to do an mier-state business the state may impose no burden whatsoever. (International Textbook Co. v. Pigg, 217 U. S. 91 , [18 Ann. Cas. 1103, 24 L. R. A. (N. S.) 493 , 54 L. Ed. 678 , 30 Sup. Ct. Rep. 481 ].)

The invalidity of these license laws if sought to be applied to foreign corporations engaged in domestic business within the state and so engaged (as was this petitioner) at the time the law went into effect, rests upon entirely different constitutional provisions. As has been pointed out the supreme court of the United States declared the Kansas laws under review in Western Union Tel. Co. v. Kansas, 216 U. S. 1 , [ 54 L. Ed. 355 , 30 Sup. Ct. Rep. 190 ] and Pullman Co. v. Kansas, 216 U. S. 56 , [ 54 L. Ed. 378 , 30 Sup. Ct. Rep. 232 ], to be unconstitutional upon two separate distinct and wholly unrelated constitutional grounds; the first, because the law violated the “commerce clause” of the constitution of the United States, and the second, because the law levied a tax, by requiring a fee to be paid, based upon the total capital stock of the foreign corporation in violation of the fourteenth amendment of the constitution of the United States, its “due process'of law” and-its “equal protection of the law” clauses. 'It attempted to tax the property of a cor

It follows from the foregoing that the requirement of section 408 of the Civil Code that petitioner file a certified copy of its articles, standing alone, is a reasonable requirement, an exaction not in restraint of interstate commerce and therefore valid (Barron v. Burnside, 121 U. S. 186 , [ 30 L. Ed. 915 , 7 Sup. Ct. Rep. 931 ]), but that the further requirement of the law that as a condition of such filing the petitioner pay the license-tax prescribed is invalid.

Let the mandate issue as prayed for.

Lorigan, J., Melvin, J., and Shaw, J., concurred.

In view of the recent decisions of the United States supreme court referred to in the opinion, I concur , in the judgment, and in the opinion except

I am not at all satisfied that there is anything in any of the opinions of the United States supreme court referred to, when considered in the light of the exact questions presented-for consideration therein, that compels the conclusion on this point that is declared in the opinion herein.

Sloss, J., concurred.

Rehearing denied.