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(266 U. S. 32)

LOVE et al. v. GRIFFITH et al.

The plaintiffs appealed to the Court of Civil
Appeals, but that Court held that at the date

(Argued Oct. 6, 1924. Decided Oct. 20, 1924.) of its decision, months after the election, the

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When there is plain assertion of federal rights in the lower court, local rules as to how far it shall be reviewed on appeal do not necessarily prevail.

2. Courts 394 (1)-Court's order dismissing appeal, claimed to have denied constitutional right, reviewable.

Order of state appellate court dismissing appeal, where it is claimed that constitutional right was denied thereby, is reviewable by United States Supreme Court.

3. Courts 394 (1)—Dismissal of appeal on theory that cause of action had ceased to exist held not denial of constitutional rights.

Where before decision on appeal from decree dismissing suit to enjoin enforcement of rule of executive committee of political party adopted for single election, on ground that it violated Const. Amend. 15, election had taken place, dismissal on theory that cause of action had ceased to exist held not denial of plaintiffs' constitutional rights.

In Error to the Court of Civil Appeals, First Supreme Judicial District of the State of Texas.

Suit by C. N. Love and others against James S. Griffith and others. An appeal from a judgment for defendants was dis

missed by the court of Civil Appeals of Texas (236 S. W. 239), and plaintiffs bring error. Affirmed.

*33

*Mr. R. D. Evans, of Waco, Tex., for plaintiffs in error.

Mr. Justice HOLMES delivered the opinion of the Court.

cause of action had ceased to exist and that
the appeal would not be entertained on the
It therefore dis-
question of costs alone.
missed the appeal with costs. Error is as-
signed here on the ground that the Fifteenth
Amendment prohibits the discrimination
which was made the basis of the complaint,
and that the decision denied the plaintiffs
their constitutional rights.

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[1-3] When as here there is a plain assertion of federal rights in the lower court, local rules as to how far it shall be reviewed on appeal do not necessarily prevail. Davis v. Wechsler, 263 U. S. 22, 24, 44 S. Ct. 13, 68 L. Ed. 143. Whether the right was denied or not given due recognition by the Court of Civil Appeals *is a question as to which the plaintiffs are entitled to invoke our judg ment. Ward v. Love County, 253 U. S. 17, 22, 40 S. Ct. 419, 64 L. Ed. 751. If the case stood here as it stood before the court of first instance it would present a grave question of constitutional law and we should be astute to avoid hindrances in the way of taking it up. But that is not the situation. The rule promulgated by the Democratic Executive Committee was for a single election only that had taken place long before the decision of the Appellate Court. No constitutional rights of the plaintiffs in error were infringceased to exist. The bill was for an injunced by holding that the cause of action had

tion that could not be granted at that time.

There was no constitutional obligation to extend the remedy beyond what was prayed. Decree affirmed.

(266 U. S. 71)

AIR-WAY ELECTRIC APPLIANCE CORPO

RATION V. DAY, State Treasurer

of Ohio, et al.

WAY ELECTRIC APPLIANCE CORPO

RATION.

Oct. 20, 1924.)

Nos. 31 and 32.

1. Commerce 69-Franchise fee imposed on foreign corporation held void as burden on interstate commerce.

This is a bill in equity alleging that the DAY, State Treasurer of Ohio, et al. v. AIRplaintiffs are qualified electors residing in Houston, Texas, and of the Democratic political faith; that on January 27, 1921, the City Democratic Executive Committee of (Argued April 30 and May 1, 1924. Decided Houston made and published a rule that negroes would not be allowed to vote in the Democratic City Primary Election to be held on February 9, 1921; that the Committee and Judges of Election threatened to enforce the rule, contrary to the Constitution of the United States; and praying an injunction to restrain the Committee and Judges of Election from carrying out their threats. The bill was filed on February 3, 1921. On Feb. ruary 5, 1921, it was demurred to generally, the demurrer maintaining that the rule did not infringe the Fifteenth Amendment. On February 7, 1921, the demurrer was sustained and the bill was dismissed with costs.

Franchise fee imposed on foreign corporation doing interstate business under Gen. Code Ohio, § 8728-11, as amended by Act May 14, 1921 (109 Ohio Laws, p. 277), based on charge on nonpar value common of certain amount stock representing corporation's property and business outside of state, as well as shares represented by property and business within state, held void as burden on interstate com

merce.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(45 S.Ct.) 2. Corporations 648-Franchise fee must | Ohio. have some relation to value of privilege for which it is imposed.

It complied with the laws of Ohio regulating the sale of stock in that state and received a certificate from the commissioner Franchise fee imposed on foreign corpora- of securities authorizing sale at $7 per share. tions must have some relation to the value of Sections 6373–1 to 6373–24, General Code of the privilege for which it is imposed. Ohio. It acquired two large manufacturing 3. Constitutional law 229(1)—Taxation plants at Toledo, including grounds, build42(3)-Franchise fee imposed on foreign cor-ings, tools, machinery, etc. August 1, 1920, poration on basis of authorized nonpar value it commenced business-the manufacture of shares held violative of equal protection electrical household appliances and their sale

clause.

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*Mr. Justice BUTLER delivered the opinion of the Court.

Plaintiff, Air-Way Electric Appliance Corporation, brought this suit against the abovenamed treasurer and other state officers to restrain the collection of a franchise fee charged against it as a foreign corporation for the privilege of exercising its franchises in Ohio during the year commencing July 1, 1921, on the grounds, among others, that the legislation of Ohio, under which the fee was imposed, is invalid under the commerce clause of the Constitution, and is repugnant to the Fourteenth Amendment.

Plaintiff was incorporated in 1920 under the laws of Delaware. Under its certificate of incorporation and the laws of that state, its authorized capital stock is 400.000 shares without par value, of which 200,000 shares are common stock and 200,000 founders'

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in Ohio and elsewhere. In July, 1921, as required by law, it filed with the tax commission a report covering the year ended July 1, 1921. There had been issued and were then outstanding only 50,485 shares of stock, of which 10,010 shares were common and 40,475 were founders' stock. All of its property was located in Ohio; its value was $458,278.56. The amount of business transacted

in the preceding year was $250,594.58. The complaint alleged and the answer admitted that the value of the stock was $7 per share.

Section 5503 (enacted May 31, 1911) imposes an annual fee required of foreign corporations having capital stock with par value as follows: "On or before October fifteenth, the auditor of state shall charge for collection, as herein provided, annually, from such company, in addition to the initial fees otherwise provided for by law, for the privilege of exercising its franchises in this state, a fee of three-twentieths of one per cent. upon the proportion of the authorized capital stock of the corporation represented by property owned and used and business transacted in this state.

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66 * *

*An act of May 14, 1921 (109 Ohio Laws, p. 277), amending section 8728-11, General Code of Ohio, provides: * The amount of fees payable by a foreign corporation having common stock without par value under section 5503 shall be three-twentieths of one per cent. upon the proportion of the authorized preferred stock represented by property owned and used and business transacted in this state and five cents per share upon the proportion of the number of shares of authorized common stock, represented by property owned and used and business transacted in this state.

*

Under the section last quoted, an annual fee of $20.000 was assessed and payment on or before December 1, 1921, was demanded, and notice was given that, if not made on or before that day, a penalty of 15 per cent. would be added. Under the laws of the state, all fees, taxes, and penalties constitute liens on the corporation's property; a fine for each day's delinquency may be imposed; and, in case of failure to pay, its authority to do business is liable to cancellation, and injunction and ouster are authorized. Sections 5506, 5507, 5509, 5512, 5513.

Plaintiff's report to the tax commission stated that the amount of business transacted in Ohio in the year ended July 1, 1920, was $250,594.58, whereas that figure represented

its total sales, of which only $70,802.30, or | erred in finding that 298,520 shares of the auabout 28 per cent., was intrastate, and the thorized capital stock of plaintiff represented balance, $179,792.28, or about 72 per cent., the property owned and used and business was interstate. The state officers, assuming transacted by it in Ohio, and in enjoining the that all plaintiff's property and business was collection of a tax in excess of $14,926. located and transacted in Ohio, made no apportionment between local and interstate business and fixed the annual franchise fee at 5 cents per share on its total authorized stock.

Plaintiff invoked equity jurisdiction on the ground that it was threatened with irreparable injury through the enforcement of the coercive provisions of the statutes above referred to. Ohio Tax Cases, 232 U. S. 576, 587, *80

34 S. Ct. 372, 58 L. Ed. 737. A mo*tion for a temporary injunction was heard by a court of three judges. Section 266, Judicial Code (Comp. St. 1243). It was held (279 Fed. 878) that the plaintiff's objections to the act and the tax were not valid; but the bill was retained to await the result of an application by the plaintiff to the tax commission for a rehearing and correction of the amount of the tax. Plaintiff made such an application, setting forth the above mentioned amount of intrastate and interstate sales respectively. The commission held that, as more than 60 days had elapsed after the certification of the amount of the tax by the state auditor, it had no jurisdiction to entertain such an application. At a later hearing, the court held that the commission was authorized to grant plaintiff a rehearing and make correction if it found the tax or any part of it to be er

roneous; that it was not the intent of the

state laws to include interstate commerce as a basis for the levy, and that plaintiff may not be taxed on its interstate business and on the portion of its authorized stock represented by property owned and used and business transacted in other states; that the $20,000 charge included a substantial sum levied directly on the stock representing interstate business and that the tax should have been $14.926-5 cents per share on 298,520 shares. These figures were arrived at by taking such proportion of 400,000, the total number of shares authorized, as the actual value of plaintiff's property in Ohio plus its local business in that state is to such actual value plus all its business, and by applying thereto 5 cents per share. By the de

*81

cree defendants are enjoined from collecting any part of the tax in excess of $14,926. The plaintiff appealed, and attacks the act on the grounds above stated. Defendants appealed and contend that the lower court

The formula employed by the court is the same as the announced rule of the tax commission for

In cases involving the validity of the laws of a state imposing license fees or excise taxes on corporations organized in another state, this court has decided:

transaction of a local business within its bor"1. The power of a state to regulate the ders by a foreign corporation-meaning a corporation of a sister state-is not unrestricted or absolute, but must be exerted in subordination to the limitations which the Constitution places on state action.

"2. Under the commerce clause exclusive power to regulate interstate commerce rests in Congress, and a state statute which either directly or by its necessary operation burdens such commerce is invalid, regardless of the purpose with which it was enacted.

"3. Consistently with the due process clause, a state cannot tax property belonging to a foreign corporation and neither located nor used within the confines of the state.

"4. That a foreign corporation is partly, or even chiefly, engaged in interstate commerce does not prevent a state in which it has property and is doing a local business from taxing that property and imposing a license fee or excise in respect of that business, but the state cannot require the corporation as a condition of the right to do a local business therein to submit to a tax on its interstate business or on its property outside the state.

"5. A license fee or excise of a given per cent. of the entire authorized capital of a for*82

eign corporation doing *both a local and in

terstate business in several states, although declared by the state imposing it to be merely a charge for the privilege of conducting a local business therein, is essentially and for every practical purpose a tax on the entire business of the corporation, including that which is interstate, and on its entire property, including that in other states, and this because the capital stock of the corporation represents all its wherever located. business of every class and all its property

"6. When tested, as it must be, by its substance-its essential and practical operationrather than its form or local characterization, such a license fee or excise is unconstitutional and void as illegally burdening interstate commerce and also as wanting in due process because laying a tax on property beyond the jurisdiction of the state."

International Paper Co. v. Massachusetts, 246 U. S. 135, 141, 38 S. Ct. 292, 62 L. Ed. 624, Ann. Cas. 1918C, 617.

[1] All plaintiff's business, intrastate and interstate, and all its property wherever located were represented by the 50,485 shares of stock outstanding. The annual fee detax to be paid by foreign corporations, and is tak-manded by the state officers is five cents per en from the case of State v. Coal Co., 17 Ohio N. share on 400,000 shares, and that fixed by P. Rep. (N. S.) 60. It was applied as follows:

the ascertainment of the correct amount of the

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the lower court is based on 298,520 shares. The inevitable effect of the act is to tax and directly burden interstate commerce of foreign corporations permitted to do business in

(45 S.Ct.)

Ohio, and engaged in interstate commerce, where organized they chance to be authorized wherever the number of shares authorized, to issue the same number of nonpar value subject to the charge of 5 cents each, exceeds shares, the annual franchise fees imposed on the number of outstanding shares attribu- foreign corporations having the same amount table to or represented by the corporation's of property and business, and exercising the property and business in that state. In this same privileges in Ohio will not be the same, case, the fee fixed by the commission was and the charge imposed on one may be many based on nearly eight times the number of times that made against another. If plainoutstanding shares and that determined by tiff's authorized shares were of the par value the court on nearly six times that number. of $100 each, the amount of capital stock for As some of the outstanding shares are rep- apportionment between its property and busiresented by plaintiff's interstate business, the ness in Ohio and its interstate business to arapplication of the rate to all the shares, or to rive at the franchise fee would be $40,000,a number greater than the total outstanding, 000, and, adopting the basis of apportionment determined by the lower court which attribnecessarily amounts to a tax and direct bur-uted about 75 per cent. of the shares to the den upon all the property and business including the interstate commerce of the plainInternational Paper Co. v. Massachusetts, supra, p. 142 (38 S. Ct. 292). We hold

tiff.

*83

that the act violates the commerce clause.

property and business in Ohio, the amount of the fee would be $44,778, and with par value of $7 each, the amount for which the commissioner of securities authorized plaintiff to sell its shares in Ohio, and their admitted value, the amount for such apportionment would be $2,800,000, and the fee would be $3,134.46.2 These figures are to be contrasted with $14,926, fixed by the lower court. Again, compare two corporations organized in a sister state having the same number of authorized nonpar value shares, one having property and

[2] The fee determined by the lower court, as well as that fixed by the state officers, is arbitrary. Without holding that such a charge must be measured by the value of the privilege for which it is imposed, it may be said that some relation to such value is a reasonable requirement. Indeed, under the Constitution and laws of Ohio, a tax on priv-business of little value, all in Ohio, and the ileges and franchises cannot exceed the reasonable value of the privilege or franchise other having much more property and busioriginally conferred or its continued annual ness in that state, and also much property value thereafter. Southern Gum Co. v. Lay- and business in other states. The act would lin, 66 Ohio St. 578, 64 N. E. 564. That value require the former to pay 5 *cents per share depends on the "property owned and used on all its shares, but would require the latter and business transacted" in Ohio. Section to pay a fee based only on the proportion of its shares representing its property owned and used and business transacted in Ohio.

8728-11. Plaintiff's authority to issue stock
or the number of shares it may have out-
standing at any time does not depend upon
the laws of Ohio. Under the laws of Dela-
ware where the corporation was organized,

these matters are left to the discretion of the
persons controlling the corporation. Laws
of Delaware 1917, c. 113, § 3, amending, by
adding 1918a, section 4a to Revised Code, c.
65. The number of nonpar value shares of
the corporation is not an indication of, and
does not purport to be a representation as
to, the amount of its capital. Each out-
standing share represents merely an aliquot
part of its assets. The number of shares not
subscribed or issued has no relation to the
privilege held by plaintiff in Ohio, and it is
not a reasonable measure of such a fee. Such
shares may never be subscribed or issued, or
additional shares may be issued to acquire
property or do business in other states or to
carry on interstate commerce. Plainly the
fee, to the extent that it is based on a num-
ber of shares in excess of those outstanding,
has no relation to what was paid in for the
stock or to its value or to the amount of
plaintiff's capital, its property or its busi-
*84
ness, intrastate in Ohio or interstate. The
act in its practical operation does not require
like fees for equal privileges held by foreign
corporations in Ohio under the same circum-
stances. Unless, under the laws of the states

*85

[3] It is clear that the mere number of sonable basis for the classification of foreign authorized nonpar value shares is not a reacorporations for the purpose of determining the amount of such annual fees. Such a classification is not based on anything having relation to the purpose for which it is made. Southern Railway Co. v. Greene, 216 U. S. 400, 417, 30 S. Ct. 287, 54 L. Ed. 536, 17 Ann. Cas. 1247; Royster Guano Co. v. Virginia, 253 U. S. 412, 415, 40 S. Ct. 560, 64 L. Ed. 989. The act has no tendency to produce equality; and it is of such a character that there is no reasonable presumption that substantial equality will result from its application. Martin v. District of Columbia, 205 U.

S. 135, 139, 27 S. Ct. 440, 51 L. Ed. 743; Gast
Realty Co. v. Schneider Granite Co., 240 U. .
S. 55, 58, 36 S. Ct. 254, 60 L. Ed. 523; Kan-
sas City Southern Ry. v. Road Improvement
District, 256 U. S. 658, 660, 41 S. Ct. 604, 65
The act violates the equal
L. Ed. 1151.
protection clause of the Fourteenth Amend-
ment.

2 If par value were $100:
298.520x$100-$29,852,000.

$29,852,000x3/20 of 1% $44,778 amount of tax.
If par value were $7:
298,520x$7-$2,089,640.

$2,089,640x3/20 of 1% $3,134.46 amount of tax.

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1. Bankruptcy 241(1)-General rules of evidence applicable to examination of bankrupt and wife under Bankruptcy Act.

The general rules governing admissibility of evidence and competency and compellability of witnesses are applicable to examination of bankrupt and wife, under Bankruptcy Act, July 1, 1898. § 21a, as amended by Act Feb. 5, 1903, §7 (Comp. St. § 9605). 2. Witnesses

2932-Constitutional privilege against self-incrimination applicable to civil as well as criminal proceedings.

Constitutional privilege against self-incrimination applies to civil as well as criminal proceedings.

3. Witnesses293-Privilege against selfincrimination applies to witness not party

defendant.

Constitutional privilege against self-incrimination is available to witness who is not a party defendant.

4. Witnesses 2932-Constitutional privilege available to owner of goods which may be forfeited in penal proceeding. Constitutional privilege against self-incrimination protects owner of goods which may be forfeited in penal proceeding.

Appeal from the District Court of the
United States for the Southern District of
New York.

On rehearing. Judgment reaffirmed.
For former opinion, see 262 U. S. 355, 43
S. Ct. 562, 67 L. Ed. 1023.

Messrs. Solicitor General Beck, of Washington, D. C., and Saul S. Myers and Walter H. Pollak, both of New York City, for appellant.

*35 *Mr. Selden Bacon, of New York City, for National Surety Co.

*38

*Mr. Lindley M. Garrison, of New York City, for American Surety Co. and others. Mr. W. Randolph Montgomery, of New York City, for National Ass'n of Credit Men. Mr. Wm. J. Fallon, of White Plains, N. Y., for appellee.

Mr. Justice BRANDEIS delivered the opinion of the Court.

In 1920, Arndstein was adjudged an involuntary bankrupt in the Southern district of New York. Pursuant to a subpoena, he appeared before a special commissioner for examination as to his assets under section 21a of the Bankruptcy Act of July 1, 1898, c. 541, 30 Stat. 544, 552, as amended by Act Feb. 5, 1903, § 7 (Comp. St. § 9605), was sworn as a witness, and freely answered some questions. Others he refused to answer on the ground that to do so might tend to incriminate him. Having persisted in this refusal, after the District Judge ordered him to answer, Arndstein was committed for contempt. He did not appeal from the order or

5. Bankruptcy 242 (2)-Constitutional privilege against self-incrimination available to bankrupt examined as to assets under Bank-file a petition to revise. Instead he applied ruptcy Act.

Constitutional privilege against self-incrimination is available to bankrupt being examined before commissioner as to assets under Bank

to another judge sitting in the same court for a writ of habeas corpus. The petition was denied, on the ground that the bank

*39

ruptcy Act, July 1, 1898, § 21a, as amended by rupt had *waived his privilege by complying Act Feb. 5, 1903, § 7 (Comp. St. § 9605), though without objection to the order that he file a information is sought for purpose of discover-schedule of his assets.1 The judgment deing estate.

6. Bankruptcy 242 (2) Privilege against self-incrimination does not relieve bankrupt of duty to surrender books and papers as part

of estate.

Constitutional privilege against self-incrimination does not relieve bankrupt from duty of surrendering books and papers as part of his estate, under Bankruptcy Act July 1, 1898, § 70a (1), being Comp. St. § 9654.

7. Bankruptcy 242 (2)-Congress can confer power of unrestricted examination of bankrupt as to assets by providing complete immunity.

Congress can confer power of unrestricted examination of bankrupt, being examined before

commissioner as to assets, under Bankruptcy Act July 1, 1898, § 21a, as amended by Act, Feb. 5, 1903, § 7 (Comp. St. § 9605), and make privilege against self-incrimination not available, by providing complete immunity.

nying the writ was reversed by this court, but the mandate required merely that the lower court issue the writ and then proceed as usual. Arndstein v. McCarthy, 254 U. S. 71, 41 S. Ct. 136, 65 L. Ed. 138; Id., 254 U. S. 379, 41 S. Ct. 136, 65 L. Ed. 314.

Thereupon the District Court issued the writ of habeas corpus. The marshal made a return which included a transcript of the entire proceedings. The court held that, despite certain oral answers given, the bankrupt was entitled to cease disclosure. The judgment, which discharged the bankrupt from custody, was affirmed by this court. McCarthy v. Arndstein, 262 U. S. 355, 357, 58, 43 S. Ct. 562, 67 L. Ed. 1023. The case is now before us on rehearing, granted in order to permit argument of the proposition, not presented by counsel before, that the

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes
In re Tobias, Greenthal & Mendelson (D. C.) 215 Fed. 815.

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