Southern Railway Company v. Greene/Opinion of the Court
The supreme court of Alabama placed its decision upon the ground that the act of March 7, 1907, should be sustained as a lawful tax, not upon the franchises of a foreign corporation, as property, but as a tax 'to add to the license tax already required an additional privilege tax for the continued exercise of the corporate franchises in the state.' 49 So. 408.

The errors assigned attack the validity of the act of March 7, 1907, upon grounds, among others, that it violates the 14th Amendment of the Federal Constitution, in that it denies to the plaintiff the equal protection of the laws, and deprives it of its property without due process of law.

The 14th Amendment provides that 'no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.' The important Federal question for our determination in this case is: When a corporation of another state has come into the taxing state, in compliance with its laws, and has therein acquired property of a fixed and permanent nature, upon which it has paid all taxes levied by the state, is it liable to a new and additional franchise tax for the privilege of doing business within the state, which tax is not imposed upon domestic corporations doing business in the state of the same character as that in which the foreign corporation is itself engaged?

The Federal Constitution, it is only elementary to say, is the supreme law of the land, and all its applicable provisions are binding upon all within the territory of the United States. Whenever its protection is invoked, the courts of the United States, both state and Federal, are bound to see that rights guaranteed by the Federal Constitution are not violated by legislation of the state. One of the provisions of the 14th Amendment, thus binding upon every state of the Federal Union, prevents any state from denying to any person or persons within its jurisdiction the equal protection of the laws. If this statute, as it is interpreted and sought to be enforced in the state of Alabama, deprives the plaintiff of the equal protection of the laws, it cannot stand.

The equal protection of the laws means subjection to equal laws, applying alike to all in the same situation. If the plaintiff is a person within the jurisdiction of the state of Alabama within the meaning of the 14th Amendment, it is entitled to stand before the law upon equal terms, to enjoy the same rights as belong to, and to bear the same burdens as are imposed upon, other persons in a like situation.

That a corporation is a person, within the meaning of the 14th Amendment, is no longer open to discussion. This point was decided in Pembina Consol. Silver Min. & Mill. Co. v. Pennsylvania, 125 U.S. 181, 31 L. ed. 650, 2 Inters. Com. Rep. 24, 8 Sup. Ct. Rep. 737, wherein this court declared:

'The inhibition of the Amendment that no state shall deprive any person within its jurisdiction of the equal protection of the laws was designed to prevent any person or class of persons from being singled out as a special subject for discriminating and hostile legislation. Under the designation of 'person' there is no doubt that a private corporation is included.'

And see Gulf, C. & S. F. R. Co. v. Ellis, 165 U.S. 150, 41 L. ed. 666, 17 Sup. Ct. Rep. 255, and cases cited on p. 154.

Is the plaintiff corporation a person within the jurisdiction of the state of Alabama? In the present case, the plaintiff is taxed because it is doing business within the state of Alabama. The averments of the complaint, admitted by the demurrer, show it has acquired a large amount of railroad property by authority of, and in compliance with, the laws of the state; that it is subject to the jurisdiction of the courts of the state; that it has paid taxes upon its property, and also upon its franchises within the state; in short, that it came into the state in compliance with its laws, and, at the time of the imposition of the tax in question, had been for many years carrying on business therein under the laws of the state. We can have no doubt that a corporation thus situated is within the jurisdiction of the state. Blake v. McClung, 172 U.S. 239, 43 L. ed. 432, 19 Sup. Ct. Rep. 165.

The argument on the part of the state of Alabama places much weight upon the cases in this court which have sustained the right of the state to exclude a foreign corporation from its borders, and to impose conditions upon the entry of such corporations into the state for the purpose of carrying on business therein. That line of cases has been so amply discussed in the opinions and concurring opinions in the cases of Western U. Teleg. Co. v. Kansas and Pullman Co. v. Kansas, decided at the present term [[[216 U.S. 1]], 56, 54 L. ed. --, 30 Sup. Ct. Rep. 190, 232], that any extended discussion of them is superfluous now. It is sufficient for the present purpose to say that we are not dealing with a corporation seeking admission to the state of Alabama, nor with one which has a limited license, which it seeks to renew, to do business in that state; nor with one which has come into the state upon conditions which it has since violated. In the case at bar we have a corporation which has come into and is doing business within the state of Alabama, with the permission of the state, and under the sanction of its laws, and has established therein a business of a permanent character, requiring for its prosecution a large amount of fixed and permanent property, which the foreign corporation has acquired under the permission and sanction of the laws of the state. This feature of the case was dealt with by Mr. Justice Brewer, then a circuit judge, in the case of Ames v. Union P. R. Co. 64 Fed. 165, 177, wherein he said:

'It must always be borne in mind that property put into railroad transportation is put there permanently. It cannot be withdrawn at the pleasure of the investors. Railroads are not like stages or steamboats, which, if furnishing no profit at one place, and under one prescribed rate of transportation, can be taken elsewhere and put to use at other places and under other circumstances. The railroad must stay, and, as a permanent investment, its value to its owners may not be destroyed. The protection of property implies the protection of its value.'

Notwithstanding the ample discussion of the questions involved in the case of the Western U. Teleg. Co. v. Kansas and Pullman Co. v. Kansas, to which we have already referred, we deem it only fair to the learned counsel for the state of Alabama to notice some of the cases which it is insisted have disposed of the question herein involved, and maintained the right of the state to impose a tax upon a foreign corporation, lawfully within the state, for the privilege of doing business in the state, when no such tax, or one less burdensome, is imposed upon domestic corporations engaged in the same business. The first case referred to is Ducat v. Chicago, 10 Wall. 410, 19 L. ed. 972, in which a tax was sustained upon a foreign insurance company which had come into the state upon complying with certain terms prescribed by the state, and was thereafter subjected to a tax on all their premiums, the statute declaring it unlawful in the companies otherwise to do business in the state. It is sufficient to say of that case that it arose before the 14th Amendment had become part of the Federal Constitution, and that no reference is made in the opinion of the court to the 14th Amendment, although the case was decided after that Amendment went into effect.

In New York v. Roberts, 171 U.S. 662, 43 L. ed. 323, 19 Sup. Ct. Rep. 58, a tax was imposed upon the franchises or business of corporations, with certain exceptions, computed upon the amount of capital stock employed within the state. It was pointed out by Mr. Justice Shiras, who delivered the opinion of the court, that the tax was imposed as well for New York corporations as for those of other states, and he said: 'So that it is apparent that there is no purpose disclosed in the statute either to distinguish between New York corporations and those of other states, to the detriment of the latter, or to subject property out of the state to taxation.'

In Horn Silver Min. Co. v. New York, 143 U.S. 305, 36 L. ed. 164, 4 Inters. Com. Rep. 57, 12 Sup. Ct. Rep. 403, the tax imposed was applicable alike to corporations doing business in New York, whether organized in that state or not; and in the courtse of the opinion in the case Mr. Justice Field, speaking for the court, said: 'It does not lie in any foreign corporation to complain that it is subjected to the same law with the domestic corporation.'

In Fire Asso. of Philadelphia v. New York, 119 U.S. 110, 30 L. ed. 342, 7 Sup. Ct. Rep. 108, a Pennsylvania corporation which was taxed in the state of New York was subjected to a license fee, which license ran for a period of a year, and it was held that the state had the power to change the conditions of admission to the state, and to impose as a condition of doing business in the state, at any time or for the future, the payment of a new or further tax. Mr. Justice Blatchford, speaking for the court, said: 'If it imposes such license fee as a prerequisite for the future, the foreign corporation, until it pays such license fee, is not admitted within the state, or within its jurisdiction. It is outside, at the threshold, seeking admission, with consent not yet given.'

We have adverted to these cases with a view of showing that the precise point involved herein is not concluded by any of them. It would not be frank to say that there is not much said in the opinions in those cases which justifies the argument that the power of the state to exclude a foreign corporation, not engaged in interstate commerce, authorizes the imposition of special and peculiar taxation upon such corporations as a condition of doing business within the state. But none of the cases relied upon presents the question under the conditions obtaining in the case at bar. We have here a foreign corporation within a state, in compliance with the laws of the state, which has lawfully acquired a large amount of permanent and valuable property therein, and which is taxed by a discriminating method, not employed as to domestic corporations of the same kind, carrying on a precisely similar business.

As we have already indicated, the discussion of the question herein involved has largely been anticipated in the recent cases from Kansas, involving the right to tax the Western Union Telegraph Company and the Pullman Company. Those cases are the latest declaration of this court upon the subject, and in one aspect of them really involve the determination of the case at bar. In the Western U. Teleg. Case, it was held that a state could not impose a tax upon an interstate commerce corporation as a condition of its right to do domestic business within the state, which tax included within its scope the entire capital of the corporation, without as well as within the borders of the state. The Kansas tax was sought to be sustained as a legal exaction for the privilege of doing domestic business within the state. It was held invalid because it violated the right secured by the Constitution of the United States, giving to Congress the exclusive power to regulate interstate commerce, and because it violated the due-process clause of the Federal Constitution in undertaking to make the payment of a tax upon property beyond the borders of the state a condition of doing domestic business within the state. In that case, the 14th Amendment was directly applied in the due-process feature. In this case, we have an application of the same Amendment, asserting the equal protection of the laws.

We therefore reach the conclusion that the corporation plaintiff, under the conditions which we have detailed, is, within the meaning of the 14th Amendment, a person within the jurisdiction of the state of Alabama, and entitled to be protected against any statute of the state which deprives it of the equal protection of the laws.

It remains to consider the argument made on behalf of the state of Alabama, that the statute is justified as an exercise of the right of classification of the subjects of taxation, which has been held to be entirely consistent with the equal protection of the laws guaranteed by the 14th Amendment. It is argued that the imposition of special taxes upon foreign corporations for the privilege of doing business within the state is sufficient to justify such different taxation, because the tax imposed is different, in that the one imposed on the domestic corporation is for the privilege of being a corporation, whereas the one on the foreign corporation is for the privilege of such corporation to do business within the state. While reasonable classification is permitted, without doing violence to the equal protection of the laws, such classification must be based upon some real and substantial distinction, bearing a reasonable and just relation to the things in respect to which such classification is imposed; and classification cannot be arbitrarily made without any substantial basis. Arbitrary selection, it has been said, cannot be justified by calling it classification. Gulf, C. & S. F. R. Co. v. Ellis, 165 U.S. 150, 155, 165, 41 L. ed. 666, 668, 671, 17 Sup. Ct. Rep. 255; Cotting v. Kansas City Stock Yards Co. (Cotting v. Godard) 183 U.S. 79, 46 L. ed. 92, 22 Sup. Ct. Rep. 30; Connolly v. Union Sewer Pipe Co. 184 U.S. 540, 559, 46 L. ed. 679, 689, 22 Sup. Ct. Rep. 431.

It is averred in the complaint, and must be taken as admitted, that there are other corporations of a domestic character in Alabama, carrying on the railroad business in precisely the same way as the plaintiff. It would be a fanciful distinction to say that there is any real difference in the burden imposed because the one is taxed for the privilege of a foreign corporation to do business in the state, and the other for the right to be a corporation. The fact is that both corporations do the same business in character and kind, and under the statute in question a foreign corporation may be taxed many thousands of dollars for the privilege of doing, within the state, exactly the same business as the domestic corporation is permitted to do by a tax upon its privilege, amounting to only a few hundred dollars. We hold, therefore, that to tax the foreign corporation for carrying on business under the circumstances shown, by a different and much more onerous rule than is used in taxing domestic corporations for the same privilege, is a denial of the equal protection of the laws, and the plaintiff being in position to invoke the protection of the 14th Amendment, that such attempted taxation under a statute of the state does violence to the Federal Constitution.

The judgment of the Supreme Court of Alabama is therefore reversed, and the case remanded to that court for further proceedings not inconsistent with this opinion.

Reversed.

Dissenting: The CHIEF JUSTICE, Mr. Justice McKenna, and Mr. Justice Holmes. 

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