US SUPREME COURT DECISIONS

Equal protection of the laws means subjection to equal laws applying alike to all in the same situation.

A corporation is a person within the meaning of the equal protection provision of the Fourteenth Amendment.

A corporation which comes into a state other than that in which it is created, pays taxes thereto and acquires property and carries on business therein, is within the jurisdiction of that state, and, under the Fourteenth Amendment, entitled to protection against any statute of that state that denies to it the equal protection of the laws.

Arbitrary selection cannot be justified by calling it classification in the absence of real distinction on a substantial basis, and a classification for taxation that divides corporations doing exactly the same business with the same kind of property into foreign and domestic is arbitrary and a denial of equal protection of the laws.

Whatever power a state may have to exclude or determine the terms of the admission of foreign corporations not already within its borders, it cannot subject a foreign corporation which has already come into the state in compliance with its laws and has acquired property of a fixed and permanent nature to a new and additional franchise tax for the privilege of doing business which is not imposed upon domestic corporations. It would be an unconstitutional denial of equal protection of the laws under the Fourteenth Amendment, and so held as to the franchise tax on foreign corporations of Alabama of 1907.

49 So. 404 reversed.

Action was brought in the City Court of Birmingham, Alabama, by the Southern Railway Company to recover the sum of $22,458.36, for so much money received by the defendant as judge of the Probate Court of Jefferson County, Alabama, which sum the plaintiff claimed was wrongfully exacted from chanrobles.com-red

Page 216 U. S. 401

it under the provisions of the Act of March 7, 1907. This sum is the amount taxed against the Southern Railway Company under the said legislative act, and, under the practice in Alabama, if illegally exacted, it may be recovered.

This act is found in the Code of Alabama of 1907, vol. 1, page 986, §§ 2391 to 2400, inclusive. It provides for the payment of an annual franchise tax to the probate judge by every foreign corporation authorized to do business within the state, in which it has a resident agent, with certain exceptions, for the use of the state, upon the actual amount of the capital stock employed by it in the state; in the amount of $25 on the first $100, 5% on the next $900, and one-tenth of 1% on all the remaining amount of capital so employed.

Provision is made for the assessment of the tax by proceedings before the probate judge, with an appeal to the circuit court in certain cases. The statute enacts that no foreign corporation required to pay a tax under this statute shall do any business in the State of Alabama not constituting interstate commerce, or maintain or commence any action in any of the courts of the state, upon contracts made in the state other than contracts based upon interstate commerce, unless such corporation shall have paid said tax within sixty days after the same shall have become due. The payment of the tax in one county shall be sufficient notwithstanding the corporation shall do business or have a resident agent in more than one county.

The payment of the franchise tax required by this statute does not exempt any corporation paying the same from payment of the regular license or privilege tax specified or required for engaging in or carrying on business, the license for which is required from individuals, firms, or corporations. In addition to the amount of the franchise tax required to be paid to the state, such foreign corporation shall pay to the county, for the use of the county, an amount equal to one-half of the amount paid by it to the state. Loans of money upon which a mortgage tax is paid are deducted from capital employed chanrobles.com-red

Page 216 U. S. 402

in the state upon which there shall be paid the recording privilege tax required by law.

The complaint averred that the act is unconstitutional and void, as it impaired the obligation of a contract between the plaintiff and the State of Alabama, and in that it deprived the plaintiff of its property without due process of law, and denied to it the equal protection of the laws.

Plaintiff averred that it is a corporation created under the laws of the State of Virginia, and as such authorized to lease, use, operate, and acquire any railroad or transportation company, then or thereafter incorporated by the laws of the United States, or any of the states thereof. That it thus organized, in February, 1894, and has since carried on the business of acquiring, owning, and operating lines of railroads in various states, and conducting interstate and intrastate transportation of persons and property. That, in conformity with the laws of the State of Alabama, on July 16, 1894, it filed in the office of the Secretary of State a copy of its charter, and designated an agent upon whom service could be made, and that at the same time, it paid to the Treasurer of the State of Alabama the sum of $250, being the sum required as a license fee for beginning business in the state. It avers that, after thus complying with the laws of Alabama, it commenced carrying on its authorized business within the state, and has therein carried on the same business ever since; that between the time of entering the state as aforesaid and the year 1899, it purchased and acquired, as permitted and authorized by the laws of Alabama, various lines of railroad and the franchises under which they had been built and operated, which lines are connected with, and continuous with, other lines owned by the plaintiff.

The complaint states that these lines of railroad situated in the State of Alabama had been theretofore constructed under its laws by duly authorized corporations, and the complaint contains a list of such lines; that it acquired said lines, paying large sums of money therefor, in pursuance of and reliance chanrobles.com-red

Page 216 U. S. 403

upon the laws of the State of Alabama, that, since such acquisition, it has continued to operate such lines of railroad, transacting a large amount of business thereon, both interstate and intrastate, and has expended large sums of money in the maintenance and improvement thereof.

Plaintiff avers that, from time to time, ownership taxes, similar to those assessed against other persons and corporations, have been assessed against it, all of which the plaintiff has paid. It has also paid from year to year the license tax exacted of it and other persons and corporations operating railroads in the State of Alabama under § 3489 of the Code of Alabama of 1896, under § 1128 of the Code of Alabama of 1886. It has also paid on account of its ownership of such railroad, taxes assessed against it under the Act of March 7, 1897, taxing the franchises or intangible property, in the state, of every person and corporation engaged in transporting persons or property over any railroad therein. It has also paid the license fee, and has procured the license provided for by the act of the Legislature of the State of Alabama, approved March 7, 1907, entitled

"An Act to Further Regulate the Doing of Business in Alabama by Foreign or Nonresident Corporations, or Corporations Organized under or by Authority of the Law of Any Other state or government than the Alabama, and to Fix a Punishment for the Violation Thereof."

Plaintiff states that all these exactions have been made by the State of Alabama upon corporations owning and operating railroads in Alabama without regard to whether the corporation owning and operating such railroad was a domestic corporation or a corporation organized under the laws of some other state, with the sole exception of the license fee last above mentioned, which is a nominal amount ($10 per annum), is exacted from foreign corporations only, for mere police purposes, in order that there may be a registration of such foreign corporations, doing business in Alabama, in the office of the Secretary of State. Plaintiff avers that the legislative act of March 7, 1907, under which it was compelled to pay the said sum of chanrobles.com-red

Page 216 U. S. 404

$22,458.36, does not apply to persons or corporations of the State of Alabama owning the same character of property and carrying on the same kind of business as is owned and carried on by corporations organized under the laws of other states, nor is there any similar exaction against domestic corporations owning such property and engaged in the same character of business.

Plaintiff recites the proceedings before the Probate Judge of Jefferson County, resulting in the finding that the capital of the plaintiff employed in the State of Alabama was $14,903,246, and the assessment thereon of the tax of $22,458.36, as aforesaid, its payment under protest, and prays judgment for its recovery. A demurrer to the complaint was sustained and judgment rendered for defendant. Upon appeal, the Supreme Court of Alabama affirmed the judgment. 49 So. 404. chanrobles.com-red

Page 216 U. S. 411