165 U.S. 304 - Western Union Tel Co v. State of Indiana

Whether the 50 per cent. penalty clause of the act of 1893 contravenes the constitution of the United States is the question presented on this writ. If it does not, the question whether that penalty was properly included in the judgment rendered against the telegraph company was for the determination of the state courts.

The necessity of classifying the subjects of taxation in order to reach uniform and just results, as far as possible, is not denined; nor that the infliction of penalties on delinquency is a usual and legitimate mode of compelling the prompt payment of taxes. But the contention is that this provision for a 50 per cent. penalty is an arbitrary discrimination, not falling within the principle of classification, and therefore open to constitutional objection, as amounting to a denial of the equal protection of the laws, and a deprivation of property without due process of law.

The supreme court of Indiana was of opinion that by reason of the differences in the nature of these companies, and the uses to which their property was devoted in the prosecution of their business, from other taxpayers and their property and business, the legislature was justified in placing them in a class by themselves, and subjecting them to the particular method of effecting collection by means of penalties and suit for recovery of judgment for the delinquent taxes, with penalties added.

Under the act of March 6, 1891, taxpayers and their property were variously classified in respect of the nature of their business and property; as, for instance, associations for banking purposes, not incorporated, were placed in one class, while the shares of capital stock of banks located within the state, whether organized under the laws of the state or the United States, were placed in another, and assessed to the owners thereof, special provision being made for the bank to retain dividends belonging to the stockholders until the taxes should be paid. Acts Ind. 1891, c. 99, §§ 59-66. Insurance companies, not organized under the laws of the state, were placed in another class, and it was provided that any insurance company failing or refusing for more than 30 days to render an account for its premium receipts, and pay taxes thereon, should forfeit $100 per day for each day the report was withheld or payment delayed, to be recovered in an action; authority being also conferred on the auditor of state to revoke the authority of the defaulting company to do business. Section 67. Express companies were placed in another class, and provision made for the forfeiture of $100 per day for failing to render the particular account provided for and pay the required taxes thereon, to be recovered in an action; the companies being prohibited from carrying on business until the payment was made. Section 68. Similar provisions were made as to telegraph companies (section 69), telephone companies (section 70), and sleeping-car companies (section 71); and the same, in substance, as to bridge and ferry companies (section 72). Street railroads, waterworks, gas, manufacturing, and mining companies, insurance companies, and other associations incorporated under the laws of the state, etc., were subjected to still a different provision. Section 73. Railroad companies (sections 76-88) and building, loan, and savings institutions (section 89) were also placed in different classes.

The act of March 6, 1893, repealed the sections of the prior act relating to express, telegraph, telephone, and sleeping-car companies, and, with other provisions, prescribed this 50 per cent. penalty, and provided for an action for the delinquent taxes and penalties, by way of securing collection. The ordinary remedies, by levy, distraint, and sale, were manifestly believed by the general assembly to be open—as to these companies and their properties—to objection, as interfering with the exercise of their public functions, and directly impeding the transaction of interstate commerce; and the impracticability of pursuing the ordinary methods of collection, in view of that objection, furnished a sufficient ground for the adoption of another mode, as better suited to the exigency, because not involving the suspension of the discharge of public duty in that regard.

It has been repeatedly laid down, as stated by Mr. Justice Lamar in Express Co. v. Seibert, 142 U. S. 339, 351, 12 Sup. Ct. 250, 253, 'that a system which imposes the same tax upon every species of property, irrespective of its nature or condition or class, will be destructive of the principle of uniformity and equality in taxation, and of a just adaptation of property to its burdens'; and it is equally true as to the particular means taken to enforce the collection of taxes,—one rule may be adopted in respect of the admitted use of one kind of property, and another rule in respect of the admitted use of another, in order that all may be compelled to contribute their proper share to the burdens of government.

As to railroad companies, it had been decided in Indiana that, under existing statutes, neither the franchise and privileges of such companies, nor any lands, easements, or things essential to their existence, or necessary to the enjoyment of their franchise, could be sold on execution to satisfy judgments at law against them, while their rolling stock, when not in actual use, was liable to seizure and sale, and that the legislature had deemed it the wiser course to leave the method of coercing payment in each case to the flexible jurisdiction of a court of chancery, rather than to prescribe a method which might be suited to one case and not to another. Railway Co. v. Boney, 117 Ind. 501, 20 N. E. 432.

In respect of the companies under consideration, the infliction of a severe penalty and the recovery of judgment, in a suit for taxes and penalties, which judgment would bear interest, as it had been held delinquent taxes did not (Railroad Co. v. West, 139 Ind. 254, 37 N. E. 1009),—and could be collected through the appointment of a receiver, by sequestration or otherwise, if in such manner as enabled the discharge of public duties to be maintained, was assumed, on grounds of public policy, to be the least objectionable and most efficient course to be pursued.

Judgments having been rendered at law, whatever course might be adopted thereupon for their collection would be necessarily such as would conserve the public interest, and would not stay the operations the companies were organized to carry on.

The amount of the penalty was a matter for the legislature to determine in its discretion, and the supreme court refers to the imposition of penalties in other instances under the statutes of Indiana, varying according to particular subjects of taxation, apparently calculated to operate with quite as much harshness.

It may properly be further remarked that these companies could have avoided incurring this liability, since, if desirous of testing the legality of the taxes assessed against them, they could have paid them under protest, and brought suits to recover back the money so paid, if unlawfully exacted, or applied to the proper authorities for relief, adequate provision being made by the laws of Indiana for the prompt return thereof in case of the invalidity of the assessment, in whole or in part. Rev. St. Ind. 1894, §§ 7915, 7916 (Rev. St. 1881, §§ 5813, 5814).

We are unable to discover any ground for holding that the federal constitution was violated by this law, and agree in the view which the supreme court of the state expressed in the premises.

Judgment affirmed.

Mr. Justice HARLAN and Mr. Justice WHITE dissent.