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[No. 11.

if they should refuse or omit to pay such taxes for twenty days after the same should become due, and that plaintiff, on or about the 25th day of January, 1871, and after the same became due, to escape trouble, &c., and to save its agents and employees from prosecution, &c., paid to the said treasurer of Hamilton County the full amount of said taxes and penalty thereon, but that it paid said sum under protest, and with a distinct understanding with said treasurer that it would sue to recover back said amount, and then and there served said treasurer with written notice of its protest and determination to sue to recover said amount, as illegally assessed and required to be paid.

12. The United States government also levied and collected a tax on its said gross receipts for the year 1870.

13. Plaintiff is entitled to recover from said defendants said sum of $5,757.93 so paid under protest, together with interest from January 25, 1871, for which it prays judgment.

Collins & Herron, for plaintiff in error. I. If the taxes complained of were illegally exacted, they may be recovered back. They were not voluntarily paid, but paid under compulsion. Sections 1 and 2 of the Statutes, 2 S. & C. 1151; Baker v. Cincinnati, 11 Ohio St. 534; 7 Wall 128; 8 Wall. 209; Deady, 400.

II. The legislature of Ohio has no power, in raising revenue for general purposes, to levy a tax upon any business, pursuit, or avocation, or upon the receipts of any business. Its power in this regard is limited. The only basis of taxation in Ohio is property. The people of the state, in their Constitution, have purposely restricted the legislature from any capricious, partial, or unjust exercise of the taxing power. Constitution, art. 12, sec. 2, and art. 13, sec. 4; 3 Ohio St. 10; Mays v. Cincinnati, 1 Ohio St. 273; Zanesville v. Auditor, &c. 5 Ohio St. 589; Hill v. Higdon, 5 Ohio St. 246; 11 Wis. 42; 2 Black, 511; Bank v. Hines, 3 Ohio St. 1; State v. Roberts, 11 Gill & J. 506.

III. The act in question infringes upon the Constitution of the United States. It is an attempt to make the people of other states pay tribute to Ohio for the privilege of stringing lines of wire through the air, for the passage of an insensible fluid, or rather for the passage of ideas, in a manner that in no way hinders or annoys the people of Ohio, but rather blesses and enlightens them. It is more illiberal than duties levied upon goods that may happen to be borne through the state, or brought into the state. It is quite as much an obstruction of free commerce among the states as it would be to levy a poll-tax upon every person coming into the state or going out of it on commercial business.

Nay, it is an impediment to the free operations of the national government itself. In the movement of armies, the rapid concentration of troops, the early promulgation of orders from the head of the army, or of any other department of the government, such legislation by the states might prove a serious embarrassment and obstruction. Crandall v. Nevada, 6 Wall. 36; Brown v. Maryland, 12 Wheat. 449; Weston v. Charleston, 2 Pet. 449; People v. Tax Commissioners, 2 Black, 620; 7 How. 400, 414; Ward v. Maryland, 8 Wall. 432; Gilman v. Philadelphia, 3 Wall. 737; 15 Wall. 282, 284.

Forrest, Cramer & Mayer and Follett & Cochran, for defendant in

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WESTERN UNION TELEGRAPH COMPANY U. MAYER.

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error. I. Corporations are not citizens within the meaning of section 2, article 4, of the federal Constitution, which guarantees to the citizens of each state "the privileges and immunities of citizens in the several states." That clause refers only to natural citizens, and not to artificial persons created by the laws of the several states, and a corporation created by one of the states can exercise none of the functions or privileges conferred by its charter in any other state of the Union, except by the comity and consent of the latter.

This is directly decided in the following cases, q. v.: Paul v. Virginia, 8 Wall. 168; Ducat v. Chicago, 10 Wall. 410; Liverpool Ins. Co. v. Massachusetts, 10 Wall. 567.

Section 8, article 1, of the Constitution of the United States, which confers upon Congress the power" to regulate commerce with foreign nations and among the several states," &c., does not prevent the several states from affixing such terms as they please as a condition of allowing foreign corporations to do business in such states, and to make binding contracts there, or from forbidding such corporations from doing business in such states at all. Gibbons v. Ogden, 9 Wheat. 592; 8 How. 73; 8 Wall. 183; 3 Wall. 713; 15 Wall. 284; 18 Wall. 206; 21 Wall. 492; 10 Wall. 566; 8 Wall. 168; 21 Ohio St. 451.

II. Such taxation is not repugnant to section 2, article 12, of the Constitution of Ohio. 10 Wall. 410; 15 Wall. 284.

Again, this tax is not a tax upon property, but is a tax upon a franchise granted by the state, and is in no manner subject to the provision of section 2, article 12, of the Constitution of this state. Society for Savings v. Crite, 6 Wall. 594; Protection Society v. Massachusetts, Ib. 611.

III. The payment, as described in the petition, is not an "involuntary payment," such as to entitle the plaintiff to sue for the recovery of the money. Sections 1, 2, 3, 4, 5, 6, 7, of the Act of May 1, 1862, and the Amendatory Act of April 13, 1865, S. & S. 171; Mays v. Cincinnati, 1 Ohio St. 278; Marietta v. Slocomb, 6 Ohio St. 471. See, also, Awalt v. Eutaw Building Association, 34 Md. 435; Lester v. Baltimore, 29 Md. 415; Baltimore v. Lefferman, 6 Gill, 425; Fleetwood v. New York, 2 Sandf. 475; Knibbs v. Hull, 1 Esp. 34; Brown v. McKinally, 1 Esp. 279; Bilbie v. Lumley, 2 East, 468, 469.

JOHNSON, J. Three questions are presented by the demurrer to the petition.

1. Was the payment of these taxes an involuntary payment, within the purview of the statute authorizing the recovery back of taxes illegally assessed and collected?

2. Is such tax on the gross receipts of a foreign telegraph company for the preceding year, where such receipts were mostly from messages pertaining to commerce, or on messages originating or terminating out of the state, or were chiefly earned on the company's lines outside of the state, a regulation or restriction of commerce between the states, and so in conflict with the Constitution of the United States?

3. Is the act (S. & S. 769-771) under which this tax is assessed and collected authorized by the Constitution of this state?

I. What constitutes such an involuntary payment of an illegal tax as will warrant an action to recover the same back under the statute (2 S.

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& C. 1151), was considered in Stephan, Treas. v. Daniels et al. 27 Ohio St. 527, and in Baker v. Cincinnati, 11 Ohio St. 536.

In the light of those decisions, we are agreed that upon the facts stated in the petition the payment of these taxes was not voluntary.

An examination of the several provisions of this act (S. & S. 769–771) discloses the fact, that seven penalties and disabilities were incurred for making default in payment, amounting to a total exclusion of the company from transacting business within the state. The act provided no mode of redress nor gave the plaintiff a day in court.

The payment was made under protest, and with notice of this action, to avoid these penalties and disabilities. If the tax is illegal, we think this action may be maintained.

II. Is this act in contravention of the Constitution of the United States? The petition states that the gross receipts, which the company was bound to return and upon which it was taxed, amounted to $172,297, of which $153,850.99 was for business "which originated or terminated at a point or points outside of the State of Ohio;" and it is alleged that these messages to or from different states pertained to commerce between the several states, and that a larger portion of said receipts were earned on the company's lines outside of the State of Ohio.

It is claimed that a tax on these gross receipts for the past year is the same as a tax on the messages themselves, and that a tax on messages between citizens of different states pertaining to commercial transactions is a state interference with the freedom of commerce among the states, and in conflict with the Constitution of the United States.

By section 8 of article 1 of this Constitution, the Congress possesses power "to regulate commerce with foreign nations, and among the several states, and with the Indian tribes."

In Brown v. Maryland, 12 Wheat. 448, Marshall, C. J., in speaking of the power of the states, in view of these provisions, says: "That the taxing power of the state must have some limits. It cannot reach and restrain the action of the national government within its proper sphere. It cannot interfere with any regulation of commerce. If the states may tax all persons and property found on their territory, what will restrain them from taxing goods in their transit throught the state, from one port to another, for the purpose of re-exportation? Or what would restrain a state from taxing any article passing through it, from one state to another, for the purpose of traffic? Or from taxing the transportation of articles passing from the state itself to another state for commercial purposes?"

From this it was held, that a state law requiring an importer to take out license before he should be permitted to sell a bale of imported goods is void, and so is a state law requiring the master of a vessel engaged in foreign commerce to pay a certain sum on account of each passenger brought from a foreign country. Passenger Cases, 7 Howard, 273.

But a state may, in the exercise of its police power, forbid the sale by retail of spirituous liquors imported from abroad, or from another state. License Cases, 5 Howard, 504.

So " a special tax on railroad and stage companies, for every passenger carried out of the state by them, is a tax on the passenger for the privi

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WESTERN UNION TELEGRAPH COMPANY v. Mayer.

[No. 11.

lege of passing through the state by the ordinary modes of travel, and is not a simple tax on the business of the corporation." Crandall v. Nevada, 6 Wall. 35.

Clifford, J., in Gilman v. Philadelphia, 3 Wall. 737, says: "Right of intercourse between state and state was a common law right, and, as such, was fully recognized and respected before the Constitution was formed, Those who framed the instrument found it an existing right, and regarding the right as one of high national interest, they gave to Congress the power to regulate it," &c.

The United States supreme court set aside an act of the legislature of Pennsylvania (Erie R. R. v. Penn. 15 Wallace, 282), holding that

"A statute imposing a tax upon freight taken up within the state and carried out of it, or taken up without the state and brought into it, was repugnant to that clause of the federal Constitution giving to Congress the power to regulate commerce between the states."

This decision was founded on the case of the State Freight Tax, 16 Wallace, 232, which arose on a law of the State of Pennsylvania, to provide additional revenue for the commonwealth.

This act required certain transportation companies doing business within the state to report the number of tons of freight carried, and compelled them to pay a tax of so much per ton on the amount carried.

The whole subject underwent a thorough discussion, and the conclusion was reached as above stated.

This conclusion rests on the ground carefully stated by the court, that it was a tax on the freight carried, and not on the aggregate business, nor franchises, nor property of the transportation companies. It was, in the view the court took of the law, a tax on the thing carried, and for that

reason was a tax on commerce.

The difference between a direct tax on an article of commerce, and a tax on the company carrying, by taxing its property, franchises, or business, is clearly shown by the case of The Reading R. R. Co. v. Pennsylvania, 15 Wall. 284, where it was held, that "a statute of a state imposing a tax upon the gross receipts of railroad companies is not repugnant to the Constitution of the United States, though the gross receipts are made up in part from freights received for transportation of merchandise from the state to another state, or into the state from another. Such a tax is not a regulation of inter-state commerce."

The court say: "It is not everything that affects commerce that amounts to a regulation of it, within the meaning of the Constitution." "We think it may safely be asserted that the states have authority to tax the estate, real or personal, of all their corporations, including carrying companies, precisely as they may tax similar property which belongs to natural persons, and to the same extent. We think also that such taxation may be laid upon a valuation, or may be an excise; and that in exacting an excise tax from their corporations, the states are not obliged to impose a fixed sum upon the franchises, or upon the value of them, but they may demand a graduated contribution, proportioned either to the value of the privileges granted, or to the extent of their exercise, or to the results of such exercise.'

Again: "If the tax be upon the instrument, such as a stage-coach, a

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WESTERN UNION TELEGRAPH COMPANY U. MAYER.

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railroad car, or a canal or a steamboat, its tendency is to increase the cost of transportation; still it is not a tax upon transportation or upon commerce, and it has never been seriously doubted that such a tax may be laid."

For these reasons it was said a tax on gross receipts for transportation was not a tax on articles of commerce, but upon the fruits of commerce after they had reached the treasury of the company.

To the same effect is the case of The Delaware R. R. Tax, 18 Wallace, 206, and Erie Railway Co. v. Pennsylvania, 21 Wall. 492.

In the case of The Delaware Railroad Tax, 18 Wall. 231, the supreme court say: "A tax upon a corporation may be proportioned to the income received, as well as to the value of the franchise granted or the property possessed." And in Erie Railway Co. v. Pennsylvania, 21 Wall. 492, the court sustained the validity of the law of Pennsylvania, imposing a tax of three fourths of one per cent. upon the gross receipts of the Erie Railway, although but forty-two miles of its whole line of four hundred and fifty-five miles lay within the state.

By a statute of Massachusetts, a tax of four per cent. upon all premiums charged or received on contracts for insurance of property was imposed upon all companies foreign to the United States; a tax of two per cent. upon corporations organized under the laws of any other state than Massachusetts, while only one per cent. was imposed upon corporations organized under the laws of Massachusetts.

The supreme court of the United States held that this "law of Massachusetts is no violation of the federal Constitution." Liverpool Ins. Co. v. Massachusetts. 10 How. 573.

In this case it was held that the business of insurance was not commerce, though carried on between citizens of different states, and therefore such business might be taxed by the states.

This subject has recently been before the supreme court in Welton v. State of Missouri, 1 Otto, 275; Henderson et al. v. Mayor of New York, 2 Otto, 259, and Chy Lung v. Freeman et al. 2 Otto, 275.

Welton v. Missouri involved the validity of a license tax on peddlers, dealing in articles not the product or growth of the state.

It was held that such a tax was in effect a tax on goods, wares, and merchandise of other states brought into the state for sale, and therefore was a discrimination that interfered with freedom of commerce between the states.

It was further held in that case, that the non-action of Congress on the subject of commerce between the states was equivalent to saying that it should be free, and that state legislation, of a restrictive character, against articles of trade and traffic between the states, by reason of their foreign origin, is an interference with that freedom, and therefore unconstitutional. Commerce between the states relates to trade in articles of property. Telegrams or correspondence by any other method, although between citizens of different states, and although it may relate to commercial transactions, are not commerce.

They are instruments or aids to facilitate commerce. Like the vehicle on which goods or persons are transported from state to state, they may be indispensable to a successful prosecution of trade. These instruments of commerce have always been subject to state taxation.