The provision in § 11 of the Act of March 6, 1893, c. 171,
of the Legislature of Indiana that, on the failure or refusal of a
telegraph company
"to pay any tax assessed against it in any county or township in
the state, in addition to other remedies provided by law for the
collection of taxes, an action may be prosecuted in the name of the
State of Indiana by the prosecuting attorneys of the different
judicial circuits of the state, . . . and the judgment in said
action shall include a penalty of fifty percent of the amount of
taxes so assessed and unpaid,"
does not, as to the penalty clause, contravene the Constitution
of the United States, and the question whether in this case that
penalty was properly included in the judgment rendered against the
telegraph company was for the determination of the state
courts.
In enforcing 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.
The amount of penalty to be enforced for nonpayment of taxes is
a matter within legislative discretion.
Under an Act of the General Assembly of Indiana of March 6,
1891, in respect of the assessment and collection of taxes upon all
property within the jurisdiction of the state, it was provided that
payment of the taxes in the year succeeding their assessment might
be made in two installments, and a penalty of ten percent was
denounced for the first six months of delinquency and of an
additional six percent for the second six months.
On March 6, 1893, an amendatory act was passed providing for the
taxation of telegraph, telephone, palace car, sleeping car, drawing
room car, dining car, express, fast-freight, and joint-stock
associations, companies, co-partnerships, and corporations
transacting business in the state, of which section 11 was as
follows:
Page 165 U. S. 305
"In case any such association, co-partnership, or corporation as
named in this supplemental and amendatory act shall fail or refuse
to pay any taxes assessed against it in any county or township in
the state, in addition to other remedies provided by law for the
collection of taxes, an action may be prosecuted in the name of the
State of Indiana by the prosecuting attorneys of the different
judicial circuits of the state on the relation of the auditors of
the different counties of this state, and the judgment in said
action shall include a penalty of fifty percent of the amount of
taxes so assessed and unpaid, together with reasonable attorney's
fees for the prosecution of such action, which action may be
prosecuted in any county into, through, over or across which the
line or route of any such association, co-partnership, company or
corporation shall extend, or in any county where such association,
company, co-partnership, or corporation shall have an office or
agent for the transaction of business. In case such association,
company, co-partnership, or corporation shall have refused to pay
the whole of the taxes assessed against the same by said state
board of tax commissioners, or in case such association, company,
co-partnership, or corporation shall have refused to pay the taxes
or any portion thereof assessed to it in any particular county or
counties, township, or townships, such action may include the whole
or any portion of the taxes so unpaid in any county or counties,
township, or townships, but the Attorney General may, at his
option, unite in one action the entire amount of the tax due, or
may bring separate actions in each separate county or township, or
join counties and townships, as he may prefer. All collection of
taxes for or on account of any particular county made in any such
suit or suits shall be by said auditor of state, accounted for as a
credit to the respective counties for or on account of which such
collections were made by said auditor of state at the next ensuing
settlement with such county, but the penalty so collected shall be
credited to the general fund of the state, and upon such
settlement's being made, the treasurers of the several counties
shall, at their next settlements, enter credits upon the proper
duplicates in their offices, and at the next settlement with such
county, report the
Page 165 U. S. 306
amount so received by him in his settlement with the state, and
proper entries shall be made with reference thereto,
provided
however that in any such action, the amount of the assessment
fixed by said state board of tax commissioners and apportioned to
such county, or apportioned by the county auditor to any particular
township, shall not be controverted."
In December, 1893, the Western Union Telegraph Company brought
suit against the auditors and treasurers of the various counties in
the State of Indiana through or in which its lines extended to
enjoin the collection of the taxes assessed for the year 1893 on
the ground that the act of 1893 was unconstitutional. This cause
was decided in favor of the validity of the law in the Circuit
Court of Marion County, from which an appeal was taken to the
Supreme Court of Indiana, where the judgment was affirmed. 141 Ind.
281. A writ of error was sued out from this Court to the Supreme
Court of Indiana to review that decision, and the judgment of that
court was affirmed.
163 U. S. 163 U.S.
1.
In August, 1894, the telegraph company filed a bill in the
Circuit Court of the United States for the District of Indiana
against the Auditor of the State of Indiana to enjoin him from
certifying to the auditors of the various counties the assessments
on its property made by the state board of tax commissioners for
the year 1894, on the ground of the unconstitutionality of the act
of 1893. A demurrer was sustained to the bill, and it was thereupon
dismissed. 68 F. 588. From this decree of the circuit court, an
appeal was taken to this Court, and the cause docketed February 17,
1896, which appeal was dismissed by appellant December 7, 1896.
On May 7, 1894, the State of Indiana brought suit against the
company in the Circuit Court of Marion County to recover the taxes
for 1893, and subsequently, on June 11, 1895, filed a supplemental
complaint therein, seeking judgment for the delinquent taxes for
the year 1894. The state recovered judgment for the amount of the
taxes and penalties thereon for the years named, including the
penalty of fifty percent, and the telegraph company appealed to the
supreme court of the state, where the judgment was affirmed. 44
N.E.
Page 165 U. S. 307
793. The cause was then brought to this Court on writ of
error.
MR. CHIEF JUSTICE FULLER, after stating the facts in the
foregoing language, delivered the opinion of the Court.
Whether the fifty percent 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
denied, 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 fifty
percent 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.
Page 165 U. S. 308
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 thirty days to render an account for its premium receipts, and
pay taxes thereon, should forfeit one hundred dollars 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. § 67. Express companies were placed in another
class, and provision made for the forfeiture of one hundred dollars
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 (§ 69), telephone companies (§ 70),
and sleeping car companies (§ 71), and the same, in substance,
as to bridge and ferry companies (§ 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.
§ 73. Railroad companies (§§ 76-88) and building,
loan, and savings institutions (§ 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 fifty
percent penalty, and provided for an action for the delinquent
taxes and penalties, by way of securing collection. The
Page 165 U. S. 309
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
Pacific Express Co. v. Seibert, 142 U.
S. 339,
142 U. S.
351,
"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.
Louisville, New Albany & Chicago Railway Co. v.
Boney, 117 Ind. 501.
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,
Evansville
Page 165 U. S. 310
& Terre Haute Railroad v. West, 139 Ind. 254, 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. Stat.Ind. 1894,
§§ 7915, 7916.
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 dissented.
