author: MiNSHARR, J.

text:
    Ashley et al. v. Ryan.

      Corporations — Fees for incorporation and consolidation of — Foreign and domestic — Constitutional law.

    Section 148a, Revised Statutes, as amended February 12,1889, (86 Ohio Laws, 33), requiring the payment of a fee to the Secretary of State for the filing of articles of agreement of incorporation, and, also, of consolidation, proportioned to the authorized capital stock of the company, is a valid law; and applies to articles of agreement of consolidation between an Ohio company and a company or companies of another state, as well as to articles of consolidation between Ohio companies only.
    (Decided June 28, 1892.)
    Error to the Circuit Court of Franklin county.
    The action below was commenced in the court of common pleas to restrain the Secretary of State, Daniel, J. Ryan, from paying into the treasury of the state certain monies, paid him as a fee, for filing in his office “articles of agreement of consolidation” of certain railway companies, which the plaintiffs claim had been wrongfully exacted of them, and having been paid under protest, they also asked a judgment for the return of the money. A demurrer to the petition as amended having been sustained, the case was appealed to the circuit court, where the demurrer was renewed, and sustained by that court. The ruling and judgment on the demurrer is assigned for error here.
    The petition reads as follows:
    “1. Plaintiffs say that for several years prior to January 1, 1889, The Wabash, St. Eouis & Pacific Railway Company .was a consolidated railway corporation, composed of several constituent corporations organized respectively under the laws of the states of Ohio, Indiana, Illinois, Missouri and Michigan; and as such owned and operated, as a public carrier, a system of connected railway lines extending from Toledo, Ohio, and Detroit, Michigan, on the East, to St. Louis and Kansas City, Missouri, and to Chicago, Illinois, on the West.
    “That said Wabash, St. Louis & Pacific Railway Company, on or about the first day of June, 1880, as thereto authorized by the laws of Ohio and other states, duly executed and delivered to The Central Trust Company of New York, and James Cheney, trustees, a general mortgage upon all its property and franchises, and issued and sold under said general mortgage, seventeen million dollars of its general mortgage bonds to divers holders for value, and subsequently thereto, to-wit: on or about the first day of June, 1884, said Wabash, St. Louis & Pacific Railway Company defaulted in the payment of interest upon the said bonds.
    “That, subsequent to said default and in consequence thereof, proceedings were had for the foreclosure of said general mortgage and the sale of all such railway property and franchises, in the United States Circuit Courts, for the Eastern Distriet of Missouri; 'for the Southern District of Illinois; for the District of Indiana; for the Northern District of Ohio, Western Division; for the Eastern District of Michigan; and in said several foreclosure proceedings under a plan of reorganization entered into by and between the holders of bonds secured by said general mortgage, executed by said company upon .its said lines of railway and 'franchises, and stockholders and creditors, the plaintiffs were, by agreement of said bondholders and stockholders, duly constituted a purchasing committee, to purchase as trustees, the railways formerly owned by said constituent corporations, and reorganize the said property according to the laws of Ohio and such other states, and they did at the sale of said railways, purchase the same, to carry out such plan of reorganization, and received' proper conveyances therefor.
    “2. That plaintiffs did thereafter, in furtherance of said plan of reorganization, cause to be organized The Wabash Western Railway Company, under the laws of the state of Missouri, and did thereafter, and on or about the 80th day of September, 1887, duly convey to said -railway company, the lines of railway and franchises situated within the state of Missouri, formerly belonging to said Wabash, St. Louis & Pacific Railway Company. The capital stock of such Missouri corporation was $30,000,000.
    “That said plaintiffs did also cause to be organized under the laws of the state of Michigan, The Detroit & State Line Wabash Railroad Company, and did on the 13th day of March, 1889, duly convey to the said railroad company, the lines of railway and franchises situated within the state of Michigan, formerly belonging to said Wabash, St. Louis & Pacific Railway Company. The capital stock of such Michigan corporation was $300,000.
    “That said plaintiffs did also cause to be organized under the laws of the state of Indiana, The Wabash & Eastern Railway Company, of Indiana, and did, on or about the 23rd day of May, 1889, duly convey to said corporation, thus organized by them, the lines of railway and franchises purchased by them, situated in the state of Indiana, and being the line of railway and franchises formerly belonging to said Wabash, St. Louis & Pacific Railway Company. The capital stock of such Indiana corporation was $9,000,000.
    “That said plaintiffs did also cause to be organized under the laws of the state of Illinois, The Wabash Eastern Railway Company, of Illinois, and did, on or about the 23rd day of May, 1889, duly convey to said corporation thus organized by them, the lines of railway and franchises purchased by them, situated in the state of Illinois and being the lines of railway and franchises formerly belonging to said Wabash, St. Louis & Pacific Railway Company. The capital stock of such Illinois corporation was $12,000,000.
    “That said plaintiffs did also cause to be organized, The Toledo Western Railway Company under the laws of the state of Ohio,and did, on or about the 23rd day of May, 1889, duly convey to the said corporation, the line of railway and franchises purchased by them, situated in the state of Ohio, formerly belonging to said Wabash, St. Louis & Pacific Railway Company. The capital stock of such Ohio corporation was $700,000.
    “That said several lines of railway connected with each other as follows, to-wit: The railroad of the said Toledo Western Railroad Company, of Ohio, extends from Toledo, Ohio, to the western boundary line of ■ Ohio, at a point in Pauld-ing county, and there connected in continuous line -with the railroad of said Wabash Eastern Railwa}' Company, of Indiana. The railroads of the Detroit and State line Wabash Railroad Company,- and of'The Wabash Eastern Railway Company, oj Indiana, at Butler, in the county of DeKLalb, state of Indiana. The railroads of The Wabash Eastern Railway Company, of Indiana, and of The Wabash Eastern Railway Company, of Illinois, at the state line of Indiana and Illinois; the railroads of The Wabash Eastern Railway Company, of Illinois, and The Wabash Western Railway Company at the city of East St. Eouis, state of Illinois. The total mileage of all such railroads is 1921 miles of which only 75 is situated in the state of Ohio.
    “3. Plaintiffs further say that in like execution of said plan of re-organization, the board of directors of each of said companies so organized as aforesaid in May, 1889, authorized and directed the president and secretary of each of said companies to sign, seal, execute and deliver an agreement for the consolidation of all of said companies into a single company with a capital stock of fifty-two million dollars, (being the aggregate capital stock of the five contracting companies) to be called The Wabash Railroad Company, a copy of which agreement is herewith attached as “Exhibit A.” At a meeting of stockholders of said companies, held in the month of July, A. D. 1889, said agreement of consolidation was duly ratified and approved and every stockholder in each of said companies in writing assented to said agreement of consolidation, and in said month of July, 1889, the said agreement of consolidation was duly filed according to law in the several offices of the Secretary of State for the states of Michigan, Indiana, Illinois and Missouri.
    “4. When the said Toledo Western Railroad Company was organized under the laws of the state of Ohio as aforesaid, it duly paid to the Secretary of State of Ohio, the fees or tax required by law to be paid to such officer, the same being $700, or one-tenth of one per cent upon the entire capital stock of said Ohio corporation, the same being $ 700,000.
    “The entire railroad, lands, structures, improvements, equipment, personal property and assets of every description, situated in the state of Ohio, belonging to said Ohio corporation, was also fully assessed for taxation according to law for the year 1889 and the taxes levied and paid for in such year, amounted to the sum of f 35,452. 55.
    “Between the date of the organization of said Toledo Western Railroad Company, in May, 1889, and the execution of such consolidation agreement in July, 1889, the said Ohio corporation, as thereto lawfully authorized by the laws of the state of Ohio and the acts of Congress, in that behalf and in due discharge of its duties as a public carrier for passengers and freight, operated the said line of railroad, extending from Toledo, in the state of Ohio, south-westwardly to the western boundary line of such state, to the junction on such state line with the railroad in the state of Indiana, belonging to and then being operated by The Wabash Eastern Railway Company of such state.
    “As such junction between such railroads was on the state line dividing the states of Ohio and Indiana, the only relation which such two railroads sustained to each other, was the reciprocal exchange of Inter-State Commerce, as to the passengers, freight and express matter and also the United States mails; and such two railroad companies, of Ohio and Indiana, in connection with the before mentioned corporation, organized and owning the railroads in Michigan, Illinois, and Missouri, were between May, 1889, and August of such year, operated as a connected and continuous line of railway, extending from Toledo, Ohio, on the east, to Chicago, St. Eouis and Kansas City, Mo., through passenger and freight trains being several times daily forwarded in either direction carrying ü. S. mails, persons, freights and express matter, and the said Toledo Western Railroad Company, during all such period, held itself out to the public as so being engaged in the business of InterState Commerce as aforesaid, as it then and there lawfully had the right to do.

      “5. Thereafter, about August, 1889, the plaintiffs, in further execution of such plan of reorganization and as trustees for said several corporations, who had theretofore executed the said agreement of consolidation, at his office at Columbus, Ohio, tendered to the defendant Daniel J. Ryan, who was then and there the Secretary of State of the state of Ohio, the said agreement of consolidation and demanded that he should file the same according to the requirements of the statutes regulating the consolidation of railroads, and then and there tendered to the said Ryan the sum of $700.00 in full, for his lawful fees for filing such consolidation agreement.
    “The said Ryan then and there wholly refused to receive the said sum of $700 as and for- his lawful fees for filing such agreement of consolidation, and refused to receive and file such agreement of consolidation unless there should be paid him, not only one-tenth' of one per cent, upon the capital stock of the Ohio constituent corporation, but also one-tenth of one per cent, upon the additional gross capital stock of the corporations of Michigan, Indiana, Illinois and Missouri, aggregating the sum of $51,300,000. In order to secure the filing of such agreement of consolidation, by said Ryan as such Secretary of State, the plaintiffs were, on August 1,1889, compelled under duress and protesting that such charge was illegal, arbitrary, and not authorized by any valid law of the state of Ohio, to pay to said Ryan as Secretary of State, the sum of fifty-two thousand dollars, which the said Ryan demanded and received, claiming the said sum to be the legal fees required by the laws of the state of Ohio for filing such agreement of consolidation, and on receipt of such sum of $52,000 the said defendant as such Secretary of State, received and filed such agreement oi consolidation.
    “6. Plaintiffs are advised and believe, and therefore sc aver, that the said defendant claims that such charge and exaction of $52,000 was and is a legal fee fixed by law and required to be paid to the Secretary of State for filing such agreement under and according to an act of the Genera] Assembly of the state of Ohio, passed February 12, 1889. and entitled “An act to amend section 148a of the Revised Statutes of Ohio, regulating the amount of fees to be charged by the secretary of state for official services.”
    “Whereas the plaintiffs claim and will to the court insist that such enactment is a statute merely attempting to levy a tax and raise revenue for the general purposes of the state, and that the same was and is as applied to such an agreement of consolidation,' wholly inoperative and void because contrary to the constitution of the United States and the constitution of the state of Ohio, and that even if such statute is valid, it cannot be construed to have any extra territorial force, and therefore the only subject of taxation within the jurisdiction of the General Assembly of Ohio is the $700,000 capital stock of the Ohio corporation, signing such agreement of consolidation.
    “Wherefore the plaintiffs claim that the sum of $51,300 so demanded of them and received by the defendant was an illegal and wrongful exaction, and that the said sum was demanded and received by the defendant and is now kept by him without right and that the plaintiffs are entitled to receive the same, as they notified the said defendant that the same was paid under protest and suit would be brought against him to recover the same.
    “Plaintiffs further say that the said Ryan threatens to pay the said sum, so illegally received by him, into the state treasury when the plaintiffs will be unable to recover the same.
    “Wherefore the plaintiffs pray that the defendant be restrained from paying the said money into the state treasury untií the final hearing, and,
    “That they also have judgment for a return of the money so unlawfully obtained -as aforesaid, and for all further proper relief.”

      Henry Crawford and Swayne, Swayne & Hayes, for plaintiff in error.

      Brief of Henry Crawford.

    I. The doctrine is well settled in Ohio and elsewhere, that illegal fees and taxes thus paid under compulsion, can be recovered back. The principle was fully settled in this state by the case of Bdker v. Cincinnati 11 Ohio St., 534, wherein the English cases were" discussed. Stephen v. Daniels, 27 Ohio St., 527; Mayer v. Tel. Co., 28 Ohio St., 521; Wilson v. Pelton, 40 Ohio 'St., 306; Ersldne v. Van Arsdale, 15 Wall., 75; Section 5848, Revised Statutes.
    II. The law under which the charge was made, is not a mere police regulation, but an attempted exercise of the taxing power of the state, ánd must be dealt with as such.
    It has no single feature of a license or regulating statute.
    Plainly, the law under debate, is neither a license law nor does it purport to regulate, in any way, any kind oí business.
    Its single purpose is to force the payment of a heavy charge nominally as compensation for the mere filing of a paper by a state officer.
    The section also requires that all-such “fees” shall-be paid directly into the state treasury.
    These tests leáve no doubt but that the enactment was passed not for any purpose of regulation but with the distinct object of producing revenue for the general uses of the state.
    All the authorities concur that when a statutory charge is laid on an occupation, or a license, privilege or franchise, and a fee is exacted, which is evidently not proportioned to the expense of issuing the license, compensating the officer maintaining the department, or regulating the occupation, but for the evident purpose of producing revenue, the law levies a tax on the privilege or occupation. Mays v. Cincinnati, 1 Ohio St., 268; Cincinnati v. Bryson, 15 Ohio St., 625; State v. Hipp, 38 Ohio St., 199; License cases, 5 Wall., 462; Steam Co. v. Portwardens, 6 Wall., 31; Royall v. Virginia, 116 U. S., 572; Butzman v. Whitbeck, 42 Ohio St., 223; Adler v. Whitbeck, 44 Ohio St., 539.
    III. The law levying this tax of $ 52,000 does not comply with the state constitution, and is therefore void.

      If the statute is valid and applicable, the function of the Secretary of State in fixing the amount of the tax involved only simple calculation, and the subject can properly be discussed as though the tax exacted had been specifically laid by the General Assembly.
    While the power of taxation is contained in the grant of legislative power, and is therefore plenary, it can only be exercised when and as conferred and restricted by the constitution.
    1. The statute imposing this taxation is contrary to Section 5, Article 12, of the constitution of the state.
    It is indisputable that every dollar of the very considerable revenue realized, will find its way into the state treasury without any attempt, whatever, to define in advance the object for which the tax was levied and must be used, State v. Ogilive, 37 Ohio St., 1; People v. Kings Co., 52 N. Y., 556; Tel. Co. v. Mayer, 28 Ohio St., 537; District court case, 34 Ohio St., 431.
    2. Construed as a tax on occupation levied for state revenue, the law is invalid. State v. Hipp, 38 Ohio St., 199.
    3. This tax as laid is not uniform in its operation.
    The enactment only attempts to impose a tax upon such corporations or consolidations, as file articles after the passage of the act.
    All organizations of the same class in existance prior to the law are allowed to continue their occupations without being subjected to the tax.
    It would hardly be contended that a law would be valid which levied an occupation tax on ordinary avocations, to produce state revenue, and yet limited its operation to some arbitrarily selected portion of the class. Bank v. Apthorp, 12 Mass., 252; Oliver v. Wash. Mills, 11 Allen, 279; Fields v. Conners, 36 Ohio St., 476; Cooley on Taxation, 12S; Youngblood v. Sexton, 32 Mich., 406; McMahon v. Palmer, 102 N. Y., 188; Boyer v. Boyer, 113 U. S., 689; Waring v. Savannah, 60 Geo., 597; Durach’s Appeal, 62 Penn. St,, 494; Whitbeck v, Bank, 127 U. S., 193; Yick Wo v. Hopkins, 118 U. S., 356; R. R. Tax. Cases, 9 Sawyer, 165.

      IV. The state of Ohio has no power, directly or indirectly,' to impose taxes upon a corporation of another state or upon its franchises, capital stock, income or interstate commerce occupation.
    Thus far the law has been considered in its relation to corporations and occupations of a purely domestic character and with reference to the conditions imposed by the state constitution.
    It is undeniable that up to the filing of the act of merger, while the state of Ohio had the power to levy taxes on the property of the home company within its territory, it had no jurisdiction whatever to impose taxation, by any method, direct or indirect, upon these four foreign corporations or upon their franchises, capital stock, property, occupations or income.
    To sustain the statute as interpreted by the state officer, it will be necessary, therefore, for him to establish that the making and filing of the consolidated articles in his office, so radically enlarged the taxing power of the State of Ohio to bring these foreign matters within its rightful jurisdiction.
    The proposition that this taxation does, for the most part, practically rest not only upon franchises, capital stock and occupations beyond the state, but also directly and materially affects inter-state commerce, cannot be successfully disputed. Brown v. Maryland, 12 Wheat., 444; Welton v. Missouri, 91 U. S., 278; Cook v.' Pennsylvania, 97 U. S.,-566; Nor. & West Ry. v. Penn., 136 U. S., 114; McCall v. California, 136 U. S., 104; Pickard v. Pull. Co., 117 U. S,, 34; Robbins v. Shelby Co., 120 U. S., 489; Ferry Co. v. Penn., 114 U. S., 196; Fargo v. Michigan, 121 U. S., 230; Leloup v. Mobile, 127 U. S., 640; Ratterman v. Tel. Co., 127 U. S., 411; Cutcherv. Kentucky, 141U. S., 47; Crandalls. Nevada, 6 Wall., 35. -
    The same doctrine which assures to the state of Ohio exclusive jurisdiction and sovereignty over persons and property within its territory, wholly excludes its power when attempted to be exercised so as to affect persons and property beyond its limits.

      This limitation applies to legislative, as well as judicial action, and forbids the imposition of taxes upon subjects lying outside the state.
    There is no force in the contention that a privilege tax, rated upon the whole capital stock, expressed in an interstate consolidation, is not in effect a direct assessment upon all its property or income, wherever situate. The money used to discharge such a tax must necessarily be taken proportionately from the income of property and result of business done outside the state. St, Louis v. Ferry Co., 11 Wáll., 423'; People v. Eq. Trust Co., 96 N. Y., 388.
    • Did the contract of consolidation and the filing thereof so alter the previous non-taxable condition of such foreign companies that the corporations themselves and their franchises and capital became thereby constructively subject to taxation,- precisely as though they had been incorporated under Ohio laws? Railroadv. Jackson, 7 Wall., 262; Taxon Foreign Held Bonds, 15 Wall., 300.
    To concede, therefore, that Ohio by the filing of this paper had obtained rightful taxing power over the franchises, stock and business of the four corporations created by other states, would be to’ affirm that one state had become vested with the unabridged power to destroy the franchises created by another sovereign.
    In substance this would be a declaration that the legislation of Ohio could rightfully assert supremacy even beyond its limits over the laws of other states, and that too, not simply as affecting ordinary tangible property, but prerogative franchises derivable only from such other state. Calif. v. Pac. Ry., 127 U. S.’, 41; 125 U. S. 498.
    ' The secretary’s construction of this law, as approved by the lower court, is evidently based upon the view that the agreement between these inter-state railway companies is to be dealt with as a purely domestic transaction, precisely like a merger of two ordinary trading corporations organized in Ohio. This theory is radically unsound.
    Arrangements of this character create in law only a business union and consolidation of interest and management, but there is no surrender of franchise or dissolution of the original corporations and no new unit corporation is resultant. Farnum v, Blackstone Canal Co., 1 Sumner, 467; Nashua R. R. v. Lowell R. R., 136 U. S., 356.
    An additional and unanswerable reason exists why tbe filing of this article of consolidation cannot be held to have created a new corporation of Ohio with $52,000,000 capital stock, the proper subject of a state privilege tax.
    The constitution of Ohio, Art. 13, Sec. 3, prohibits the formation of any corporation by the legislature unless provision is made making each stockholder individually liable for corporate debts.
    On what possible theory, consistent with independent state sovereignty, can it be contended that by force of the consolidation, the Ohio statute imposing the personal liability of stockholders had become supreme, and that the holders of $51,300,000 foreign stock included in the transaction had become individually liable. Yet it is clear upon conclusive authority that there is no new Ohio corporation with $52,000,000 capital stock, subject to be assessed with an Ohio franchise or privilege tax unless such individual liability does attach to the whole share capital as thus assessed. State v. Sherman, 22 Ohio St., 411.
    These decisions leave nothing to be added. Applying the principles they declare to the facts of this record, and the conclusion is unavoidable, that the consolidation did not determine the existence or change the identity of the original Ohio corporation which signed it. It still continued in existence as an Ohio corporation, with its $700,000 authorized capital stock, and without- any new franchises. There was no creation of a new Ohio corporation with $52,000,000 authorized capital stock.
    The original corporations of the other states remained as before, created by and subject to control and taxation solely according to the laws of their respective states.
    In law and in fact the situation was unchanged. As the separate identity of the constituent companies still remained, they continued to be foreign corporations and the situs of their franchises, capital stock, and occupation, was in other states and wholly beyond the. taxing jurisdiction of the state of Ohio. There still remained the prohibition of the Federal constitution which rendered nugatory all licenses, fees and taxes, imposed upon the business of transporting inter-state- commerce or the income thereof.
    The total lack of legislative power to tax the combined capital stock of such inter-state combination is most clearly recognized in Lee v. Sturges, 46 Ohio St., 167, and made the basis for taxing the shares in such bodies held by state residents.
    Recognizing that in such cases the taxing jurisdiction of a state is not exclusive, the assessment of public charges has always been levied only upon some approximately fair proportional share of the whole franchise, stock or earnings. State v. Metz, 32 N. J. E., 199; Pitts. Ry. v. Com., 66 Penn. St., 73; Delaware Tax Case, 18 Wall., 206; Erie v. Penn., 21 Wall., 492; West Un. Tel. v. Mass., 125 U. S., 530; Pull. Co. v. Penn., 141 U. S., 18; Sebastian v. Bridge Co., 21 Ohio St.; 451; Bridge Co. v. Mayer, 31 Ohio St., 317.
    Even if the conclusion should be reached that the state of Ohio possessed rightful taxing power over some portion of the franchise or occupation of the consolidated company, inasmuch as the single charge exacted rests to a material extent upon subjects not within its jurisdiction, and the law as thus construed has not supplied any basis of apportionment, the exaction as a whole was illegal and void. California v. S. P. R. R., 127 U. S., 45.
    V. Properly construed, section 148a does nor authorize the imposition of a unit franchise or organization tax, rated upon the aggregate capital stock of an inter-state railway consolidation.
    It has been the purpose of the previous discussion to establish the proposition that the construction of the act under which the f 52,000 was exacted would render the legislation void because it would be an extra-territorial exercise of the taxing power, and also a burden levied upon inter-state commerce.
    Courts will decline to adopt a reading of a statute that will render it nugatory, if it can fairly receive a construction consistent with its validity.

      In seeking the true interpretation of this law it is important to give due weight to the consideration that its sole purpose is the production of domestic revenue, which in the very nature of things is due exclusively from domestic corporations and occupations. Such legislation should consequently be construed in harmony with that governing principle.
    If the construction contended for is adopted it is equally competent for the other four states to pass similar enactments, and it will then result that the entire aggregate capital separately created in each state will be subjected to five taxes on its full amount.
    No law ought to receive a construction which would render possible such an -oppressive and unconscionable imposition of special public burdens in excess of usual property taxes. Courts will not assume that such a result was intended by the legislature.
    It will further aid the proper construction of this law to-read it in pari materia with section 3387, which is original section 8 of the act regulating domestic and inter-state railway consolidations.
    A.s it has been held in Jones v. Davis, 35 Ohio St., 474, that the capital stock of a corporation stands as the legal equivalent of the entire corporate property, any legislation assessing the aggregate share capital of the five consolidated roads would, in effect, rest upon the property in each state or the income therefrom.
    This construction would be wholly inconsistent with and Operate as a repeal of sec. 3387, which expressly defines the subjects of the taxing power to be the real estate in the state and a mileage proportion of the equipment.
    Examining the text of the law itself it will be found that it does not, in terms or by implication, refer to foreign corporations or inter-state consolidations. Riley v. W. U. Tel, 47 Ind., 516; Mayre v. B. & O. Ry., 127 U. S., 117; Treas. v. And. Gen., 46 Mich., 224; Tel Co. v. Lieb, 76 Ill., 172; Railway v. Aud. Gen., 53 Mich., 79; People v. Rice, 33 St., Rep. 1011.

      J. K. Richards, Attorney General, for defendant in error.
    I. The presumption is always in favor of the validity of the law; and it is only when manifest assumption of authority and clear incompatibility between the constitution and the law appear, that the judicial power can refuse to «execute it. Such interference can never be permitted in a doubtful case. R. R. v. Clinton Co., 1 Ohio St., 82, 83; State v. Cincinnati, 20 Ohio St., 33; Marmet v. State, 45 Ohio St., 64; 25 Ohio St., 274.
    The power to raise revenue is included in the general grant of legislative-power, 11 Ohio St„ 542; Ohio exrel. v. Covington, 29 Ohio St., 113; State ex rel. v. Smith, 44 Ohio. St., 372; Cooley’s Constitutional Eimitations, 107.
    The limitation of section 2, Article 12, Constitution of 1851, applies to the taxation of property and does not pre«clude the legislature from using other modes of raising money for general revenue purposes,
    Opposing counsel insist, that because the fees collected ■under the act are paid into the public treasury without any ■express limitation on their use, it follows that what is provided is a tax for general revenue; that no tax for general revenue can be levied except in accordance with article 2, •section 12; in other words, that every tax for general rev■enue must be levied by a uniform rule upon all property .■according to its true value in money.
    Section 2, of article 12, thus relied on as furnishing the sole rule and authority for levying taxes for revenue, is (says Gholston, Judge, 11 Ohio St., 543) not a grant of power, but a regulation of the power already granted in the first section of the second article.
    While it may be conceded, that the principle of equality and uniformity set forth in section 2, of article 12, should ibe observed, as a general principle of constitutional law, in •all legislation looking to the raising of money for public •purposes, yet I contend, that section 2, of article 12, furnishes the rule for levying raxes for general revenue on property only. It provides that laws shall be passed taxing by a uniform rule all property according to its true value in money. It does not furnish the rule for taxing what is not property. It does not furnish the rule for raising revenue in other modes than by the taxation of property. Hill v. Higdon, 5 Ohio St., 246; Zanesville v. Richards, 5 Ohio St., 592; Baker v. Cincinnati, 11 Ohio St., 540; Exchange Bank v. Hines, 8 Ohio St., 43; W. U. Tel. Co. v. Mayer, 28 Ohio St., 533, 536; Adler v. Whitbeck, 44 Ohio St., 565; Anderson v. Brewster, 44 Ohio St., 585; Marmet v. State, 45 Ohio St., 68; Cooley Con, Uim., 617.
    II. Benefits accrue from the filing of the articles of incorporation or consolidation to those paying the fees, fully equal to the benefits held sufficient to justify assessments.
    The burden imposed by the act in question cannot be justified as an assessment, say our opponents, because, first, it is not laid with reference to the special benefit which the property assessed derives from the expenditure - of the money collected; and, second, because it is not of a character recognized and exercised ‘at and before the time of the adoption' of the present constitution. In support of this is cited: Hillv. Higdon and Reeves v. Treasurer of Wood County.

    The rule contended for by the other side, as limiting assessments, has not been followed' by the later decisions. Cincinnati Gas Light Company v. The State, 18 Ohio St., 242; Ohio ex rel. v. Covington,29 Ohio St., 113; W. U. Tel. Company v. Mayer, 28 Ohio St., 523; Anderson v. Brewster, 44 Ohio St., 576; Baker v. Cincinnati, 11 Ohio St., 543.
    Reference is made to these cases for the purpose of show: ing that the definition of “assessment,” by counsel on the other side, does not cover the whole ground. In one case, one reason is given justifying an assessment, in another case, another. The reason given for one assessment has not been taken as limiting the right of the legislature to make an assessment for another reason, when the reason arose,
    But opposing counsel say, there is no relation between, the charge made and the benefits received by the persons of corporations who pay under this law; that the filing of' articles of incorporation or consolidation, is not for the benefit of incorporations, but an imposition upon them for the protection of the public against the acts of those who usurp the franchises of corporations.
    This argument, apparently, is on the theory that the granting of franchises by the state, is a perfunctory act; that persons have some inherent or inalienable rights to make themselves a corporate body and invest themselves with corporate franchises, irrespective, except in the most formal way, of legislative authority; that, virtually, the state has no power of control or restriction in respect of the creation of corporations, but that, at the mere will and pleasure of‘'private individuals, corporations, infinite in variety and boundless in extent, may be called into existence, •clothed with all the peculiar powers of these political entities. Such is not the view taken by the constitution and the law. Constitution, article 1, section 2; article 13, section 2; Revised Statutes, section, 3235, 8239; section 3382. See also section 3384b, as amended April 11, ,1890, 87 Ohio Raw, 184,
    III. The benefits conferred by the grant of corporate power, and the burden imposed on the State of controlling and restricting its exercise, justify the charge.
    It is urged that the charge cannot be sustained as a license, because there is no just relation between the charge made and the expense or inconvenience to the government for the benefit of the incorporators or corporation, In other words, that the charge is extortionate. Baker v. Cincinnati, 11 Ohio St., 544.
    The benefits to individuals from being incorporated have been mentioned. The expense and inconvenience to the government in supervising corporations, controlling their operations, and seeing they do not transcend their powers to the prejudice of individual enterprise, is a thing impossible 'accurately to ascertain, and as to which the legislature, acting for the people, has alone the right to speak. Marmet v. State, 45 Ohio St., 67, 68.
    IV. The fees are for official service in granting a franchise, not in merely filing a paper.
    In filing articles of incorporation, the Secretary of State acts for and on behalf of the state, not on behalf of the individuals who desire to become incorporated, The official service he performs as the agent of the state, is to-create a corporation. This is the immediate result of the filing of the articles. The official services- rendered by the Secretary Gf State under this act,, is but another description for the granting of franchises by the state. It is for official services in granting a franchise, in conferring a privilege which the state alone can confer, that the general assembly,. by this act,- representing the state and the people, has seen fit to make the charge imposed. For such services, the charge is not excessive. It is moderate. Many states, for the same service, in conferring the- privilege of corporate existence, require an annual payment to be made during the life of the corporation.
    V. There are two broad grounds for sustaining the act. (a,) Power to regulate corporations, (b.) Power to raise revenue, 11 Ohio St., 544; 28 Ohio St., 540; 44 Ohio St.,. 562; State v. Gcczley, 5 Ohio 22.
    (a.) The granting of corporate franchises resting entirely within the discretion of the general assembly, under the power to regulate corporations, a contribution to the state. may be exacted, as by the act in question, as a condition of the grant. Article 13, constitution; 37 N. Y., 365; Fire Department of Milwaukee v. Helfenstein, 16 Wis., 136; Leavenworth v. Booth, 16 Kan. 627; W. Ü. Tel. Co. v. Mayer, 28 Ohio St., 523; Californian. Pacific Railroad Company, 127 U. S., 40; Home Insurance Company v. New York, 134 U. S. 599; Monroe Savings Bank v. Rochester, 37 N. Y., 365.
    (b.) The raising of revenue being a recognized purpose of government, the legislature, under the general grant, may exact this contribution, which is not imposed on property, but charged for franchises, and is equal and uniform, exacted from all obtaining corporate privileges, and in proportion to the measure of the privileges obtained. Cooley Con. Rim. 619.
    I have cited the leading Ohio cases to the effect that the limitation of section 2, article 12,-'is on the power to raise revenue by the taxation of property, and that other proper modes of raising revenue may be resorted to by the legislature.
    The problem of so framing the laws as to compel corporations to bear their fair share of the increased burdens of the state, is a difficult one. The property rule of taxation has not reached the valuable rights, privileges and franchises, through the enjoyment and exercise of which corporations have grown immensely rich. The effective mode of raising revenue from corporations is to base the charge on the privilege or franchise in one way or another, — to annex as a condition to the privilege of corporate existence, the payment of a contribution to the state. Reading Railway Company v. Pennsylvania, 15 Wall., 284;77z<? Railroad Tax Case (Delaware), 18 Wall., 206; State Railroad' Tax Cases, 92 U. S., 575; Home Insurance Company v. New York, 184 U. S., 594; California v. Pacific Railroad Company, 147 U. S., 41; Provident Institution v. Mass., 6 Wall,, 611.
    VI. Answer to additional points of Mr. Crawford, counsel for Wabash system.
    1. The act dose not violate section 5, article 12, of the constitution. Leavenworth v. Booth, 16 Kans., 627; 11 Ohio St., 544; 21 Ohio St., 1.
    2. An equal and uniform contribution is required under the act.
    3. No tax is imposed by the act upon any corporation of another state or upon its franchise or property; nor is there any burden laid upon inter-state commerce.
    (a.) The effect of filing articles of consolidation in Ohio is to create a new corporation. For the franchise thus granted, the charge under the act is made.
    The result of filing articles of consolidation in Ohio, must be determined by. the provisions of Ohio law. Whether the constituent companies be Ohio corporations, or partly Ohio and partly foreign corporations, the consolidation is an Ohio consolidation, made under Ohio law, and possessing the rights and privileges conferred by the Ohio statutes. Sections 8379 et seq.; Lee v. Sturges 46, Ohio St., 153; Shields v. Ohio, 95 U. S., 324; 114 U. S.,587;
      Nashua v. The Lowell Railroad, 136 U. S., 356; State; Treasurer v. The Auditor General, 46 Mich., 224.
    (b.) The act in no way interferes with or places a burden on inter-state commerce.!
    An act relating only to the terms upon which corporate capacity in various shapes may be conferred by Ohio laws, a measure regulating and controlling the granting of corporate privileges by this state, has no proper connection with the business to be carried on by the companies when incorporated.
    The dollar-a-mile act was an invalid tax on property, and in no respect akin to the law under consideration.
    A brief was also filed in the case by Merrick & Tompkins, attorneys for The Pittsburg, Akron & Western Railway Company, who had a like case pending in this court.
    A brief was also filed by Watson, Búrr & Livesay, attorneys for The Pittsburgh, Cincinnati, Chicago & St. Rouis Railway Company, who had a like case pending in the court of common pleas of Franklin county.
   MiNSHARR, J.

The plaintiffs base their right to relief upon the invalidity of the law under which the money paid by them, was exacted by the Secretary of State. The statute was passed February 12, 1889, and is an amendment of sec. 148a, Revised Statutes, fixing the fees which the Secretary of State is required to charge'for “official services.” It is divided into various paragraphs. The first fixes the fee for filing articles of incorporation of any corporation whose capital stock is over ten thousand dollars, at one-tenth of one per cent, upon the authorized capital of the company.

The third paragraph reads ás follows:

“For filing articles of- agreements of consolidation of corporations having a capital stock, the following fees shall be collected by the Secretary of State: Said articles of agreements of consolidation shall be treated as the articles of incorporation of the new consolidated corporations created by such articles or agreements of consolidation, and the fees for filing such articles or agreements of consolidation, shall be the same in each case as is hereinbefore set forth for the filing of articles of incorporation of a corporation having the same amount of capital stock, as is provided for by the articles or agreements of consolidation for the new consolidated corporation, created by any such articles or agreement of consolidation; and in fixing the amount of such fees, no credit shall be allowed for fees previously paid by any of the constituent corporations, parties to such consolidation, but the same shall be determined solely by the amount of capital stock of the new corporation created by such articles or agreements of consolidation.”

The fees are required to be paid into the state treasury, and the secretary is prohibited from filing or recording such articles until the fees have been paid. '

The first objection to the statute is, that it imposes a tax, not authorized by the constitution of the state; and the second is, that, as to the plaintiffs, it imposes a burden upon inter-state commerce, and is, therefore, in violation of the constitution and laws of the United States.

In support of the first objection the second and fifth sections of the twelfth article of the constitution, are cited. We think it well settled that the second section simply relates to the taxation of property; and unless it can be shown that the sum exacted of the plaintiffs is such a tax, it has no application to the case. Much stress is placed upon language to be found in the opinions delivered in Exchange Bank v. Hines, 3 Ohio St. 1. The question there, however, was not as to whether the tax complained of was a tax on property, but whether the bank was entitled to deduct its debts from its moneys and credits. The decision of that question in no way involved the question as to the limit of the power of taxation conferred on the General Assembly by the general grant of legislative power. This question arose and was fully considered in the subsequent case of Baker v. The City of Cincinnati, 11 Ohio St. 534. It was there held that the provision of the constitution requiring all property to be taxed by a uniform rule, was simply a limitation on that mode of taxation, and does not necessarily exclude taxation upon that which is not property, nor cover the whole ground within the limits of the taxing power; and that “If there be a species of taxation, or a subject matter of taxation, not embraced in that section, there is nothing in it by which they are prohibited or excluded.” The learned judge, delivering the opinion, then proceeded to show, that the taxing power is embraced, in the general grant of legislative power, and'is as ample, except where restrained by express provisions, as the object and purposes of the state government. The doctrine of this case has never been questioned as a sound exposition of the constitution on the subject of taxation, and has since been followed in numerous cases: Gas-light Co v. The State, 18 Ohio St. 237; Telegraph Co. v Mayer, 28 Id. 521; Adler v. Whitbeck, 44 Id. 565; Anderson v. Brewster, Id. 585; Marmet v. State, 45 Id. 68.

The recent decision in Railway Company v. State, is not in conflict with these cases. There the tax was upon property, levied by its miles in length, and hence not permissible under the provision of the constitution requiring all taxes on property to be levied by a uniform rule according to its true value in money. Whether the sum required by this statute for filing articles of incorporation be termed a fee, a tax or an assessment, is, we think, immaterial, for it is clear that it is not a tax on property. The filing and record of such articles is simply an authority or license to the persons filing them to form a corporation, and the sum paid therefor is the consideration demanded and paid the state for the grant of the right to be a .corporation. We fail to perceive anything in the principles of government or sound policy, that should forbid the state from making such an exaction, even for the purposes of general revenue. The franchise is valuable to the corporators, or, it is fair to assume, it would not be sought; and that the burdens of government are greatly increased by the formation of corporations, is daily seen in the business of the courts and the police establishment of the state.. It is further claimed that the exaction made by the statute violates that principle of equality that should underlie all taxation. That this principle should not be disregarded is clear; but perfect equality is not attainable in any system of taxation. This, however, is equal in the sense that it applies to the formation of all incorporated companies, and is imposed according to the amount of the capital of each; and in this respect it is neither unequal nor unusual. Cooley Const. Eim. 608. The fact that it does not apply to companies already formed, does not make it unequal. If that were so then a change in any fee bill, or rate of charges, would be open to the same objection. The law operates upon the future, and its equality must be determined by the future and not the past.

It is also claimed, that the statute is void because it does not state the object for which the tax is imposed, as required by section 5, of article 12, of the constitution. It may be questioned whether this section has any application to the case. Baker v. Cincinnati, 11 Ohio St. 544. But, if it does, the objection is met by the provisions oí section 181a, Revised Statutes, that “all money paid into the state treasury, the disposition of which is not otherwise provided for by law, shall be credited by the Auditor of State to the general revenue fund.” It is not necessary that the object should be stated in the very statute imposing the tax; it is sufficient, we apprehend, if the object distinctly appear from the statute read in connection with some other provision found elsewhere in the statutes of the state. And, if the raising of a fund for general revenue purposes,, had been expressed in section 148a as amended, the purpose of the exaction would, have been no more definitely stated, than it is by reading that section in connection with section 181a.

We now inquire whether the statute is a restraint upon inter-state commerce, The Wabash Railroad Company as consolidated, embracing a system of roads located in Ohio, Michigan, Indiana, Illinois, and Missouri. The powe'r to regulate commerce between the states, belongs without doubt to the Congress of the United States; the states cannot interfere with or regulate it in any way. But the duty of the states in respect to such commerce -is passive and not active. No state is under any federal obligation to furnish highways, nor to create agencies of any kind, for the purpose of faciliating inter-state commerce. The grant of the right to be a corporation is within the sovereign discretion of the state, and cannot be controlled by any other power, state or federal. As it may create or withhold such franchises at its pleasure, it may grant them upon such conditions as best suit its own notions of convenience and policy. Hence the state violates no federal Euty toward non-residents, whether corporate or natural persons, in refusing them corporate franchises or in making an exaction for the grant of the same, simply because such persons may have the control of a system of railways used in inter-state commerce. “The right or privilege,” says Justice Fibrd, “ to be a corporation, or to do business as s(uch body, is one generally deemed of value to the corporators, or it would not be sought in such numbers as at present. It is a right or privilege by which several individuals may unite themselves under a common name, and act as a single person, with a succession of members, without dissolution or suspension of business and with a limited individual liability. The granting of such right or privilege rests entirely in the discretion of the state, and, of course, when granted, may be accompanied with such conditions as its legislature may judge most befitting to its interests and policy. It may require, as a condition of the grant of the franchise, and also of its continued exercise, that the corporation pay a specific sum to thé state each year, or month, or a specific portion of its gross receipts, or of the profits of its business, or a sum to be ascertained in any convenient mode which it may prescribe.” Insurance Co. v. New York, 134, U. S. 599. And so, in Monroe Savings Bank v. Rochester, 37 N. Y. 365, it is said, “It must be régarded as sound doctrine to hold that the state, in granting a franchise to a corporation, may limit the powers to be exercised under it, and annex conditions to its enjoyment, and make it contribute to the revenues of the state. If the grantee accepts' the boon it must, bear the burden.

The fee required to be paid for the filing of such articles, can, in no proper sense, be said to be a tax upon the business of commerce .between the states. No commodity is taxed directly or indirectly; and the business of the Wabash system is in no way hindered or embarrassed. It is not required to become a consolidated company under the laws of Ohio; nor is the transaction of its business made to depend upon its filing such articles and becoming a corporation. It can continue its business with the same freedom in the state, whether j.t incorporates or not under its laws. That the franchise of being a corporation under the laws of this state would be fruitful of advantages to those who own and operate the Wabash system, may well be inferred from the fact that they are anxious to obtain it. And the state is in no way averse to making the grant; it simply requires that its terms be complied with; and, as we have shown, that it is under no federal obligation to make such grant, there is no ground upon which they can, as we see, object to the terms.

The further claim is made that, by filing the articles of agreement of consolidation of the companies composing the Wabash system, no “new corporation” is created; and, therefore, the provisions of section 148a, as amended February 12, 1889, do not apply to them; that this section only applies where all the companies entering into the consolidation are Ohio companies. If this «were so, then the plaintiffs should not have presented their articles to the Secretary of State to be filed and recorded. But we are of the opinion that it is not so, and that a new company is formed in the one case as well as in the other. Referring to the Revised Statutes on the subject of “consolidation,” it will be observed that section 3379 authorizes the consolidation of Ohio companies and that the next authorizes the consolidation of a company in this state with a company in an adjoining state. The next section, 3381, provides how the consolidation is to be effected, and applies without distinction to either case. It is then provided by section 3382, that when iMta^^ement is made and perfected, and the same, or a copy filed with the Secretary of State, “the several companies parties thereto shall be deemed and taken to be one company, possessing within this state all the rights, privileges and franchises, of a railroad company.” And by section 3384 it is provided that, upon the election of the directors of the consolidated company, all and singular the rights, privileges, franchises and property of the companies who are parties to, the agreement, shall be transferred to and vested in the “ new company without furthur act or deed.” The result is that by consolidation, whether between Ohio companies or between an Ohio company and companies of another state, a new company is formed by the extinguishment of the old ones. And it has been so determined in a number of cases. Shields v. Ohio, 95 U. S. 324; Compton v. Railway Co. 45 Ohio St. 592, 615; Lee v. Sturges, 46 Id. 163, 169.

In the subsequent sections the company formed by consolidation is designated as “the new company.” The stockholders of the old company become stockholders in the consolidated company except such as refuse to convert their stock into the stock of the latter company. One who refuses to do so, is paid the highest market value of his stock at any time within six months preceding the making of the agreement, to be determined, where the parties cannot agree, by arbitration. But those who voted for the agreement are estopped to refuse, so that there can be no such thing as a consolidated company without stock.

Many difficulties have been suggested, as arising, if a company, formed by the consolidation of an Ohio company with a company of another state, should be held to be a new corporation. We would have, it is claimed, the anomaly of a corporation with a capital stock, without the individual liability of the stockholders. The fallacy consists in the assumption, for such wrould not be the case. There has been some diversity of opinion as to the status of a corporation formed by the consolidation of companies under the laws of different states. But it seems pretty well settled, upon principle at least, that where formed under co-operative legislation of the different states, it becomes a corporation in each state where its- road is located. It is a legal entity residing and doing business in different states, with a status in each, derived from and determined by the laws of that state. If by the laws of one of these states an individual liability attaches to the holder of stock in an incorporated company, the same liability will attach to its stockholders. The liability will, • in this regard, depend upon the laws of the state, where it is- sued. Whatever may be the holding in other states, there can be no doubt but that in Ohio the stockholders of an incorporated company, however formed, are individually liable for its debts to the extent fixed by statute. The stockholders of the company in the other states, must be presumed to know what the Ohio'law is in this regard; and by agreeing to consolidate with an Ohio company, must be presumed to assent to the individual liability attached by Ohio law to the ownership of stock in an Ohio company.

Judgment affirmed.


source: Caselaw Access Project

author: Bradbury, J.

license: Public Domain

text:
    Van Dyke v. Rule.

      Justices of the peace — Jurisdiction—Covenants running with the land — Common pleas courts — Appellate jurisdiction of — Practice in civil actions — When may substitute cause of action.

    1. A covenant against incumbrances, contained in a conveyance of real estate, runs -with, tlie laud, and an action founded on a breach of such covenant is, by the sixth clause of section 591, Revised Statutes, withdrawn from the jurisdiction of a justice of .the peace, for it necessarily draws in question the title of the' real estate to which the covenant is attached.
    2. Where an action, begun before a justice of the peace, is appéaled to the court of common pleas, the latter court has no power to substitute, by amendment, another cause of action not within the jurisdiction of the justice of the peace, though it is within the original jurisdiction of the court of common pleas, unless the defendant consents to the substitution, or waives his right to object to the action of the court.
    (Decided June 28, 1892.)

      Error to the Circuit Court of Mercer county.
    This proceeding had its inception in an action brought before a justice of the peace, by the defendant in error, upon a claim for money paid out and expended by him for the plaintiff in error, at the request of the latter, to discharge certain taxes.
    The defendant in error recovered a judgment before the justice of the peace, whereupon the plaintiff in error appealed the case to the court of common pleas, in which court the defendant in error filed a petition as follows:
    “The plaintiff says that on or about the 23d day of August, in the year A. D. 1884, defendant sold and conveyed by deed one hundred and sixty acres of land; eighty acres of which to this plaintiff and eighty acres to one Charles Weitz. That the defendant is indebted to him, plaintiff, in the sum of $35.44 with interest as hereinafter alleged, for so much money laid out and expended in the payment of certain taxes charged on said lands for the year 1885, sold as aforesaid to this plaintiff, paid by this plaintiff to and for the use of this defendant and'at his request as follows, to wit;
    December 29th, 1884, the sum of...-...$ 7.31
    December 19th, 1885 the sum of..10.41

      $17.72

    Second cause of action.
    And also for so much money paid, laid out and expended by Charles Weitz, in the payment of certain taxes charged on the said lauds for the year 1884, when sold as aforesaid to the said Charles Weitz, which taxes were paid to and for the use of this defendant, and at his request as follows, to wit:
    December 29th, 1884, the sum of..$ 7.31
    December 19th, 1885, the sum of.......10.41
    $17.72-
    Which said account of the said >Charles Weitz, as above set forth, was for a full and valuable consideration assigned on or about the 19th day of December, A. D. 1885, to this plaintiff.

      Wherefore the plaintiff says the defendant is indebted to him, plaintiff, in the sum of $14.62 with interest from the 29th day of December, 1884, and on $20.82 with interest from the 19th day of December, 1885, for so much money laid out and expended by him at defendant’s request. There is now due to this plaintiff from the defendant the sum of $35.45 with interest on $14.62 from the 29th of December, 1884, and with interest on $20.82 from the 19th day of December, 1885, for which he asks judgment.”
    “ Marsh & Loree,
    Attorneys for Plaintiff.”
    Upon the filing of this petition, the plaintiff in error moved the court of common pleas to dismiss the action because it had come into said court by appeal from the docket of a justice of the peace, and, as it drew in question the title to real estate, the justice had no jurisdiction of the action. This motion was overruled. A demurrer to the petition was also interposed, and upon its being overruled, the plaintiff in error answered denying that he had requested the defendant in error, or Charles Weitz, to pay any taxes for him, and denying any indebtedness to defendant in error on that account.
    The cause was tried to the court without the intervention of a jury, and the court at the request of plaintiff in error separately stated its findings of facts and its conclusions of law as follows:
    “That the defendant, Thomas Van Dyke, did, on the 23d day of August, 1884, sell and convey to the plaintiff and Charles Weitz, by separate deeds, containing covenants of warrant}"- against all encumbrances, the land set -out in plaintiff’s petition; that the plaintiff and the said Weitz paid the amount of taxes charged on the said lands for the year 1884, at the times stated in plaintiff’s petition; that the defendant, Thomas VanDylce, never requested the plaintiff or the said Charles Weitz to pay said taxes for him, and never verbally agreed to pay the said taxes; and the court as a conclusion of law, from the facts so found, find that the taxes paid by the plaintiff and the said Charles Weitz were a lien on the land so sold to them by the defendant on the 23d day of August, 1884; and that the defendant is liable to the plaintiff and the said Charles Weitz to the amount of $37.98.”

      Patrick Gainor, for plaintiff in error.

      Marsh & Loree, for defendant in error.
   Bradbury, J.

The findings of the court show that the plaintiff in error made no request, either of the defendant in error or Chas. Weitz, to pay the taxes in controversy, or made any verbal agreement whatever, respecting their payment; and that any obligation which might rest on him in respect thereof, grew out of the covenants contained in the deeds that he had made to the defendant in error and Chas. Weitz respectively. The only covenants that the findings show that these deeds contained were those of warranty and against incumbrances. Whatever the rule may be elsewhere, it was settled in this state by the case of Foote v. Burnett, 10 Ohio, 317, decided by this court in 1840, that the covenant against incumbrances is a real covenant which runs with the land. Therefore a cause of action founded on that covenant, as well as one founded on a covenant of warranty, necessarily draws in question title to real estate, and for that reason falls within the sixth clause of section 591, Revised Statutes, denying jurisdiction to justices of the peace; for, as the covenant attaches to and passes with the land, it can only enure to the benefit of one who either has, or has had, title to the real estate to which it relates.

The cause of action, however, asserted by the defendant in error in the justice’s court, was for money paid out by him for the use and benefit of the plaintiff in error and at the request of the latter, and being for less than three hundred dollars was within the jurisdiction of the justice.

The petition filed in the court of common pleas after the cause was appealed to that court, set forth substantially the same grounds for relief. True, the petition mentions that the plaintiff in error had conveyed to the defendant in error and to Weitz certain lands, and that the money paid was on account of the taxes thereon, but is silent respecting any covenant or stipulation in the deeds, or either of them, obligating the plaintiff in error to liquidate those taxes, but places his obligation in that respect solefy on the averment that the payment was made for the use and benefit of the plaintiff in error and at his request. Therefore, the motion made in the court of common pleas to dismiss the action, on the ground that it was one over which the justice of the peace had no jurisdiction, was properly overruled.

The plaintiff in error, then, by answer, put in issue the averment of the 'petition, that the money had been paid at his request. The parties went to trial upon the issue thus joined between them, which issue the court found for the plaintiff in error; but instead of rendering judgment on this finding the court ignored it entirely and proceeded as if a covenant against encumbrances had been set up in the petition and its breach averred and proven. The finding and judgment on its face shows that the court did not place the judgment upon tlie cause of action set forth in the petition, but on the ground that the money was paid to satisfy a claim for taxes which were a lien on a tract of land that the plaintiff in error, in a deed of conveyance therefor, had covenanted was clear, free and unincumbered.

This course of procedure can be sustained only upon the ground that the court in its discretion, after trial and to conform the pleadings to the evidence, could order or permit an amendment which would transform an action for money paid for the use of another and at his request, into one founded upon a covenant against incumbrances contained in a conveyance of real estate. The record does not show that an amendment was in fact made; but, if in furtherance of justice, under the liberal rules of our code of civil procedure, one ought to, or might have been allowed, it would perhaps be the duty of the reviewing court to treat the case in all respects as if an amendment had been actually made.

Where, however, as in the case under consideration, an action has been begun before a justice of the peace, upon a cause of action within his jurisdiction, and upon the cause being taken to the court of common pleas by an appeal, the petition follows the bill of particulars, and the defendant by answer joins issue upon a material averment of the petition, which upon the trial is found in his favor, it is error for the court trying the cause, unless with the consent or acquiescence of the defendant, to either direct or allow an amendment that not only substitutes one cause of action for another, but introduces a new cause of action over which the justice of the peace had no jurisdiction whatever. Where the justice of the peace had no jurisdiction of the subject matter, an appeal from his judgment will confer none on the court of common pleas. Nichol v. Patterson, 4 Ohio 200; Wood v. O’Ferrall et al. 19 Ohio St., 427.

And it is equally certain that the appeal confers on the appellate court jurisdiction only of the cause of action appealed.

It is also settled in this state that, though the justice of the peace had not jurisdiction of the caqse of action appealed from, yet, if the subject matter of the action was within the original jurisdiction of the appellate court, and the parties without objecting to' the jurisdiction, joined issue and went to trial, they should be held to have waived the objection. Wood v. O'Ferrall et al. 19 Ohio St., 427; Harrington v. Heath, 15 Ohio 483; Bisher v. Richards, 9 Ohio St., 495; Thomas v. Pennrich, 28 Ohio St., 55; O’Neal v. Blessing, 34 Ohio St., 33.

Had a cause of action founded on the covenant against incumbrances been pleaded, and, without objecting, the plaintiff in error had joined issue upon it and gone to trial, he would fall within that principle. But this was not done; on the contrary the plaintiff in error sought in the first instance to avail himself of the objection, nor did he after-wards join in an issue by which he submitted to the court of common pleas the question it decided, or by any other act, waive his right to object to the jurisdiction of the court over any question arising upon the covenants in the deeds he had made to the defendant m error and Weitz. The court of common pleas having found the issues joined between the parties, in favor of the plaintiff in error, and having no authority to substitute for it a cause of action over which, as the record stood, it had no jurisdiction, it should have rendered judgment for the plaintiff in error; and this court having before it the facts found by the court of common pleas, will render such judgment as that court should have rendered.

Judgment for plaintiff in error upon the facts found by the court of common pleas.


author: DiCKMAN J.

text:
    Sipe v. Murphy et al.

      Municipal Corporations — License to sell at auction, goods imported into the corporation for that purpose — Validity of ordinance.

    1. Under the authority given to cities hy section 1692 of the Revised Statutes, to regulate auctioneering, and to regulate, license or prohibit the sale at auction of goods, wares and merchandise imported into the corporation for the purpose of being sold at auction, city councils may, if no discrimination is made .against goods imported for that purpose and in favor of goods of the same class, lcind and quality already within the corporation, provide by ordinance, for licensing the sale at auction within the corporation of .such imported goods; and may, when necessary for the protection of the public health, safety, or morals, prohibit the sale at auction of goods imported into the corporation for the purpose of being so sold.
    2 .A city ordinance which provides that, it shall be unlawful for any person, by himself, or by any agent, within the corporate limits of such city, to sell or offer for sale at auction, any goods, wares or merchandise which have been imported into such city for the purpose of being sold or offered for sale at auction, unless such person shall pay or cause to be paid a license fee of twenty-five dollars for each day and part of day he may desire to sell and offer for sale such goods, wares or merchandise at auction, is an unreasonable exercise of the power granted to municipalities, as above stated, under section 1692 of the Revised Statutes, and is invalid.
    (Decided June 28, 1892.)
    On Habeas Corpus. Error to the Circuit Court of Franklin count}7.

      John F. Sipe, the plaintiff in error, was arrested on a •complaint charging that, at the city of Columbus, in the ■county of Franklin, and state of Ohio, on or about the 27th •day of January 1892, he unlawfully did sell and offer for sale at auction, certain goods and merchandise within the limits of said city, which goods and merchandise were imported in said city for the purpose of being sold at auction by him without having procured a license from the mayor •of said city so to do.
    The plaintiff in error made application to the court of ■common pleas for a writ of habeas corpus, stating in his petition that he was unlawfully imprisoned and restrained of his liberty by John E. Murphy, Chief of Police of the city •of Columbus, and praying that he might be discharged from, such unlawful imprisonment. The writ was issued, the plaintiff in error was brought before the court, and on the 8th day of February, 1892, the cause came on for hearing before the court of common pleas upon the following agreed statement of facts:
    “It is agreed that the relator, John F. Sipe, brought into the corporation 'of Columbus,.O., a stock of goods consisting of jewelry, for sale at auction, and neglected and refused to take out or pay for the license required by the city ordinance of the city of .Columbus, a copy of which ordinance is hereto attached, marked “Exhibit A.”
    “It is further agreed, that-the goods thus imported into the corporation for sale by auction were wholly without the corporate limits, and a portion without the state, but those without the state were not sold in original packages, but broken, intermingled and sold at retail.
    “Further, that the relator, John F. Sipe, is the owner of the goods, but not the auctioneer, but has in his employ two auctioneers, licensed by the state to follow that avocation.
    “ For the violation of said ordinance in selling said goods at auction without such license the relator, John F. Sipe was arrested, as shown by the records, and is now in custody of John E. Murphy, Chief of Police of Columbus, by virtue of a writ, a copy of which is attached to the application.”
    “Exhibit A.”

      “An Ordinance to regulate and license the sale at auction within the city of Columbus, of goods, wares and merchandise imported into said city for the purpose of being sold at auction.
    “Section 1. Be it ordained by the City Council of the city of Columbus, that from and after the passage and publication of this ordinance, it shall be unlawful for any person, persons, party or corporation, by himself, themselves or itself or by any agent within the corporate limits of the city of Columbus, to sell or offer for sale at auction, any goods, wares and merchandise, which have been imported into said city for the purpose of being sold or offered for sale at auction, unless such person, persons, party or corporation, shall first procure a license so to do, as hereinafter provided.
    “Section 2. The City Clerk of the city of Columbus, upon the application of any person, persons, party or corporation, to sell at auction any goods, wares and merchandise, imported into the corporation for the purpose of being sold at auction, is authorized upon the receipt of twenty-five dollars ($25) from the party making such application for each day and part of day such party may desire to sell and offer for sale such goods, wares or merchandise at auction, to give such party a receipt for such money and also to prepare and deliver to such party a license to authorize such party to make such sales for the time therein specified, which said party shall before commencing such sales present to the mayor of said'city whose duty it shall be to sign the same; provided that the city clerk shall be first satisfied that the applicant touching the goods, wares and merchandise proposed to be sold at auction, has complied with the requirements of the Statutes of this state regulating the listing of the same for taxation, and for the payment of the taxes thereon.
    “ Section 3. Any person, persons, party or corporation violating an}' of the provisions of section 1 of this ordinance, shall upon conviction thereof before the mayor for the first offense, be fined in the sum of twenty-five dollars and costs of prosecution, and for any repetition of the offense upon conviction thereof before the mayor, shall be fined in an}’’ sum not less than twenty-five dollars nor more than fifty dollars in the discretion of the mayor, and the costs of prosecution.
    “Section 4. This ordinance shall take effect and be in force from and after its passage and publication according to law.
    “Passed February-19, 1877.”
    The court of common pleas refused the prayer of the petitioner, dismissed the petition and writ, and rendered judgment against the petitioner for costs.
    The circuit court, on petition in error, affirmed the judgment and proceedings of the court of common pleas, and this proceeding in error is prosecuted to reverse both judgments.
    - Ong & Hamilton, for plaintiff in error.
    The ordinance is void, because of the discriminating features therein against goods that are non-resident of the municipality, in favor of goods resident of the municipality. It is unequal, oppressive, unjust and not uniform, and is in restraint of trade.
    The ordinance in question requires of the owner of goods, whether he resides within the municipality of Columbus or without, the payment of twenty-five dollars per day for the privilege of selling goods at auction imported into the corporation for that purpose, hut if imported to be sold at retail or wholesale, or if the goods are already within the corporate limits, they may be sold in any manner therein at auction or otherwise without the payment of twenty-five dollars per day or any other sum.
    We do not think that the legislature, by the grant of power made under section 1692, paragraph 9 of the Revised Statutes, intended any such legislation predicated thereon and if it did, then such grant is wholly void and unconstitutional, inconsistent, unequal, oppressive, and in restraint of trade; and if it be held valid, both the grant and ordinance predicated upon it, then eve^ municipality within the state may erect such a wall around the corporation as to amount to absolute prohibition for the sale of any goods brought from any portion of the state for the purpose of being sold at auction, thereby creating jealousies between the different municipalities and absolutely annulling, thwarting and rendering nugatory, the statute authorizing and legalizing the vending of goods at auction or public outcry anywhere within the state.
    In support of this proposition we direct the Court’s attention specially to 52 Cal. 606; 58 la., 184; 78 Ky., 542; 80 Gratt., 471.
    We have carefully examined every decision by this court that counsel have or may refer to, and especially the 45 Ohio St., each and every decision made by this court upon all ordinances held valid; they have all fallen within the police regulation, such as affected health, morals, the use of the public streets and thoroughfares, alleys and public grounds of the municipality. We know of no case, either in Ohio or elsewhere, that permits a municipalhy to thus openly and flagrantly discriminate against goods of the same class, kind and quantity, solely upon their location, the place of their production, whether it be in favor of a municipality, of a county, or of a state.

      Frank, T. Clarke, Emmett Tompkins, Paul Jones and Flor-isel Smith, for defendants in error.
    Is the ordinance discriminating, unequal, oppressive, unjust, not uniform, in restraint of trade and therefore void?
    Section 1692, paragraph 9, gives the city the power to do four things; (1) to regulate auctioneering; (2) to regulate, (3) license, or (4) prohibit the sale at auction of goods, wares and merchandise, imported into the corporation for the purpose of being sold at auction.
    The record discloses that the city lias exercised the third of these powers and it does not disclose whether or not the city has exercised the first power thereof. This court will not presume, in the absence of anything in the record showing it, that the city has not exercised the power conferred by the first provision of this paragraph. Counsel for the relator wishes the court to assume that no provision whatever has been made concerning the regulation or auc-tioneering of goods, that were brought into the city for some purpose other than to be sold at auction, and after inducing the court to make this assumption, he seeks to induce the court to hold that such exercise and non-exercise' of power as to two different kinds of goods make the present ordinance void. But we take it that the exercise of power conferred bjr any one of the provisions of this paragraph would not be void simply because the city in its discretion has not seen fit to exercise, or has not deemed that the public interests require the exercise of the other powers conferred by the other provisions of the paragraph. There is nothing in the statute that requires the exercise of all of these powers in one and the same ordinance. And it seems to us that counsel for the relator has no right to assume, outside of the record, that the city has made the discrimination that he alleges to exist.
    If the city has exercised the power conferred to “regulate auctioneering” and thereby made provision for the auction of goods that were brought into the city limits for a purpose other than to be sold at auction, then the discrimination of which counsel complains does not exist. But that discrimination can not be found in the ordinance in question.
    The ordinance will be found in restraint of trade only upon the court’s finding that the fee demanded is unreasonable. We think that the record makes no such disclosure.
   DiCKMAN J.

The plaintiff in error, John E. Sipe, was arrested upon the charge of having unlawfully sold and offered for sale at auction certain goods and merchandise, -within the corporate limits of the city of Columbus, which had been imported into that city for the purpose of being sold at auction by him, without having first procured the required license therefor. The. arrest was made for an alleged violation of the ordinance passed February 19,1877, “To regulate and license the sale at auction within the city of Columbus, of goods, wares and merchandise imported into said city for the purpose of being sold at auction.

It is contended that the municipality had no authority to pass the ordinance, and that the plaintifF in error was therefore unlawfully restrained of his liberty. It.is claimed, however, in behalf of the city of. Columbus and John E. Murphy, defendants in error, that the ordinance in question was properly passed under the following provisions of section 1692 of the Revised Statues: “In addition to the powers specifically granted in this title, and subject to the exceptions and limitations in other parts of it, cities and villages shall have the general powers enumerated in this section, and the council may provide by ordinance for the exercise and enforcement of the same. * * * 9. To regulate auctioneering, and to regulate, license or prohibit the sale at auction of goods, wares and merchandise imported into the corporation for the purpose of being sold at auction.”

The powers thus vested in cities in reference to auctions, though general, are not without limitation. It is not to be presumed from the language of the statute, that it was the design of the legislature to authorize the passage of ordinances that would be unjust, or oppressive, or unfair and partial, or in restraint of trade, or in contravention of public policy, or containing special and unwarranted discrimi-nations against property brought into the corporation from other parts of the same state to be sold at auction, or ordinances containing such discriminations against property brought into the corporation from another state for the same purpose, and thus in conflict with the powers of congress to regulate commerce among the several states. And while ordinances subject to such infirmities cannot be deemed to'be authorized by the statute, obviously it cannot be held that the municipal body has such authority by vir-tu'e of the general incidental power of municipal corporations to enact appropriate by-laws or ordinances.

Under the authority given by the statute, “to regulate auctioneering,” city councils, in view of promoting the order, comfort and convenience of the inhabitants, may pass ordinances regulating sales at auction upon the streets, alleys, sidewalks, and public grounds of the city, and may subject the occupation of auctioneering to such police regulations as seem essential to the public convenience and protection. By the same authority, councils may, upon principles of equality- — without discriminating against the goods imported — license the sale at auction of such goods imported into the corporation for the purpose of being thus sold, and when the public health, or the public safety, or the morals of the citizens of the municipality are endangered, may prohibit the sale at auction of goods imported into the corporation for such purpose. But, we do not find the reasonable intendment of the statute to be, to empower councils to arbitrarily prohibit, either by words of prohibition or by heavy license fee, the sale at public auction of goods imported into the city for the purpose of being sold at auction, notwithstanding such goods may be of a harmless nature,and even useful and beneficial to the community.

The ordinance under consideration provides in sec. 1 that, “it shall be unlawful for any person, persons, party or corporation, by himself, themselves, or itself, or by any agent, within the corporate limits of the city of Columbus, to sell or offer for sale at auction, any goods, wares or merchandise which have been imported into said city for the purpose of being sold or offered for sale at auction, unless such person, persons, party or corporation shall first procure a license so to do, as hereinafter provided.” Such license can be procured only upon receipt from the party making application, of twenty-five dollars for each day and part of day such party may desire so to sell and offer for sale such goods — the applicant having first complied with the requirements of the statutes of the state, regulating the listing of the goods for taxation, and for the payment of the taxes thereon. For violating any of the provisions of the ordinance, the offender, for the first offense, is fined in the sum of twenty-five dollars and costs of prosecution; and for any repetition of the offense, a fine is imposed of not less than twenty-five nor more than fifty dollars, in the discretion of the mhyor, with the costs of prosecution.

In the case at bar, the goods imported into the corporation for sale by auction were wholly without the corporate limits, and a portion were without the state, but those from beyond the borders of the state were not sold in original but broken packages, intermingled and at retail. No foreign goods were sold while remaining in .the packages in which they were imported. And as the ordinance does not impose a heavier burden upon goods brought from another state than upon goods brought into the city from other places within this state; as it does not in any way discriminate between merchandise imported from other states and merchandise imported from any other part of the state of Ohio outside of the city of Columbus, it is therefore argued, that the ordinance under which the plaintiff in error was arrested, was not in violation of the constitutional provision vesting in congress alone the power to regulate commerce among the several states. Having reached the conclusion that the ordinance is invalid on other grounds, we do not deem it necessary to examine that constitutional question. Though a constitutional question may be legitimately presented by the record, yet if the record also presents some other and satisfactory ground upon which the court may rest its judgment, that course will be adopted, and the question of constitutional power will be left for consideration until a case arises which cannot be disposed of without considering it, and when consequently a decision upon such question will be unavoidable. Cooley Const. Tim. 196, 6 Ed.

It will be observed, that the object of the ordinance in question is not to exact a license fee from the auctioneer because he is not an actual resident of the city, or has not paid for a city license. The license fee made payable by the ordinance is incident more to the goods than to the auctioneer or owner. It is required because the goods are brought from outside the city for the purpose of being sold or offered for sale therein at auction, and not where they are already in the city before it is purposed to sell them therein at auction; and the situs of the goods at the time of first conceiving the design of selling them at auction, is made the criterion for exacting a license fee which is, in effect, a tax upon the goods themselves.

The owner, whether residing in the city of Columbus or not, must pay twenty-five dollars per day for the privilege of there selling his goods at auction, if imported into the corporation for that purpose. But, if the goods be imported to be sold at retail or wholesale in the ordinary course of trade, or are already within the corporate limits when the owner forms the purpose of there selling them at auction or in any other manner, he may so sell them, without the payment of the license fee of twenty-five dollars per day.

The license fee thus exacted is in addition to the duties to which all property and effects offered for sale and struck off at public auction are subject under section 4226, of the Revised Statutes. If the articles imported into the corporation for the purpose of sale at auction, do not exceed in value the sum of twenty-five dollars, the same license-fee is required, and the property is thereby virtually confiscated. The owner, in such case, is denied the right of selling at auction, unless such right is exercised at the cost of practically sacrificing his goods. And in this connection it may be noted, that in addition to the duties to which articles sold at auction are subject by section 4226, auctioneers, in cities of the first grade of the first class, whose sales amount to less than seventy-five thousand dollars -per annum, are required to pay a license of only twenty-five dollars per annum. Revised Statutes, section 2672 (37).

Upon an examination of the ordinance under consideration, we are led to the conclusion, that its passage was not a reasonable exercise of the power to legislate on the subject of auctions, as conferred by section 1692, of the Revised Statutes.

The effect of the ordinance is largely to prohibit, under the name of a license, the sale at auction of goods brought into the corporation for that purpose, which enter into the daily use and consumption, and which would not be excluded by any police regulation as being 'detrimental to the public health, comfort and convenience.

The ordinance is not impartial, and unjustly discriminates by the imposition of the license tax, between goods, wares and merchandise in the city, and such as may be imported from other cities or places within the borders of the state, for the purpose of sale at auction.

The ordinance is in restraint of trade. It checks the freedom of commercial intercourse, in treating unequally goods of the same class, kind and quality, by, in effect, levying a heavy tribute on the goods, as a condition on which the owner can be allowed to sell the same at auction, when imported into the corporation for that purpose. It places an unwarranted impediment in the way of the buyer and seller in acquiring and disposing of property. By a policy of exclusion, it tends to the creation of monopoly, by protecting local tradesmen and merchants against outside competition.

The ordinance is opposed to the public policy of the state. It is very plain that the power vested in Congress by the constitution to “regulate commerce among the several states,” rests upon a most obvious and enlightened public policy. A very material object of this power is the relief of the states which import and export through other states, from the levy of improper contributions on them by the latter. If each state were at liberty to regulate the trade between state and state, it is easy to' foresee that ways would be found out to load the articles of import and export, during their passage through the jurisdiction, with duties, which should fall on the makers of the latter, and the consumers of the former. Story Const., § 1066; Federalist, No. 42; Brown v. State of Maryland, 12 Wheat. 448, 449; Gibbons v. Ogden, 9 Wheat. 199 to 204.

The same wise policy that dictated such a power to regulate the commercial intercourse of the states with each other, would suggest and give force to the policy of prohibiting cities and towns within the same state, from imposing illiberal and unjust restraints upon their trade and commerce with each other.

In the case of Ex parte Frank, 52 California, 606, the petitioner having been convicted of a misdemeanor for the violation of what was known as the “Sample-seller’s Ordinance” of the city and county-of San Francisco, and being restrained of his liberty upon process issued upon the judgment of conviction, he was brought before the court on a writ of habeas corpus, and claimed that he was entitled' to be discharged from custody, on the ground that the ordinance was unconstitutional and void. The ordinance was passed under a general power conferred by the charter of the city, which exacted a license for selling goods, and fixed one rate-of license for selling goods which were within the corporate limits, or in transitu to the city, and another and much larger license for selling goods which were not in the city, or in transitu to it.

The court in holding the ordinance to be inoperative and void said: “It is flagrantly unjust, oppressive, unequal, and partial. It discriminates between merchants in the same place, dealing in the same kinds of merchandise, for no better reason than that one deals in goods either actually in the corporate limits, or in transitu under a bill of lading, while the other deals in goods outside the corporate limits, and not in transitu under a bill of lading. If this kind of discrimination be legitimate and valid, there is no reason wrhy a merchant having his goods in a warehouse on a particular street might not be required to pay a license fee of ten thousand dollars, while another merchant doing the same kind of business, in the same city, and with his goods stored in another street, would be required to pay only ten dollars. It also contravenes the public policy of the state, in that it obstructs commercial intercourse between the principal seaport city of the state and the interior; the policy being to foster and encourage commercial intercourse and a free interchange of commodities between the several sections. It is in restraint of trade, in that it exacts a heavy tribute from the owner of goods outside the corporate limits and not in transitu, as a condition on which be will be allowed to offer them for sale in the principal city and seaport of the state.”

The discrimination in the above cited case was against goods which were not within the corporate limits or in transitu to the city at the time they were sold, while in the case at bar, the ordinance under consideration discriminates against goods that are outside the city when the purpose originates to sell them within the corporate limits. The discrimination in the two cases differs but slightly in the alleged objectionable features.

Sections 4222 to 4238 inclusive, ®f the Revised Statutes, among other things, provide for the issuing of a state license ' to auctioneers, and for the payment of pro rata duties on all property and effects exposed to'sale by public auction. In our view there is no inconsistency between these provisions and section 1692 of the Revised Statutes. But with the implied limitations in that section upon municipal legislation, we are not prepared to affirm the validity of the ordinance, for the alleged violation of which, the plaintiff in error was arrested. The judgments of the courts below must therefore be reversed, and the plaintiff in error discharged from custody.

Judgment accordingly.