Lappin v. District of Columbia

Constitutional Law; License Taxes; Brokers. 1. While the 14th Amendment of the Constitution, declaring that no State shall deny to any person within its jurisdiction the equal protection of the laws, does not purport to extend to authority exercised- by the United States (following Moses v. United States, 16 App. D. C. 428, 50 L. R. A. 532), Congress in legislating for this District may not deny its residents such protection, but all of the constitutional guaranties of life, liberty, and property are equally for the benefit of citizens of the United States residing permanently or temporarily in this District, as of those residing in the several States (following United States ex rel. Kerr -v. Ross, 5 App. D. C. 241; Curry v. District of Columbia, 14 App. D. C. 423, and Stoutenburgh v. Frasier, 16 App. D. C. 229, 48 L. R. A. 220). 2. The right to pursue any legitimate trade, calling, or profession, subject only to such reasonable regulations in the interest of the public welfare as may be imposed upon all persons under like conditions, cannot be arbitrarily taken away from them any more than their real or personal property can be thus taken. 3. Under the first proviso of par. 15, § 6 of the act of Congress of July 1, 1902, which, after imposing a license tax of $250 on general brokers, provides that the Washington StoeK Exchange shall pay $500 per annum in lieu of tax on members thereof for business done on such exchange, a member of the exchange who confines himself exclusively to business thereon is not a general broker and is not, therefore, required to pay a license tax. 4. The second proviso of par. 15, § 6 of the act of Congress of July 1, 1902, which, after imposing a license tax of $250 on general brokers, first provides that the Washington Stock Exchange shall pay $500 per annum in lieu of tax on members thereof for business done on the exchange, and then provides that any broker who is a member of a regular exchange located outside of the District of Columbia and transacting a brokerage business therein shall pay a license tax of only $100 per annum, is an arbitrary discrimination in favor of members of foreign exchanges, and imposes an unreasonable burden upon the right of a citizen to pursue a lawful occupation open to his competitors upon less onerous terms, and is void; Chief Justice Alvey, dissenting.

In error to the Police Court of the District of Columbia. The Court in the opinion stated the case as follows: The plaintiff in error, Robinson Lappin, was convicted in the police court of the District upon an information charging him with engaging in the business of a general broker without having first paid the license tax imposed by the act of Congress approved July 1, 1902 [23 Stat at L. 621, p. 1352], and has been granted a writ of error. ^ The tax which the plaintiff in error failed to pay is provided for in par. 15, § 6, of the act aforesaid, which reads as follows: “Par. 15. General brokers shall pay a tax of $250 per annum. Every person, firm, company, or association not incorporated (except insurance and real-estate brokers acting as such) that solicits business from the general public by advertisement or otherwise, and that purchases, sells, or negotiates for others securities, shares, stocks, bonds, exchange, bullion, coin, money, bank notes, or promissory notes, or that deals in futures on market quotations of prices or values on merchandise, shares, stocks, bonds, or other securities, or accepts margins on prices or values of said shares, stocks, bonds, merchandise, or securities, shall be deemed a general broker: Provided, that the Washington Stock Exchange, through its president or treasurer, shall pay to the collector of taxes of the District of Columbia a sum equal to $500 per annum in lieu of tax on the members thereof for business done on said exchange; Provided further, that any broker who is a member of a regularly organized stock exchange located outside of the District of Columbia, and transacting a brokerage business therein, shall pay a sum equal to $100 per annum to the collector of taxes of the District of Columbia: And he it further provided, that if any person or firm shall have paid the tax in this section provided for banks and bankers, such person or firm shall not again be taxed as a broker or brokers.” A demurrer to the information having been overruled, the defendant pleaded not guilty, and the case was submitted to the court upon the following agreed statement of facts: * ^The defendant, Nobinson Lappin, was some time prior to the 1st day of July, a. d. 1902, and from said 1st day of July down to the time of the filing of the information herein, and since the filing thereof to the date hereof, was and still is engaged at his place of business on the comer of Seventh and E streets northwest, in the city of Washington, District of Columbia, in conducting the business of a general broker, in that he solicited business from the general public by advertisement and otherwise to purchase, sell, and negotiate for it securities, shares, stocks, and bonds, and dealt in futures on market quotations on prices or values on merchandise, shares, stocks, and bonds afid other securities, and accepted margins on prices or values of said shares, stocks, bonds, merchandise, and securities. The said defendant is not a member of a regularly organized stock exchange located outside of the District of Columbia, and has not been such a member at any time since said 1st day of July. Subsequent to said 1st day of July demand was made upon said defendant by the assessor of tbe District of Columbia for tbe payment of a tax of $250 for a license to conduct his said business as a general broker in said District for one year from and after tbe 1st day of July, a. d. 1902, which tbe said defendant refused to pay, and the said assessor refused to issue said license without said payment of $250. “Tbat Allison C. Jenkins and Elmer E. Simpson, trading and doing business as general brokers at No. 1229 E street northwest, in said city and District, under tbe firm name and style of Jenkins & Simpson, on tbe 15th day of September, a. d. 1902, paid tbe collector of taxes of tbe District of Columbia $100, and were granted a license by tbe assessor of said District to conduct tbe business of general brokers in said District for one year from tbe 1st day of July a. d. 1902. Tbe business of tbe said Jenkins & Simpson was and is tbe same in all respects as tbat above described as conducted by tbe defendant, Robinson Lappin, tbe said Jenkins & Simpson being, however, at tbe time of tbe issuance to them of their said license, members of a regularly organized stock exchange outside of the District of Columbia, to wit, tbe Denver Stock Exchange of tbe city of Denver, State of Colorado. “Counsel for tbe District of Columbia objecting to tbe relevancy and materiality of tbe facts set forth in tbe last preceding paragraph.” 1. There is no distinction of class made by the act of July 1, 1902, and tbe tax must therefore be uniform. Curry v. District of Columbia, 14 App. D. C. 441; Railway v. Ellis, 165 IT. S. 150; Cotting v. Stock Yards Co. 183 IT. S. 79; Yot Sang, 75 Eed. 983; Yick Wo v. Hopkins, 118 IT. S. 356; State v. Hinman, 65 N. H. 103; State v. Pennoyer, 65 N. H. 113; Fechheimer v. Louisville, 84 Ky. 306, 21 Am. & Eng. Enc. Law, 2d ed. p. 804, and cases cited. See also State v. Moore (N. C.) 22 L. R. A. 472; State v. Schoenig, 72 Minn. 528; State v. Ash-brook, 154 Mo. 375; State v. Endom, 23 La. Ann. 663; New Orleans v. Insurance Co. 23 La. Ann. 449; St. Louis v. Speigel, 75 Mo. 145 ; Com. v. Snyder, 182 Pa. 630; State v. Morgan, 50 N. J. L. 389; Judson, Tan. 1903, pp. 561, 595, 599. 2. Even assuming that the act of Congress approved J uly 1, 1902, attempts a division, into different classes, of the general broker and the broker who is a member of some regularly organized stock exchange outside of the District of Columbia, yet such classification here attempted makes a distinction between persons engaged in the same business and under the same conditions, and is not only arbitrary, but unreasonable and unjust, and violates the equality clause of the 14th Amendment to the Federal Constitution. Gotting v. Kansas Gity Stock Yards, 183 U. S. 79 ; E. Co. v. Ellis, 165 U. S. 159; State v. Ashbrook, 154 Mo. 376. 1. There is a distinction of class between a general broker as defined in the act-of Congress of July 1, 1902, and a broker who is a member of a regular stock exchange. A state may classify property for the purpose of taxation. Connolly v. Union Sewer Pipe Co. 184 D. S. 563. 2. Congress has exclusive legislation over the District of Columbia. Capital Traction Co. v. Hof, 174 D. S. 5; Mattingly v. District of Columbia, 97 U. S. 687. Congress has the power to discriminate in taxation in the District of Columbia. It may exempt all property employed for manufacturing purposes (Welch v. Cook, 97 IT. S. 541) and church property, and “may, at its discretion, exempt certain classes of property from taxation, or may tax them at a lower rate.” Gibbons v. District of Columbia, 116 IT. S. 404. The power of Congress to legislate for the District of Columbia includes the power to provide for the assessment on abutting lands and lands benefited, arbitrarily, one half or more of the damage for and in respect of land condemned for the opening of the streets. Such power is to be referred, not to the right of eminent domain, but bo the right of taxation. Wight v. Davidson, 181 IT. S. 371, and cases cited. The law reports in this jurisdiction contain instances (Justh v. Holliday, 2 Mackey, 346; Tully v. Morgan, 21 D. C. 88) of the evils of gambling on margins through alleged stock brokers. Gurley v. MacLennan, 17 App. D. C. 182. 3. It is not claimed in this case, and it nowhere appears from the agreed statement of facts, that the plaintiff in error was connected in any way with any stock exchange. It is not necessary to claim that he is one of that class so well known in this District, conducting what is commonly known as a “bucket shop,” wherein all of the parties gamble on the rise and fall of stocks by means of quotations furnished by a detached wire unconnected with any stock exchange or any member of a stock exchange. It is sufficient, we submit, to know, that such places existed in the District of Columbia when the act in question was passed, and now exist therein. Besides, a member of the Washington Stock Exchange or other regularly organized stock exchange, it is fair to presume, has some financial standing, and is amenable to discipline for violation of its rules, or expulsion for grave business delinquencies. Surely a membership of a regularly organized stock exchange is of itself a reasonable distinction above “curbstone” and “bucket shop” brokerage. Regulation of the latter business can be justified and distinguished on grounds of public policy, and is within the police power. The purpose to protect the community is sufficient justification. Fulton v. District of Columbia, 2 App. D. 0. 431 — 436. 4. The imposition of a tax of $250 per annum on general brokers who are not members of a regularly organized stock exchange, and of $100 per annum on brokers who are members of such an exchange, constitutes a reasonable classification for purposes of taxation. Curry v.' District of Columbia, 14 App. D. 0. 423, and Hazel v. District of Columbia, 16 App D. C. 283, do not involve the authority of Congress under the 14th Amendment; but, if they do, the latter case is authority to show that a distinction is not arbitrary or unjust which divides the same business into two classes; the one respecting the cab service of a railroad corporation, and the other respecting the same service by individuals engaged in the same business. The 14th Amendment was not intended to compel the State to adopt an iron rule of equal taxation (Bell’s Gap B. Go. v. Pennsylvania, 134 IT. S. 233), or “cast-iron rule” (Florida G. & P. It. Co. v. Reynolds, 183 IT. S. 471). Thus, it is the right of the States to exempt certain corporations (Merchants’ & M. Nat. Bank v. Pennsylvania, 167 IT. S. 461), to tax inheritances in accordance with the degrees of relationship (Magounv. Illinois Trust & Sav. Go. 170 IT. S. 283), to tax business in accordance with the amount thereof (Qlark v. Titusville, 184 IT. S. 329), and to restrict the locality in which a business may be conducted (Barbier v. Gonnolly, 113 IT. S. 27). Kequiring a license for elevators and warehouses on a railroad right of way or depot does not deny to the proprietors the equal protection of the laws because a license is not required for elevators and warehouses differently located, public policy being a sufficient justification. Cargüí Go. v. State, 180 IT. S. 452. See also Capital Gity Dairy Go. v. State, 183 IT. S. 238; Missouri v. Lewis, 101 U. S. 22; Brown v. New Jersey, 175 U. S. 177. That a distinction respecting personal character and qualifications for business would not infringe the constitutional requirement was recognized in Yick Wo v. Hopkins, 118 IT. S. 356. See also American Sugar Ref. Go. v. Louisiana, 179 U. S. 89; Williams v. Fears, 179 IT. S. 270; People v. Roberts, 171 IT. S. 658; Merchants’ & M. Nat. Bank v. Pennsylvania, 167 IT. S. 463; Gotting v. Kansas Gity Stock Yards, 183 IT. S. 79, was a case not at all concerned with the subject of taxation. There the act of the State of Kansas regulating charges in public stock yards applied only to the defendant corporation, and to no other companies or corporations engaged in like business, and therefore has no application to the present case. The difficulty in drawing the line between reasonable and unreasonable classification is illustrated by two cases, neither of which arose under any taxing law, but both were occasioned by a dispute about taxable costs. The first case mentioned is that of R. Co. v. Filis, 165 IT. S. 159. In so far as these cases may be applicable to the present discussion, the latter case (Atchison, T. & S. F. R. Go. v. Matthews, 174 IT. S. 96), is favorable to our contention. 5. The 14th Amendment to the Federal Constitution is not applicable. The Supreme Court of the United States has held that the jurisdiction of Congress in matters of taxation in the District of Columbia is not controlled by the provisions of this amendment. Wight v. Davidson, 181 U. S. 384. The first ten Amendments to the Federal Constitution contain no restrictions •on the powers of the State, but were intended to operate solely on the Federal government. Brown v. New Jersey, 175 U. S. 172; ÁSlaughter Souse Cases, 16 Wall. 36. Prior to 1868 there was no guaranty in the Federal Constitution of the equal protection •of the laws as against state action. The provisions of the 14th Amendment are addressed in its prohibitions to the States. Unless, therefore, as it seems to us, the District of Columbia, for the purpose of taxation by Congress, can be considered to be a State, the statute here questioned is not unconstitutional. The District of Columbia has been held to be a State for some purposes, but for other purposes it has been declared not to be a State. Two of the illustrations are found in the following cases: According to the definitions of writers on general law, the District of Columbia, being a separate political community, is a State. De Ceofroy v. Biggs, 133 U. S. 258. But the District of Columbia is not a State within the meaning of the provision giving courts of the United States cognizance of controversies between citizens of different States. Sooe v. Jamisson, 166 U. S. 395.