Gaar Scott Company v. Shannon

In this suit against Shannon, secretary of state for Texas, for the recovery of taxes paid under protest, the plaintiff, Gaar, Scott, & Company, alleged that it is a corporation chartered by the laws of Indiana, in which state it has its principal place of business, and where it manufactures machinery; that in 1901 it paid the amount of franchise tax required of foreign corporations, and obtained from the state of Texas a permit to do business for ten years. This permit, it alleges, was a contract which could not be impaired, but, notwithstanding that fact, the legislature, in 1905, passed an act requiring foreign companies doing business in Texas to pay a still higher franchise tax, measured by their capital and surplus, and provided that if the same was not paid by May 1st, a penalty of 25 per cent should be added, and if not paid by July 1st, the permit to do business in the state should be forfeited 'without judicial ascertainment,' and the company deprived of the right to sue in the courts. It alleged that the secretary of state had mailed to the company a circular calling attention to the provisions of the act, and thereupon, and before May 1, 1905, and again before May 1, 1906, under the duress of this statute, the company had paid the tax demanded, under protest, and with written notice that it reserved the right to sue for the recovery of the amount exacted by an unconstitutional law.

The petition alleges that plaintiff 'only transacts an interstate business in the state of Texas in the sale of its manufactured products. That it employs at Dallas and Houston, Texas, agents who solicit and superintend the soliciting of orders for the goods manufactured by it at Richmond, Indiana, and that this applies to all goods sold by your petitioner in the state of Texas, and your petitioner further alleges that it was, at the time this permit was granted to do business in the state of Texas, and that it now is, and has been ever since said permit was granted to it, engaged in an interstate commerce business.'

The only prayer was for the recovery of the taxes paid for the years 1905 and 1906. The defendant's general demurrer was sustained. 52 Tex. Civ. App. 634, 115 S. W. 361.

Messrs.C. E. More, Almon W. Bulkley, and J. L. Patterson for plaintiff in error.

Mr. Jewel P. Lightfoot, Attorney General of Texas, and Mr. James D. Walthall, Assistant Attorney General, for defendant in error.

Statement by Mr. Justice Lamar:

Mr. Justice Lamar, after making the foregoing statement, delivered the opinion of the court: