For almost fifty years the Court was to wander through a maze of

conflicting formulas for valuing public service corporation property

only to emerge therefrom in 1944 at a point not very far removed from

Munn _v._ Illinois.[215] By holding, in 1942, in Federal Power

Commission _v._ Natural Gas Pipeline Co.,[216] that the "Constitution

does not bind rate-making bodies to the service of any single formula or

combination of formulas," and in 1944, in Federal Power Commission _v._

Hope Gas Co.,[217] that "it is the result reached not the method

employed which is controlling, * * * [that] it is not the theory but the

impact of the rate order which counts, [and that] if the total effect of

the rate order cannot be said to be unjust and unreasonable, judicial

inquiry under the Act is at an end," the Court, in effect, abdicated

from the position assumed in the Ben Avon Case.[218] Without

surrendering the judicial power to declare rates unconstitutional on

grounds of a substantive[219] deprivation of due process, the Court

announced that it would not overturn a result deemed by it to be just

simply because "the method employed [by a commission] to reach that

result may contain infirmities. * * * [A] Commission's order does not

become suspect by reason of the fact that it is challenged. It is the

product of expert judgment which carries a presumption of validity. And

he who would upset the rate order * * * carries the heavy burden of

making a convincing showing that it is invalid because it is unjust and

unreasonable in its consequences."[220]

In dispensing with the necessity of observing any of the formulas for

rate computation which previously had currency, the Court did not

undertake to devise, by way of substitution, any discernible guide to

aid it in ascertaining whether a so-called end result is unreasonable.

It did intimate that rate-making "involves a balancing of the investor

and consumer interests," which does not, however, "'insure that the

business shall produce net revenues,' * * * From the investor or company

point of view it is important that there be enough revenue not only for

operating expenses but also for the capital costs of the business. These

include service on the debt and dividends on the stock. * * * By that

standard the return to the equity owner should be commensurate with

returns on investments in other enterprises having corresponding risks.

That return, moreover, should be sufficient to assure confidence in the

financial integrity of the enterprise, so as to maintain its credit and

to attract capital."[221] Nevertheless, in the light of the court's

concentration on the reasonableness of the final result rather than on

the correctness of the methods employed to reach that result, it is

conceivable that methods or formulas, now discredited in whole or in

part, might continue to be observed by State commissions in drafting

rate orders that will prove to be justiciably sustainable.[222]

REGULATION OF PUBLIC UTILITIES (OTHER THAN RATES)

In General

By virtue of the nature of the business they carry on and the public's

interest in it, public utilities are subject, as to their local

business, to State regulation exerted either directly by legislature or

by duly authorized administrative bodies.[223] But inasmuch as their

property remains under the full protection of the Constitution, it

follows that whenever this power of regulation is exerted in what the

Court considers to be an "arbitrary" or "unreasonable" way and to be in

effect an infringement upon the right of ownership, such exertion of

power is void as repugnant to the due process clause.[224] Thus, a city

cannot take possession of the equipment of a street railway company, the

franchise of which has expired,[225] although it may subject said

company to the alternative of accepting an inadequate price for its

property or of ceasing operations and removing its property from the

streets.[226] Likewise, a city, which is desirous of establishing a

lighting system of its own, may not remove, without compensation, the

fixtures of a lighting company already occupying the streets under a

franchise;[227] but in erecting its own waterworks in competition with

that of a company which has no exclusive charter, a municipality

inflicts no unconstitutional deprivation.[228] Nor is the property of a

telegraph company illegally taken by a municipal ordinance which

demands, as a condition of the establishment of poles and conduits in

the city streets, that positions be reserved for the city's wires, which

shall be carried free of charge, and which provides for the moving of

the conduits, when necessary, at company expense.[229] And, the fact

that a State, by mere legislative or administrative fiat, cannot convert

a private carrier into a common carrier will not protect a foreign

corporation which has elected to enter a State, the Constitution and

laws of which require that it operate its local private pipe line as a

common carrier. Such foreign corporation is viewed as having waived its

constitutional right to be secure against imposition of conditions which

amount to a taking of property without due process of law.[230]

Compulsory Expenditures

The enforcement of uncompensated obedience to a regulation for the

public health and safety is not an unconstitutional taking of property

without due process of law.[231] Thus, where the applicable rule so

required at the time of the granting of its charter, a water company may

be compelled to furnish connections at its own expense to one residing

on an ungraded street in which it voluntarily laid its lines.[232]

However, if pipe and telephone lines are located on a right of way owned

by a pipe line company, the latter cannot, without a denial of due

process, be required to relocate such equipment at its own

expense;[233] but if its pipes are laid under city streets, a gas

company validly may be obligated to assume the cost of moving them to

accommodate a municipal drainage system.[234]

To require a turnpike company, as a condition of its taking tolls, to

keep its road in repair and to suspend collection thereof, conformably

to a State statute, until the road is put in good order, does not take

property without due process of law, notwithstanding the fact that

present patronage does not yield revenue sufficient to maintain the road

in proper condition.[235] Nor is a railroad bridge company

unconstitutionally deprived of its property when, in the absence of

proof that the addition will not yield a reasonable return, it is

ordered to widen its bridge by inclusion of a pathway for pedestrians

and a roadway for vehicles.[236]

Grade Crossings and Other Expenditures by Railroads.--When

railroads are required to repair a viaduct under which they

operate,[237] or to reconstruct a bridge or provide means for passing

water for drainage through their embankment,[238] or to sprinkle that

part of the street occupied by them,[239] their property is not taken

without due process of law. But if an underground cattle-pass is to be

constructed, not as a safety measure but as a means of sparing the

farmer the inconvenience attendant upon the use of an existing and

adequate grade crossing, collection of any part of the cost thereof from

a railroad is a prohibited taking for private use.[240] As to grade

crossing elimination, the rule is well established that the State may

exact from railroads the whole, or such part, of the cost thereof as it

deems appropriate, even though commercial highway users, who make no

contribution whatsoever, benefit from such improvements. But, the power

of the State in this respect is not unlimited. If its imposition is

"arbitrary" and "unreasonable" it may be set aside; but to reach that

conclusion, it may become necessary to consider certain relevant facts;

e.g., whether a new highway on which an underpass is to be constructed

is essential to the transportation needs of a community already well

served by a crossing equipped with devices which are adequate for safety

and convenience of a local traffic; whether the underpass is prescribed

as part of a national system of federal aid highways for the

furtherance of motor vehicle traffic, much of which is in direct

competition with the railroad; whether the increase in such traffic will

greatly decrease rail traffic and hence the revenue of the railroad;

whether the amount of taxes paid by the railroads of the State, part of

which is devoted to the upkeep of public highways used by motor

carriers, is disproportionately higher than the amount paid by motor

carriers.[241]

Compellable Services

The primary duty of a public utility being to serve on reasonable terms

all those who desire the service it renders, it follows that a company

cannot pick and choose and elect to serve only those portions of its

territory which it finds most profitable, leaving the remainder to get

along without the service which it alone is in a position to give.

Compelling a gas company to continue serving specified cities as long as

it continues to do business in other parts of the State entails

therefore no unconstitutional deprivation.[242] Likewise a railway may

be compelled to continue the service of a branch or part of a line

although the operation involves a loss.[243] But even though a utility,

as a condition of enjoyment of powers and privileges granted by the

State, is under a continuing obligation to provide reasonably adequate

service, and even though that obligation cannot be avoided merely

because performance occasions financial loss, yet if a company is at

liberty to surrender its franchise and discontinue operations, it cannot

be compelled to continue at a loss.[244]

Pursuant to the principle that the State may require railroads to

provide adequate facilities suitable for the convenience of the

communities served by them,[245] such carriers have been obligated to

establish stations at proper places for the convenience of patrons,[246]

to stop all their intrastate trains at county seats,[247] to run a

regular passenger train instead of a mixed passenger and freight

train,[248] to furnish passenger service on a branch line previously

devoted exclusively to carrying freight,[249] to restore a siding used

principally by a particular plant but available generally as a public

track, and to continue, even though not profitable by itself, a

sidetrack[250] as well as the upkeep of a switch-track leading from its

main line to industrial plants.[251] However, a statute requiring a

railroad without indemnification to install switches on the application

of owners of grain elevators erected on its right of way was held

void.[252] Whether a State order requiring transportation service is to

be viewed as reasonable may necessitate consideration of such facts as

the likelihood that pecuniary loss will result to the carrier, the

nature, extent and productiveness of the carrier's intrastate business,

the character of the service required, the public need for it, and its

effect upon service already being rendered.[253] If the service required

has no substantial relation to transportation, it will be deemed

arbitrary and void, as in the case of an order requiring railroads to

maintain cattle scales to facilitate trading in cattle,[254] and of a

prohibition against letting down an unengaged upper berth while the

lower berth was occupied.[255]

Intercompany Railway Service.--"Since the decision in Wisconsin

M. & P.R. Co. _v._ Jacobson, 179 U.S. 287 (1900), there can be no doubt

of the power of a State, acting through an administrative body, to

require railroad companies to make track connections. But manifestly

that does not mean that a Commission may compel them to build branch

lines, so as to connect roads lying at a distance from each other; nor

does it mean that they may be required to make connections at every

point where their tracks come close together in city, town and country,

regardless of the amount of business to be done, or the number of

persons who may utilize the connection if built. The question in each

case must be determined in the light of all the facts, and with a just

regard to the advantage to be derived by the public and the expense to

be incurred by the carrier. * * * If the order involves the use of

property needed in the discharge of those duties which the carrier is

bound to perform, then, upon proof of the necessity, the order will be

granted, even though 'the furnishing of such necessary facilities may

occasion an incidental pecuniary loss.' * * * Where, however, the

proceeding is brought to compel a carrier to furnish a facility not

included within its absolute duties, the question of expense is of more

controlling importance. In determining the reasonableness of such an

order the Court must consider all the facts--the places and persons

interested, the volume of business to be affected, the saving in time

and expense to the shipper, as against the cost and loss to the

carrier."[256]

Although a carrier is under a duty to accept goods tendered at its

station, it cannot be required, upon payment simply for the service of

carriage, to accept cars offered at an arbitrary connection point near

its terminus by a competing road seeking to reach and use the former's

terminal facilities. Nor may a carrier be required to deliver its cars

to connecting carriers without adequate protection from loss or undue

detention or compensation for their use.[257] But a carrier may be

compelled to interchange its freight cars with other carriers under

reasonable terms,[258] and to accept, for reshipment over its lines to

points within the State, cars already loaded and in suitable

condition.[259]

Intercompany Discriminatory Railroad Service Charges.--Due

process is not denied when two carriers, who wholly own and dominate a

small connecting railroad, are prohibited from exacting higher charges

from shippers accepting delivery over said connecting road than are

collected from shippers taking delivery at the terminals of said

carriers.[260] Nor is it "unreasonable" or "arbitrary" to require a

railroad to desist from demanding freight in advance on merchandise

received from one carrier while it accepts merchandise of the same

character at the same point from another carrier without such

prepayment.[261]

Safety Regulations Applicable to Railroads

The following regulations with reference to railroads have been upheld:

a prohibition against operation on certain streets,[262] restrictions on

speed, operations, etc., in business sections,[263] requirement of

construction of a sidewalk across a right of way,[264] or removal of a

track crossing a thoroughfare,[265] compelling the presence of a flagman

at a crossing notwithstanding that automatic device might be cheaper and

better,[266] compulsory examination of employees for color

blindness,[267] full crews on certain trains,[268] specification of a

type of locomotive headlight,[269] safety appliance regulations,[270]

and a prohibition on the heating of passenger cars from stoves or

furnaces inside or suspended from the cars.[271]

Liabilities and Penalties

A statute making the initial carrier[272] or the connecting or

delivering carrier,[273] liable to the shipper for the nondelivery of

goods is not unconstitutional; nor is a law which provides that a

railroad shall be responsible in damages to the owner of property

injured by fire communicated by its locomotive engines and which grants

the railroad an insurable interest in such property along its route and

authority to procure insurance against such liability.[274] Equally

consistent with the requirements of due process are the following two

enactments; the first, imposing on all common carriers a penalty for

failure to settle within a reasonable specified period claims for

freight lost or damaged in shipment and conditioning payment of that

penalty upon recovery by the claimant in subsequent suit of more than

the amount tendered,[275] and the second, levying double damages and an

attorney's fee upon a railroad for failure to pay within a reasonable

time after demand the amount claimed by an owner for stock injured or

killed. However, only in the event that the application of the latter

statute is limited to cases where the plaintiff has not demanded more

than he recovered in court will its constitutionality be upheld;[276]

but when the penalty allowed thereunder is exacted in a case in which

the plaintiff demanded more than he sued for and recovered, a defendant

railroad is arbitrarily deprived of its property without due

process.[277] The requirements of fair play are similarly violated by a

statute which, by imposing double liability for failure to pay the full

amount of damages within 60 days after notice, unless the claimant

recovers less than the amount offered in settlement, in effect penalizes

a carrier for guessing incorrectly what a jury would award.[278]

To penalize a carrier which has collected transportation charges in

excess of established maximum rates by permitting a person wronged to

sue for and collect as liquidated damages $500 plus a reasonable

attorney's fee is to subject the carrier to a requirement so

unreasonable as to be repugnant to the due process clause; for such

liability is not only disproportionate to actual damages, but is being

exacted under conditions which do not afford the carrier an adequate

opportunity for safely testing the validity of the rates before any

liability for the penalty attaches.[279] Where it appears, however, that

the carrier had an opportunity to test the reasonableness of the rate,

and that its deviation therefrom, by collection of an overcharge, did

not proceed from any belief that the rate was invalid, the validity of

the penalty imposed is not to be tested by comparison with the amount of

the overcharge. Inasmuch as it is imposed as punishment for violation of

a law, the legislature may adjust its amount to the public wrong rather

than the private injury, and the only limitation which the Fourteenth

Amendment imposes is that the penalty prescribed shall not be "so severe

and oppressive as to be wholly disproportioned to the offense and

obviously unreasonable." In accordance with the latter standard, a

statute granting an aggrieved passenger (who recovered $100 for an

overcharge of 60 cents) the right to recover in a civil suit not less

than $50 nor more than $300 plus costs and a reasonable attorney's fee

is constitutional.[280]

For like reasons, a statute requiring railroads to erect and maintain

fences and cattle guards, and making them liable in double amount of

damages for their failure to so maintain them is not

unconstitutional.[281] Nor is a Nebraska law which establishes a minimum

rate of speed for delivery of livestock and which requires every carrier

violating the same to pay the owner of such livestock the sum of $10 per

car per hour.[282] On the other hand, when a telephone company, in

accordance with its established and uncontested regulations, suspends

the service of a patron in arrears, infliction upon it of penalties

aggregating $3,600, levied pursuant to a statute imposing fines of $100

per day for alleged discrimination, is so plainly arbitrary and

oppressive as to take property without due process.[283]

REGULATION OF CORPORATIONS, BUSINESS, PROFESSIONS, AND TRADES

Domestic Corporations

Although a corporation is the creation of a State which reserves the

power to amend or repeal corporate charters, the retention of such power

will not support the taking of the corporate property without due

process of law. To terminate the life of a corporation by annulling its

charter is not to confiscate its property but to turn it over to the

stockholders after liquidation.[284] Conversely, unreasonable

regulation, as by the imposition of confiscatory rates, although it

ostensibly falls short of termination of the corporate existence,

entails an invalid deprivation.[285]

Foreign Corporations

Foreign corporations also enjoy the protection which the due process

clause affords; but such protection does not entitle them to enter

another State or, once having been permitted to enter, to continue to do

business therein.[286] The power of a State to exclude or to expel a

foreign corporation being almost plenary as long as interstate commerce

is not directly affected, it follows that a State may subject such entry

or continued operation to conditions. Thus, a State law which requires

the filing of articles with a local official as a condition prerequisite

to the validity of conveyances of local realty to such corporations is

not violative of due process.[287] Neither is a State statute which

requires a foreign insurance company, as part of the price of entry, to

maintain reserves computed by a specific percentage of premiums,

including membership fees, received in all States.[288] Similarly a

statute requiring corporations to dispose of farm land not necessary to

the conduct of their business is not invalid as applied to a foreign

hospital corporation, even though the latter, because of changed

economic conditions, is unable to recoup its original investment from

the sale which it is thus compelled to make.[289]

Business: In General

"The Constitution does not guarantee the unrestricted privilege to

engage in a business or to conduct it as one pleases. Certain kinds of

business may be prohibited; and the right to conduct a business, or to

pursue a calling, may be conditioned. * * * Statutes prescribing the

terms upon which those conducting certain businesses may contract, or

imposing terms if they do enter into agreements, are within the State's

competency."[290]

Laws Prohibiting Trusts, Discrimination, Restraint of Trade.--A

State act prohibiting trusts, etc., is not in conflict with the

Fourteenth Amendment as to a person combining with others to pool and

fix prices, divide net earnings, and prevent competition in the purchase

and sale of grain.[291] Nor does the Fourteenth Amendment preclude a

State from adopting a policy against all combinations of competing

corporations and enforcing it even against combinations which may have

been induced by good intentions and from which benefit and not injury

may have resulted.[292] Nor is freedom of contract unconstitutionally

abridged by a statute which prohibits retail lumber dealers from uniting

in an agreement not to purchase materials from wholesalers selling

directly to consumers in the retailers' localities,[293] nor by a law

punishing combinations for "maliciously" injuring a rival in his

business profession or trade.[294] Similarly, a prohibition of unfair

discrimination by any one engaged in the manufacture or distribution of

a commodity in general use for the purpose of intentionally destroying

competition of any regular dealer in such commodity by making sales

thereof at a lower rate in one section of the State than in another,

after equalization for distance, effects no invalid deprivation of

property or interference with freedom of contract.[295] Liberty of

contract is infringed, however, by a law punishing dealers in cream who

pay higher prices in one locality than in another. Although high bidding

by strong buyers tends toward monopoly, the statute has no reasonable

relation to such bidding, but infringes private rights whose exercise is

not shown to produce evil consequences.[296] A law sanctioning contracts

requiring that commodities identified by trade mark will not be sold by

the vendee or subsequent vendees except at prices stipulated by the

original vendor does not violate the due process clause.[297]

Statutes Preventing Fraud in Sale of Goods.--Laws and

ordinances tending to prevent frauds and requiring honest weights and

measures in the sale of articles of general consumption have long been

considered lawful exertions of the police power.[298] Thus, a

prohibition on the issuance by other than an authorized weigher of any

weight certificate for grain weighed at any warehouse or elevator where

State weighers are stationed, or to charge for such weighing, is not

unconstitutional.[299] Nor is a municipal ordinance requiring that

commodities sold in load lots by weight be weighed by a public

weigh-master within the city invalid as applied to one delivering coal

from State-tested scales at a mine outside the city.[300] A statute

requiring merchants to record sales in bulk not made in the regular

course of business is also within the police power.[301]

Similarly, the power of a State to prescribe standard containers to

protect buyers from deception as well as to facilitate trading and to

preserve the condition of the merchandise is not open to question.

Accordingly, an administrative order issued pursuant to an authorizing

statute and prescribing the dimensions, form, and capacity of containers

for strawberries and raspberries is not arbitrary inasmuch as the form

and dimensions bore a reasonable relation to the protection of the

buyers and the preservation in transit of the fruit.[302] Similarly, an

ordinance fixing standard sizes of bread loaves and prohibiting the sale

of other sizes is not unconstitutional.[303] However, by a case decided

in 1924, a "tolerance" of only two ounces in excess of the minimum

weight of a loaf of bread is unreasonable when it is impossible to

manufacture good bread without frequently exceeding the prescribed

tolerance and is consequently unconstitutional;[304] but by one decided

ten years later, regulations issued in furtherance of a statutory

authorization which impose a rate of tolerance not to exceed three

ounces to a pound of bread and requiring that the bread maintain the

statutory minimum weight for not less than 12 hours after cooling are

constitutional.[305] Likewise a law requiring that lard not sold in bulk

should be put upon in containers holding one, three, or five pounds

weight, or some whole multiple of these numbers, does not deprive

sellers of their property without the process of law.[306]

The right of a manufacturer to maintain secrecy as to his compounds and

processes must be held subject to the right of the State, in the

exercise of the police power and in the promotion of fair dealing, to

require that the nature of the product be fairly set forth.[307] Nor

does a statute providing that the purchaser of harvesting or threshing

machinery for his own use shall have a reasonable time after delivery

for inspecting and testing it, and permitting recission of the contract

if the machinery does not prove reasonably adequate, and further

declaring any agreement contrary to its provisions to be against public

policy and void, does not violate the due process clause.[308]

Blue Sky Laws; Laws Regulating Boards of Trade, Etc.--In the

exercise of its power to prevent fraud and imposition, a State may

regulate trading in securities within its borders, require a license of

those engaging in such dealing, make issuance of a license dependent on

a public officer's being satisfied of the good repute of the applicants,

and permit him, subject to judicial review of his findings, to revoke

the same.[309] A State may forbid the giving of options to sell or buy

at a future time any grain or other commodity.[310] It may also forbid

sales on margin for future delivery;[311] and may prohibit the keeping

of places where stocks, grain, etc., are sold but not paid for at the

time, unless a record of the same be made and a stamp tax paid.[312]

Making criminal any deduction by the purchaser from the actual weight of

grain, hay, seed, or coal under a claim of right by reason of any custom

or rule of a board of trade is a valid exercise of the police power and

does not deprive the purchaser of his property without due process of

law, nor interfere with his liberty of contract.[313]

Trading Stamps.--A prohibitive license fee upon the use of

trading stamps is not unconstitutional.[314]

Banking

The Fourteenth Amendment does not deny to States the power to forbid a

business simply because it was permitted at common law; and therefore,

where public interests so demand, a State may place the banking business

under legislative control and prohibit it except under prescribed

conditions. Accordingly, a statute subjecting State banks to assessments

for a depositors' guaranty fund is within the police power of the States

and does not deprive the banks of property without due process of

law.[315] Also, a law requiring savings banks to turn over to the State

deposits inactive for thirty years (when the depositor cannot be found),

with provision for payment to the depositor or his heirs on

establishment of the right, does not effect an invalid taking of the

property of said banks; nor does a Kentucky statute requiring banks to

turn over to the protective custody of that State deposits that have

been inactive ten or twenty-five years (depending on the nature of the

deposit).[316]

The constitutional rights of creditors in an insolvent bank in the hands

of liquidators are not violated by a later statute permitting reopening

under a reorganization plan approved by the Court, the liquidating

officer, and by three-fourths of the creditors.[317] Similarly, a

Federal Reserve bank is not unlawfully deprived of business rights of

liberty of contract by a law which allows State banks to pay checks in

exchange when presented by or through a Federal Reserve bank, post

office, or express company and when not made payable otherwise by a

maker.[318]

Loans, Interest, Assignments

In fixing maximum rates of interest on money loaned within its borders,

a State is acting clearly within its police power; and the details are

within legislative discretion if not unreasonably or arbitrarily

exercised.[319] Equally valid as an exercise of a State's police power

is a requirement that assignments of future wages as security for debts

of less than $200, to be valid, must be accepted in writing by the

employer, consented to by the assignors, and filed in a public office.

Such a requirement deprives neither the borrower nor the lender of his

property without due process of law.[320]

Insurance

The relations generally of those engaged in the insurance business[321]

as well as the business itself have been peculiarly subject to

supervision and control.[322] The State may fix insurance rates and

regulate the compensation of insurance agents.[323] It may impose a fine

on "any person 'who shall act in any manner in the negotiation or

transaction of unlawful insurance * * * with a foreign insurance company

not admitted to do business [within said State].'"[324] It may forbid

life insurance companies and their agents to engage in the undertaking

business and undertakers to serve as life insurance agents.[325] Nor

does a Virginia law which forbids the making of contracts of casualty or

surety insurance, by companies authorized to do business therein, except

through registered agents, which requires that such contracts applicable

to persons or property in the State be countersigned by a registered

local agent, and which prohibits such agents from sharing more than 50%

of a commission with a nonresident broker, deprive authorized foreign

casualty and surety insurers of due process.[326] And just as all banks

may be required to contribute to a depositors' guaranty fund, so may all

automobile liability insurers be required to submit to the equitable

apportionment among them of applicants who are in good faith entitled

to, but are financially unable to, procure such insurance through

ordinary methods.[327]

However, a statute which prohibits the assured from contracting directly

with a marine insurance company outside the State for coverage of

property within the State is invalid as a deprivation of liberty without

due process of law.[328] For the same reason, a State may not prevent a

citizen from concluding with a foreign life insurance company at its

home office a policy loan agreement whereby the policy of his life is

pledged as collateral security for a cash loan to become due upon

default in payment of premiums, in which case the entire policy reserve

might be applied to discharge the indebtedness. Authority to subject

such an agreement to the conflicting provisions of domestic law is not

deducible from the power of a State to license a foreign insurance

company as a condition of its doing business therein.[329]

A stipulation that policies of hail insurance shall take effect and

become binding twenty-four hours after the hour in which an application

is taken and further requiring notice by telegram of rejection of an

application is not invalid.[330] Nor is any arbitrary restraint upon

their liberty of contract imposed upon surety companies by a statute

providing that any bond executed after its enactment for the faithful

performance of a building contract shall inure to the benefit of

materialmen and laborers, notwithstanding any provision of the bond to

the contrary.[331] Likewise constitutional is a law requiring that a

policy, indemnifying a motor vehicle owner against liability to persons

injured through negligent operation, shall provide that bankruptcy of

the insured shall not release the insurer from liability to an injured

person.[332]

If fire insurance companies, in case of total loss, are compelled to pay

the amount for which the property was insured, less depreciation between

the time of issuing the policy and the time of the loss, such insurers

are not deprived of their property without due process of law.[333]

Moreover, even though it has its attorney-in-fact located in Illinois,

signs all its contracts there, and forwards therefrom all checks in

payment of losses, a reciprocal insurance association, if it covers real

property located in New York, may be compelled to comply with New York

regulations which require maintenance of an office in that State and the

countersigning of policies by an agent resident therein.[334] Also, to

discourage monopolies and to encourage competition in the matter of

rates, a State constitutionally may impose on all fire insurance

companies connected with a tariff association fixing rates a liability

or penalty to be collected by the insured of 25% in excess of actual

loss or damage, stipulations in the insurance contract to the contrary

notwithstanding.[335]

A State statute by which a life insurance company, if it fails to pay

upon demand the amount due under a policy after death of the insured, is

made liable in addition for fixed damages, reasonable in amount, and for

a reasonable attorney's fee is not unconstitutional even though payment

is resisted in good faith and upon reasonable grounds.[336] It is also

proper by law to cut off a defense by a life insurance company based on

false and fraudulent statements in the application, unless the matter

misrepresented actually contributed to the death of the insured.[337] A

provision that suicide, unless contemplated when the application for a

policy was made, shall be no defense is equally valid.[338] When a

cooperative life insurance association is reorganized so as to permit it

to do a life insurance business of every kind, policyholders are not

deprived of their property without due process of law.[339] Similarly,

when the method of liquidation provided by a plan of rehabilitation of a

mutual life insurance company is as favorable to dissenting

policyholders as would have been the sale of assets and pro rata

distribution to all creditors, the dissenters are unable to show any

taking without due process. Dissenters have no constitutional right to a

particular form of remedy.[340]

Professions, Trades, Occupations

Employment Agencies.--An act imposing license fees for

operating such agencies and prohibiting them from sending applicants to

an employer who has not applied for labor does not deny due process of

law.[341]

Pharmacies.--A Pennsylvania law forbidding a corporation to own

therein any drug store, excepting those owned and operated at the time

of the enactment, unless all its stockholders are licensed pharmacists,

violates the due process clause as applied to a foreign corporation, all

of whose stockholders are not pharmacists, which sought to extend its

business in Pennsylvania by acquiring and operating therein two

additional stores.[342]

Miscellaneous Business, Professions, Trades, and

Occupations.--The practice of medicine, using this word in its most

general sense, has long been the subject of regulation;[343] and in

pursuance of its power a State may exclude osteopathic physicians from

hospitals maintained by it or its municipalities;[344] and may regulate

the practice of dentistry by prescribing qualifications that are

reasonably necessary, requiring licenses, establishing a supervisory

administrative board, and by prohibiting certain advertising regardless

of its truthfulness.[345] But while statutes requiring pilots to be

licensed[346] and railroad engineers to pass color blindness tests[347]

have been sustained, an act making it a misdemeanor for a person to act

as a railway passenger conductor without having had two years'

experience as a freight conductor or brakeman is invalid.[348]

Legislation has been upheld which regulated or required licenses for

admissions to places of amusement,[349] grain elevators,[350] detective

agencies,[351] sale of cigarettes,[352] or cosmetics,[353] and the

resale of theatre tickets;[354] or which absolutely forbade the

advertising of cigarettes,[355] or the use of a representation of the

United States flag on an advertising medium,[356] the solicitation by a

layman of business of collecting and adjusting claims,[357] the keeping

of private markets within six squares of a public market,[358] the

keeping of billiard halls except in hotels,[359] or the purchase by junk

dealers of wire, copper, etc., without ascertaining the sellers' right

to sell.[360]

PROTECTION OF RESOURCES OF THE STATE

Oil and Gas

To prevent waste production may be prorated; the prohibition of wasteful

conduct, whether primarily in behalf of the owners of gas in a common

reservoir or because of the public interests involved is consistent with

the Constitution.[361] Thus a statute which defines waste as including,

in addition to its ordinary meaning, economic waste, surface waste, and

waste incident to production in excess of transportation or marketing

facilities or reasonable market demands, and which provides that

whenever full production from a common source of supply can be obtained

only under conditions constituting waste, a producer may take only such

proportion of all that may be produced from such common source without

waste, as the production of his wells bears to the total production of

such common source, is not repugnant to the due process clause.[362] But

whether a system of proration based on hourly potential is as fair as

one based upon estimated recoverable reserves or some other combination

of factors is a question for administrative and not judicial judgment.

In a domain of knowledge still shifting and growing, and in a field

where judgment is necessarily beset by the necessity of inferences

bordering on the conjecture even for those learned in the art, it has

been held to be presumptuous for courts, on the basis of conflicting

expert testimony, to nullify an oil proration order, promulgated by an

administrative commission in execution of a regulatory scheme intended

to conserve a State's oil resources, as violative of due process.[363]

On the other hand, where the evidence showed that an order, purporting

to limit daily total production of a gas field and to prorate the

allowed production among several wells, had for its real purpose, not

the prevention of waste nor the undue drainage from the reserves of

other well owners, but rather the compelling of pipe line owners to

furnish a market to those who had no pipe line connections, the order

was held void as a taking of private property for private benefit.[364]

As authorized by statute the Oklahoma Corporation Commission, finding

that existing low field prices for gas were resulting in economic and

physical waste, issued orders fixing a minimum price for natural gas and

requiring the Cities Service Company to take gas ratably from another

producer in the same field at the dictated price. The orders were

sustained by the Court as conservation measures.[365]

Even though carbon black is more valuable than the gas from which it is

extracted, and notwithstanding a resulting loss of investment in a plant

for the manufacture of carbon black, a State, in the exercise of its

police power, may forbid the use of natural gas for products, such as

carbon black, in the production of which such gas is burned without

fully utilizing for other manufacturing or domestic purposes the heat

therein contained.[366] Likewise, for the purpose of regulating and

adjusting coexisting rights of surface owners to underlying oil and gas,

it is within the power of a State to prohibit the operators of wells

from allowing natural gas, not conveniently necessary for other

purposes, to come to the surface without its lifting power having been

utilized to produce the greatest quantity of oil in proportion.[367]

Protection of Property Damaged by Mining or Drilling of Wells

An ordinance conditioning the right to drill for oil and gas within the

city limits upon the filing of a bond in the sum of $200,000 for each

well, to secure payment of damages from injuries to any persons or

property resulting from the drilling operation, or maintenance of any

well or structures appurtenant thereto, is consistent with due process

of law, and is not rendered unreasonable by the requirement that the

bond be executed, not by personal sureties, but by a bonding company

authorized to do business in the State.[368] On the other hand, a

Pennsylvania statute, which forbade the mining of coal under private

dwellings or streets or cities by a grantor that had reserved the right

to mine, was viewed as restricting the use of private property too much,

and hence as a "taking" without due process of law.[369]

Water

A statute making it unlawful for a riparian owner to divert water into

another State does not deprive him of property without due process of

law. "The constitutional power of the State to insist that its natural

advantages shall remain unimpaired by its citizens is not dependent upon

any nice estimate of the extent of present use or speculation as to

future needs. * * * What it has it may keep and give no one a reason for

its will."[370]

Apple and Citrus Fruit Industries

A statute requiring the destruction of cedar trees to avoid the

infecting with cedar rust of apple orchards within the vicinity of two

miles is not unreasonable, notwithstanding the absence of provision for

compensation for the trees thus removed or the decrease in the market

value of realty caused by their destruction. Apple growing being one of

the principal agricultural pursuits in Virginia and the value of cedar

trees throughout that State being small as compared with that of apple

orchards, the State was constitutionally competent to decide upon the

destruction of one class of property in order to save another which, in

the judgment of its legislature, is of greater value to the public.[371]

With a similar object in view; namely, to protect the reputation of one

of its major industries, Florida was held to possess constitutional

authority to penalize the delivery for shipment in interstate commerce

of citrus fruits so immature as to be unfit for consumption.[372]

Fish and Game

Over fish found within its waters, and over wild game, the State has

supreme control.[373] It may regulate or prohibit fishing and hunting

within its limits;[374] and for the effective enforcement of such

restrictions, it may forbid the possession within its borders of special

instruments of violations, such as nets, traps, and seines, regardless

of the time of acquisition or the protestations of lawful intentions on

the part of a particular possessor.[375] To conserve for food fish found

within its waters, a State constitutionally may provide that a reduction

plant, processing fish for commercial purposes, may not accept more fish

than can be used without deterioration, waste, or spoilage; and, as a

shield against the covert depletion of its local supply, may render such

restriction applicable to fish brought into the State from the

outside.[376] Likewise, it is within the power of a State to forbid the

transportation outside the State of game killed therein;[377] and to

make illegal possession during the closed season even of game imported

from abroad.[378]

LIMITATIONS ON OWNERSHIP

Zoning, Building Lines, Etc.

By virtue of their possession of the police power, States and their

municipal subdivisions may declare that in particular circumstances and

in particular localities specific businesses, which are not nuisances

_per se_ are to be deemed nuisances in fact and in law.[379]

Consequently when, by an ordinance enacted in good faith, a

municipality prohibited brickmaking in a designated area, the land of a

brickmaker in said area was not taken without due process of law,

although such land contained valuable clay deposits which could not

profitably be removed for processing elsewhere, was far more valuable

for brickmaking than for any other purpose, and had been acquired by him

before it was annexed to the municipality, and had long been used as a

brickyard.[380] On the same basis laws have been upheld which restricted

the location of dairy or cow stables,[381] of livery stables,[382] of

the grazing of sheep near habitations.[383] Also a State may declare the

emission of dense smoke in cities or populous neighborhoods a nuisance

and restrain it; and regulations to that effect are not invalid even

though they affect the use of property or subject the owner to the

expense of complying with their terms.[384]

Not only may the height of buildings be regulated;[385] but it also is

permissible to create a residential district in a village and to exclude

therefrom apartment houses, retail stores, and billboards. Before

holding unconstitutional an ordinance establishing such a district, it

must be shown to be clearly arbitrary and unreasonable and to have no

substantial relation to the public health, safety, or general

welfare.[386] On the other hand, erection of a home for the aged within

a residential district cannot be made to depend upon the consent of

owners of two-thirds of the property within 400 feet of the site

thereof;[387] nor may the interests of nonassenting property owners be

ignored by an ordinance which requires municipal officers to establish

building lines in a block on request of owners of two-thirds of the

property therein.[388] But ordinances requiring lot owners, when

constructing new buildings, to set them back a certain distance from the

street lines is constitutional unless clearly arbitrary or

unreasonable.[389] However, colored persons cannot be forbidden to

occupy houses in blocks where the greater number of houses are occupied

by white persons, and vice versa. Such a prohibition, the practical

effect of which is to prevent the sale of lots in such blocks to colored

persons, violates the constitutional prohibitions against interference

with property rights except by due process of laws; and cannot be

sustained on the ground that it will promote public peace by preventing

race conflicts.[390]

Safety Regulations

As a legitimate exercise of the police power calculated to promote

public safety and diminish fire hazards, municipal ordinances have been

sustained which prohibit the storage of gasoline within 300 feet of any

dwelling,[391] or require that all tanks with a capacity of more than

ten gallons, used for the storage of gasoline, be buried at least three

feet under ground,[392] or which prohibit washing and ironing in public

laundries and wash houses, within defined territorial limits, from 10

p.m. to 6 a.m.[393] Equally sanctioned by the Fourteenth Amendment is

the demolition and removal by cities of wooden buildings erected within

defined fire limits contrary to regulations in force at the time.[394]

Nor does construction of property in full compliance with existing laws

confer upon the owner an immunity against exercise of the police power.

Thus, a 1944 amendment to a Multiple Dwelling Law, requiring

installation of automatic sprinklers in lodginghouses of nonfireproof

construction erected prior to said enactment, does not, as applied to a

lodginghouse constructed in 1940 in conformity with all laws then

applicable, deprive the owner thereof of due process, even though

compliance entails an expenditure of $7,500 on a property worth only

$25,000.[395]

THE POLICE POWER

General

According to settled principles, the police power of a State must be

held to embrace the authority not only to enact directly quarantine[396]

and health laws of every description but also to vest in municipal

subdivisions a capacity to safeguard by appropriate means public health,

safety and morals. The manner in which this objective is to be

accomplished is within the discretion of the State and its localities,

subject only to the condition that no regulation adopted by either shall

contravene the Constitution or infringe any right granted or secured by

that instrument.[397]

Health Measures

Protection of Water Supply.--A State may require the removal of

timber refuse from the vicinity of a watershed for a municipal water

supply to prevent the spread of fire and consequent damage to such

watershed.[398]

Garbage.--An ordinance for cremation of garbage and refuse at a

designated place as a means for the protection of the public health is

not a taking of private property without just compensation even though

such garbage and refuse may have some elements of value for certain

purposes.[399]

Sewers.--Compelling property owners to connect with a publicly

maintained system of sewers and enforcing that duty by criminal

penalties does not violate the due process clause.[400]

Food and Drugs, Etc.--"The power of the State to * * * prevent

the production within its borders of impure foods, unfit for use, and

such articles as would spread disease and pestilence, is well

established";[401] and statutes forbidding or regulating the manufacture

of oleomargarine have been upheld as a valid exercise of such

power.[402] For the same reasons, statutes ordering the destruction of

unsafe and unwholesome food[403], prohibiting the sale and authorizing

confiscation of impure milk[404] have been sustained, notwithstanding

that such articles had a value for purposes other than food. There also

can be no question of the authority of the State, in the interest of

public health and welfare, to forbid the sale of drugs by itinerant

vendors,[405] or the sale of spectacles by an establishment not in

charge of a physician or optometrist.[406] Nor is it any longer possible

to doubt the validity of State regulations pertaining to the

administration, sale, prescription, and use of dangerous and

habit-forming drugs.[407]

Milk.--Equally valid as police power regulations are laws

forbidding the sale of ice cream not containing a reasonable proportion

of butter fat,[408] or of condensed milk made from skimmed milk rather

than whole milk,[409] or of food preservatives containing boric

acid.[410] Similarly, a statute which prohibits the sale of milk to

which has been added any fat or oil other than milk fat, and which has,

as one of its purposes, the prevention of fraud and deception in the

sale of milk products, does not, when applied to "filled milk" having

the taste, consistency, and appearance of whole milk products, violate

the due process clause. Filled milk is inferior to whole milk in its

nutritional content; and cannot be served to children as a substitute

for whole milk without producing a dietary deficiency.[411] However, a

statute forbidding the use of shoddy, even when sterilized, was held to

be arbitrary and therefore invalid.[412]

Protection of the Public Morals

Gambling and Lotteries.--Unless effecting a clear, unmistakable

infringement of rights securely by fundamental law, legislation

suppressing gambling will be upheld by the Court as concededly within

the police power of a State.[413] Accordingly, a State may validly make

a judgment against those winning money a lien upon the property in which

gambling is conducted with the owner's knowledge and consent.[414] For

the same reason, lotteries, including those operated under a legislative

grant, may be forbidden, irrespective of any particular equities.[415]

Red Light Districts.--An ordinance prescribing limits in a city

outside of which no woman of lewd character shall dwell does not deprive

persons owning or occupying property in or adjacent to said limits of

any rights protected by the Constitution.[416]

Sunday Blue Laws.--The Supreme Court has uniformly recognized

State laws relating to the observance of Sunday as representing a

legitimate exercise of the police power. Thus, a law forbidding the

keeping open of barber shops on Sunday is constitutional.[417]

Intoxicating Liquor.--"* * * on account of their well-known

noxious qualities and the extraordinary evils shown by experience to be

consequent upon their use, a State * * * [is competent] to prohibit

[absolutely the] manufacture, gift, purchase, sale, or transportation of

intoxicating liquors within its borders * * *."[418] And to implement

such prohibition, a State has the power to declare that places where

liquor is manufactured or kept shall be deemed common nuisances;[419]

and even to subject an innocent owner to the forfeiture of his property

for the acts of a wrongdoer.[420]

Regulation of Motor Vehicles and Carriers

The highways of a State are public property, the primary and preferred

use of which is for private purposes; their uses for purposes of gain

may generally be prohibited by the legislature or conditioned as it sees

fit.[421] In limiting the use of its highways for intrastate

transportation for hire, a State reasonably may provide that carriers

who have furnished adequate, responsible, and continuous service over a

given route from a specified date in the past shall be entitled to

licenses as a matter of right, but that the licensing of those whose

service over the route began later than the date specified shall depend

upon public convenience and necessity.[422] To require private contract

carriers for hire to obtain a certificate of convenience and necessity,

which is not granted if the service of common carriers is impaired

thereby, and to fix minimum rates applicable thereto which are not less

than those prescribed for common carriers is valid as a means of

conserving highways;[423] but any attempt to convert private carriers

into common carriers,[424] or to subject them to the burdens and

regulations of common carriers, without expressly declaring them to be

common carriers, is violative of due process.[425] In the absence of

legislation by Congress a State may, in protection of the public safety,

deny an interstate motor carrier the use of an already congested

highway.[426]

In exercising its authority over its highways, on the other hand, a

State is limited not merely to the raising of revenue for maintenance

and reconstruction, or to regulations as to the manner in which vehicles

shall be operated, but may also prevent the wear and hazards due to

excessive size of vehicles and weight of load. Accordingly, a statute

limiting to 7,000 pounds the net load permissible for trucks is not

unreasonable.[427] No less constitutional is a municipal traffic

regulation which forbids the operation in the streets of any

advertising vehicle, excepting vehicles displaying business notices or

advertisements of the products of the owner and not used mainly for

advertising; and such regulation may be validly enforced to prevent an

express company from selling advertising space on the outside of its

trucks. Inasmuch as it is the judgment of local authorities that such

advertising affects public safety by distracting drivers and

pedestrians, courts are unable to hold otherwise in the absence of

evidence refuting that conclusion.[428]

Any appropriate means adopted to insure compliance and care on the part

of licensees and to protect other highway users being consonant with due

process, a State may also provide that one, against whom a judgment is

rendered for negligent operation and who fails to pay it within a

designated time, shall have his license and registration suspended for

three years, unless, in the meantime, the judgment is satisfied or

discharged.[429] By the same token a nonresident owner who loaned his

automobile in another State, by the law of which he was immune from

liability for the borrower's negligence, and who was not in the State at

the time of an accident, is not subjected to any unconstitutional

deprivation by a law thereof, imposing liability on the owner for the

negligence of one driving the car with the owner's permission.[430]

Compulsory automobile insurance is so plainly valid as to present no

federal question.[431]

Succession to Property

When a New York Decedent Estate Law, effective after 1930, grants for

the first time to a surviving spouse a right of election to take as in

intestacy, and the husband, by executing in 1934 a codicil to his will

drafted in 1929, made this provision operative, his widow,

notwithstanding her waiver in 1922 of any right in her husband's estate,

may avail herself of such right of election. The deceased husband's

heirs cannot contend that the impairment of the widow's waiver by

subsequent legislation deprived his estate of property without due

process of law. Rights of succession to property are of statutory

creation. Accordingly, New York could have conditioned any further

exercise of testamentary power upon the giving of right of election to

the surviving spouse regardless of any waiver however formally

executed.[432]

Administration of Estates.--Even after the creation of

testamentary trust, a State retains the power to devise new and

reasonable directions to the trustee to meet new conditions arising

during its administration, especially such as the depression presented

to trusts containing mortgages. Accordingly, no constitutional right is

violated by the retroactive application to an estate on which

administration had already begun of a statute which had the effect of

taking away a remainderman's right to judicial examination of the

trustee's computation of income. Judicial rules, promulgated prior to

such statute and which were more favorable to the interests of

remaindermen, can be relied upon by the latter only insofar as said

rules were intended to operate retroactively; for the decedent, in whose

estate the remaindermen had an interest, died even before such court

rules were established. If a property right in a particular rule of

income allotment in salvage proceedings vested at all, it would seem to

have done so at the death of the decedent or testator.[433]

Abandoned Property.--As applied to insurance policies on the

lives of New York residents issued by foreign corporations for delivery

in New York, where the insured persons continued to be residents and the

beneficiaries were resident at the maturity date of the policies, a New

York Abandoned Property Law requiring payment to the State of money

owing by life insurers and remaining unclaimed for seven years does not

deprive such foreign companies of property without due process. The

relationship between New York and its residents who abandon claims

against foreign insurance companies, and between New York and foreign

insurance companies doing business therein is sufficiently close to give

New York jurisdiction.[434] In Standard Oil Co. _v._ New Jersey,[435] a

sharply divided Court held recently that due process is not violated by

a statute escheating to the State shares of stock in a domestic

corporation and unpaid dividends declared thereon, even though the

last-known owners were nonresidents and the stock was issued and the

dividends were held in another State. The State's power over the debtor

corporation gives it power to seize the debts or demands represented by

the stock and dividends.

Vested Rights, Remedial Rights, Political Candidacy

Inasmuch as the right to become a candidate for State office is a

privilege only of State citizenship, an unlawful denial of such right

is not a denial of a right of "property."[436] However, an existing

right of action to recover damages for an injury is property, which a

legislature has no power to destroy.[437] Thus, the retroactive repeal

of a provision which made directors liable for moneys embezzled by

corporate officers, by preventing enforcement of a liability which

already had arisen, deprived certain creditors of their property without

due process of law.[438] But while a vested cause of action is property,

a person has no property, in the constitutional sense, in any particular

form of remedy; and is guaranteed only the preservation of a substantial

right to redress by any effective procedure.[439] Accordingly, a statute

creating an additional remedy for enforcing stockholders' liability is

not, as applied to stockholders then holding stock, violative of due

process.[440] Nor is a law which lifts a statute of limitations and make

possible a suit, theretofore barred, for the value of certain

securities. "The Fourteenth Amendment does not make an act of State

legislation void merely because it has some retrospective operation.

* * * Some rules of law probably could not be changed retroactively

without hardship and oppression, * * *, certainly it cannot be said that

lifting the bar of a statute of limitation so as to restore a remedy

lost through mere lapse of time is _per se_ an offense against the

Fourteenth Amendment."[441]

Man's Best Friend

A statute providing that no dog shall be entitled to the protection of

the law unless placed upon the assessment rolls, and that in a civil

action for killing a dog the owner cannot recover beyond the value fixed

by himself in the last assessment preceding the killing is within the

police power of the State.[442]

Control of Local Units of Government

The Fourteenth Amendment does not deprive a State of the power to

determine what duties may be performed by local officers, nor whether

they shall be appointed or popularly elected.[443] Its power over the

rights and property of cities held and used for governmental purposes

was unaltered by the ratification thereof.[444] Thus, notwithstanding

that it imposes liability irrespective of the power of a city to have

prevented the violence, a statute requiring cities to indemnify owners

of property damaged by mobs or during riots effects no unconstitutional

deprivation of the property of such municipalities.[445] Likewise, a

person obtaining a judgment against a municipality for damages

resulting from a riot is not deprived of property without due process

of law by an act which so limits the municipality's taxing power as to

prevent collection of funds adequate to pay it. As long as the judgment

continues as an existing liability unconstitutional deprivation is

experienced.[446]

Local units of government obliged to surrender property to other units

newly created out of the territory of the former cannot successfully

invoke the due process clause,[447] nor may taxpayers allege any

unconstitutional deprivation as the result of changes in their tax

burden attendant upon the consolidation of contiguous

municipalities.[448] Nor is a statute requiring counties to reimburse

cities of the first class but not other classes for rebates allowed for

prompt payment of taxes in conflict with the due process clause.[449]

TAXATION

In General

It was not contemplated that the adoption of the Fourteenth Amendment

would restrain or cripple the taxing power of the States.[450] Rather,

the purpose of the amendment was to extend to the residents of the

States the same protection against arbitrary State legislation affecting

life, liberty, and property as was afforded against Congress by the

Fifth Amendment.[451]

Public Purpose

Inasmuch as public moneys cannot be expended for other than public

purposes, it follows that an exercise of the taxing power for merely

private purposes is beyond the authority of the States.[452] Whether a

use is public or private is ultimately a judicial question, however, and

in the determination thereof the Court will be influenced by local

conditions and by the judgments of State tribunals as to what are to be

deemed public uses in any State.[453] Taxes levied for each of the

following listed purposes have been held to be for a public use: city

coal and fuel yard,[454] State bank, warehouse, elevator, flour-mill

system, and homebuilding projects,[455] society for preventing cruelty

to animals (dog license tax),[456] railroad tunnel,[457] books for

school children attending private as well as public schools,[458] and

relief of unemployment.[459]

Other Considerations Affecting Validity: Excessive Burden; Ratio of

Amount to Benefit Received

When the power to tax exists, the extent of the burden is a matter for

the discretion of the lawmakers;[460] and the Court will refrain from

condemning a tax solely on the ground that it is excessive.[461] Nor can

the constitutionality of the power to levy taxes be made to depend upon

the taxpayer's enjoyment of any special benefit from use of the funds

raised by taxation.[462]

Estate, Gift, and Inheritance Taxes

The power of testamentary disposition and the privilege of inheritance

being legitimate subjects of taxation, a State may apply its inheritance

tax to either the transmission, or the exercise of the legal power of

transmission, of property by will or descent, or to the legal privilege

of taking property by devise or descent.[463] Accordingly, an

inheritance tax law, enacted after the death of a testator, but before

the distribution of his estate, constitutionally may be imposed on the

shares of legatees, notwithstanding that under the law of the State in

effect on the date of such enactment, ownership of the property passed

to the legatees upon the testator's death.[464] Equally consistent with

due process is a tax on an _inter vivos_ transfer of property by deed

intended to take effect upon the death of the grantor.[465]

The due process clause places no restriction on a State as to the time

at which an inheritance tax shall be levied or the property valued for

purposes of such a tax; and for that reason a graduated tax on the

transfer of contingent remainders, undiminished by the value of an

intervening life estate but not payable until after the death of the

life tenant, is valid.[466] Also, when a power of appointment has been

granted by deed, transfer tax upon the exercise of the power by will is

not a taking of property without due process of law, even though the

instrument creating the power was executed prior to enactment of the

taxing statute.[467] Likewise when a transfer tax law did not become

effective until after a deed creating certain remainders had been

executed, but the State court applied the tax on the theory that the

vesting actually occurred after the tax law became operative, no denial

of due process resulted. "* * *, the statute unquestionably might have

made the tax applicable to this transfer, * * * [and the Court need]

* * * not inquire * * * into the reasoning by which * * *" the State

held the statute operative.[468]

On the other hand, when remainders indisputably vest at the time of the

creation of a trust and a succession tax is enacted thereafter, the

imposition of said tax on the transfer of such remainder is

unconstitutional.[469] But where the remaindermen's interests are

contingent and do not vest until the donor's death subsequent to the

adoption of the statute, the tax is valid.[470] Another example of valid

retroactive taxation is to be found in a New York statute amending a

1930 estate tax law. The amendment required inclusion in the decedent's

gross estate, for tax computation purposes, of property in respect of

which the decedent exercised after 1930, by will, a nongeneral power of

appointment created prior to that year. The amendment reached such

transfers under powers of appointment as under the previous statute

escaped taxation. In sustaining application of the amendment, the Court

held that the inclusion in the gross estate of property never owned by

the decedent, but appointed by her will under a limited power which

could not be exercised in favor of the decedent, her creditors, or her

estate, did not deny due process to those who inherited the decedent's

property, even though, because the tax rate was progressive, the net

amount they inherited was less than it would have been if the appointed

property had not been included in the gross estate.[471] In summation,

the Court has noted that insofar as retroactive taxation of vested gifts

has been voided, the justification therefor has been that "the nature or

amount of the tax could not reasonably have been anticipated by the

taxpayer at the time of the particular voluntary act which the

[retroactive] statute later made the taxable event * * * Taxation,

* * *, of a gift which * * * [the donor] might well have refrained from

making had he anticipated the tax, * * * [is] thought to be so arbitrary

* * * as to be a denial of due process."[472]

Other Types of Taxes

Income Taxes.--Any attempt by a State to measure a tax on one

person's income by reference to the income of another is contrary to due

process as guaranteed by the Fourteenth Amendment. Thus a husband cannot

be taxed on the combined total of his and his wife's incomes as shown by

separate returns, where her income is her separate property and where,

by reason of the tax being graduated, its amount exceeded the sum of the

taxes which would have been due had their separate incomes been

separately assessed.[473] Moreover, a tax on income, unlike a gift tax,

is not necessarily unconstitutional, because retroactive. Taxpayers

cannot complain of arbitrary action or assert surprise in the

retroactive apportionment of tax burdens to income when that is done by

the legislature at the first opportunity after knowledge of the nature

and amount of the income is available.[474]

Franchise Taxes.--A city ordinance imposing annual license

taxes on light and power companies is not violative of the due process

clause merely because the city has entered the power business in

competition with such companies.[475] Nor does a municipal charter

authorizing the imposition upon a local telegraph company of a tax upon

the lines of the company within its limits at the rate at which other

property is taxed, but upon an arbitrary valuation per mile, deprive the

company of its property without due process of law, inasmuch as the tax

is a mere franchise or privilege tax.[476]

Severance Taxes.--A State excise on the production of oil which

extends to the royalty interest of the lessor in the oil produced under

an oil lease as well as to the interest of the lessee engaged in the

active work of production, the tax being apportioned between these

parties according to their respective interest in the common venture, is

not arbitrary as regards the lessor, but consistent with due

process.[477]

Real Property Taxes (Assessment).--The maintenance of a high

assessment in the face of declining value is merely another way of

achieving an increase in the rate of property tax. Hence, an

over-assessment constitutes no deprivation of property without due

process of law.[478] Likewise, land subject to mortgage may be taxed

for its full value without deduction of the mortgage debt from the

valuation.[479]

Real Property Taxes: Special Assessments.--A State may defray

the entire expense of creating, developing, and improving a political

subdivision either from funds raised by general taxation, or by

apportioning the burden among the municipalities in which the

improvements are made, or by creating, or authorizing the creation of,

tax districts to meet sanctioned outlays.[480] Where a State statute

authorizes municipal authorities to define the district to be benefited

by a street improvement and to assess the cost of the improvement upon

the property within the district in proportion to benefits, their action

in establishing the district and in fixing the assessments on included

property, after due hearing of the owners as required by the statute

cannot, when not arbitrary or fraudulent, be reviewed under the

Fourteenth Amendment upon the ground that other property benefited by

the improvement was not included.[481]

It is also proper to impose a special assessment for the preliminary

expenses of an abandoned road improvement, even though the assessment

exceeds the amount of the benefit which the assessors estimated the

property would receive from the completed work.[482] Likewise a levy

upon all lands within a drainage district of a tax of twenty-five cents

per acre to defray preliminary expenses does not unconstitutionally take

the property of landowners within that district who may not be benefited

by the completed drainage plans.[483] On the other hand, when the

benefit to be derived by a railroad from the construction of a highway

will be largely offset by the loss of local freight and passenger

traffic, an assessment upon such railroad is violative of due

process,[484] whereas any gains from increased traffic reasonably

expected to result from a road improvement will suffice to sustain an

assessment thereon.[485] Also the fact that the only use made of a lot

abutting on a street improvement is for a railway right of way does not

make invalid, for lack of benefits, an assessment thereon for grading,

curbing, and paving.[486] However, when a high and dry island was

included within the boundaries of a drainage district from which it

could not be benefited directly or indirectly, a tax on such island was

held to be a deprivation of property without due process of law.[487]

Finally, a State may levy an assessment for special benefits resulting

from an improvement already made[488] and may validate an assessment

previously held void for want of authority.[489]

JURISDICTION TO TAX

Land

Prior even to the ratification of the Fourteenth Amendment, it was

settled principle that a State could not tax land situated beyond its

limits; and subsequently elaborating upon that principle the Court has

said that "* * *, we know of no case where a legislature has assumed to

impose a tax upon land within the jurisdiction of another State, much

less where such action has been defended by a court."[490] Insofar as a

tax payment may be viewed as an exaction for the maintenance of

government in consideration of protection afforded, the logic sustaining

this rule is self-evident.

Tangible Personalty

As long as tangible personal property has a situs within its borders, a

State validly may tax the same, whether directly through an _ad valorem_

tax or indirectly through death taxes, irrespective of the residence of

the owner.[491] By the same token, if tangible personal property makes

only occasional incursions into other States, its permanent situs

remains in the State of origin, and is taxable only by the latter.[492]

The ancient maxim, _mobilia sequuntur personam_, which had its origin

when personal property consisted in the main of articles appertaining to

the person of the owner, yielded in modern times to the "law of the

place where the property is kept and used." In recent years, the

tendency has been to treat tangible personal property as "having a situs

of its own for the purpose of taxation, and correlatively to * * *

exempt [it] at the domicile of its owner."[493]The benefit-protection

theory of taxation, upon which the Court has in fact relied to sustain

taxation exclusively by the situs State, logically would seem to permit

taxation by the domiciliary State as well as by the nondomiciliary State

in which the tangibles are situate, especially when the former levies

the tax on the owner in terms of the value of the tangibles. Thus far,

however, the Court has taken the position that when the tangibles have a

situs elsewhere, the domiciliary State can neither control such

property nor extend to it or to its owner such measure of protection as

would be adequate to meet the jurisdictional requirements of due

process.

Intangible Personalty

General.--To determine whether a State, or States, may tax

intangible personal property, the Court has applied the fiction,

_mobilia sequuntur personam_ and has also recognized that such property

may acquire, for tax purposes, a business or commercial situs where

permanently located; but it has never clearly disposed of the issue as

to whether multiple personal property taxation of intangibles is

consistent with due process. In the case of corporate stock, however,

the Court has obliquely acknowledged that the owner thereof may be taxed

at his own domicile, at the commercial situs of the issuing corporation,

and at the latter's domicile; but, as of the present date,

constitutional lawyers are speculating whether the Court would sustain a

tax by all three jurisdictions, or by only two of them, and, if the

latter, which two, the State of the commercial situs and of the issuing

corporation's domicile, or the State of the owner's domicile and that of

the commercial situs.[494]

Taxes on Intangibles Sustained.--Thus far, the Court has

sustained the following personal property taxes on intangibles:

(1) A debt held by a resident against a nonresidence, evidenced by a

bond of the debtor and secured by a mortgage on real estate in the State

of the debtor's residence.[495]

(2) A mortgage owned and kept outside the State by a nonresident but on

land within the State.[496]

(3) Investments, in the form of loans to residents, made by a resident

agent of a nonresident creditor, are taxable to the nonresident

creditor.[497]

(4) Deposits of a resident in a bank in another State, where he carries

on a business and from which these deposits are derived, but belonging

absolutely to him and not used in the business, are subject to a

personal property tax in the city of his residence, whether or not they

are subject to tax in the State where the business is carried on. The

tax is imposed for the general advantage of living within the

jurisdiction [benefit-protection theory], and may be measured by

reference to the riches of the person taxed.[498]

(5) Membership owned by a nonresident in a domestic exchange, known as a

chamber of commerce.[499]

(6) Membership by a resident in a stock exchange located in another

State. "Double taxation" the Court observed "by one and the same State

is not" prohibited "by the Fourteenth Amendment; much less is taxation

by two States upon identical or closely related property interests

falling within the jurisdiction of both, forbidden."[500]

(7) A resident owner may be taxed on stock held in a foreign corporation

that does no business and has no property within the taxing State. The

Court also added that "undoubtedly the State in which a corporation is

organized may * * *, [tax] of all its shares whether owned by residents

or nonresidents."[501]

(8) Stock in a foreign corporation owned by another foreign corporation

transacting its business within the taxing State. The Court attached no

importance to the fact that the shares were already taxed by the State

in which the issuing corporation was domiciled and might also be taxed

by the State in which the issuing corporation was domiciled and might

also be taxed by the State in which the stock owner was domiciled; or at

any rate did not find it necessary to pass upon the validity of the

latter two taxes. The present levy was deemed to be tenable on the basis

of the benefit-protection theory; namely, "the economic advantages

realized through the protection, at the place * * *, [of business situs]

of the ownership of rights in intangibles * * *"[502]

(9) Shares owned by nonresident shareholders in a domestic corporation,

the tax being assessed on the basis of corporate assets and payable by

the corporation either out of its general fund or by collection from the

shareholder. The shares represent an aliquot portion of the whole

corporate assets, and the property right so represented arises where the

corporation has its home, and is therefore within the taxing

jurisdiction of the State, notwithstanding that ownership of the stock

may also be a taxable subject in another State.[503]

(10) A tax on the dividends of a corporation may be distributed ratably

among stockholders regardless of their residence outside the State, the

stockholders being the ultimate beneficiaries of the corporation's

activities within the taxing State and protected by the latter and

subject to its jurisdiction.[504] This tax, though collected by the

corporation, is on the transfer to a stockholder of his share of

corporate dividends within the taxing State, and is deducted from said

dividend payments.[505]

(11) Stamp taxes on the transfer within the taxing State by one

nonresident to another of stock certificates issued by a foreign

corporation;[506] and upon promissory notes executed by a domestic

corporation, although payable to banks in other States.[507] These

taxes, however, were deemed to have been laid, not on the property, but

upon an event, the transfer in one instance, and execution, in the

latter, which took place in the taxing State.

Taxes on Intangibles Invalidated.--The following personal

property taxes on intangibles have not been upheld:

(1) Debts evidenced by notes in safekeeping within the taxing State, but

made and payable and secured by property in a second State and owned by

a resident of a third State.[508]

(2) A property tax sought to be collected from a life beneficiary on the

corpus of a trust composed of property located in another State and as

to which said beneficiary had neither control nor possession, apart from

the receipt of income therefrom.[509] However, a personal property tax

may be collected on one-half of the value of the corpus of a trust from

a resident who is one of the two trustees thereof, notwithstanding that

the trust was created by the will of a resident of another State in

respect of intangible property located in the latter State, at least

where it does not appear that the trustee is exposed to the danger of

other _ad valorem_ taxes in another State.[510] The first case, Brooke

_v._ Norfolk,[511] is distinguishable by virtue of the fact that the

property tax therein voided was levied upon a resident beneficiary

rather than upon a resident trustee in control of nonresident

intangibles. Different too is Safe Deposit and Trust Co. _v._

Virginia,[512] where a property tax was unsuccessfully demanded of a

nonresident trustee with respect to nonresident intangibles under its

control.

(3) A tax, measured by income, levied on trust certificates held by a

resident, representing interests in various parcels of land (some inside

the State and some outside), the holder of the certificates, though

without a voice in the management of the property, being entitled to a

share in the net income and, upon sale of the property, to the proceeds

of the sale.[513]

Transfer Taxes (Inheritance, Estate, Gift Taxes).--Being

competent to regulate exercise of the power of testamentary disposition

and the privilege of inheritance, a State may base its succession taxes

upon either the transmission, or an exercise of the legal power of

transmission, of property by will or by descent, or the enjoyment of the

legal privilege of taking property by devise or descent.[514] But

whatever may be the justification of their power to levy such taxes,

States have consistently found themselves restricted by the rule,

established as to property taxes in 1905 in Union Refrigerator Transit

Co. _v._ Kentucky,[515] and subsequently reiterated in Frick _v._

Pennsylvania[516] in 1925, which precludes imposition of transfer taxes

upon tangible personal property by any State other than the one in which

such tangibles are permanently located or have an actual situs. In the

case of intangibles, however, the States have been harassed by the

indecision of the Supreme Court; for to an even greater extent than is

discernible in its treatment of property taxes on intangibles, it has

oscillated in upholding, then rejecting, and again currently sustaining

the levy by more than one State of death taxes upon intangibles

comprising the estate of a decedent.

Until 1930, transfer taxes upon intangibles levied by both the

domiciliary as well as nondomiciliary, or situs State, were with rare

exceptions approved. Thus, in Bullen _v._ Wisconsin,[517] the

domiciliary State of the creator of a trust was held competent to levy

an inheritance tax, upon the death of the settlor, on his trust fund

consisting of stocks, bonds, and notes kept and administered in another

State and as to which the settlor reserved the right to control

disposition and to direct payment of income for life, such reserved

powers being equivalent to a fee. Cognizance was taken of the fact that

the State in which these intangibles had their situs had also taxed the

trust. Levy of an inheritance tax by a nondomiciliary State was

sustained on similar grounds in Wheeler _v._ Sohmer, wherein it was held

that the presence of a negotiable instrument was sufficient to confer

jurisdiction upon the State seeking to tax its transfer.[518] On the

other hand, the mere ownership by a foreign corporation of property in a

nondomiciliary State was held insufficient to support a tax by that

State on the succession to shares of stock in that corporation owned by

a nonresident decedent.[519] Also against the trend was Blodgett _v._

Silberman[520] wherein the Court defeated collection of a transfer tax

by the domiciliary State by treating coins and bank notes deposited by a

decedent in a safe deposit box in another State as tangible property,

albeit it conceded that the domiciliary State could tax the transfer of

books and certificates of indebtedness found in that safe deposit box as

well as the decedent's interest in a foreign partnership.

In the course of about two years following the recent Depression, the

Court handed down a group of four decisions which, for the time being at

any rate, placed the stamp of disapproval upon multiple transfer and--by

inference--other multiple taxation of intangibles. Asserting, as it did

in one of these cases, that "practical considerations of wisdom,

convenience and justice alike dictate the desirability of a uniform

general rule confining the jurisdiction to impose death transfer taxes

as to intangibles to the State of the [owner's] domicile; * * *"[521]

the Court, through consistent application of the maxim, _mobilia

sequuntur personam_, proceeded to deny the right of nondomiciliary

States to tax and to reject as inadequate jurisdictional claims of the

latter founded upon such bases as control, benefit, and protection or

situs. During this interval, 1930-1932, multiple transfer taxation of

intangibles came to be viewed, not merely as undesirable, but as so

arbitrary and unreasonable as to be prohibited by the due process

clause.

Beginning, in 1930, with Farmers' Loan and Trust Co. _v._

Minnesota,[522] the Court reversed its former ruling in Blackstone _v._

Miller,[523] in which it had held that the State in which a debtor was

domiciled or a bank located could levy an inheritance tax on the

transfer of the debt or the deposit, notwithstanding that the creditor

had his domicile in a different State. Farmers' Loan and Trust Co. _v._

Minnesota, strictly appraised, was authority simply for the proposition

that jurisdiction over a debtor, in this instance a State which had

issued bonds held by a nonresident creditor, was inadequate to sustain a

tax by that debtor State on the transfer of such securities. The

securities in question, which had never been used by the creditor in any

business in the issuing State, were located in the State in which the

creditor had his domicile, and were deemed to be taxable only in the

latter. In Baldwin _v._ Missouri,[524] a nondomiciliary State was

prevented from applying its inheritance tax to bonds, bank deposits, and

promissory notes, all physically present within its limits and some of

them secured by lands therein, when the owner thereof was domiciled in

another State. A like result, although on this occasion on grounds of

lack of evidence of any "business situs," was reached in Beidler _v._

South Carolina Tax Commission,[525] in which the Court ruled that a

State, upon the death of a nonresident creditor, may not apply its

inheritance tax to a debt [open account] owned by one of its domestic

corporations. Finally, in First National Bank _v._ Maine,[526] which has

since been overruled in State Tax Commission _v._ Aldrich,[527] the

Court declared that only the State in which the owner of corporate stock

died domiciled was empowered to tax the succession to the shares by will

or inheritance and that the State in which the issuing corporation was

domiciled could not do so.

Without expressly overruling more than one of these four cases

condemning multiple succession taxation of intangibles, the Court,

beginning with Curry _v._ McCanless[528] in 1939, announced a departure

from the "doctrine, of recent origin, that the Fourteenth Amendment

precludes the taxation of any interest in the same intangible in more

than one State * * *." Taking cognizance of the fact that this doctrine

had never been extended to the field of income taxation or consistently

applied in the field of property taxation, where the concepts of

business situs as well as of domiciliary situs had been utilized to

sustain double taxation, especially in connection with shares of

corporate stock, the Court declared that a correct interpretation of

constitutional requirements would dictate the following conclusions:

"From the beginning of our constitutional system control over the person

at the place of his domicile and his duty there, common to all citizens,

to contribute to the support of government have been deemed to afford an

adequate constitutional basis for imposing on him a tax on the use and

enjoyment of rights in intangibles measured by their value. * * * But

when the taxpayer extends his activities with respect to his

intangibles, so as to avail himself of the protection and benefit of the

laws of another State, in such a way as to bring his person or * * *

[his intangibles] within the reach of the tax gatherer there, the reason

for a single place of taxation no longer obtains, * * * [However], the

State of domicile is not deprived, by the taxpayer's activities

elsewhere, of its constitutional jurisdiction to tax." In accordance

with this line of reasoning, Tennessee, where a decedent died domiciled,

and Alabama, where a trustee, by conveyance from said decedent, held

securities on specific trusts, were both deemed competent to impose a

tax on the transfer of these securities passing under the will of the

decedent. "In effecting her purposes," the testatrix was viewed as

having "brought some of the legal interests which she created within the

control of one State by selecting a trustee there, and others within the

control of the other State, by making her domicile there." She had found

it necessary to invoke "the aid of the law of both States, and her

legatees" were subject to the same necessity.

These statements represented a belated adoption of the views advanced by

Chief Justice Stone in dissenting or concurring opinions which he filed

in three of the four decisions rendered during 1930-1932. By the line of

reasoning taken in these opinions, if protection or control was extended

to, or exercised over, intangibles or the person of their owner, then as

many States as afforded such protection or were capable of exerting such

dominion should be privileged to tax the transfer of such property. On

this basis, the domiciliary State would invariably qualify as a State

competent to tax and a nondomiciliary State, so far as it could

legitimately exercise control or could be shown to have afforded a

measure of protection that was not trivial or insubstantial.

On the authority of Curry _v._ McCanless, the Court, in Pearson _v._

McGraw,[529] also sustained the application of an Oregon transfer tax to

intangibles handled by an Illinois trust company and never physically

present in Oregon, jurisdiction to tax being viewed as dependent, not on

the location of the property in the State, but on control over the owner

who was a resident of Oregon. In Graves _v._ Elliott,[530] decided in

the same year, the Court upheld the power of New York, in computing its

estate tax, to include in the gross estate of a domiciled decedent the

value of a trust of bonds managed in Colorado by a Colorado trust

company and already taxed on its transfer by Colorado, which trust the

decedent had established while in Colorado and concerning which he had

never exercised any of his reserved powers of revocation or change of

beneficiaries. It was observed that "the power of disposition of

property is the equivalent of ownership, * * * and its exercise in the

case of intangibles is * * * [an] appropriate subject of taxation at the

place of the domicile of the owner of the power. Relinquishment at

death, in consequence of the non-exercise in life, of a power to revoke

a trust created by a decedent is likewise an appropriate subject of

taxation."[531] Consistent application of the principle enunciated in

Curry _v._ McCanless is also discernible in two later cases in which the

Court sustained the right of a domiciliary State to tax the transfer of

intangibles kept outside its boundaries, notwithstanding that "in some

instances they may be subject to taxation in other jurisdictions, to

whose control they are subject and whose legal protection they enjoyed."

In Graves _v._ Schmidlapp[532] an estate tax was levied upon the value

of the subject of a general testamentary power of appointment

effectively exercised by a resident donee over intangibles held by

trustees under the will of a nonresident donor of the power. Viewing the

transfer of interest in said intangibles by exercise of the power of

appointment as the equivalent of ownership, the Court quoted from

McCulloch _v._ Maryland[533] to the effect that the power to tax "'is an

incident of sovereignty, and is coextensive with that to which it is an

incident.'" Again, in Central Hanover Bank & T. Co. _v._ Kelly,[534] the

Court approved a New Jersey transfer tax imposed on the occasion of the

death of a New Jersey grantor of an irrevocable trust executed, and

consisting of securities located, in New York, and providing for the

disposition of the corpus to two nonresident sons.

The costliness of multiple taxation of estates comprising intangibles is

appreciably aggravated when each of several States founds its tax not

upon different events or property rights but upon an identical basis;

namely that, the decedent died domiciled within its borders. Not only is

an estate then threatened with excessive contraction but the contesting

States may discover that the assets of the estate are insufficient to

satisfy their claims. Thus, in Texas _v._ Florida,[535] the State of

Texas filed an original petition in the Supreme Court, in which it

asserted that its claim, together with those of three other States,

exceeded the value of the estate, that the portion of the estate within

Texas alone would not suffice to discharge its own tax, and that its

efforts to collect its tax might be defeated by adjudications of

domicile by the other States. The Supreme Court disposed of this

controversy by sustaining a finding that the decedent had been domiciled

in Massachusetts, but intimated that thereafter it would take

jurisdiction in like situations only in the event that an estate did not

exceed in value the total of the conflicting demands of several States

and that the latter were confronted with a prospective inability to

collect.

Corporation Taxes

(1) Intangible Personal Property.--A State in which a foreign

corporation has acquired a commercial domicile and in which it maintains

its general business offices may tax the latter's bank deposits and

accounts receivable even though the deposits are outside the State and

the accounts receivable arise from manufacturing activities in another

State.[536] Similarly, a nondomiciliary State in which a foreign

corporation did business can tax the "corporate excess" arising from

property employed and business done in the taxing State.[537] On the

other hand, when the foreign corporation transacts only interstate

commerce within a State, any excise tax on such excess is void,

irrespective of the amount of the tax.[538] A domiciliary State,

however, may tax the excess of market value of outstanding capital stock

over the value of real and personal property and certain indebtedness of

a domestic corporation even though this "corporate excess" arose from

property located and business done in another State and was there

taxable. Moreover, this result follows whether the tax is considered as

one on property or on the franchise.[539] Also a domiciliary State,

which imposes no franchise tax on a stock fire insurance corporation,

validly may assess a tax on the full amount of its paid-in capital stock

and surplus, less deductions for liabilities, notwithstanding that such

domestic corporation concentrates its executive, accounting, and other

business offices in New York, and maintains in the domiciliary State

only a required registered office at which local claims are handled.

Despite "the vicissitudes which the so-called 'jurisdiction-to-tax'

doctrine has encountered * * *," the presumption persists that

intangible property is taxable by the State of origin.[540] But a

property tax on the capital stock of a domestic company which includes

in the appraisement thereof the value of coal mined in the taxing State

but located in another State awaiting sale deprives the corporation of

its property without due process of law.[541] Also void for the same

reason is a State tax on the franchise of a domestic ferry company which

includes in the valuation thereof the worth of a franchise granted to

the said company by another State.[542]

(2) Privilege Taxes Measured by Corporate Stock.--Since the tax

is levied not on property but on the privilege of doing business in

corporate form, a domestic corporation may be subjected to a privilege

tax graduated according to paid up capital stock, even though the

latter represents capital not subject to the taxing power of the

State.[543] By the same token, the validity of a franchise tax, imposed

on a domestic corporation engaged in foreign maritime commerce and

assessed upon a proportion of the total franchise value equal to the

ratio of local business done to total business, is not impaired by the

fact that the total value of the franchise was enhanced by property and

operations carried on beyond the limits of the State.[544] However, a

State, under the guise of taxing the privilege of doing an intrastate

business, cannot levy on property beyond its borders; and, therefore, as

applied to foreign corporations, a license tax based on authorized

capital stock is void,[545] even though there be a maximum to the

fee,[546] unless apportioned according to some method, as, for example,

a franchise tax based on such proportion of outstanding capital stock as

is represented by property owned and used in business transacted in the

taxing State.[547] An entrance fee, on the other hand, collected only

once as the price of admission to do an intrastate business, is

distinguishable from a tax and accordingly may be levied on a foreign

corporation on the basis of a sum fixed in relation to the amount of

authorized capital stock (in this instance, a $5,000 fee on an

authorized capital of $100,000,000).[548]

(3) Privilege Taxes Measured by Gross Receipts.--A municipal

license tax imposed as a percentage of the receipts of a foreign

corporation derived from the sales within and without the State of goods

manufactured in the city is not a tax on business transactions or

property outside the city and therefore does not violate the due process

clause.[549] But a State is wanting in jurisdiction to extend its

privilege tax to the gross receipts of a foreign contracting corporation

for work done outside the taxing State in fabricating equipment later

installed in the taxing State. Unless the activities which are the

subject of the tax are carried on within its territorial limits, a State

is not competent to impose such a privilege tax.[550]

(4) Taxes on Tangible Personal Property.--When rolling stock

is permanently located and employed in the prosecution of a business

outside the boundaries of a domiciliary State, the latter has no

jurisdiction to tax the same.[551] Vessels, however, inasmuch as they

merely touch briefly at numerous ports, never acquire a taxable situs at

any one of them, and are taxable by the domicile of their owners or not

at all;[552] unless, of course, the ships operate wholly on the waters

within one State, in which event they are taxable there and not at the

domicile of the owners.[553] Only recently airplanes have been treated

in a similar manner for tax purposes. Noting that the entire fleet of

airplanes of an interstate carrier were "never continuously without the

[domiciliary] State during the whole tax year," that such airplanes also

had their "home port" in the domiciliary State, and that the company

maintained its principal office therein, the Court sustained a personal

property tax applied by the domiciliary State to all the airplanes owned

by the taxpayer. No other State was deemed able to accord the same

protection and benefits as the taxing State in which the taxpayer had

both its domicile and its business situs; and the doctrines of Union

Refrigerator Transit Co. _v._ Kentucky,[554] as to the taxability of

permanently located tangibles, and that of apportionment, for

instrumentalities engaged in interstate commerce[555] were held to be

inapplicable.[556]

Conversely, a nondomiciliary State, although it may not tax property

belonging to a foreign corporation which has never come within its

borders, may levy on movables which are regularly and habitually used

and employed therein. Thus, while the fact that cars are loaded and

reloaded at a refinery in a State outside the owner's domicile does not

fix the situs of the entire fleet in such State, the latter may

nevertheless tax the number of cars which on the average are found to be

present within its borders.[557] Moreover, in assessing that part of a

railroad within its limits, a State need not treat it as an independent

line, disconnected from the part without, and place upon the property

within the State only a value which could be given to it if operated

separately from the balance of the road. The State may ascertain the

value of the whole line as a single property and then determine the

value of the part within on a mileage basis, unless there be special

circumstances which distinguish between conditions in the several

States.[558] But no property of an interstate carrier can be taken into

account unless it can be seen in some plain and fairly intelligible way

that it adds to the value of the road and the rights exercised in the

State.[559] Also, a State property tax on railroads, which is measured

by gross earnings apportioned to mileage, is not unconstitutional in the

absence of proof that it exceeds what would be legitimate as an ordinary

tax on the property valued as part of a going concern or that it is

relatively higher than taxes on other kinds of property.[560] The tax

reaches only revenues derived from local operations, and the fact that

the apportionment formula does not result in mathematical exactitude is

not a constitutional defect.[561]

Income and Other Taxes

Individual Incomes.--Consistently with due process of law, a

State annually may tax the entire net income of resident individuals

from whatever source received,[562] and that portion of a nonresident's

net income derived from property owned, and from any business, trade, or

profession carried on, by him within its borders.[563] Jurisdiction, in

the case of residents, is founded upon the rights and privileges

incident to domicile; that is, the protection afforded the recipient of

income in his person, in his right to receive the income, and in his

enjoyment of it when received, and, in the case of nonresidents, upon

dominion over either the receiver of the income or the property or

activity from which it is derived, and upon the obligation to contribute

to the support of a government which renders secure the collection of

such income. Accordingly, a State may tax residents on income from rents

of land located outside the State and from interest on bonds physically

without the State and secured by mortgage upon lands similarly

situated;[564] and the income received by a resident beneficiary from

securities held by a trustee in a trust created and administered in

another State, and not directly taxable to the trustee.[565] Nor does

the fact that another State has lawfully taxed identical income in the

hands of trustees operating therein necessarily destroy a domiciliary

State's right to tax the receipt of said income by a resident

beneficiary. "The taxing power of a State is restricted to her confines

and may not be exercised in respect of subjects beyond them."[566]

Likewise, even though a nonresident does no business within a State, the

latter may tax the profits realized by the nonresident upon his sale of

a right appurtenant to membership in a stock exchange within its

borders.[567]

Incomes of Foreign Corporations.--A tax based on the income of

a foreign corporation may be determined by allocating to the State a

proportion of the total income which the tangible property in the State

bears to the total.[568] However, such a basis may work an

unconstitutional result if the income thus attributed to the State is

out of all appropriate proportion to the business there transacted by

the corporation. Evidence may always be submitted which tends to show

that a State has applied a method which, albeit fair on its face,

operates so as to reach profits which are in no sense attributable to

transactions within its jurisdiction.[569] Nevertheless, a foreign

corporation is in error when it contends that due process is denied by a

franchise tax measured by income, which is levied, not upon net income

from intrastate business alone, but on net income justly attributable to

all classes of business done within the State, interstate and foreign,

as well as intrastate business.[570] Inasmuch as the privilege granted

by a State to a foreign corporation of carrying on local business

supports a tax by that State on the income derived from that business,

it follows that the Wisconsin privilege dividend tax, consistently with

the due process clause, may be applied to a Delaware corporation, having

its principal offices in New York, holding its meetings and voting its

dividends in New York, and drawing its dividend checks on New York bank

accounts. The tax is imposed on the "privilege of declaring and

receiving dividends" out of income derived from property located and

business transacted in the State, equal to a specified percentage of

such dividends, the corporation being required to deduct the tax from

dividends payable to resident and nonresident shareholders and pay it

over to the State.[571]

Chain Store Taxes.--A tax on chain stores, at a rate per store

determined by the number of stores both within and without the State, is

not unconstitutional as a tax in part upon things beyond the

jurisdiction of the State.[572]

Insurance Company Taxes.--A privilege tax on the gross premiums

received by a foreign life insurance company at its home office for

business written in the State does not deprive the company of property

without due process;[573] but a tax is bad when the company has

withdrawn all its agents from the State and has ceased to do business,

merely continuing to be bound to policyholders resident therein and

receiving at its home office the renewal premiums.[574] Distinguishable

therefrom is the following tax which was construed as having been

levied, not upon annual premiums nor upon the privilege merely of doing

business during the period that the company actually was within the

State, but upon the privilege of entering and engaging in business, the

percentage "on the annual premiums _to be paid throughout the life of

the policies issued_." By reason of this difference a State may continue

to collect such tax even after the company's withdrawal from the

State.[575]

A State which taxes the insuring of property within its limits may

lawfully extend its tax to a foreign insurance company which contracts

with an automobile sales corporation in a third State to insure its

customers against loss of cars purchased through it, so far as the cars

go into possession of purchasers within the taxing State.[576] On the

other hand, a foreign corporation admitted to do a local business, which

insures its property with insurers in other States who are not

authorized to do business in the taxing State, cannot constitutionally

be subjected to a 5% tax on the amount of premiums paid for such

coverage.[577] Likewise a Connecticut life insurance corporation,

licensed to do business in California, which negotiated reinsurance

contracts in Connecticut, received payment of premiums thereon in

Connecticut, and was there liable for payment of losses claimed

thereunder, cannot be subjected by California to a privilege tax

measured by gross premiums derived from such contracts, notwithstanding

that the contracts reinsured other insurers authorized to do business in

California and protected policies effected in California on the lives of

residents therein. The tax cannot be sustained whether as laid on

property, business done, or transactions carried on, within California,

or as a tax on a privilege granted by that State.[578]

When policy loans to residents are made by a local agent of a foreign

insurance company, in the servicing of which notes are signed, security

taken, interest collected, and debts are paid within the State, such

credits are taxable to the company, notwithstanding that the promissory

notes evidencing such credits are kept at the home office of the

insurer.[579] But when a resident policyholder's loan is merely charged

against the reserve value of his policy, under an arrangement for

extinguishing the debt and interest thereon by deduction from any claim

under the policy, such credit is not taxable to the foreign insurance

company.[580] Premiums due from residents on which an extension has been

granted by foreign companies also are credits on which the latter may be

taxed by the State of the debtor's domicile;[581] and the mere fact that

the insurers charge these premiums to local agents and give no credit

directly to policyholders does not enable them to escape this tax.[582]

PROCEDURE IN TAXATION

In General

Exactly what due process requires in the assessment and collection of

general taxes has never been decided by the Supreme Court. While it was

held that "notice to the owner at some stage of the proceedings, as well

as an opportunity to defend, is essential" for imposition of special

taxes, it has also ruled that laws for assessment and collection of

general taxes stand upon a different footing and are to be construed

with the utmost liberality, even to the extent of acknowledging that no

notice whatever is necessary.[583] Due process of law as applied to

taxation does not mean judicial process;[584] neither does it require

the same kind of notice as is required in a suit at law, or even in

proceedings for taking private property under the power of eminent

domain.[585] If a taxpayer is given an opportunity to test the validity

of a tax at any time before it is final, whether the proceedings for

review take place before a board having a quasi-judicial character, or

before a tribunal provided by the State for the purpose of determining

such questions, due process of law is not denied.[586]

Notice and Hearing in Relation to General Taxes

"Of the different kinds of taxes which the State may impose, there is a

vast number of which, from their nature, no notice can be given to the

taxpayer, nor would notice be of any possible advantage to him, such as

poll taxes, license taxes (not dependent upon the extent of his

business), and generally, specific taxes on things, or persons, or

occupations. In such cases the legislature, in authorizing the tax,

fixes its amount, and that is the end of the matter. If the tax be not

paid, the property of the delinquent may be sold, and he be thus

deprived of his property. Yet there can be no question, that the

proceeding is due process of law, as there is no inquiry into the weight

of evidence, or other element of a judicial nature, and nothing could be

changed by hearing the taxpayer. No right of his is, therefore, invaded.

Thus, if the tax on animals be a fixed sum per head, or on articles a

fixed sum per yard, or bushel, or gallon, there is nothing the owner can

do which can affect the amount to be collected from him. So, if a person

wishes a license to do business of a particular kind, or at a particular

place, such as keeping a hotel or a restaurant, or selling liquors, or

cigars, or clothes, he has only to pay the amount required by law and go

into the business. There is no need in such cases for notice or hearing.

So, also, if taxes are imposed in the shape of licenses for privileges,

such as those on foreign corporations for doing business in the State,

or on domestic corporations for franchises, if the parties desire the

privilege, they have only to pay the amount required. In such cases

there is no necessity for notice or hearing. The amount of the tax would

not be changed by it."[587]

Notice and Hearing in Relation to Assessments

"But where a tax is levied on property not specifically, but according

to its value, to be ascertained by assessors appointed for that purpose

upon such evidence as they may obtain, a different principle comes in.

The officers in estimating the value act judicially; and in most of the

States provision is made for the correction of errors committed by them,

through boards of revision or equalization, sitting at designated

periods provided by law to hear complaints respecting the justice of the

assessments. The law in prescribing the time when such complaints will

be heard, gives all the notice required, and the proceeding by which the

valuation is determined, though it may be followed, if the tax be not

paid, by a sale of the delinquent's property, is due process of

law."[588]

Nevertheless, it has never been considered necessary to the validity of

a tax that the party charged shall have been present, or had an

opportunity to be present, in some tribunal when he was assessed.[589]

Where a tax board has its time of sitting fixed by law and where its

sessions are not secret, no obstacle prevents the appearance of any one

before it to assert a right or redress a wrong; and in the business of

assessing taxes, this is all that can be reasonably asked.[590] Nor is

there any constitutional command that notice of an assessment as well as

an opportunity to contest it be given in advance of the assessment. It

is enough that all available defenses may be presented to a competent

tribunal during a suit to collect the tax and before the demand of the

State for remittance becomes final.[591] A hearing before judgment, with

full opportunity to submit evidence and arguments being all that can be

adjudged vital, it follows that rehearings and new trials are not

essential to due process of law.[592] One hearing is sufficient to

constitute due process;[593] and the requirements of due process are

also met if a taxpayer, who had no notice of a hearing, does receive

notice of the decision reached thereat, and is privileged to appeal the

same and, on appeal, to present evidence and be heard on the valuation

of his property.[594]

Notice and Hearing in Relation to Special Assessments

However, when assessments are made by a political subdivision, a taxing

board or court, according to special benefits, the property owner is

entitled to be heard as to the amount of his assessments and upon all

questions properly entering into that determination.[595] The hearing

need not amount to a judicial inquiry,[596] but a mere opportunity to

submit objections in writing, without the right of personal appearance,

is not sufficient.[597] If an assessment for a local improvement is made

in accordance with a fixed rule prescribed by legislative act, the

property owner is not entitled to be heard in advance on the question of

benefits.[598] On the other hand, if the area of the assessment district

was not determined by the legislature, a landowner does have the right

to be heard respecting benefits to his property before it can be

included in the improvement district and assessed; but due process is

not denied if, in the absence of actual fraud or bad faith, the decision

of the agency vested with the initial determination of benefits is made

final.[599] The owner has no constitutional right to be heard in

opposition to the launching of a project which may end in assessment;

and once his land has been duly included within a benefit district, the

only privilege which he thereafter enjoys is to a hearing upon the

apportionment; that is, the amount of the tax which he has to pay.[600]

Nor can he rightfully complain because the statute renders conclusive,

after said hearing, the determination as to apportionment by the same

body which levied the assessment.[601]

More specifically, where the mode of assessment resolves itself into a

mere mathematical calculation, there is no necessity for a hearing.[602]

Statutes and ordinances providing for the paving and grading of streets,

the cost thereof to be assessed on the front foot rule, do not, by their

failure to provide for a hearing or review of assessments, generally

deprive a complaining owner of property without due process of law.[603]

In contrast, when an attempt is made to cast upon particular property a

certain proportion of the construction cost of a sewer not calculated by

any mathematical formula, the taxpayer has a right to be heard.[604]

Sufficiency and Manner of Giving Notice

Notice, insofar as it is required, may be either personal, or by

publication, or by statute fixing the time and place of hearing.[605] A

State statute, consistently with due process, may designate a

corporation as the agent of a nonresident stockholder to receive notice

and to represent him in proceedings for correcting assessments.[606]

Also "where the State * * * [desires] to sell land for taxes upon

proceedings to enforce a lien for the payment thereof, it may proceed

directly against the land within the jurisdiction of the Court, and a

notice which permits all interested, who are 'so minded,' to ascertain

that it is to be subjected to sale to answer for taxes, and to appear

and be heard, whether to be found within the jurisdiction or not, is due

process of law within the Fourteenth Amendment * * *."[607] A

description, even though it not be technically correct, which identifies

the land will sustain an assessment for taxes and a notice of sale

therefor when delinquent. If the owner knows that the property so

described is his, he is not, by reason of the insufficient description,

deprived of his property without due process. Where tax proceedings are

_in rem_, owners are bound to take notice thereof, and to pay taxes on

their property, even if assessed to unknown or other persons; and if an

owner stands by and sees his property sold for delinquent taxes, he is

not thereby wrongfully deprived of his property.[608]

Sufficiency of Remedy

When no other remedy is available, due process is denied by a judgment

of a State court withholding a decree in equity to enjoin collection of

a discriminatory tax.[609] Requirements of due process are similarly

violated by a statute which limits a taxpayer's right to challenge an

assessment to cases of fraud or corruption,[610] and by a State tribunal

which prevents a recovery of taxes imposed in violation of the

Constitution and laws of the United States by invoking a State law

limiting suits to recover taxes alleged to have been assessed illegally

to taxes paid at the time and in the manner provided by said law.[611]

Laches

Persons failing to avail themselves of an opportunity to object and be

heard, cannot thereafter complain of assessments as arbitrary and

unconstitutional.[612] Likewise a car company, which failed to report

its gross receipts as required by statute, has no further right to

contest the State comptroller's estimate of those receipts and his

adding thereto the 10% penalty permitted by law.[613]

Collection of Taxes

To reach property which has escaped taxation, a State may tax the

estates of decedents for a period anterior to death and grant

proportionate deductions for all prior taxes which the personal

representative can prove to have been paid.[614] Collection of an

inheritance tax also may be expedited by a statute requiring the sealing

of safe deposit boxes for at least ten days after the death of the

renter and obliging the lessor to retain assets found therein sufficient

to pay the tax that may be due the State.[615] Moreover, with a view to

achieving a like result in the case of gasoline taxes, a State may

compel retailers to collect such taxes from consumers and, under penalty

of a fine for delinquency, to remit monthly the amounts thus

collected.[616] Likewise, a tax on the tangible personal property of a

nonresident owner may be collected from the custodian or possessor of

such property, and the latter, as an assurance of reimbursement, may be

granted a lien on such property.[617] In collecting personal income

taxes, however, most States require employers to deduct and withhold the

tax from the wages of only nonresident employees; but the duty thereby

imposed on the employer has never been viewed as depriving him of

property without due process of law, nor has the adjustment of his

system of accounting and paying salaries which withholding entails been

viewed as an unreasonable regulation of the conduct of his

business.[618]

As a State may provide in advance that taxes shall bear interest from

the time they become due, it may with equal validity stipulate that

taxes which have become delinquent shall bear interest from the time the

delinquency commenced. Likewise, a State may adopt new remedies for the

collection of taxes and apply these remedies to taxes already

delinquent.[619] After liability of a taxpayer has been fixed by

appropriate procedure, collection of a tax by distress and seizure of

his person does not deprive him of liberty without due process of

law.[620] Nor is a foreign insurance company denied due process of law

when its personal property is distrained to satisfy unpaid taxes.[621]

The requirements of due process are fulfilled by a statute which, in

conjunction with affording an opportunity to be heard, provides for the

forfeiture of titles to land for failure to list and pay taxes thereon

for certain specified years.[622] No less constitutional, as a means of

facilitating collection, is an _in rem_ proceeding, to which the land

alone is made a party, whereby tax liens on land are foreclosed and all

pre-existing rights or liens are eliminated by a sale under a decree in

said proceeding.[623] On the other hand, while the conversion of an

unpaid special assessment into both a personal judgment therefor against

the owner as well as a charge on the land is consistent with the

Fourteenth Amendment,[624] a judgment imposing personal liability

against a nonresident taxpayer over whom the State court acquired no

jurisdiction is void.[625] Apart from such restraints, however, a State

is free to adopt new remedies for the collection of taxes and even to

apply new remedies to taxes already delinquent.[626]

EMINENT DOMAIN

Historical Development

"Prior to the adoption of the Fourteenth Amendment," the power of

eminent domain, which is deemed to inhere in every State and to be

essential to the performance of its functions,[627] "was unrestrained by

any federal authority."[628] An express prohibition against the taking

of private property for public use without just compensation was

contained in the Fifth Amendment; but an effort to extend the

application thereof to the States had been defeated by the decision, in

1833, in Barron _v._ Baltimore.[629] The most nearly comparable

provision included in the Fourteenth Amendment, was the prohibition

against a State depriving a person of property without due process of

law. The Court was accordingly confronted with the task of determining

whether this restraint on State action, minus the explicit provision for

just compensation found in the Fifth Amendment, afforded property owners

the same measure of protection as did the latter in its operation as a

limitation on the Federal Government. The Court's initial answer to this

question, as set forth in Davidson _v._ New Orleans,[630] decided in

1878, was in the negative; and on the ground of the omission of the

clause found in the Fifth Amendment from the terms of the Fourteenth, it

refused to equate the just compensation with due process. Within less

than a decade thereafter, however, the Court modified its position, and

in Chicago, B. & Q.R. Co. _v._ Chicago,[631] seven Justices

unequivocally rejected the contention, obviously based on the Davidson

Case that "the question as to the amount of compensation to be awarded

to the railroad company was one of local law merely, and [insofar as]

that question was determined in the mode prescribed by the Constitution

and [State] law, the [property owner] appearing and having full

opportunity to be heard, the requirement of due process of law was

observed." On the contrary, the seven Justices maintained that although

a State "legislature may prescribe a form of procedure to be observed in

the taking of private property for public use, * * * it is not due

process of law if provision be not made for compensation * * * The mere

form of the proceeding instituted against the owner, * * *, cannot

convert the process used into due process of law, if the necessary

result be to deprive him of his property without compensation."

Public Use

While acknowledging that agreement was virtually nonexistent as to "what

are public uses for which the right of compulsory taking may be

employed," the Court, until 1946, continued to reiterate "the nature of

the uses, whether public or private, is ultimately a judicial

question."[632] But because of proclaimed willingness to defer to local

authorities, especially "the highest court of the State" in resolving

such an issue,[633] the Court, as early as 1908, was obliged to admit

that, notwithstanding its retention of the power of judicial review, "no

case is recalled where this Court has condemned as a violation of the

Fourteenth Amendment a taking upheld by the State court as a taking for

public uses * * *"[634] In 1946, however, without endeavoring to

ascertain whether "the scope of the judicial power to determine what is

a 'public use' in Fourteenth Amendment controversies, * * *" is the

same as under the Fifth Amendment, a majority of the Justices, in a

decision involving the Federal Government, declared that "it is the

function of * * * [the legislative branch] to decide what type of taking

is for a public use * * *"[635]

Necessity for a Taking

"Once it is admitted or judicially determined that a proposed

condemnation is for a public purpose and within the statutory authority,

a political or judicially nonreviewable question may emerge, to wit, the

necessity or expediency of the condemnation of the particular

property."[636] The necessity and expediency of the taking are

legislative questions to be determined by such agency and in such mode

as the State may designate.[637]

What Constitutes a Taking For a Public Use

To constitute a public use within the law of eminent domain, it is not

essential that an entire community should directly participate in or

enjoy an improvement, and, in ascertaining whether a use is public, not

only present demands of the public but those which may be fairly

anticipated in the future may be considered.[638] Moreover, it is also

not necessary that property should be absolutely taken, in the narrowest

sense of the word, to bring the case within the protection of this

constitutional provision, but there may be such serious interruption to

the common and necessary use of property as will be equivalent to a

taking. "It would be * * * [an] unsatisfactory result, if * * *, it

shall be held that if the government refrains from the absolute

conversion of real property to the uses of the public, it can destroy

its value entirely, can inflict irreparable and permanent injury to any

extent, can in effect, subject it to total destruction without making

any compensation, because, in the narrowest sense of that word, it [has]

not [been] taken for the public use."[639]

Takings for a purpose that is public hitherto have been held to comprise

the following: a privately owned water supply system formerly operated

under contract with the municipality effecting the taking;[640] a right

of way across a neighbor's land for the enlargement of an irrigation

ditch therein to enable the taker to obtain water for irrigating land

that would otherwise remain valueless;[641] a right of way across a

placer mining claim for the aerial bucket line of a mining

corporation;[642] land, water, and water rights for the production of

electric power by a public utility;[643] water rights by an interurban

railway company for the production of power in excess of current

needs;[644] places of historical interest;[645] land taken for the

purpose of exchange with a railroad company for a portion of its right

of way, required for widening a highway;[646] land by a railway for a

spur track;[647] establishment by a municipality of a public hack stand

upon the driveway maintained by a railroad upon its own terminal grounds

to afford ingress and egress to its patrons.[648] Likewise, damages for

which compensation must be paid are sustained by an upper riparian

proprietor by reason of the erection of a dam by a lower mill owner

under authority of a "mill act."[649] On the other hand, even when

compensation is tendered, an owner of property cannot be compelled to

assent to its taking by the State for the private use of another. Such a

taking is prohibited, by the due process clause. Thus, a State, by law,

could not require a railroad corporation, which had permitted the

erection of two grain elevators by private citizens on its right of way,

to grant upon like terms, a location to another group of farmers

desirous of erecting a third grain elevator for their own benefit.[650]

Just Compensation

"When * * * [the] power [of eminent domain] is exercised it can only be

done by giving the party whose property is taken or whose use and

enjoyment of such property is interfered with, full and adequate

compensation, not excessive or exorbitant, but just compensation."[651]

However, "there must be something more than an ordinary honest mistake

of law in the proceedings for compensation before a party can make out

that the State has deprived him of his property

unconstitutionally."[652] Unless, by its rulings of law, the State court

prevented a complainant from obtaining substantially any compensation,

its findings as to the amount of damages will not be overturned on

appeal, even though as a consequence of error therein the property owner

received less than he ought.[653] Accordingly, when a State court,

expressly recognizing a right of recovery for any substantial damage,

found that none had been shown by the proof, its award of only $1 as

nominal damages was held to present no question for review.[654] "All

that is essential is that in some appropriate way, before some properly

constituted tribunal, inquiry shall be made as to the amount of

compensation, and when this has been provided there is that due process

of law which is required by the Federal Constitution."[655]

"The general rule is that compensation 'is to be estimated by reference

to the uses for which the property is suitable, having regard to the

existing business and wants of the community, or such as may be

reasonably expected in the immediate future,' * * * [but] 'mere possible

or imaginary uses, or the speculative schemes of its proprietor, are to

be excluded.'"[656] Damages are measured by the loss to the owner, not

by the gain to the taker;[657] and attorneys' fees and expenses are not

embraced therein.[658] "When the public faith and credit are pledged to

a reasonably prompt ascertainment and payment, and there is adequate

provision for enforcing the pledge, * * * the requirement of just

compensation is satisfied."[659]

Uncompensated Takings

"It is well settled that 'neither a natural person nor a corporation can

claim damages on account of being compelled to render obedience to a

police regulation designed to secure the common welfare.' * * *

Uncompensated obedience to a regulation enacted for the public safety

under the police power of the State is not a taking or damaging without

just compensation of private property, * * *"[660] Thus, the flooding

of lands consequent upon private construction of a dam under authority

of legislation enacted to subserve the drainage of lowlands was not a

taking which required compensation to be made, especially since such

flooding could have been prevented by raising the height of dikes around

the lands. "The rule to be gathered from these cases is that where there

is a practical destruction, or material impairment of the value of

plaintiff's lands, there is a taking, which demands compensation, but

otherwise where, as in this case, plaintiff is merely put to some extra

expense in warding off the consequences of the overflow."[661]

Similarly, when a city, by condemnation proceedings, sought to open a

street across the tracks of a railroad, it was not obligated to pay the

expenses that the railroad would incur in planking the crossing,

constructing gates, and posting gatemen at the crossing. The railway was

presumed to have "laid its tracks subject to the condition necessarily

implied that their use could be so regulated by competent authority as

to insure the public safety."[662] Also, one who leased oyster beds in

Hampton Roads from Virginia for $1 per acre under guaranty of an

"absolute right" to use and occupy them was held to have acquired such

rights subject to the superior power of Virginia to authorize Newport

News to discharge its sewage into the sea; and, hence could not

successfully contend that the resulting pollution of his oysters

constituted an uncompensated taking without due process of law.[663]

Consequential Damages

"Acts done in the proper exercise of governmental powers, and not

directly encroaching upon private property, though their consequences

may impair its use, are universally held not to be a taking within the

meaning of the due process clause."[664] Accordingly, consequential

damages to abutting property caused by an obstruction in a street

resulting from the authorization of a railroad to erect tracks, sheds,

and fences over a portion thereof have been held to effect no

unconstitutional deprivation of property.[665] Likewise, the erection

over a street of an elevated viaduct, intended for general public travel

and not devoted to the exclusive use of a private transportation

corporation, has been declared to be a legitimate street improvement

equivalent to a change in grade; and, as in the case of a change of

grade, the owner of land abutting on the street has been refused damages

for impairment of access to his land and the lessening of the

circulation of light and air over it.[666]

Limits to the Above Rule.--There are limits however, to the

amount of destruction or impairment of the enjoyment or value of private

property which public authorities or citizens acting in their behalf may

occasion without the necessity of paying compensation therefor. Thus, in

upholding zoning regulations limiting the height of buildings which may

be constructed in a designated zone, the Court has warned that similar

regulations, if unreasonable, arbitrary, and discriminatory, may be held

to deprive an owner of the profitable use of his property and hence to

amount to a taking sufficient to require compensation to be paid for

such invasion of property rights.[667] Similarly, in voiding a statute

forbidding mining of coal under private dwellings or streets or cities

in places where such right to mine has been reserved in a conveyance,

Justice Holmes, speaking for his associates, declared if a regulation

restricting the use of private property goes too far, it will be

recognized as a taking for which compensation must be made. "Some values

are enjoyed under an implied limitation, and must yield to the police

power. But obviously the implied limitation must have its limits, * * *

One fact for consideration in determining such limits is the extent of

the diminution. * * * The damage [here] is not common or public. * * *

The extent of the taking is great. It purports to abolish what is

recognized in Pennsylvania as an estate in land."[668]

Due Process in Eminent Domain

(1) Notice.--If the owner of property sought to be condemned is

a nonresident, personal notice is not requisite and service may be

effected by publication.[669] In fact, "it has been uniformly held that

statutes providing for * * * condemnation of land may adopt a procedure

summary in character, and that notice of such proceedings may be

indirect, provided only that the period of notice of the initiation of

proceedings and the method of giving it are reasonably adapted to the

nature of the proceedings and their subject matter." Insofar as

reasonable notice is deemed to be essential, that requirement was

declared to have been satisfied by a statute providing that notice of

initiation of proceedings for establishment of a county road be

published on three successive weeks in three successive issues of a

paper published in the county, and that all meetings of the county

condemning agency be public and published in a county newspaper.[670]

(2) Hearing.--The necessity and expediency of a taking being

legislative questions irrespective of who may be charged with their

decision, a hearing thereon need not be afforded;[671] but the mode of

determining the compensation payable to an owner must be such as to

furnish him with an opportunity to be heard. Among several admissible

modes is that of causing the amount to be assessed by viewers, or by a

jury, generally without a hearing, but subject to the right of the owner

to appeal for a judicial review thereof at which a trial on the evidence

may be had. Through such an appeal the owner obtains the hearing to

which he is entitled;[672] and the fact that after having been

adequately notified of the determination by the condemning authorities,

the former must exercise his right of appeal within a limited period

thereafter, such as 30 days, has been held not so arbitrary as to

deprive him of property without due process of law.[673] Nor is there

any "denial of due process in making the findings of fact by the triers

of fact, whether commissioners or a jury, final as to such facts [that

is, conclusive as to the mere value of the property], and leaving open

to the courts simply the inquiry as to whether there was any erroneous

basis adopted by the triers in their appraisal, * * *"[674]

(3) Occupation in Advance of Condemnation.--Due process does

require that condemnation precede occupation by the condemning authority

so long as the opportunity for a hearing as to the value of the land is

guaranteed during the condemnation proceedings. Where the statute

contains an adequate provision for assured payment of compensation

without unreasonable delay, the taking may precede compensation.[675]

DUE PROCESS OF LAW IN CIVIL PROCEEDINGS

Some General Criteria

What is due process of law depends on the circumstances.[676] It varies

with the subject matter and the necessities of the situation. By due

process of law is meant one which, following the forms of law, is

appropriate to the case, and just to the parties affected. It must be

pursued in the ordinary mode prescribed by law; it must be adapted to

the end to be attained; and whenever necessary to the protection of the

parties, it must give them an opportunity to be heard respecting the

justice of the judgment sought. Any legal proceeding enforced by public

authority, whether sanctioned by age or custom or newly devised in the

discretion of the legislative power, which regards and preserves these

principles of liberty and justice, must be held to be due process of

law.[677]

Ancient Usage and Uniformity.--What is due process of law may

be ascertained in part by an examination of those settled usages and

modes of proceedings existing in the common and statute law of England

before the emigration of our ancestors, and shown not to have been

unsuited to their civil and political condition by having been acted on

by them after the settlement of this country. If it can show the

sanction of settled usage both in England and in this country, a process

of law which is not otherwise forbidden may be taken to be due process

of law. In other words, the antiquity of a procedure is a fact of weight

in its behalf. However, it does not follow that a procedure settled in

English law at the time of the emigration and brought to this country

and practiced by our ancestors is, or remains, an essential element of

due process of law. If that were so, the procedure of the first half of

the seventeenth century would be fastened upon American jurisprudence

like a strait jacket, only to be unloosed by constitutional amendment.

Fortunately, the States are not tied down by any provision of the

Constitution to the practice and procedure which existed at the common

law, but may avail themselves of the wisdom gathered by the experience

of the country to make changes deemed to be necessary.[678]