A threatened interference with the business of the taxpayer sometimes is,2 and sometimes is not,3 held to constitute duress 11894, 102 Mich. 528; 61 N. W. 15.
2 Swift Co. v. United States, 1884, 111 U. S. 22, 29; 4 S. Ct. 244, (Internal revenue tax. Mr. Justice Matthews: "The only alternative was to submit to an illegal exaction, or discontinue its business. It was in the power of the officers of the law, and could only do as they required."); Atchison, etc., R. Co. v. O'Connor, 1912,
U. S. ; 32 S. C. 216 (tax on foreign corporation) ; County of La Salle v. Simmons, 1849, 10 111. 513, ("gift" to county in order to get reissue of ferry license) ; Chicago v. Waukesha Brewing Co., 1900, 97 111. App. 583, (license tax paid on threat of police to prevent corporation from continuing business); Scottish Ind. Co. v. Herriott, 1899, 109 la. 606; 80 N. W. 665; 77 Am. St. Rep. 548, (payment of license tax by foreign corporation in order to continue doing business in State); Cunningham v. Monroe, 1860, 15 Gray (Mass.) 471, (head money paid to secure entry at customs house); cf. Cunningham v. Boston, 1860, 15 Gray (Mass.) 468, (head money paid in order to land passengers); City of Vicksburg v. Butler, 1878, 56 Miss. 72, (threat to close up shop); cf. Jackson v. Newman, 1882, 59 Miss. 385, (privilege tax-: threat to stop hack); Catoir v. Watterson, 1882, 38 Ohio St. 319, (liquor license: statute provided fine and imprisonment).
3 Emery v. Lowell, 1879, 127 Mass. 138, (illegal increase in liquor license); C. & J. Michel Brewing Co. v. State, 1905, 19 S. D. 302; 103 N. W. 40; 70 L. R. A. 911, (license tax on non-resident wholesalers of liquors); City of Houston v. Feeser, 1890, 76 Tex. 365; 13 S. W. 266, (butcher's license tax); Custin v. City of Viroqua, 1886, 67 Wis. 314; 30 S. W. 515, (liquor license paid to prevent closing of business). And see Yates v. Royal Ins. Co., 1902, 200 111. 202; 65 N. E. 726, (tax paid by foreign insurance company to continue business in State).
- the question depending in a large measure, no doubt, upon the extent of the damage that may result, the imminence of the danger, the availability of reasonably prompt judicial protection, and other circumstances (see ante, Sec. 218). In this connection it is noticeable that the courts seem less disposed to permit the recovery of an illegal license tax when it is paid to secure the privilege of opening a new business, than when paid to prevent the closure or interruption of a business already established.
Though there be no danger that one's place of business will be closed, or that its conduct will be otherwise directly interfered with, if the penalty imposed by the law for non-payment of the tax is an onerous one, payment of the tax is regarded as compulsory:
Robertson v. Frank Brothers Company, 1889, 132 U. S. 17; 10 Sup. Ct. 5: A customs appraiser required an importer to add certain charges to the invoices of goods and declared that whenever such charges should be omitted by the importer, they would be added by the appraisers and a penalty of twenty per cent of the whole duty imposed and exacted. The importer made the addition required and paid under protest the increased duty that resulted. Mr Justice Bradley (p. 24): "In our judgment, the payment of money to an official, as in the present case, to avoid an onerous penalty, though the imposition of the penalty might have been illegal, was sufficient to make the payment an involuntary one."
Ratterman v. American Express Company, 1892, 49 Oh. St. 608; 32 N. E. 754: An Ohio statute made it a criminal offense punishable by imprisonment for any person to transact business for an express company that failed to pay the taxes assessed against it, and imposed a penalty upon any railroad company that should carry goods for such express company. To avoid the consequences of a violation of the statute, the American Express Company paid an illegal tax on its gross receipts from interstate business. It was subsequently allowed by the Supreme Court of Ohio to recover the amount paid, the court saying (p. 621): "A failure to comply with the requirement of the statute as to the payment of the tax, would have imperiled the existence of the company's business; and to save its business in this state, and, to a large extent in the United States from destruction, it was necessary to avoid the statutory penalties and disabilities. . . . With the obvious danger in view that employees, and others independent of and beyond the control of the express company would be deterred by the penalties, and refuse to carry for it packages, parcels, or merchandise in the line of its business, a payment of the tax by the company might well be deemed to have been made under duress or coercion, and without waiver by the company of its day in court."1
There are cases which hold that if the threatened penalty, no matter how burdensome, can be enforced only through the medium of an action at law in which the taxpayer will have an opportunity to contest the validity of the tax, payment to avoid the penalty is not compulsory.2 Perhaps the most conspicuous is Oceanic Steam Navigation Company v. Tappan.3 A statute of New York imposed a tax upon alien passengers, to be collected from the owner of the ship by which they were landed. If the owner failed to make a certain report he was liable to a fine of seventy-five dollars for each passenger; if he did report, he was required to pay one dollar and fifty cents for each passenger, or was liable, if required by the mayor, to give onerous bonds, and in case of default to pay a penalty of five hundred dollars for each bond withheld. In order to avoid these penalties the plaintiff complied with the law, and subsequently, the act having been declared unconstitutional, sought to recover the taxes paid. The court conceded that the penalties would aggregate such an enormous sum as ordinarily to bankrupt a shipowner, and that it was consequently natural for the plaintiff to pay the tax rather than run the risk of litigation, but nevertheless decided that since the penalties could only have been collected by suit and the plaintiff was therefore sure of his day in court, the tax was not paid under "legal coercion," and consequently could not be recovered. These decisions apparently overlook the vital distinction between the ordinary case of a threatened suit and the case of an onerous penalty. In the former the execution of the threat cannot possibly result in serious hardship, for in the event of an adverse decision only the amount originally demanded, with the addition of interest and costs, must be paid. In the latter, on the other hand, an actual attempt to collect the penalty may, in the event of a determination adverse to the taxpayer, impose upon him a burden so heavy as to cripple his business or even make him a bankrupt. But, says the court in Oceanic Steam Navigation Company v. Tappan,1 " The party paying is bound to know the law and to assume that it will be correctly administered by the tribunal which is to decide the controversy." Here are two conclusive presumptions of law, based upon considerations of public policy. With the first - that every one knows the law - we are not now concerned, since there is no claim that payment is made in ignorance of or under a mistake of law. As to the second - that every question will be correctly decided by the courts - it is submitted that there is no consideration of justice or public policy that requires its application to the cases under consideration. It is difficult, indeed, to conceive of an act of more obvious injustice and unwisdom than to compel one to assume the risk of an adverse judicial decision, when not merely the amount of money involved in the original controversy but a penal sum so great as to endanger the very existence or solvency of his business, is at stake.
1 Also: Maxwell v. Griswold, 1850, 10 How. (U. S.) 241; Western Union Tel. Co. v. Mayer, 1876, 28 Ohio St. 521; City of Marshall v. Snediker, 1860, 25 Tex. 460; 78 Am. Dec. 534. And see Bergmeyer v. Greenup County, 1898, 19 Ky. Law Rep. 1599; 44 S. W. 82.
2 Oceanic Steam Navigation Co. v. Tappan, 1879, 16 Blatchf.(U. S. C. C.) 296; Fed. Cas., No. 10,405; Benson p. Monroe, 1851, 7 Cush. (Mass.) 125; 54 Am. Dec. 716; Boston, etc., Ins. Co. v. Hendricks, 1903, 41 Misc. Rep. 478; 85 N. Y. Supp. 44.
31879,16 Blatchf. (U. S. C. C.) 296; Fed. Cas., No. 10,405.