The taxes sought to.be enforced in this case are based upon a statute of a foreign jurisdiction. They are in the nature of a franchise tax, and the decree of the Circuit Court-gave them preference over unsecured local creditors in this jurisdiction.
The proposition as to what might be the status in this jurisdiction of a New Jersey tax levied upon property, under rules which exclude the idea of disproportion and arbitrary imposition," has no bearing whatever upon the question before us.
The taxes in question and the mode of assessment are admittedly arbitrary upon outstanding stock, without the remotest referencé to *770value, and they were imposed upon an insolvent situation subsequent to proceedings in-equity and'subsequent to the appointment óf a receiver.
The question whether taxes of the nature of those in issue shall be enforced an'd given preference outside the state in a suit involving the rights of creditors foreign to the jurisdiction imposing the taxes is one which, concerns substantial rights, and is not to be concluded by what is called the exercise of a discretion necessarily incident to a trial; but, aside frdm'the idea that such a question-"is not concluded upon grounds of-'discretion, arid that all-points come up upon appeals'in equity, it is apparent that,the Circuit Court, ,in this case,'did not asssume to conclude the point by determining .it as one ".of discretion, but decided it as one-involving substantive right.
"It is -extremely doubtful whethér á tax dike the one. here."would be upheld, in New Jersey with the conditions reversed; that is to say, a tax- .in the nature of a fee imposed by Massachusetts upon the franchise of a corporation created in that state,- with its property wholly in New Jersey, and its business being wound up in an insolvent proceeding in New Jersey. As stated in Re United States Car Co., 60 N. J. Eq. 514, 43 Atl. 673, a claim like the one under consideration is •not a tax. in the ordinary sense, but an arbitrary imposition laid upon a corporation without regard to the value o'f its property or of its franchises.
The corporation before us in a practical and substantial sense is an insolvent corporation, and the proceeding, since the interlocutory decree. of December 4, 1905, is one to wind up the corporate affairs in Massachusetts. The corporation is a mere shell, and its existence only a technical one,.and it is difficult to see equitable considerations which-require"that-.a New Jersey-franchise tax,or fee,.-characterized by its own courts as an arbitrary imposition, rather than as a just tax upon property, should be extraterritorially upheld and preferred upon equitable principles against bona fide creditors" in Massachusetts who have put their money and labor and materials into the local business of the corporation. At best, under the characterization of the New Jersey courts,.it is an arbitrary imposition, not a tax at all, and does not have the elements of a tax, but is something in the nature of a license fee imposed upon the corporation without regard to the value of its property or of its franchises. The corporation being one which was not to do business within the state creating it, but one which was intended to go and^does go elsewhere, the so-called tax imposed upon its existence is contrary to all principles of just and “proportional” taxation, and is, therefore, odious in an equitable if not in a legal sense.
It would seem that the latest New Jersey case, that of Ballou v. Flour Milling Co., 67 N. J. Eq. 188-191, 59 Atl. 331, fully sustains the view that such an arbitrary imposition would not be enforced outside oi the stat'e,'because the New Jersey court there says .those" courts '(deferring to' the "outside courts) would neither allow the "state franchise taxes which have accrued since, the date of the decree of insolvency .nór give priority to them if allowed, and that considerations of comity require the New Jersey courts to be governed by the rules which govern the extraterritorial courts.
*771It must be remembered that the proceeding here is not ancillary to one in New Jersey, but primary in this jurisdiction, arid has reference to local conditions and a fund which has its situs here and which never had a situs in New Jersey, and therefore, under the doctrine "and expressions of Ballou v. Flour Milling Co., 67 N. J. Eq. 191, 59 Atl, 331; this court surely has the right to determine what creditors have just claim to the fund in question.
Giving extraterritorial enforcement and priority to a franchise tax possessing the arbitrary, obnoxious, and discriminatory elements of the one in question would not only be contrary to principles of equity, but would be contrary to the decisions of Massachusetts, .where the. funds of the insolvent corporation and the equitable rights of the creditors are located—contrary to decisions of the courts of that state in respect to her own excise laws. Oliver v. Washington Mills, 11 Allen (Mass.) 268. See, also, Com. v. Savings Bank, 123 Mass. 493. A fee or franchise tax like this has no legal status in foreign jurisdictions unless-supported by statute or special equities. We fail'to see any equitable considerations upholding this claim which would not exist in respect to such a claim in any winding up proceeding in an extraterritorial court.
It must be borne in mind that this is a proceeding under the general-rules of equity, and not a bankruptcy case. New Jersey v. Anderson, 203 U. S. 483, 27 Sup. Ct. 137, 51 L. Ed. 284, was decided upon the broad and imperative bankruptcy section in respect to preference of taxes of all kinds, and not upon equitable considerations at all. That decision was expressly based upon the imperative force of the sedtiori of the bankruptcy act, in respect to taxes, which specifically obliges the trustee in bankruptcy to pay all taxes legally due and owing. There fore that decision in no way touches the question whether an arbitrary imposition of this kind, though legal in the bankruptcy statutory sense, would be upheld and given priority upon general principles of equity in an equity proceeding independent of the bankrupt law. The strong dissenting opinion of Mr. Justice Harlan, the Chief Justice, and Mr. Justice Peckham does, however, deal with the question of equitable priority even in a bankruptcy case. Under the bankruptcy section in respect to taxes a license fee or franchise of the character in question-doubtless has a certain legal status until the stock is surrendered arid the corporation dissolved; but, when it is proposed to give it enforcement and priority over bona fide creditors of an insolvent corporation in a foreign jurisdiction upon broad principles of equity, iMlependent of the bankruptcy statute, an entirely different question is presented.
The decree of the Circuit Court is reversed, and the case is remanded to that court with directions to enter, a final decree disallowing - the pending claim of the state of New Jersey for taxes; and neither party recovers costs in this court.
LOWELL, Circuit Judge, concurs in the result.