Clark Equipment Co. v. Johnson, 453

• Decision Date: 31 January 1964
• Docket Number: No. 453,453
• Citation: 261 N.C. 269,134 S.E.2d 327
• Parties: CLARK EQUIPMENT COMPANY, Petitioner, v. W. A. JOHNSON, Commissioner of Revenue of the State of North Carolina, Respondent.
• Court: North Carolina Supreme Court

Page 327

134 S.E.2d 327

261 N.C. 269

CLARK EQUIPMENT COMPANY, Petitioner, v. W. A. JOHNSON, Commissioner of Revenue of the State of North Carolina, Respondent.

No. 453

Supreme Court of North Carolina.

Jan. 31, 1964

Poyner, Geraghty, Hartsfield & Townsend, by N. A. Townsend, Jr., Thomas L. Norris, Jr., Raleigh, for petitioner appellant.

T. W. Bruton, Atty. Gen., Peyton B. Abbott, Deputy Atty. Gen., for respondent appellee.

RODMAN, Justice.

The findings made by the Tax Review Board (Board) are summarized, or quoted as follows: Clark manufactures and sells industrial equipment and machinery, including truck trailers and bodies. It operates its business through seven divisions, viz.: (a) Automotive Division: It makes and sells axles, housings and transmissions for truck trailers and construction machinery. (b) Industrial Trucks: It makes and sells industrial haulage trucks and straddle carriers. (c) Construction Machinery: It produces and sells heavy construction machinery. (d) Central Parts: It provides parts to users of products made by automotive, industrial truck, and construction machinery divisions. (e) Special Products: It manufactures cabs and weldments for the construction machinery and industrial truck divisions. It also produces screw machinery products and operates an aluminum foundry. (f) Hydraulic Products: It makes and sells pumps, hydraulic motors and valves, and hydrostatic transmissions. (g) Brown Trailer: It manufactures and sells aluminum, composite and steel truck trailers, cargo van bodies, and shipping containers.

Clark has no factories in North Carolina. Its Brown Trailer Division maintains a sales office in North Carolina. No other division of Clark has an office in North Carolina. Each division has its own administrative, selling, and production organization. The division officers operate entirely within the division to which they are assigned and are completely independent of every other division, except the general manager of each division is a vice president of Clark and helps control its general policy. Brown Trailer uses axles produced by the automotive division. Its purchases from Automotive Division amounted to $409,185.00 in 1959; $457,943.00 in 1960; $756,369.00 in 1961. These purchases represented 1.8 per cent, 1.9 per cent, and 3.1 per cent of the cost of goods produced by Brown in those years.

Consolidated accounting records of all of the divisions are maintained by Clark at its home office. There is also an accounting organization in the home office which combines the cost ledger summaries of the various divisions. General and administrative expenses are allocated among the several divisions by formula based primarily on sales.

Clark had a net income for the year 1959 of $21,771,176.38. Use of the basic formula allocated $201,949.43 of this income to North Carolina. But by Clark's 'separate accounting' method the Brown Trailer Division showed a loss for 1959 of $2,090,303.00. 'Nevertheless, the evidence reveals that the officers of Brown Trailer Division participated in a bonus based upon company-wide profits, indicating that each division was regarded as a part of a whole company-wide unitary activity.' The several divisions are interrelated and engaged in the manufacture and sale of related lines, having common officers and management and operating under a common 'corporate umbrella.' Service parts are generally shipped to the various divisions from the company's central parts warehouse in Chicago.

'The Board specifically finds as a fact that the taxpayer is a single corporate unity and that all of its corporate activities, although carried on upon a divisional basis, are so allied and so interwoven as to constitute the entire business of a corporation unitary and not multiform. The taxpayer, having the burden thereto, has failed to overcome by evidence which is 'clear, cogent and convincing,' the statutory presumption 'that the appropriate allocation formula reasonably attributes to this State the portion of the corporation's income earnings in the State."

On its appeal to the Superior Court, Clark filed exceptions to specific findings made by the Board. It also excepted to the Board's failure to find facts requested by it. The Court overruled each of Clark's exceptions to the facts as found by the Board but held the Board was in error in failing to find additional facts requested by Clark.

Appellant did not except to rulings of the Superior Court sustaining findings made by the Review Board. If one wishes to have this Court review an affirmance by the Superior Court of findings by a referee or administrative agency, it is necessary to specifically except to the court's ruling with respect to the fact he wishes to challenge. City of Goldsboro v. Atlantic Coast Line R.R., 246 N.C. 101, 97 S.E.2d 486. This may be done in the time and manner prescribed by G.S. § 1-186. An exception to a judgment does not present for review the facts found by the court or the sufficiency of the evidence to support the findings. Milwaukee Ins. Co. v. McLean Trucking Co., 256 N.C. 721, 125 S.E.2d 25. An assignment of error is not a substitute for an exception. Vance v. Hampton, 256 N.C. 557, 124 S.E.2d 527; Cratch v. Taylor, 256 N.C. 462, 124 S.E.2d 124.

The question for decision cannot, however, be determined solely on the facts found by the Board and approved by the Superior...