State v. National Cash Credit Ass'n
| Decision Date | 31 March 1932 |
| Docket Number | 3 Div. 988. |
| Citation | 224 Ala. 629,141 So. 541 |
| Parties | STATE v. NATIONAL CASH CREDIT ASS'N. |
| Court | Alabama Supreme Court |
Rehearing Denied May 19, 1932.
Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.
Appeal to the circuit court, in equity, by the National Cash Credit Association from an assessment by the State Tax Commission. From a decree annulling the assessment, the State appeals.
Affirmed.
Thos E. Knight, Jr., Atty. Gen., and Frontis H. Moore, Asst. Atty Gen., for the State.
Wilkinson & Burton and Hollis O. Black, all of Birmingham, for appellee.
This cause involves the liability of National Cash Credit Association, a foreign corporation, for certain franchise taxes.
Having qualified to do business in Alabama, appellee filed its tax returns, including returns for franchise tax purposes, as of December 31, 1929, as required by law, showing the following:
The state tax commission, thereupon, by regular order, found the capital employed by the corporation in the state of Alabama to be the sum of $893,431.88, being the aggregate of items 12 and 15 above, and assessed the franchise tax thereon at the statutory rate of $2 per thousand upon the capital actually employed in this state.
An appeal was taken in statutory manner to the circuit court of Montgomery county. That court held the corporation not liable for such franchise tax, nor any portion of same, and the state appeals.
A preliminary question going to the jurisdiction of the circuit court is raised by appellant. The cause was styled on the docket of the circuit court: "National Cash Credit Association vs. State Tax Commission." The party defendant should have been "The State of Alabama." Gen. Acts 1927, p. 181, § 66.
But the official representatives of the state appeared, the cause proceeded without objection to a hearing and judgment. Thereupon the state moved to vacate the judgment for want of a proper party defendant. This motion being granted, the taxpayer moved to correct the style of the cause by substituting "The State of Alabama" for "State Tax Commission" on the docket. This motion was granted over objections of the state, and a judgment thereupon rendered between the appropriate parties.
The appeal was duly taken as per statute, vesting the court with jurisdiction of the subject-matter. The parties appeared and proceeded upon the merits. The style of the case on the docket was subject to correction from the record itself. There was no error in this regard.
The cause was heard and comes here on an agreed statement of facts.
Appellee, National Cash Credit Association, is a Delaware corporation, with principal place of business at 40 Journal Square, Jersey City, N. J.
Dealing first with stock owned by appellee in the two Alabama corporations above named, the inquiry is whether investments in such stock is capital employed in this state within the meaning of our franchise tax law.
While not expressly stated in the agreed facts, the detailed information therein discloses these Alabama corporations may be aptly called subsidiaries of appellee corporation. Still, they have existence as distinct legal entities, duly recognized and authorized to function as such under Alabama charters.
That they have capital stock owned by stockholders is recognized in this proceeding seeking to impose a franchise tax because of appellee's investments in such stock.
Each of these Alabama corporations has duly made returns and paid its franchise tax as fixed by the state tax commission.
Franchise taxes are dealt with by the Constitution of Alabama. As to domestic corporations the provision is: "The legislature shall, by general law, provide for the payment to the state of Alabama of a franchise tax by corporations organized under the laws of this state, which shall be in proportion to the amount of capital stock." Section 229, Constitution.
As to foreign corporations, who must first qualify to do business in this state, the provision is: "The legislature shall, by general law, provide for the payment to the State of Alabama of a franchise tax by such corporation, but such franchise tax shall be based on the actual amount of capital employed in this state." Section 232, Constitution.
These two provisions of the Constitution and statutes aimed to carry them into effect were dealt with by the full court in Louisville & N. R. Co. v. State, 201 Ala. 317, 78 So. 93.
The constitutionality of the statutes, and in effect the State Constitution, was assailed as arbitrary and discriminatory against foreign corporations in the matter of franchise taxes. The decision is directed to sustaining the substantial uniformity in the burden thus imposed, the domestic corporation being required to pay on its full capital stock, and the foreign corporation on the capital actually employed in this state.
In construing a related statute, we have said: State v. Burchfield Bros., 211 Ala. 32, 99 So. 198, 200.
Again we have declared: "Our law does not say capital owned or invested, but 'capital employed,' and it is admitted that the plant is employed in the business of the corporation." Ellis, Treas. v. W. A. Handley Mfg. Co., 214 Ala. 540, 108 So. 343.
It is conceded that mere investment in or ownership of property interests in Alabama by a foreign corporation does not subject it to a franchise tax. Such property must be employed in a corporate business done in this state.
The statute, in keeping with this principle, declares: "Every corporation organized under the laws of any other state, nation, or territory, and doing business in this State *** shall pay annually to the State an annual franchise tax of Two Dollars ($2.00) on each One Thousand Dollars of the actual amount of capital employed in this State." (Italics supplied.) Gen. Acts 1927, p. 176,§ 54.
The agreed statement of facts shows appellee qualified to do business in Alabama only "to hold stock in Alabama corporations."
Under our statutes a foreign corporation is required to qualify to do business in Alabama as a condition precedent to acquiring stock in domestic corporations by subscription or purchase. Code, § 7206. We are not concerned with the validity of this provision.
It may be suggested that such statute recognizes the acquirement of stock in a domestic corporation as doing business in Alabama subjecting such foreign corporation to a franchise tax.
Qualifying to do business under our Constitution and laws is primarily for the purpose of bringing the foreign corporation within the jurisdiction of our courts. A stockholder in a domestic...
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