Jackson Securities & Investment Co. v. State

• Decision Date: 29 May 1941
• Docket Number: 6 Div. 825.
• Court: Alabama Supreme Court
• Parties: JACKSON SECURITIES & INV. CO. v. STATE.

2 So.2d 760

241 Ala. 288

JACKSON SECURITIES & INV. CO. v. STATE.

6 Div. 825.

Supreme Court of Alabama

May 29, 1941

Mead & Moebes, J. J. Scarborough, Jr., Hartwell A. Greene, and Andrew H. Knight, all of Birmingham, for appellant.

Thos S. Lawson, Atty. Gen., and John W. Lapsley and J. Edw Thornton, Asst. Attys. Gen., for appellee.

Frontis H. Moore, of Birmingham, amicus curiae.

FOSTER, Justice.

Appellant is a foreign corporation organized under the laws of Delaware.

On June 28, 1940, the State Department of Revenue made an assessment of the franchise tax against it. On July 13, 1940, appellant undertook to appeal to the Circuit Court of Jefferson County in equity. That court sustained a motion to dismiss the appeal, and dismissed it on the gound that being a foreign corporation, under the laws pertaining to appeals under such circumstances it should have been to the Circuit Court of Montgomery County, in equity. Appellant seeks to review that judgment by this appeal, or in the alternative it seeks a mandamus to set it aside.

On that question, section 103, General Acts of 1935, page 307 re-enacted in that respect in 1936, Extra Session, page 172, Code 1940, Tit. 51, § 140, is as follows: "If any taxpayer against whom an assessment is made by the State Tax Commission under any assessment required by law to be made by the State Tax Commission, is dissatisfied with the final assessment as fixed by the State Tax Commission, he may appeal from said final assessment to the Circuit Court of Montgomery County sitting in equity, or, in cases other than public utilities, to the Circuit Court of the County in which the taxpayer resides if the taxpayer has within the State a permanent residence."

Section 334, General Acts of 1935, page 394, is as follows: "Either the State or foreign corporation may appeal from the final assessment made by the State Tax Commission to the Circuit Court of Montgomery County, sitting in Equity, in the manner provided by this Act for appeals made from assessments of the State Tax Commission."

A material inquiry is whether appellant had or could have a permanent residence in Alabama, since it is a foreign corporation. A solution of that question will be a material aid in construing the two sections of the Revenue Act copied above, likewise a history of legislative enactments on the subject of appeals from assessments made by the State Tax Commission (now State Department of Revenue) will give light on the subject.

The Revenue Act of 1923 (section 20, General Acts 1923, pages 152-168) and of 1927 (section 66, General Acts 1927, pages 139-181) made provision for appeal by a foreign corporation, similar to section 334, supra. The Revenue Act of 1927, supra, page 185, section 73, contains the first legislative provision for appeals available to the taxpayers generally from such assessments. The appeal was to be to the Circuit Court of Montgomery, in equity. So that section 334, supra, goes back in history to the Act of 1923. The same provision has extended through the intervening period, and as is set out in that section of the Act of 1935 now in effect. Section 103 of the same Act as section 334 made for the first time special provision for taxpayers residing in a county other than Montgomery, and having a permanent residence in Alabama. We will first inquire whether or not this taxpayer, a foreign corporation, has or, in fact, can have a permanent residence in Alabama, as contemplated in section 103, supra. The facts material to that inquiry, as agreed upon, are that:

"4. Appellant established an office and place of business in the city of Birmingham, Jefferson County, Alabama, in the year 1925, and has maintained a place of business in said city in said county for each year thereafter including the year 1940. Appellant has no other office or place of business in Alabama, except said place of business in said city.

"5. All officers, agents and employees of appellant reside in said Jefferson County, Alabama, except the agent in the state of Delaware as set out in said certificate of incorporation, which said agent performs all its functions for appellant under instructions from appellant's board of directors and officers from Birmingham, Alabama. The meetings of the board of directors of appellant are held at said place of business in said city of Birmingham.

"6. Appellant's office in said city of Birmingham is its only office except the office in the state of Delaware set out in said certificate of incorporation."

In qualifying to do business in Alabama as a foreign corporation, appellant, in 1925, designated the city of Birmingham, Jefferson County, Alabama, as its known place of business, with an authorized agent named to be there and on whom service of process and all legal notices may be had, and for all the purposes contemplated by the laws of Alabama. There has been no change in that respect noted. So that if a foreign corporation can have a permanent residence in Alabama within the contemplation of section 103 of the Acts of 1935, and 1936, supra, this appellant may be so classified.

Let us assume for the present that the legislature meant to have section 103, supra, apply to a foreign corporation, not a public utility, if it has a permanent residence in Alabama, and in some county other than Montgomery, though section 334 of the same Act makes specific provision for foreign corporations without exception. So we reach the question of whether a foreign corporation can have such permanent residence in Alabama, contemplated by section 103, supra. If it cannot, the inquiry need proceed no further.

When the legislature there used the term "permanent residence" in Alabama, we must assume that it intended to apply to such situation as that term in ordinary legal parlance describes. The legal residence of a foreign corporation has been most usually defined by the federal courts, since usually it is connected with a federal question. Our statute using a term defined by the federal courts should ordinarily be considered as having the meaning thus given by those courts, if consistent with our conception of its true meaning.

We will first refer to the leading case of Southern Pac. Co. v. Denton, 146 U.S. 202, 13 S.Ct. 44, 36 L.Ed. 942, decided in 1892. A statute of Texas had provided that such corporation qualifying to do business in Texas must stipulate that if it removes a cause from a state court to a federal court, on the ground of nonresidence, its permit shall be void. That was a feature of that act prescribing conditions on which it could do business in Texas. The court held that the foreign corporation remained a resident of another state and as such had the right given by federal authority to make such removal; that the act with such a provision was void, and that residence of the foreign corporation qualifying in Texas under a void statute was not in Texas, and the foreign corporation could not be sued in a federal court in Texas by a nonresident, when jurisdiction was based on diversity of citizenship, since the laws of Congress then, and now, provided that when such is the basis of jurisdiction, the action must be either in the district of the residence of the plaintiff or defendant. See United States Judicial Code, section 51, 28 U.S. C.A. § 112. The same principle was given effect in Terral v. Burke Const. Co., 257 U.S. 529, 42 S.Ct. 188, 66 L.Ed. 352, 21 A. L.R. 186.

In Neirbo Co. v. Bethlehem Shipbuilding Corporation, 308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167, 128 A.L.R. 1437, decided in 1939, the court held that when a foreign corporation filed its consent to be sued in a state as a feature of its qualification under a valid act, it thereby agreed that its residence was so far in that state as to be subject to suit in a federal court there. This ruling was not made upon the basis of the existence of a residence in that state by the foreign corporation. The holding was distinctly placed upon the theory that qualification stipulations under a valid act of the state subjected the foreign corporation to the valid process of any court held in that state, including a federal court; whereas in Denton's case, supra, the qualification did not have such effect, since it was pursuant to an act which was void because it deprived the foreign corporation of the benefits of a federal grant, viz. to remove a cause to the federal court on account of it being a nonresident of the state. But in no respect was it held to be a resident of the state in which it qualified. It was predicated alone on the basis of an agreement to be subject to federal process in that state, effective though the federal act may have application only to residents of that state. It was an agreed residence for that purpose. The dissenting opinion makes specific this meaning of the majority opinion. Those cases are not therefore authority to the proposition that a foreign corporation acquires a residence in fact in a state in which it qualifies to do business. See, also, International Milling Co. v. Columbia Trans. Co., 292 U.S. 511, 54 S.Ct. 797, 78 L.Ed. 1396.

But there is another line of federal cases relating to the taxation of the intangibles of a corporation. They are only subject to taxation in the state of the residence of their owner, since by a fiction they follow the owner wheresoever he shall reside. These cases hold that a foreign corporation may acquire a business situs in a state other than that of its incorporation. This is said to be a fiction also worked out by the court decisions to justify a state in taxing the intangibles of a foreign corporation which were created in a business there conducted and have become an integral part of such local business. For that purpose, the courts have said that...