Alabama Clay Products Co. v. City of Birmingham

• Decision Date: 18 May 1933
• Docket Number: 6 Div. 194.
• Citation: 148 So. 328,226 Ala. 631
• Parties: ALABAMA CLAY PRODUCTS CO. v. CITY OF BIRMINGHAM.
• Court: Alabama Supreme Court

148 So. 328

226 Ala. 631

ALABAMA CLAY PRODUCTS CO. v. CITY OF BIRMINGHAM.

6 Div. 194.

Supreme Court of Alabama

May 18, 1933

Appeal from Circuit Court, Jefferson County; J. Russell McElroy Judge.

Action to recover taxes by the City of Birmingham against the Alabama Clay Products Company. From a judgment for plaintiff defendant appeals.

Affirmed.

Smyer Smyer & Bainbridge, of Birmingham, for appellant.

W. J Wynn and Jas. H. Willis, both of Birmingham, for appellee.

BOULDIN J.

The city of Birmingham sued to recover ad valorem taxes claimed to be due on the shares of stock in Alabama Clay Products Company, a domestic corporation, for the years 1926 to 1930, inclusive.

The sole question presented on appeal is: What was the situs of the corporation for purpose of taxing the shares?

The evidence is without dispute, consisting in part of agreed facts, and in part of the oral testimony of Judge E. N. Hamill, witness called by defendant.

The certificate of incorporation, filed in the probate office of Jefferson county, Ala., on November 20, 1921, recited: "'C. The principal place of business and the office of said corporation shall be Lewisburg, Jefferson County, Alabama, with the privilege of establishing branch offices at other places within or without the State of Alabama."' At that time it was contemplated that the corporation should acquire certain lands at Lewisburg deemed a valuable location for a brick-making plant, and to build such plant and operate the same with business offices at Lewisburg.

After acquiring the property, and a permit from the securities commission to sell stock, sufficient sales of stock to erect such plant were not made; and, thereupon, the corporation in due course bought the properties of Bessemer Fire Brick Company, a going concern, with one plant operating at Ensley within the corporate limits of Birmingham, and another just outside the corporate limits of Bessemer, Ala. The Lewisburg site was abandoned, no plant was ever erected, no business office located there, and no corporate business ever conducted there other than mining and shipping small quantities of clay and shale to the Bessemer plant. During the period covered by the suit active business has been done through operations of the purchased plant, with business offices in Birmingham, as more fully discussed later in this opinion.

The general incorporation laws of the state require the certificate of incorporation made out by the incorporators and filed in the office of the judge of probate "shall set forth: * * * (3) Location.-The location of its principal office in this state." Code, § 6965 (3446).

The corporation may, by amendment of its charter, "change the location of its principal office in this state." Code, § 6982.

No such amendment was ever made. Our statute fixes the situs of shares in a domestic corporation for purposes of taxation at "its home or chief office in the State." Acts 1927, p. 166, § 25.

Appellant insists the charter designation of the location of its principal office is conclusive in law, binding upon the taxing authorities; and evidence of the location of its principal office in fact is inadmissible.

This question is of first impression in Alabama. The decisions of other states are not in harmony. Some states, following the early New York case of Western Transportation Co. v. Scheu, 19 N.Y. 408, hold the charter designation, when required by statute, conclusive. Other states hold the charter not conclusive in tax proceedings; that the actual location of the principal office is an issue of fact, which may be shown by evidence aliunde, and taxation imposed accordingly. Some cases have involved a fictitious location in the first instance, or a fictitious change of location for the purpose of evading the payment of taxes at the place of the actual situs of the business. The same principles would apply to a fictitious location where no business is done, whether so named in the first instance, or from failure to amend the charter to conform to an entire change of location in fact. If the situation works an evasion of taxation, the result is the same.

The purpose of the statutory requirement of a charter designation of location is primarily for the benefit of the public; such as the fixing of jurisdiction of courts, facilitating...