Alabama Textile Products Corp. v. State

• Decision Date: 15 September 1955
• Docket Number: 3 Div. 726
• Parties: ALABAMA TEXTILE PRODUCTS CORP. v. STATE of Alabama.
• Court: Alabama Supreme Court

Page 42

83 So.2d 42

263 Ala. 533

ALABAMA TEXTILE PRODUCTS CORP. v. STATE of Alabama.

3 Div. 726.

Supreme Court of Alabama.

Sept. 15, 1955.

Rehearing Denied Nov. 10, 1955.

Albrittons & Rankin, Andalusia, for appellant.

John Patterson, Atty. Gen., Willard W. Livingston and H. Grady Tiller, Asst. Attys. Gen., for appellee.

Jack Grenshaw, Montgomery, amicus curiae.

MERRILL, Justice.

This is an appeal from a decree of the Circuit Court of Montgomery County, in Equity, sustaining demurrers to appellant's bill of complaint to the bill as a whole and to the various aspects of the bill. The bill presented an appeal under § 140, Title 51, Code of 1940, from a final assessment by the State Department of Revenue of franchise taxes against the appellant for the tax year 1952.

The excellent opinion of Judge Jones, which precedes the decree, is full, comprehensive and complete, and demonstrates that it is the result of much thought and research. Since we are affirming the decree, any opinion by us would cite and discuss most of the cases considered by Judge Jones in his opinion. We, therefore, quote and adopt his opinion on the same questions presented here, but we omit the portion of it which deals with the alleged violation of the Fifth and Fourteenth Amendments to the Constitution of the United States. Those aspects of the decree are not argued by appellant in this court and are not considered by us. The opinion of Judge Jones, with the noted exceptions, follows:

'The Alabama Textile Products Corporation, a corporation, will hereinafter be referred to as 'the appellant' and the State of Alabama, one of the appellees in this cause, will hereinafter be referred to as either 'the appellee' or 'the State.'

'The appellant is a Delaware corporation, same having been chartered under the laws of said State on March 29, 1929 and qualified to do business in the State of Alabama on March 31, 1929, and has continuously done business as a foreign corporation in the state of Alabama since said time.

'This case arose in the Department of Revenue of the State of Alabama where, after due notice and a contest therein by the appellant, a final assessment was made and entered by the State Department of Revenue against the appellant for franchise tax in the amount of $10,506.61 and the appellant, within the time and in the manner provided by law, duly appealed from said final assessment to this Court.

'Within the time required by law, the appellant duly filed its bill of complaint in this Court, making as parties appellee thereto Joe M. Edwards, as Commissioner of Revenue for the State of Alabama, the State Department of Revenue of the State of Alabama and the State of Alabama, and attached to the bill of complaint a copy of its franchise tax return for the year 1952.

'The bill of complaint alleges that the appellant was organized and granted its charter on March 29, 1929 under the laws of the State of Delaware and was duly qualified to do business in the State of Alabama on March 31, 1929; that its principal place of business in Alabama was and is Andalusia, Alabama, and that the corporation was and is engaged in the manufacturing of garments such as shirts and pajamas; that it was engaged in business during the franchise tax year 1952 in this State and also in the State of Florida.

'That on January 14, 1954 the Department of Revenue of the State of Alabama made and entered against the appellant a final franchise tax assessment for the tax year 1952 in the amount of $10,506.61; that the appellant, within the time and in the manner provided by law, duly perfected its appeal therefrom to this Court and within the time required by law, filed its bill of complaint herein; that the appellees and each of them, separately and severally, interposed demurrer to the bill of complaint as a whole and to the several and separate aspects thereof.

'The parties to this litigation appeared before the Court and orally argued the demurrer and later filed with the Court written briefs, and the matter is now before the Court for decree on said demurrer.

'The Commissioner and the State Department of Revenue as Appellees.

'Joe M. Edwards, as Commissioner of Revenue for the State of Alabama and the State Department of Revenue of the State of Alabama were each made parties appellee to the bill of complaint, and each interposed demurrer thereto. It is the opinion of the Court that the demurrer of these appellees should be sustained for they nor either of them are proper or necessary parties appellee to said suit. Section 140, Title 51, Code of Alabama 1940; State v. National Cash Credit Association, 224 Ala. 629, 141 So. 541, and Birmingham Vending Co. v. State, 251 Ala. 584, 38 So.2d 876.

'What Is Capital?

'From the oral argument before this Court, as well as the written brief and argument of the appellant filed with the Court, it appears that its main contention was that 'capital' should be redefined so as to include only the issued and outstanding capital stock, surplus and undivided profits and long term bonds maturing more than one year from accounting date, and that the actual amount of capital employed in Alabama could not exceed the aggregate sum thereof. With this contention, the Court cannot agree.

'The tax here in question is a constitutional tax provided for by Section 232 of the Constitution of Alabama 1901 which, as to a foreign corporation, provides, so far as here pertinent, as follows:

"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 229 of said Constitution provides that the Legislature shall levy a franchise tax against domestic corporations and, so far as here pertinent, provides as follows:

"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; * * *."

'In compliance with the mandate of these constitutional provisions, the Legislature enacted Laws levying a franchise tax against domestic corporations and a franchise tax against foreign corporations. Section 347 of Title 51, Code of Alabama 1940 levies a franchise tax against domestic corporations and said Section is as follows:

"Every corporation organized under the laws of this state, except strictly benevolent, educational or religious corporations, shall pay annually to the state an annual franchise tax of two dollars on each one thousand dollars of its capital stock."

'Section 348 of Title 51, Code of Alabama 1940, levies a franchise tax against foreign corporations and same, so far as here pertinent, is as follows:

"Every corporation organized under the laws of any other state, nation or territory and doing business in this state, except strictly benevolent, educational or religious corporations, shall pay annually to the state an annual franchise tax of two dollars on each one thousand dollars of the actual amount of capital employed in this state."

'It will be observed that the rate provided for by the Legislature for the tax against the domestic and against the foreign corporation is the same, namely, two dollars per thousand, but that with respect to the domestic corporation the tax is measured by the capital stock; whereas, with respect to the foreign corporation the tax is measured by 'the actual amount of capital employed in this state.' What does that expression mean?

'The latest case to go before the Supreme Court of this State involving the franchise tax on foreign corporations is that of State v. Travelers Ins. Co., 256 Ala. 61, 53 So.2d 745, 750. In that case the Supreme Court of Alabama, in language too clear for misunderstanding, stated:

"The basis of this tax is therein [the constitutional and statutory provisions] clearly defined to be the 'actual amount of capital employed in Alabama,' and our decisions have given that definition a fixed interpretation."

'From this quotation it appears that the Supreme Court regarded the expression "actual amount of capital employed in Alabama" as being itself the definition of what constitutes the measure of the tax. Furthermore, since their decisions have given said expression a fixed interpretation, it appears that there only remains to determine what that fixed interpretation is.

'Mr. Justice Simpson, the writer of said opinion, defined the expression as follows:

"We have said the words 'actual amount of capital employed' are used in their natural and ordinary signification and in the general accepted sense they have application to the properties and monies set apart from other uses and invested or employed in the operation of the business in the state with the view to income or profit therefrom. State v. Burchfield Bros., 211 Ala. 30, 99 So. 198."

'After referring to the case of Louisville & N. R. Co. v. State, 201 Ala. 317, 78 So. 93, an opinion written by Mr. Chief Justice Anderson, and calling attention to the fact that he relied upon and quoted approvingly from the cases of St. Louis Southwestern R. Co. v. State of Arkansas ex rel. Norwood, 235 U.S. 350, 35 S.Ct. 99, 59 L.Ed. 265, and Postal Telegraph Cable Co. v. Adams, 155 U.S. 688, 15 S.Ct. 268, 360 L.Ed. 311, Mr. Justice Simpson stated:

"We think it manifest the italicized portions evinced the opinion of our court as then constituted that the actual amount of capital employed in the state by a foreign corporation was to be based on the property of the corporation that is within the state and used in business transacted within the state. Subsequent decisions point to the same conclusion."

'It will be observed that Mr. Justice Simpson, in the Travelers Ins. Co. case, supra, quoted from the case of Consolidated Coal Co. v. State, 236 Ala. 489, 183 So. 650, 651, as follows:

"'The franchise tax...