Attorney General v. Massachusetts Pipe-line Gas Co.

• Decision Date: 22 May 1901
• Parties: ATTORNEY GENERAL v. MASSACHUSETTS PIPE--LINE GAS CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

179 Mass. 15

60 N.E. 389

ATTORNEY GENERAL v. MASSACHUSETTS PIPE--LINE GAS CO.

Supreme Judicial Court of Massachusetts, Suffolk.

May 22, 1901

COUNSEL

A. W. De Gosh, Asst. Atty. Gen., for plaintiff.

Wm. M Butler and Guy W. Cox, for defendant.

OPINION

KNOWLTON J.

The question in this case is whether the defendant was taxable under Pub. St. c. 13, § 40, on May 1, 1898. This section imposes a tax on 'every corporation embraced in the provisions of section 38.' The provisions of section 38 apply to 'every corporation chartered by the commonwealth, or organized under the general laws for purposes of business or profit, having a capital stock divided into shares.' They require 'the treasurer annually, between the first and the tenth day of May,' to return to the tax commissioner a list of its shareholders and a statement of various other facts which tend to show the value of its franchise. Section 39 requires the tax commissioner to ascertain, from the returns or otherwise, the true market value of the shares of each corporation included in the provisions of section 38, as a basis for an assessment. It is conceded that the defendant corporation came within the provisions of section 38 on May 1, 1898, if it then had 'a capital stock divided into shares,' within the meaning of the statute. Its treasurer did not seasonably make the return required by section 39, but it is not contended that his failure to do this duty until June 23 1898, relieves it from liability to taxation. The defendant was incorporated by St. 1896, c. 537, and was made subject to the laws applicable to gas companies. In July, 1896, the corporation organized and voted to fix the capital stock at $1,000,000, and to issue the same in shares of $100 each. In December, 1897, these shares were subscribed for, and paid for in full in cash, and certificates were issued therefor by the corporation to the subscribers. The defendant contends that it was not liable to taxation, because on May 1, 1898, it had not filed the certificate of the payment of its capital stock into its treasury, as required by Pub. St. c. 106,§ 46. This section declares that 'no corporation which is subject to this chapter shall commence the transaction of the business for which it was organized or chartered, until the whole amount of its capital stock has been paid in, and a certificate of that fact * * * has been filed in the office of the secretary of the commonwealth.' About March 1, 1898, the defendant offered such a certificate for filing; but, because of irregularity in issuing capital stock without the approval of the gas commissioners, the secretary of the commonwealth declined to receive it, and no such certificate was filed until December 21, 1899. It has often been held that a tax assessed upon such corporations is upon the franchise, and not upon the property, of the corporation. Bank v. Apthorp, 12 Mass. 252; Attorney General v. Bay State Min. Co., 99 Mass. 148, 96 Am. Dec. 717; Com. v. People's Five-Cent Sav. Bank, 5 Allen, 428; Com. v. Provident Sav. Inst., 12 Allen, 312. The defendant contends that this franchise is the power to do business, and that no tax can be assessed upon any corporation which has not done all that the law requires to be done before it commences business. The position of its counsel is stated in its brief as follows: 'We go so far as to say that the only logical, and the only fair, conclusion is that a corporation may organize, issue capital stock, file its certificate with the secretary, as required by Pub. St. c. 106, § 46, and, so long as it never transacts any business, so long it may not be liable to pay a tax on a corporate franchise.' We do not agree to this extreme contention. The franchise which subjects the corporation to taxation is the right to do business legally by complying with the laws. A corporation having this right under legislative action cannot relieve itself from liability to taxation by neglecting to do business, or ceasing to do business. Its franchise remains, and it may do business, when it chooses. Nor can it escape taxation by failing to comply with a statute which is intended to regulate its conduct while doing business or before commencing business. Whatever the effect of such conditions upon the amount to be assessed, after it once has a capital stock divided into shares, nothing short of the loss of the franchise as a power that may be exercised, if the corporation chooses to comply with the law, can leave it free from liability to taxation under the statute. Com. v. Lancaster Sav. Bank, 123 Mass. 493.

It has been decided repeatedly that if a corporation goes on in the transaction of business, in disobedience of Pub. St. c. 106 § 46, before the whole amount of its capital stock is paid in, its doings are not void on that account. Chase's Patent...