Chrysler Corp. v. State

• Decision Date: 10 September 1982
• Citation: 457 A.2d 345
• Parties: CHRYSLER CORPORATION, a corporation of the State of Delaware, Plaintiff, v. STATE of Delaware and Glenn C. Kenton, in his capacity as the Secretary of State of the State of Delaware, Defendants. . Submitted:
• Court: Supreme Court of Delaware

Page 345

457 A.2d 345

CHRYSLER CORPORATION, a corporation of the State of Delaware, Plaintiff, v. STATE of Delaware and Glenn C. Kenton, in his capacity as the Secretary of State of the State of Delaware, Defendants.

Supreme Court of Delaware.

Submitted: Sept. 10, 1982.

Decided: Feb. 4, 1983.

Upon certification by the Court of Chancery.

Charles S. Crompton, Jr. (argued) and James F. Burnett (argued), of Potter Anderson & Corroon, Wilmington, for plaintiff.

W. Harding Drane, Jr. (argued) and Roger A. Brown (argued), Deputy Attys. Gen., Wilmington, for defendants.

Before HERRMANN, C.J., McNEILLY and QUILLEN, JJ.

HERRMANN, Chief Justice:

This case requires inquiry into the application of Section 391 of the General Corporation Law, both prior and subsequent to its amendment of July 9, 1982. ¹

The Chrysler Corporation, a Delaware corporation, instituted this action in the Court of Chancery for a declaratory judgment and injunctive relief preventing the Secretary of State from collecting taxes and fees assessed under § 391. The case was certified to this Court for decision of the following question:

"Where a Delaware corporation, by means of adoption of a single resolution, amends its certificate of incorporation so as to change its authorized common stock from a certain number of par value shares to a greater number of shares without par value; and the corporation initially files a certificate of amendment changing only the number of shares which it is authorized to issue and pays a tax for such change computed under 8 Del.C. § 391(a)(2); and the corporation thereafter files a second certificate of amendment changing the shares of common stock which it is authorized to issue from shares having a par value to shares without par value; is the tax payable to the Secretary of State upon the filing of the second certificate of amendment assessed pursuant to subsection (2) or subsection (3) of 8 Del.C. § 391(a)?"

This Court accepted certification, having determined that the question was "of first instance in this State," and that it demonstrated "important and urgent reasons for an immediate determination by this Court." Del. Const. Art. IV, § 11(9); Rule 41(b). ²

I.

The following facts are undisputed:

At Chrysler's 1981 annual stockholders meeting, pursuant to the unanimous recommendation of its Board of Directors, the stockholders voted to amend Chrysler's certificate of incorporation in two respects: (1) to increase the authorized number of shares of common stock that the Corporation may issue from 120 million to 170 million; and (2) to redesignate the stock from shares having a par value of $6.25 to shares without par value. ³

Thereafter, on July 17, 1981, Chrysler filed with the Secretary of State ("Secretary") a certificate of amendment of its corporate charter increasing the authorized number of shares of common stock from 120 million to 170 million. Concurrently, Chrysler paid taxes thereon in the amount of $6,250, as assessed by the Secretary under § 391(a)(2).

A second certificate of amendment was filed by Chrysler later the same day redesignating the common stock from shares having a par value of $6.25 to shares without par value. The Secretary determined that, based on a longstanding interpretation of § 391 by his Department and an administrative determination that Chrysler was required to file a single certificate of amendment under the circumstances, a tax of $318,050. was due and payable by Chrysler upon the second certificate of amendment under § 391(a)(2). Chrysler promptly and timely protested on the ground that the assessment on the second certificate should have been made under § 391(a)(3) in the amount of $10, and not under § 391(a)(2). ⁴

II.

Chrysler contends basically that the provisions of the Statute are clear and unambiguous and that the second certificate was assessable under § 391(a)(3) because it did not involve "an increase of authorized capital stock."

The State contends that § 391(a)(2) is not limited in application to increases in the number of shares that a corporation is authorized to issue, but applies to all changes in the corporation's authorized capital stock which increase the tax computed thereon under § 391(a)(1); that § 391(a)(2) and § 391(a)(3) are ambiguous and therefore statutory construction is required; that "analysis of the statutory scheme as a whole demonstrates that the Secretary's interpretation is correct and in accordance with the statutory scheme, while [Chrysler's] construction leads to an unreasonable and absurd result that cannot have been intended by the General Assembly."

The State has summarized its position on this facet of the case as follows: "To adopt the interpretation urged by Chrysler, that section 391(a)(2) applies exclusively to increases in the number of authorized shares, would altogether defeat the statutory scheme distinguishing par from no par shares, exalt form over substance, and substantially lower the tax collectable under section 391(a)."

III.

We find untenable the State's position that the phrase "increasing the authorized capital stock" in § 391(a)(2), and the phrase "not involving an increase of authorized capital stock" in § 391(a)(3), are ambiguous and do not mean an increase (or lack thereof) in the number of authorized shares.

The language in issue is defined in the Statute in clear and unambiguous terms.

For §§ 391(a)(2) and (a)(3) purposes, a charter amendment changing stock from shares with par value to shares without par value does not "increase the authorized capital stock" of a corporation. For the purpose of computing the taxes prescribed by § 391(a)(1) and (2), the definition of "authorized capital stock" was expressly set forth in § 391(b) as follows:

" * * * the authorized capital stock of a corporation shall be considered to be the total number of shares which the corporation is authorized to issue." (Emphasis supplied)

Sections 391(a)(2) and 391(b) must be read together. The second certificate of amendment did not increase the "total number of shares" which Chrysler was authorized to issue. It follows that the certificate did not increase "the authorized capital stock" of Chrysler and that, therefore, § 391(a)(3), and not § 391(a)(2), controlled the assessment of tax on the second certificate.

This conclusion is mandated by the clear and unambiguous language of § 391(b). There is no room for statutory construction or interpretation here. Obviously, if a word or phrase "is neither defined in the Act nor is there an accepted definition in common usage ... the word and the phrase is ambiguous and judicial construction is required to ascertain the legislative intent." Mosley v. Bank of Delaware, Del.Supr., 372 A.2d 178, 179 (1977). However, if the General Assembly sees fit to provide a definition for a word or a phrase in a statute, "a court will be bound by that definition." Stiftel v. Malarkey, Del.Supr., 384 A.2d 9, 21 (1977); accord, C & T Associates, Inc. v. Government of New Castle County, Del.Ch., 408 A.2d 27, 30 (1979). "Absent an ambiguity in language, there is no room for construction, and an ambiguity may not be created in language otherwise clear by an underlying general statutory purpose." Beck v. Lund's Fisheries, Inc., Del.Supr., 164 A.2d 583, 586 (1960). "The general rule of statutory construction repeatedly affirmed by the courts of this state generally, and, in particular, by this court, is that where the language of a statute is plain and conveys a clear and definite meaning, the courts will give to the statute the exact meaning conveyed by the language, adding nothing thereto, and taking nothing therefrom." Federal United Corp. v. Havender, Del.Supr., 11 A.2d 331, 337 (1940).

The State contends that substantial weight should be given to the Secretary's application of the Statute because it is consistent with a longstanding administrative practice of his Department. This argument is of little help to the State for two reasons: First, because the practice has not been documented; and second, weight is given to an administrative interpretation only when a statute is ambiguous and construction is required. Kelly v. Bell, Del.Ch., 254 A.2d 62, 68 (1969). If a statute is plain and explicit, "usage or custom, no matter how long continued or how generally acquiesced in, cannot be seized upon to override the plain meaning conveyed by it." Delaware Steeplechase & Race Ass'n. v. Wise, Del.Supr., 27 A.2d 357, 361 (1942).

To sustain the State's position would be to disregard the clear language of the Statute, to speculate, and to engage in impermissible judicial legislation. It is neither for the Secretary nor for this Court to adjudge the wisdom or practicality of a clear and plain statutory provision, or to restructure the Statute by interpretation. Compare State v. Bethlehem Steel Corp., Del.Super., 184 A. 873 (1936).

The State seeks to find ambiguity, permitting invocation of rules of construction, upon the ground that the literal terms of the Statute lead to "unjust and absurd" results and would "exalt form over substance." In the present context, it is not within our province thus to classify the letter of § 391. The State argues that "anyone who examines the statute in more than a cursory fashion will be struck by the fact that there is little which is equitable or rational in the scheme it establishes." Whether this is so, we are not required to decide here. Suffice it to say that if tax "loopholes" result from the literal application of the language of the Statute, it is generally a matter for the General Assembly to address. For present purposes, we adopt the position taken by this Court in Highfield v. Delaware Trust Co., Del.Supr., 152 A. 124, 129 (1930):

"We recognize that our conclusion will deny to the State a substantial tax in the instant case and as time goes on may result in the loss of considerable revenue. If the result be an objectionable one, the remedy lies...