Cobb v. Commissioners of Durham County

• Citation: 30 S.E. 338,122 N.C. 307
• Parties: COBB v. COMMISSIONERS OF DURHAM COUNTY et al.
• Decision Date: 24 May 1898
• Court: North Carolina Supreme Court

30 S.E. 338

122 N.C. 307

COBB v. COMMISSIONERS OF DURHAM COUNTY et al.

Supreme Court of North Carolina

May 24, 1898

Appeal from superior court, Durham county; Robinson, Judge.

Controversy submitted without action between Howell Cobb and the commissioners of Durham county and another to test the validity of a tax. From a judgment for plaintiff, defendants appeal. Reversed.

Manning & Foushee and Cook & Green, for appellants.

Guthrie & Guthrie and Boone & Bryant, for appellee.

MONTGOMERY J.

The Carolina Hotel Company, a company duly incorporated by the general assembly of North Carolina, has paid, for the year 1897, the tax of $100, imposed upon its franchise, as a corporation, according to the amount of its capital stock under section 37 of chapter 168 of the Laws of 1897. The sheriff of the county has, in addition to that tax, demanded of the plaintiff, who is the lessee of the hotel company, the license tax of $10 imposed under the provisions of section 35 of the act, and onehalf of 1 per cent. on all gross receipts by the lessee plaintiff from the hotel business over and above $2,000, for the privilege of carrying on the business of an hotel keeper during the same year 1897. Upon a case agreed, his honor, being of the opinion that the plaintiff lessee was not liable for the last-mentioned tax imposed under section 35, and that the same was illegal, ordered that the collection of the tax from the plaintiff be perpetually enjoined, and that the sheriff do not report the plaintiff as a delinquent to the proper authorities. The plaintiff's first ground of resistance of the tax is that, because the hotel company has paid the tax imposed upon the corporation under section 37 of the revenue act, he cannot, therefore, be compelled to pay the tax imposed under section 35, for the privilege of conducting the business of an hotel keeper; that is, that the payment of a tax on the corporation carries with it the privilege of conducting the hotel business without the payment of a license tax for the conducting of the same. The question for decision, then, on that point, is: Is it lawful for the general assembly to impose a tax on the franchise of a corporation simply as a privilege tax for being a corporation, and at the same time to impose a tax for the privilege of conducting the business contemplated by the charter of thecorporation? And, if lawful, has the legislature, in section 35, imposed the tax on the business and in section 37 the tax on the corporation? We are of the opinion that both taxes are lawful, and that the general assembly, in the sections above referred to, has imposed them.

There are many advantages, in a business way, accruing to those persons who associate themselves in the formation of private corporations, and, for such benefits and advantages, the state has the right to receive, in return, compensation in the way of taxes for the privileges conferred. As was said by the supreme court of the United States in the case of Home Ins. Co. v. New York State, 134 U.S. 594, 10 S.Ct. 593: "By the term 'corporate franchise or business,' as here used, we understand, is meant *** the right or privilege given by the state to two or more persons of being a corporation,--that is, of doing business in a corporate capacity,--and not the privilege or franchise which, when incorporated, the company may exercise. The right or privilege to be a corporation, or to do business as such body, is one generally deemed of value to the corporation, or it would not be sought in such numbers as at present. It is a right or privilege by which several individuals may unite themselves under a common name, and act as a single person with a succession of members, without dissolution or suspension of business, and with a limited individual liability. The granting of such right or privilege rests entirely in the discretion of the state, and, of course, when granted, may be accompanied, with such conditions as the legislature may judge most befitting to its interest and policy. It may require as a condition of the grant of the franchise, and also of its continued exercise, that the corporation pay a specific sum to the state each year or...