Federal Crude Oil Co. v. Yount-Lee Oil Co.

• Decision Date: 20 June 1932
• Docket Number: No. 5545.,5545.
• Citation: 52 S.W.2d 56
• Parties: FEDERAL CRUDE OIL CO. v. YOUNT-LEE OIL CO. et al.
• Court: Texas Supreme Court

52 S.W.2d 56

FEDERAL CRUDE OIL CO. v. YOUNT-LEE OIL CO. et al.

No. 5545.

Supreme Court of Texas.

June 20, 1932.

Certified Questions from Court of Civil Appeals of Ninth Supreme Judicial District.

Suit by the Federal Crude Oil Company against the Yount-Lee Oil Company and others. Judgment for defendants, and plaintiff appeals. On certified questions to the Court of Civil Appeals.

Questions answered.

Superseding opinion of Commission of Appeals in 35 S.W.(2d) 111.

Nelson Phillips, of Dallas, and W. D. Gordon, E. E. Easterling, and M. S. Duffie, all of Beaumont, for appellant.

F. A. Williams, of Galveston, Beeman Strong, Orgain, Carroll & Bell and Ewell Strong, Jr., all of Beaumont, and R. L. Batts, of Austin, for appellees.

LEDDY, C.

The honorable Court of Civil Appeals for the Ninth Supreme Judicial District certifies for the determination of the Supreme Court two questions of law arising in the above cause, which is now pending in that court.

These questions were answered in an opinion of this Commission. 35 S.W.(2d) 111. Appellant's motion for rehearing was granted; the cause withdrawn by the Supreme Court and submitted to the nine-judge court.

It will not be necessary to quote the entire statement of the case which the Court of Civil Appeals sets forth in the certificate accompanying the questions propounded. We will briefly state from the certificate such facts as we deem essential in our discussion of the questions submitted.

The appellant, Federal Crude Oil Company, was, on April 23, 1901, duly incorporated under the laws of this state with the right to acquire land for prospecting and developing for oil.

It paid all the franchise taxes to the state of Texas in accordance with law up to the year 1905, omitting to pay the franchise tax due for that year. On July 1, 1905, the secretary of state, because of the default in payment of the franchise tax for that year, forfeited, by a proper entry upon the records of that office, the right of appellant to do business in Texas.

It appears that appellant, in the year 1905, while it was lawfully transacting its business in this state, acquired by fee-simple title the land in controversy in this suit, and drilled a well thereon in search of oil. The well was not a producer, and appellant did no further prospecting upon said land, ceased to transact any business in Texas, and never since that time has resumed the business for which it was chartered.

On June 5, 1928, appellant applied to the secretary of state for a revival of its right to do business in Texas, tendering to such official $10,500 in cash, the amount of its delinquent franchise taxes, with all interest, penalties, and costs. This payment was accepted by the secretary of state, who thereupon issued a certificate reciting such payment, certifying that appellant's right to do business had been revived, and that it was in good standing on the records of that office.

It is further shown that on September 5, 1913, the then secretary of state received a ruling from the Attorney General's department construing the Franchise Tax Act of 1913 (c. 159). In said opinion it was held that the provisions of said act giving corporations whose right to do business had been forfeited because of a failure to pay franchise taxes until September 1, 1913, within which to pay same, and have their right to do business revived, was not mandatory as to time of payment. It was further held that it was the duty of the secretary of state to accept such taxes, even though tendered by a corporation after the expiration of the period provided in said law, and that upon such payment the secretary of state was authorized to issue a certificate reviving the right of such corporation to do business in this state.

The record discloses that the secretary of state, since said ruling of the Attorney General, has accepted payments of franchise taxes, penalties, and interest, at any time when the same were tendered by corporations and has revived the right of such corporations to do business in this state, and that such has been the uniform practice in hundreds of cases, from the date of such ruling up to the time of the filing of this suit.

After appellant's right to do business had been revived in the manner aforesaid, it filed this suit against appellees in the district court of Jefferson county, in which it sought by action of trespass to try title to recover the land in controversy, alleging that appellee, on or about the 1st day of July, 1926, entered upon the land and ejected it therefrom, since which time it had withheld it from appellant.

Appellant's suit was met by a plea in abatement, interposed by appellee, which challenged its right to prosecute the suit upon two grounds:

First, because, by its failure to pay the franchise tax for the year 1905 within the time required by law, it was expressly denied the right to prosecute or defend any suit in the courts of this state, except to defend a suit brought by the state of Texas to forfeit its charter.

Second, that appellant's payment to the secretary of state did not revive its right to do business or remove the ban against its use of the courts of this state because it could not by payment of such delinquent franchise taxes, after the expiration of six months from the date its right to do business was forfeited, lawfully revive such right or the right to sue in the courts.

The trial court sustained appellee's plea in abatement, the effect of which was to deny appellant the right to maintain this suit.

The Court of Civil Appeals certifies two questions arising under the above state of facts:

"(1) Did the payment by appellant of the franchise taxes due the State, together with accumulated penalties and interest, and the acceptance thereof by said official with issuance of proper certificate of revival operate to restore appellant's right to carry on its business in this State so as to entitle it to maintain this suit?

"(2) If the payment of such taxes was not effective for the purpose above recited, is appellant nevertheless entitled to maintain this suit to recover the land involved because of its having acquired the same at a time when its current franchise taxes were fully paid and when it was lawfully transacting the business authorized by its charter?"

The last question submitted will be discussed first. In order properly to dispose of this question, it is necessary to review briefly the enactments of the Legislature in regard to franchise taxes levied against corporations.

By the Revised Statutes of 1895, a nominal franchise tax was imposed upon foreign and domestic corporations. This statute contained no provision denying corporations in default a right to sue in the courts. It was provided, however, that a corporation so defaulting should forfeit its charter. Article 5243i.

This statute was amended in 1897 (Acts 25th Leg. c. 104). By the terms of the amendment much larger franchise taxes were imposed, and provision was made for the forfeiture of the right of a corporation to do business because of its failure to pay such tax, such provision reading: "And any corporation whose charter may be thus forfeited shall be denied the right to sue; provided, in any suit against such corporation, on a cause of action arising before such forfeiture, no affirmative relief may be granted to such defendant corporation, unless its charter is revived, as provided in Article 5243j." Gen. Laws of the 25th Leg. p. 141.

At the same session of the Legislature (chapter 120, p. 168), there was added a clause denying such defaulting corporation the right to defend any suit brought against it.

In 1907 (Acts 30th Leg., 1st Called Sess., c. 23, p. 505), by amendment, the franchise taxes were again largely increased, and article 5243i was expressly repealed. Section 8 of this act contained this provision: "Any corporation whose right to do business shall be thus forfeited shall be denied the right to sue * * * in any other [of the] courts of this State except in the suit to forfeit the charter of such corporation, and in any suit against such corporation on a cause of action arising before such forfeiture no affirmative relief shall be granted to such corporation unless its right to do business in this State shall be revived as provided by this Act [the General Laws, 30th Legislature, 1st Called Sess., c. 23, p. 505]."

The act of 1897 was in force at the time appellant was incorporated, when it acquired the property in controversy, and when its right to do business was forfeited on account of its failure to pay the franchise tax for the year 1905. The act of 1907, which subsequently became article 7399, R. S. 1911, and later article 7091, R. S. 1925, was in force at the time this suit was instituted, and when the trespasses were alleged to have been committed.

The grounds upon which appellant predicates its right to prosecute this suit may be summarized as follows:

(1) A fair construction of article 7091 does not deny a domestic corporation a judicial remedy as to rights acquired while lawfully doing business within this state, as said statute was designed only to deny a corporation the right to prosecute or defend in the courts in respect to property rights acquired while illegally doing business within the state.

(2) By the operation of article 1320, appellant was given by virtue of its charter the unconditional right to sue and defend its property rights in this state, and that article 7091 was not intended to take away this broad and unconditional power to protect such lawfully acquired rights.

(3) If article 7091 be construed so as to deny appellant the right to protect in the courts its property acquired while it was lawfully transacting its business, then it is void because in contravention of section 13 of the Bill of Rights of this state, and it also operates to deny appellant the equal protection of the law guaranteed by both the State and Federal...