Fort Smith Lumber Company v. State of Arkansas ex rel. Attorney General

• Decision Date: 05 May 1919
• Docket Number: 206
• Citation: 211 S.W. 662,138 Ark. 581
• Parties: FORT SMITH LUMBER COMPANY v. STATE OF ARKANSAS EX REL. ATTORNEY GENERAL
• Court: Arkansas Supreme Court

211 S.W. 662

138 Ark. 581

FORT SMITH LUMBER COMPANY v. STATE OF ARKANSAS EX REL. ATTORNEY GENERAL

No. 206

Supreme Court of Arkansas

May 5, 1919

Appeal from Sebastian Chancery Court, Fort Smith District; J. V Bourland, Chancellor; affirmed.

Decree affirmed.

Hill Brizzolara & Fitzhugh, for appellant.

1. Under the decision in 128 Ark. 505 we are entitled to a decree for defendant. There is nothing in the former decision of this case that is conclusive of this case. 131 Ark. 40. The decree is in violation of article 16, section 5 Constitution of Arkansas. 73 Ark. 515; 97 Id. 254; 128 Id. 505; 131 Id. 40.

2. Taxation of the capital stock and property of a corporation and of its shares of stock is double taxation and not allowable. 97 Ark. 254; 128 Id. 505-513. The words "capital stock" mean the aggregate value of the shares of stock in the hands of shareholders, and is the basis for taxation purposes after deducting the value of the tangible property which is assessed specifically and separately. 73 Ark. 515; 78 Id. 187; 126 Id. 611; 160 P. 971; 128 Ark. 505; 131 Ark. 40.

3. The agreed statement of facts recites that the lumber company each year made out the return required by section 6036, Kirby Digest. This report gave the market value of the corporate stock or in lieu thereof the true value of all the corporate stock and all the tangible property of the corporation and disclosed all stock owned in the railway company and investment company. This was all assessed at 50 per cent. of its true market value, and each assessment was also 50 per cent. of the value of the stock of the lumber company and investment company. 87 Ark. 484. No person is required to list for taxation any stock in a corporation where the corporation is required to list or return its capital and property. Kirby's Digest, §§ 6872-6902; 87 Ark 484; 97 Id. 262; 244 U.S. 499. Here there was double taxation. 240 U.S. 522; 198 Id. 341; 188 Id. 385-730; 232 U.S. 1; 240 Id. 532. See also 198 U.S. 341.

John D. Arbuckle, Attorney General, Robert C. Knox, Assistant; George Vaughan, Frank Pace and T. M. Seawell, for appellee.

1. On the question of ultra vires, one corporation has no power to purchase and hold stock in another unless the power is clearly granted by its charter. 7 R. C. L. 547-553; 81 Ind. 500; 6 N.W. 675; 30 Am. Rep. 270; 53 N.W. 1150; 18 L. R. A. 778. The charter consists of its articles of association and the general law under which it is organized. 87 Ark. 587-591; 113 S.W. 796; 67 N.E. 207-210; 31 Ind.App. 34; 136 Ill.App. 606; 124 Ia. 107; 99 N.W. 290. There is no authority in Arkansas for one corporation to purchase and hold stock in another.

2. Holding companies have no legal status in Arkansas. 71 Ark. 379; 74 S.W. 518.

3. The general rule is that one corporation has no power to acquire and hold stock in another, unless the power is expressly granted by law or necessarily implied. 71 Ark. 379; 175 U.S. 40; Morawitz on Corp., §§ 431-2; 1 Cook on Corp., §§ 315-16-17; 7 A. & Eng. Law (2 ed.) 810-13; 96 Ark. 1; 130 S.W. 585; 30 L. R. A. (N. S.) 694; Ann. Cases 1912 B. 488.

4. Defendant's funds were invested in excess of its chartered powers, and the employment of any of the funds of the lumber company in stock of the railway company was ultra vires, and a fortiori was the acquisition of all the stock of the railroad. Kirby's Dig., 6936, 6547; 128 Ark. 505; 50 N.J.Eq. 656.

5. Defendant is a manufacturing corporation and falls within the general class required to list all its property for taxation. Kirby's Dig., § 6936, as amended by Act March 11, 1915, Acts 1915, p. 615; 128 Ark. 505. The assessment of all its shares collectively is requested by law. State v. Bodcaw Lbr. Co., ms. op. No deduction is allowed. 73 Ark. 515. For the rule in other States, see 204 Pa. 36; 53 A. 517; 60 W.Va. 357; 55 S.E. 398; 155 N.C. 53; 70 S.E. 1079; L. R. A. 1915 C.380-385; 99 Ala. 1; 42 Am. St. Rep. 17; 97 Ark. 254-259, 260; 87 Ark. 484.

5. All property is subject to taxation; there is no exemption by law. The court erred in sustaining the demurrer.

SMITH J. WOOD and HART, JJ., dissent.

OPINION

SMITH, J.

Upon the remand of the cause of State ex rel. Attorney General v. Fort Smith Lumber Company, 131 Ark. 40, 198 S.W. 702, the parties prepared the following agreed statement of facts upon which the cause was submitted:

"1. That the Fort Smith Lumber Company, Central Railway of Arkansas and the Choctaw Investment Company were each, for the years mentioned in the complaint, corporations existing and doing business in the State of Arkansas, and each was duly organized under the laws of Arkansas, the Fort Smith Lumber Company and Choctaw Investment Company being organized under section 837 and following sections of Kirby's Digest providing for the organization of corporations for manufacturing and other business, and the Central Railway of Arkansas being organized under chapter 133 of Kirby's Digest providing for the incorporation of railroad companies. That the Fort Smith Lumber Company was authorized by its articles of incorporation, among other powers, 'to own buy, sell and deal in real estate and other property; to engage in the mercantile business and conduct commissaries; to own, buy, sell and deal in stocks, bonds and securities of other corporations.' That all of the assets of the Fort Smith Lumber Company, Central Railway of Arkansas and the Choctaw Investment Company of every kind, nature and description were during the years mentioned in the complaint situated in the State of Arkansas, and that none of said corporations owned any assets outside of the State of Arkansas.

"2. That the Fort Smith Lumber Company owned 260 shares of stock in the Central Railway of Arkansas during the years hereinafter mentioned and prior to 1909 the Central Railway of Arkansas made annual report to the State Board of Railway Commissioners, and said State Board of Railway Commissioners each year made an assessment of its property until 1909, when the Tax Commission was created, and thereafter said Railway Company made its report to the Tax Commission and the Tax Commission each year made the assessment of the railroad property; that each year hereinafter mentioned the Central Railway of Arkansas made its annual report, pursuant to statute, to said taxing body. That each year the Central Railway of Arkansas was assessed fifty per cent. of the true market value of all of its assets, real, personal and mixed, and including tangible and intangible property and that said assessment of fifty per cent. of the true market value of its assets was also fifty per cent. of the true market value of the stock of said Central Railway of Arkansas. That all other railroad property in the State of Arkansas was assessed during each of the years on the basis of fifty per cent. of the true market value of all of its assets, real, personal and mixed, including tangible and intangible property. That the railroad company paid each year the full amount of the assessment against it. That the Central Railway of Arkansas paid no other taxes than that assessed against it by the Board of Railroad Commissioners or Tax Commission, the same being an assessment upon all of the property of whatsoever kind of the railroad company.

"3. That the Fort Smith Lumber Company owned stock in the Choctaw Investment Company in different amounts during the several years hereinafter mentioned. That all of the assets of the Choctaw Investment Company consisted of timber lands, and it owned no personal property or any other property than said timber lands. That said lands were assessed by the assessors in the various counties in which the same were situated, and at the time the assessment was finally determined by the county courts on appeal from the Board of Equalization. That the lands of the Choctaw Investment Company were each year assessed at fifty per cent. of their true market value, and the lands in the counties wherein said lands were situated throughout the State were assessed on a basis of fifty per cent. of their true market value. That the assessment of fifty per cent of the true market value of said lands was also fifty per cent. of the value of the stock of the Choctaw Investment Company. That the Choctaw Investment Company paid no other taxes than that assessed on said real estate, the same being all of its property.

"4. That the Fort Smith Lumber Company each year made its return as required by section 6936 of Kirby's Digest and amendatory act thereto. That it did not return for assessment the stock owned by it in the Central Railway of Arkansas or in the Choctaw Investment Company, as all of the property of the Central Railway Company and of the Choctaw Investment Company were separately assessed. It made a full disclosure of its holding of the stock in the Central Railway of Arkansas and the Choctaw Investment Company to the taxing officials who made the assessment against the Fort Smith Lumber Company. Excepting the stock owned by the Fort Smith Lumber Company in the Central Railway of Arkansas and in the Choctaw Investment Company, the assets of the Fort Smith Lumber Company, real, personal and mixed, including tangible and intangible property, were for each of the years hereinafter mentioned assessed for fifty...