Louisville Tobacco Warehouse Co. v. Commonwealth

Decision Date14 March 1899
Citation106 Ky. 165,49 S.W. 1069
PartiesLOUISVILLE TOBACCO WAREHOUSE CO. v. COMMONWEALTH. [1]
CourtKentucky Court of Appeals

"To be officially reported."

Petition for rehearing. Granted.

DU RELLE, J.

Most of the questions presented by the briefs in this case have been settled by the opinion recently delivered at this term in the case of Ferry Co. v. Com., 47 S.W. 877. The sole question remaining for decision is whether a private trading corporation is required to make a report to the auditor, as a basis for the ascertainment of a tax upon its franchise.

The statute (Ky. St. § 4077) provides: "Every railway company or corporation and every incorporated bank, trust company, guaranty or security company, gas company, water company, ferry company, bridge company, street railway company, express company, electric light company, electric power company telegraph company, press dispatch company, telephone company turnpike company, palace-car company, dining-car company sleeping-car company, chair-car company, and every other like company, corporation, or association, also every other corporation, company or association having or exercising any special or exclusive privilege or franchise not allowed by law to natural persons, or performing any public service shall, in addition to the other taxes imposed on it by law, annually pay a tax on its franchise to the state, and a local tax thereon to the county, incorporated city, town and taxing district where its franchise may be exercised," etc. By the next section it is provided: "In order to determine the value of the franchises mentioned in the next preceding section, the corporations, companies and associations mentioned in the next preceding section, except banks and trust companies, whose statements shall be filed as hereinafter required by section 4092 of this article, shall annually, between the fifteenth day of September and first day of October, make and deliver to the auditor of public accounts of this state a statement verified by its president, cashier, secretary, treasurer, manager, or other chief officer or agent, in such form as the auditor may prescribe, showing the following facts," etc. By section 4078 it is provided that the auditor, secretary of state, and treasurer, constituting the board of valuation, shall, "from the said statement of the corporation, and from such other evidence as it may have, fix the value of the capital stock of the corporation; and from the amount thus fixed shall deduct the assessed value of all tangible property assessed in the state, or in the county where situated; and the remainder thus found shall be the value of the corporate franchise subject to taxation by the board." From these provisions it is manifest that the so-called franchise tax is in reality a property tax upon all the intangible property of the corporations named in the act. And so, in Henderson Bridge Co. v. Kentucky, 166 U.S. 154, 17 S.Ct. 534, the supreme court, in considering this statute, said: "The tax in controversy was nothing more than a tax on intangible property of the company in Kentucky, and was sustained as such by the court of appeals." And in Adams Exp. Co. v. Com., 166 U.S. 180, 17 S.Ct. 530, the supreme court said: "We agree with the circuit court that it is evident that the word 'franchise' was not employed in a technical sense; and the legislative intention is plain that the entire property, tangible and intangible, of all foreign and domestic corporations, and all foreign and domestic companies, possessing no franchise, should be valued at its entirety, the value of the tangible property be deducted, and the value of the intangible property be thus ascertained and taxed for these purposes." And so this court in Henderson Bridge Co. v. Com., 99 Ky. 639, 31 S.W. 486, held that the term "intangible property" was used as synonymous with "franchises." The sections we have referred to show conclusively that their object was to obtain a valuation of property for the purpose of taxation. The corporate property sought by this statute to be subjected to taxation may be said to be the added value which the exercise by the corporation of any special or exclusive privilege or franchise not allowed by law to natural persons gives to the tangible property. For example, a railroad track, without the right of operating a railroad, would be of small value; with that right, it might be worth millions of dollars. So, in ascertaining what corporations come within the purview of this statute, and are by it required to make report to the auditor, we should keep in mind the ultimate purpose of the statute, which is the taxation of this intangible property, and consider whether all corporations can, in law, possess such intangible property; for surely we are not to stretch the language of the statute beyond its letter, and assume that the legislature intended to require a vain thing, by imposing severe penalties for failure to report intangible property upon corporations which do not, and in law cannot, possess it. The appellant is an ordinary business corporation, created under the general law, under which no special or exclusive privilege not allowed by law to natural persons can be obtained. It conducts its business with the same rights and privileges, and subject to the same restrictions, as natural persons engaged in the same business.

It is insisted--and appears to have been so decided by the trial court--that the insertion in the articles of incorporation of a proviso that the private property of stockholders should not be subject to the corporate debts gave to the corporation an exclusive privilege not enjoyed by natural persons, and therefore brought this corporation within the purview of the statute. This construction would bring every business corporation in the commonwealth within the letter of the statute, and that is the contention made on behalf of appellee. But this privilege is a privilege, not of the corporation, but to the stockholder, and a privilege which every natural person may avail himself of by becoming a stockholder in a corporation. The corporation itself is a distinct entity, making its own contracts, and responsible for its debts, to the uttermost farthing of its assets. It is conceded that a trading corporation has a franchise; but its franchise is merely a franchise to exist, to have a name, to contract and be contracted with, to sue and be sued, in the same manner as a natural person, and this franchise is not a "special or exclusive privilege or franchise not allowed by law to natural persons." Nor can the appellant corporation be said to have any intangible property subject to taxation under this statute. Its tangible property--its warehouse, drays, and personal property--is of no greater value in the hands of the corporation than it would bear if owned and managed by the natural persons who are its stockholders. This is also true of its choses in action, etc. The value of its capital stock must necessarily be the value of its tangible property, choses in action, etc. It had no intangible property subject to taxation under the statute, and, as matter of law, could have none.

This brings us to consider the question whether private business corporations were intended by the legislature to make the report provided for in the statute. The statute enumerates by name 20 different varieties of corporation and company followed by the words, "and every other like company, corporation or association." It then provides, "also every other corporation, company or association having or exercising any special or exclusive privilege or franchise not allowed by law to natural persons, or performing any public service." It seems obvious that some varieties of corporations were intended to be excluded from the operation of this act; for why should this painstaking particularity of enumeration have been used, if the object was to include all incorporated companies, which would be the effect of the law if appellee's contention be sustained,-- that the exemption of private property from corporate debts is a privilege to the corporation? The latter clause, "also every other corporation, company or association having or exercising any special or exclusive privilege or franchise not allowed by law to natural persons, or performing any public service," seems to us to have been added for the purpose of including such corporations as were not strictly ejusdem generis with the companies previously enumerated, but which might possess exclusive privileges, and, as a provision for the future, to impose the intangible property tax upon corporations to be hereafter created, which might have exclusive privileges or perform public services. The only authority relied on in support of the contention that this language includes all corporations is the case of Telegraph Co. v. Norman, 77 F. 27. But the case was in relation to a company specifically named in the statute under consideration. The question here presented did not arise in that case, and was, presumably, not argued; and the suggestion made by the learned judge who delivered that opinion was made in argument, in reaching a conclusion to reach which the dictum cited was not necessary. While we attach little importance to legislative debate or legislative action, in the amendment or alteration of bills while on their passage, as a means of ascertaining the proper construction of the act adopted, it is interesting to note that this bill, as originally introduced, provided for the taxation of "every corporation organized under the laws of this state, or any other state, for the purpose of profit or doing business," with the exception of certain enumerated foreign corporations. It further appears, from an examination...

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