Nashville Trust Co. v. Evans

• Citation: 258 S.W.2d 761,195 Tenn. 205,31 Beeler 205
• Parties: NASHVILLE TRUST CO. v. EVANS. GUARANTY TITLE CO. v. EVANS. 31 Beeler 205, 195 Tenn. 205, 258 S.W.2d 761
• Decision Date: 25 April 1953
• Court: Supreme Court of Tennessee

Page 761

258 S.W.2d 761

NASHVILLE TRUST CO. v. EVANS.

GUARANTY TITLE CO. v. EVANS.

31 Beeler 205, 195 Tenn. 205, 258 S.W.2d 761

Supreme Court of Tennessee.

April 25, 1953.

Bailey, Ewing & Powell, Nashville, for appellants.

Taber, Chambliss, Swafford & Claunch, Chattanooga, amicus curiae.

Roy H. Beeler, Atty. Gen., Allison B. Humphreys, Sol. Gen., and William F. Barry, Sp. Counsel, Nashville, for J. Clarence Evans.

BURNETT, Justice.

The two above styled suits involve the same questions of law and even though they are separate suits they were treated by counsel and the Chancellor below in one opinion as they involve the identical question. It was agreed in the oral argument that one opinion might be filed by this Court applicable to both suits.

The suits were filed to recover certain franchise taxes and excise taxes which the two complainants had previously paid under protest to the Commissioner of Finance and Taxation. A demurrer to these suits was filed by the Commissioner to each suit predicated upon the ground that neither the franchise tax nor the excise tax was a tax upon the obligations of the United States or the income therefrom, but on the contrary the franchise tax and the excise tax were both non-discriminatory privilege taxes, levied upon all corporations for profit and doing business in Tennessee, that such taxes are imposed for the privilege in engaging in business in corporate form and are in no sense a direct tax upon the obligations of the United States or the income therefrom. The Chancellor in an excellent opinion sustained the demurrers. An appeal has been duly perfected, the cases have been ably briefed and argued before this Court. We now have the matter for determination.

It is insisted by the complainants that the State through its Commissioner of Finance and Taxation included obligations of the United States Government and income therefrom as a measure of the franchise tax and excise tax, respectively, in its tax and by so doing contravened Article I, Section 8 of the Constitution of the United States, which authorizes the United States to borrow money on its credit; and that it likewise was in conflict with Section 3701 of the Revised Statutes, 31 U.S.C.A. Sec. 742, which provides as follows:

'Except as otherwise provided by law, all stocks, bonds, Treasury notes, and other obligations of the United States, shall be exempt from taxation by or under State or municipal or local authority.'

In the brief and argument of the appellant it is said:

'It is realized that the learned Chancellor decided the cases in question in accord with the previous decisions of this court. The suits would not have been instituted except for a recent decision of the Supreme Court of the United States. The questions involved have been settled by the Supreme Court of Tennessee in the case of National Life & Accident Insurance Company v. Dempster, 168 Tenn. 446 ; Reynolds Tobacco Company v. Carson, 187 Tenn. 162 ; and American Bemberg Corp. v. Carson, 188 Tenn. 272 .'

In Reynolds Tobacco Co. v. Carson, 187 Tenn. 157, 213 S.W.2d 45, 47, this Court defined the nature of franchise and excise taxes as follows:

'The excise tax and the franchise tax are both privilege taxes (Corn v. Fort, 170 Tenn. 377, 95 S.W.2d 620, 106 A.L.R. 647) levied on corporations for the privilege of doing business in Tennessee. The excise tax is measured by the 'net earnings' (Bank of Commerce & Trust Co. v. Senter, 149 Tenn. 569, 596, 260 S.W. 144) within the State, and the franchise tax undertakes to reach the use of the corporate franchise and is based on that proportionate part of the corporate capital stock, surplus and undivided profits employed in doing the business in Tennessee. * * *'

The contention of the appellants is that it matters not whether the tax is described as a franchise or excise tax, but that it is a question of whether or not the tax is imposed on Government obligations and the income therefrom. And it is thus argued that when Tennessee imposes a franchise and excise tax on income from non-taxable Government Bonds that then this tax is unconstitutional as violating Article I, Section 8 of the United States Constitution heretofore...