People ex rel. Roberts & Schaefer Co. v. Emmerson

• Decision Date: 13 December 1922
• Docket Number: No. 14831.,14831.
• Citation: 137 N.E. 202,305 Ill. 348
• Court: Illinois Supreme Court
• Parties: PEOPLE ex rel. ROBERTS & SCHAEFER CO. v. EMMERSON, Secretary of State.

305 Ill. 348

137 N.E. 202

PEOPLE ex rel. ROBERTS & SCHAEFER CO.

v.EMMERSON, Secretary of State.

No. 14831.

Supreme Court of Illinois.

Oct. 21, 1922.

Rehearing Denied Dec. 13, 1922.

Mandamus by the People on the relation of Roberts & Schaefer Company against Louis L. Emmerson, Secretary of State, to compel him to accept payment in satisfaction of tax on relator's capital stock.

Writ awarded.

Johnson, Moran, Paltzer & O'Donnell, of Chicago, for relator.

Edward J. Brundage, Atty. Gen. (James W. Gullett and Clarence N. Boord, both of Springfield, of counsel), for respondent.

THOMPSON, C. J.

The relator, the Roberts & Schaefer Company, is an Illinois corporation originally organized with a capital stock of $100,000, divided into 1,000 shares of the par value of $100 each. In June, 1921, the stockholders, by proper amendment to the charter of the corporation, changed the old stock to preferred stock and then increased the capital stock of the corporation by issuing 10,000 shares of stock with no par value. The resolution effecting this change was as follows:

‘Resolved further, that the capital stock of this company is hereby increased from $100,000, consisting of 1,000 shares of preferred stock of the par value of $100 each, by the additional issue of 10,000 shares of no par value common stock. Such stock shall be fully paid up and nonassessable upon the payment of five dollars for each share in cash or property, as may be determined by the board of directors. The articles of incorporation are amended accordingly.’

A certificate of the increase of capital stock was duly filed with the Secretary of State showing that the amount of increased capital stock, which it was proposed to issue at once, was 10,000 shares of common stock having no par value, which was of the value of $50,000; that all this increased capital stock was to be issued at once for property, and that the property for which the stock was to be issued was ‘$50,000, * * * to be transferred from the surplus account of the company to capital account in full payment of the 10,000 shares of no par value common stock.’ In February, 1922, relator filed its annual report with the Secretaryof State, in which it stated that the amount of its authorized capital stock was $100,000 preferred stock and 10,000 shares of no par value stock issued and paid up at $5 a share.

The question presented by this proceeding is the amount of the annual franchise tax which relator must pay to the Secretary of State. Section 105 of the General Corporation Act provides:

‘Each corporation for profit, including railroads, except insurance companies, heretofore or hereafter organized under the laws of this state or admitted to do business in this state, and required by this act to make an annual report, shall pay an annual license fee or franchise tax to the Secretary of State of five cents each one hundred dollars of the proportion of its capital stock, authorized by its charter in the office of the Secretary of State, represented by business transacted and property located in this state, but in no event shall the amount of such license fee or franchise tax be less than that required by this act of corporations having no tangible property or business in this state.’ Hurd's Stat. 1921, p. 813.

All of the property of relator is located in this state, and all of its business is transacted here. It contends that the annual franchise tax should be assessed upon its capital stock of $150,000, which, computed at 5 cents on each $100, would amount to $75, thereby bringing it within the minimum tax of $200, which sum it has tendered to the Secretary of State. On the other hand, the Secretary of State contends that the 10,000 shares of stock of no par value should be reckoned at $100 a share for the purpose of computing the annual franchise tax, and that relator should therefore pay a tax upon a capital stock of $1,100,000, which, at 5 cents on each $100, amounts to $550. The Secretary of State has refused to accept the amount tendered by relator, and it has brought this original proceeding, requesting this court to award its writ of mandamus against respondent commanding him to accept the sum of $200 as and for the franchise tax due from relator for the year beginning July 1, 1922. Respondent has filed a general demurrer to relator's petition, and the cause has been argued and submitted for decision on the issue of law raised by this demurrer.

The tax required by section 105, above quoted, to be paid by corporations doing business in this state is a tax on the authorized capital stock of such corporations. It is not a property tax, and so the value of the corporate assets does not in any way measure the amount of tax to be paid. In construing section 105 it is necessary to keep in mind the distinction between capital stock and capital. The capital stock of a corporation is the sum total fixed by the charter or articles of incorporation as the amount paid in or to be paid in as the capital upon which the corporation is to do business. The capital may be increased by surplus profits or diminished by losses, but this does not increase or diminish the amount of capital stock. The funds or capital of the company may fluctuate; its capital stock remains invariable until changed by authority of the state. 5 Fletcher's Cyc. on Corp. 5681; 14 Corpus Juris, 379.

‘The term ‘capital stock’ of the corporation does not designate the shares of stock owned by the shareholder, either separately or in the aggregate, or the identical lands, chattels or other articles of property owned by the corporation, but it does designate the aggregate property of the corporation-not in separate parcels but as an homogeneous unit.' Central Illinois Service Co. v. Swartz, 284 Ill. 108, 119 N. E. 990.

Section 4 of the General Corporation Act requires that the verified statement of incorporation must set forth, inter alia:

‘(6) The number of shares into which the capital stock is to be divided, whether all or part of the same shall have a par value, and if so, the par value thereof, which shall not be less than $5, nor more than $100,...