Roberts & Schaefer Co. v. Emmerson

• Decision Date: 09 October 1924
• Docket Number: No. 15573.,15573.
• Citation: 144 N.E. 818,313 Ill. 137
• Court: Illinois Supreme Court
• Parties: ROBERTS & SCHAEFER CO. v. EMMERSON, Secretary of State.

313 Ill. 137

144 N.E. 818

ROBERTS & SCHAEFER CO.

v.EMMERSON, Secretary of State.

No. 15573.

Supreme Court of Illinois.

June 17, 1924.

Rehearing Denied Oct. 9, 1924.

Suit for injunction by the Roberts & Schaefer Company against Louis L. Emmerson, Secretary of State. From decree for defendant on demurrer, plaintiff appeals.

Affirmed.

Thompson, J., dissenting.Appeal from Circuit Court, Sangamon County; E. S. Smith, judge.

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

Edward J. Brundage, Atty. Gen. (Clarence N. Boord, of Springfield, of counsel), for appellee.

CARTER, C. J.

Appellant, the Roberts & Schaefer Company, a domestic corporation, filed its bill in the circuit court of Sangamon county against Louis L. Emmerson, secretary of state, alleging that the total amount of its authorized capital stock is $150,000; that it is divided into 1,000 shares of preferred stock of the par value of $100, and 10,000 shares of common stock of no par value, issued as fully paid at $5 a share; that, under section 105 of the General Corporation Act (Smith-Hurd Rev. St. 1923, c. 32), its annual franchise tax should be $75; that the amendment to the section added in 1923, fixing the value of all stock of no par value at $100 a share, for the purpose of the annual license or franchise tax, is unconstitutional; that the secretary of state had refused to accept $75 tendered to him by appellant, and demands $550 as the annual franchise tax due from appellant, and threatens to enforce his demand by inficting the statutory penalty. Appellant prayed that the court grant a mandatory injunction against appellee to accept $75 in full for the annual franchise tax due from appellant for the year beginning July 1, 1923, and for other relief. On demurrer the court held the amendment constitutional and that the tax demanded by the secretary of state was due from appellant. Complainant having elected to abide by its bill, the bill was dismissed for want of equity. This appeal followed.

It is urged that the language at the end of section 105 of the Corporation Act added by amendment in 1923, is unconstitutional because violative of section 1 of article 9 of the Constitution, which authorizes the General Assembly to tax corporations ‘owning or using franchises and privileges, in such manner as it shall from time to time direct by general law, uniform as to the class upon which it operates.’ Section 105, as amended in 1923, 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 on each $100 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. In the event that the corporation has stock of no par value, its shares for the purpose of fixing such fees shall be considered to be of the par value of $100 per share.’ Smith's Stat. 1923, p. 507.

All of the property of appellant is located, and all of its business is transacted, in this state. If the language italicized in section 105 above is unconstitutional, the appellant is required only to pay the smaller amount of $75, according to its contention; if constitutional, the company is required to pay the larger amount demanded by the secretary of state. A decision to the effect that the italicized language in section 105 is unconstitutional will also invalidate the same language found at the end of section 107, as originally passed in 1919.

Appellant's contention is that under the Corporation Law of Illinois its no par value stock must be valued at $5 a share-the amount at which it is fully paid up and the lowest amount for which, under the General Corporation Act, no par value stock may be sold. Computing the annual franchise or license tax upon this basis, appellant would be obligated to pay $75. The larger amount demanded by the secretary of state is based upon the amendment of 1923, providing that no par value stock shall be considered as of the par value of $100 per share for the computation of the franchise tax. Appellant contends that the total amount of authorized capital stock of a corporation must be stated in money in the application for incorporation, and that this amount is the necessary basis for the franchise tax, and that to establish a specific basis of $100 for the valuation of no par value stock is unconstitutional, as establishing a method of taxation not uniform as to the class of corporations upon which is operates.

Before passing on the constitutional issue raised in this case, it is necessary to determine the place of no par value stock in the General Corporation Act as revised in 1919. Such an inquiry is necessary to discover whether there is an actual discrimination bringing the amendment of 1923 within the constitutional prohibition against the taxation of corporations ‘owning or using franchises and privileges,’ in a manner otherwise than ‘uniform as to the class upon which it operates.’ The General Corporation Act of 1919 was a revision of the laws of Illinois regarding corporations for pecuniary profit.

[1] It must be construed as a whole. In its construction it must be borne in mind that no par value stock was an innovation introduced in the 1919 revision of the corporation laws of this state-a revision based primarily upon previously existing laws, providing only for stock with a par value. It will be well to review briefly the provisions of the General Corporation Act bearing upon no par value stock. The provisions of that act of primary interest in this connection are paragraphs 6, 8, 9, and 10 of section 4, and sections 23, 28, 32, 53, 96, 101, 105, and 107. Inasmuch as the basis for the construction of the act rests primarily upon section 4, prescribing the requirements of the statement of incorporation, it will be worth while to set out the germane paragraphs of that section. The statement of incorporation must indicate, among other things:

‘(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, per share, and whether all or part of the same shall have no par value. * * * (8) The total amount of authorized capital stock. (9) The amount of such stock which it is proposed to issue at once (which shall not be less than $1,000, all of which must be subscribed). (10) The payment of at least one-half of the capital stock, which it is proposed to issue at once, with a description of the nature and value of property, if any, paid for such capital stock.’

Appellant contends that the provisions quoted above from section 4 require the statement and articles of incorporation to prescribe definitely, in money, the total value of all authorized capital stock, whether of par value or no par value, or both, and that such articles of incorporation necessarily furnish the basis, and a definite basis, for the franchise tax imposed under section 105. Appellee contends, on the other hand, that ‘the total amount of authorized capital stock,’ in so far as it is represented by shares of no par value, is not required to be stated in dollars in the articles of incorporation, and that it is therefore necessary for the Legislature to establish a definite value for such shares, in order to fix a basis for computing the annual license or franchise tax upon the total money value of authorized capital stock. Section 4 expressly requires the statement of incorporation to set forth the number of shares into which the capital stock is to be divided, indicating whether or not all or a part of the same shall have no par value. This is supplemented by a required statement of the total amount of authorized capital stock; a statement of the amount of such stock to be issued at once, which shall not be less than $1,000; and the payment of at least one-half of the capital stock, which is proposed to be issued, at once. Appellant contends that the reference to the amount of stock means a definite amount in money, and that this construction becomes clear when the statement regarding amount of authorizedcapital stock is coupled with the requirement that the amount proposed to be issued at once shall not be less than $1,000. Appellee, on the other hand, insists that the very nature of no par value stock implies an absence of specific value, and that the requirements of section 4 are met, and can readily be met, by a statement of the value of proposed par value stock and of the number of shares of proposed stock of no par value. He contends that under his construction the minimum of $1,000 can be met either by the issuance of par value stock, or of no par value stock whose sale price is determined in the articles of incorporation, or by a combination of the two. Both the appellant and the appellee contend that their constructions are supported by other provisions of the act. It may be worth while, therefore, to examine briefly certain other sections of the act.

Section 28 relates to the report of stock issued within the authorized limit, but not previously reported to the secretary of state as issued. The second numbered paragraph of this section provides that the statements as to the issuance of such additional stock shall contain a statement that ‘as least one-half has been paid in,’ just as paragraph 10 of section 4 requires a similar statement in connection with the original issue of capital stock. It is contended that section 28 makes it...