Sinclair Pipe Line Co. v. Carpentier
| Citation | 140 N.E.2d 115,10 Ill.2d 300 |
| Decision Date | 24 January 1957 |
| Docket Number | No. 34160,34160 |
| Parties | SINCLAIR PIPE LINE COMPANY, Appellant, v. Charles F. CARPENTIER, Secretary of State, et al., Appellees. |
| Court | Supreme Court of Illinois |
Giffin, Winning, Lindner & Newkirk, Springfield (Montgomery S. Winning and James M. Winning, Springfield, of counsel), for appellant.
Latham Castle, Atty. Gen. (Mark O. Roberts and Lucien S. Field, Springfield, of counsel), for appellees.
This appeal, taken from a decree of the circuit court of Sangamon County, involves the revenue and questions both the construction and constitutionality of certain provisions of the Business Corporation Act which served as the basis for an annual franchise tax and increased license fee assessed in 1955 by the State of Illinois against appellant, the Sinclair Pipe Line Company, a foreign corporation engaged exclusively in interstate commerce activities within the State.
The facts are either stipulated or admitted by the pleadings and disclose that appellant is a Delaware corporation whose principal business office is in Kansas. On May 14, 1952, it qualified to do business in Illinois as a foreign corporation upon an application for certificate of authority which recited the following:
'Sixth-The purpose or purposes for which it was organized which it proposes to pursue in the transaction of business in this State are:
'Generally to build, own and operate pipe lines, storage facilities, pump stations and all other necessary or desirable facilities, equipment and appurtenances, including telephone, telegraph and radio communication systems, for the receipt, gathering, transportation, carriage, conveyance, storage of crude petroleum and the products and byproducts thereof and all other rights and privileges necessary or appurtenant to such business; to acquire by purchase, lease, condemnation or other appropriate proceedings interest in such lands, rights of way, easements or other property as may be necessary, useful or proper in the conduct of said business; and generally to do all other and further acts and to own, acquire, hold, use and dispose of real and personal property as may be necessary or convenient in the conduct of such business.'
It is conceded that this language is broad enought to permit appellant to engage both in interstate and intrastate business in Illinois.
Following its qualification, appellant set about to acquire land and easements to accomplish its purpose and in some instances, all prior to 1955, its acquisitions were made through eminent domain proceedings initiated in Illinois courts. The stipulation sets forth that appellant has at all times paid all ad valorem and property taxes assessed against its holdings by the taxing authorities of the taxing districts in which they are located. By January, 1955, appellant owned and operated three pipeline systems, originating in or traversing Illinois, which were used solely in the transportation of crude oil or oil products either through Illinois or from Illinois into the State of Missouri. As an adjunct to its pipelines appellant maintains and operates communication systems by wire or radio along routes roughly paralleling the pipelines, and also has seven pumping stations at various sites along the three lines. These facilities are operated and maintained by seventy-three employees, all of whom are paid from the Kansas office. It is stipulated that appellant engages in no intrastate business and that all its activities and property in Illinois are devoted exclusively to its business of transporting oil or oil products in interstate commerce.
As it existed in 1955, section 138 of the Business Corporation Act (Ill.Rev.Stat.1955, chap. 32, par. 157.138) imposed franchise taxes on foreign corporations authorized to do business in Illinois in the following terms:
'Each foreign corporation authorized to transact business in this State shall pay to the Secretary of State the following franchise taxes, computed on the basis, at the rates and for the periods prescribed in this Act:
'(a) An initial franchise tax at the time of filing its application for a certificate of authority to transact business in this State.
'(d) An annual franchise tax during the month of July of each year in which the corporation is required by this Act to file an annual report.'
The annual report referred to is covered by section 115 of the act (par. 157.115) which directs each 'foreign corporation authorized to transact business in this State' to file, within the time prescribed by the act, an annual report containing specific data and such other information as may be necessary or appropriate to enable the Secretary of State to determine and assess the amount of fees and franchise taxes payable by such corporation. Section 116, in turn, provides that the annual report of a foreign corporation shall be filed between January 15 and the last day of February in each year, while section 139 contains provisions which permit such a corporation to elect to file a subsequent annual report on or before June 25 and before the payment of its annual tax. See: Ill.Rev.Stat.1955, chap. 32, pars. 157.116 and 157.139.
In addition to the annual franchise tax, license fees are required to be paid by foreign corporations in accordance with the following provisions of section 135 of the Business Corporation Act:
'The Secretary of State shall charge and collect from each foreign corporation authorized to transact business in this State the following license fees, computed on the basis and at the rates prescribed in this Act:
'(a) An initial license fee at the time of filing its application for a certificate of authority to transact business in this State.
'(d) An additional license fee during the month of July of each year in which the corporation is required by this Act to file an annual report whenever such report discloses an increase in the amount represented in this State of the sum of its stated capital and paid-in surplus over the amount previously determined to be represented in this State in accordance with the provisions of this Act.'
The basis for the computation of both the franchise taxes and the license fees required of a foreign corporation is supplied by section 136 of the act (par. 157.136) while the rate of tax and rate for license fees is provided by sections 140 and 137, respectively. (Pars. 157.140 and 157.137.) Insofar as pertinent to this proceeding, the formula provisions of section 136 are as follows:
'For the purpose of determining the amount represented in this State of the sum of the stated capital and paid-in surplus of a foreign corporation, the amount represented in this State shall be that proportion of the sum of its stated capital and paid-in surplus which the sum of (1) the value of its property located in this State and (2) the gross amount of business transacted by it at or from places of business in this State bears to the sum of (1) the value of all its property, whereever located, and (2) the gross amount of its business, wherever transacted.'
In passing it is to be noted that this formula, insofar as it was applied to foreign corporations engaging both in intrastate and interstate commerce in Illinois, was approved in Western Cartridge Co. v. Emmerson, 281 U.S. 511, 50 S.Ct. 383, 74 L.Ed. 1004, affirming 335 Ill. 150, 166 N.E. 501, and in Hump Hairpin Mfg. Co. v. Emmerson, 258 U.S. 290, 42 S.Ct. 305, 66 L.Ed. 622, affirming 293 Ill. 387, 127 N.E. 746.
Appellant states in its reply brief that it paid an initial license fee at the time it qualified to do business in 1952, but we find no indication that it was called upon to pay an initial franchise tax or an annual franchise tax for 1953 and 1954. Subsequent to the filing of its annual report in February, 1955, appellant received a notice from the Secretary of State that it had been assessed for the year commencing July 1, 1955, an annual franchise tax of $2,054.18 and also that it had been assessed an additional license fee of $13.15 for the same year. Upon receipt of such notice appellant requested a hearing which was granted and held on June 24, 1955. At that time appellant contended that it did no local or intrastate business, that it was engaged exclusively in interstate commerce in Illinois and thus was not liable for the assessments. While the Secretary of State apparently disagreed with such position, appellant was advised that the franchise tax would have to be paid unless it could withdraw by filing an application for withdrawal prior to July 1, 1955. Accordingly, on June 29, appellant submitted an application for a certificate-of-withdrawal proceeding under section 120 of the Business Corporation Act (Ill.Rev.Stat.1955, chap. 32, par. 157.120) which states in part:
'The application for withdrawal shall set forth:
'(a) That no proportion of its issued shares is on the date of such application represented by business transacted or property located in this State.'
The application filed by appellant modified the form of withdrawal provided by the Secretary of State by inserting the following words: 'said business is exclusively in interstate commerce and said property is used exclusively in interstate commerce,' after a printed phrase which reads as follows: 'That no portion of its issued shares at this time is represented by business transacted or property located in this State.' On the same day the Secretary refused to file the application, his letter to appellant stating that this court had held in Pennsylvania Co. for Ins. on Lives and Granting Annuities v. Bauerle, 143 Ill. 459, 33 N.E. 166,...
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