Smith v. Burton
| Decision Date | 12 December 1968 |
| Docket Number | 7 Div. 710 |
| Citation | 217 So.2d 540,283 Ala. 391 |
| Parties | William I. SMITH et al. v. Otis R. BURTON, Sr., Tax Collector, Talladega County. |
| Court | Alabama Supreme Court |
Fred Blanton, Birmingham, for appellants.
MacDonald Gallion, Atty. Gen., Willard W. Livingston and Jas. R. Payne, Asst. Attys. Gen., and J. N. Montgomery, County Atty., Talladega, for appellee.
Complainants appeal from a decree declaring that the shareholders of the stock of Ampco, Incorporated, an Alabama corporation herein referred to as Ampco, are liable for the payment of ad valorem taxes on their respective shares, for the tax year 1963, assessed as provided by Title 51, § 25 et seq., Code 1940.
The complainants are four individual persons and the corporation, Ampco. Three of the individual complainants own all the shares of Ampco. The fourth individual complainant is a director, but not a shareholder, of Ampco.
The named respondent is the Tax Collector of Talladega County. The Attorney General and counsel for the Department of Revenue also appear in opposition to complainants.
The cause commenced with complainants' filing their bill for declaratory relief. Complainants aver that the four individual complainants are residents of the State of Alabama; that three of them are shareholders, directors, and officers of Ampco, and that the fourth individual complainant is a director of Ampco; that the Department of Revenue of the State of Alabama and the county tax assessor did assess the shares of stock in Ampco 'pursuant to Title 51, Section 25, et seq.,' Code 1940; that the shares 'were assessed to the corporation as provided by law'; that at the time of said assessment and thereafter until the filing of the bill, Ampco was defunct and insolvent, and the shares of Ampco were and continued to be without actual value; that after the aforesaid assessment, the respondent tax collector sent to Ampco a tax notice in the amount of the taxes assessed, to wit, $13,860.00; that Ampco was and continues to be unable to pay said tax; that the county tax collector has notified the three individual shareholders that he intends to collect the tax from the shareholders by authority of Title 51, § 25 et seq., Code 1940; that the tax assessor has not assessed the shares of Ampco to the shareholders individually or collectively; that the three individual shareholders, 'owners of all the shares of stock of' Ampco, have protested to the tax collector the payment of said tax on the ground that the shares have not been assessed to them individually, thereby denying to them their right to protest as provided by Title 51, § 25, Code 1940, and that collection of the tax from them without assessment would deprive complainants of their property without due process of law guaranteed by Section 6 of the Constitution of Alabama of 1901 and the Fourteenth Amendment of the Constitution of the United States.
Complainants pray for a declaration that the tax collector has no authority to collect the tax from the shareholders without an individual assessment against each of them 'with opportunity to protest as provided in' Title 51, § 25 et seq.; and that the collection of the tax from each shareholder is in violation of his constitutional right to due process.
The parties made stipulation as follows:
'That the only question remaining to be determined by the Court, subsequent to the ruling on demurrers in this case, is the constitutionality of said sections in their application to said Complainants under the allegations of the bill.'
After submission on bill, answer, and stipulation, the court decared that Title 51, § 25 et seq., is constitutional as applied to complainants; that the assessment, which was not appealed from, is valid and binding on the individual shareholders; that it is not a valid ground of objection that the assessment was entered on the assessment book in the name of the corporation rather than to the shareholders individually or collectively; that insolvency, inability, or failure of the corporation to pay the tax does not relieve the individual shareholder of liability for tax on his individually held shares; and that complainants are entitled to no further relief.
Complainants state a single proposition of law in brief, to wit:
'Collection of an ad valorem tax on shares of stock from the individual owners thereof without notice of an assessment on such shares of stock to the individual owners thereof and a hearing thereon is a denial of that due process guaranteed by Article I, Section 6, Constitution, State of Alabama, 1901, and that due process and equal protection of the laws guaranteed by Amendment XIV, Constitution of the United States, even though such shares of stock have been finally assessed by the Department of Revenue of the State of Alabama to the corporation.'
In essence, complainants' argument seems to be that an assessment against the corporation and in its name, for which the individual shareholder becomes liable without an additional assessment against him individually and without notice to him individually, deprives him of his property without due process of law.
We think it must be conceded that a taxpayer is denied due process if he is required to pay a tax on his property without assessment or notice or opportunity to be heard in protest against the assessment. In the instant case, we understand that the assessment was made as provided by the cited statutes. 1 It is agreed that the statutes were complied with. This means that the corporation did have notice and opportunity to be heard before the Department of Revenue, and the further right to appeal to the courts 'in behalf of the shareholder' if dissatisfied with the determination of the department. The shareholders also had the right to appeal. Title 51, § 26.
Unquestionably, the corporation, as such, had adequate notice and opportunity to be heard; but complainants, shareholders, contend that assessment to the corporation was not assessment to them and that notice to the corporation was not notice to them. So, the question for decision is whether or not assessment and notice to the corporation, as provided by the statute, were sufficient to give notice and opportunity to be heard to the shareholders so as to afford to them due process of law.
Counsel for complainants says in brief that he has found no case which resolves the primary question here presented, but we think he has found such a case, i.e., Corry v. City of Baltimore, 196 U.S. 466, 25 S.Ct. 297, 49 L.Ed. 556, which is not on all fours with the instant case, but, as we understand it, resolves the question whether notice to the corporation is sufficient notice to the shareholders.
In Corry, the Maryland laws provided for assessment of the value of the shares of stock of Maryland corporations in substantially the same manner as provided in our § 25, Title 51; except that the Maryland law required the corporation to pay the tax on behalf of the shareholder and provided that the corporation, when it had paid the tax, might proceed by personal action against the shareholder to recover the amount paid. Pursuant to Maryland law, tax had been assessed against a corporation and demand for payment made for state and municipal taxes due. Corry, a shareholder and nonresident of Maryland, brought suit to restrain collection. The Court of Appeals of Maryland denied relief, saying, among other things:
'The second and third objections urged by the appellant are, that section 144 of article 81 of the Code fails to provide a notice to the shareholder of the assessment and valuation of this property, and he was therefore, without an opportunity and to enforce the collection would be and to enforce the collection would be 'taking property without due process of law.'
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