Southern Ry. Co. v. Greene

• Court: Alabama Supreme Court
• Writing for the Court: SIMPSON, J.
• Citation: Southern Ry. Co. v. Greene, 49 So. 404, 160 Ala. 396 (Ala. 1909)
• Decision Date: 06 April 1909
• Parties: SOUTHERN RY. CO. v. GREENE, PROBATE JUDGE.

49 So. 404

160 Ala. 396

SOUTHERN RY. CO. v. GREENE, PROBATE JUDGE.

Supreme Court of Alabama

April 6, 1909

Appeal from City Court of Birmingham; C. C. Nesmith, Judge.

Action by the Southern Railway Company against Samuel E. Greene, as Probate Judge of Jefferson County. Judgment for defendant and plaintiff appeals. Affirmed.

Anderson J., dissenting.

James Weatherly, Alex P. Humphrey, and Alfred P. Thom, for appellant.

Alexander M. Garber, Atty. Gen., Thomas W. Martin, Asst. Atty. Gen S.D. Weakley, and H. C. Selheimer, for appellee.

SIMPSON J.

This suit was brought by the appellant against the appellee, as probate judge of Jefferson county, to recover $22,458.36, which had been paid to said probate judge under protest on account of the franchise tax required by Acts 1907, p. 418 (sections 2391-2399 of the Code of 1907). The complaint alleges that the plaintiff is a corporation organized under the laws of Virginia, specially authorized by said laws to acquire railroad properties in other states by either purchase or consolidation, and to use the same in the business of transporting passengers and freight as a common carrier; that it commenced business July 1, 1894, and has continued in business ever since, having acquired various lines of railway in Virginia, North Carolina, Tennessee, Georgia, and other states; that it is and has been conducting both an interstate and intrastate business; that on July 16, 1894, it filed in the office of the Secretary of State of Alabama a copy of its charter, and at the same time designated its principal place of business in said state, and an agent on whom process could be served, and paid to the Treasurer of the state of Alabama $250, being a full payment of the fee required by the provisions of an act to require all corporations to pay a fee or license, for the use of the state, before commencing business in this state, approved February 18, 1893 (Acts 1893, p. 690), and at once entered upon the business in said state for which it was chartered; also that it has paid the tax on franchise, or intangible property, required of all corporations by Act March 4, 1907 (Acts 1907, p. 342; section 2365 of Code of 1907); that between the time of commencing business and the year 1899 it purchased and acquired various lines of railroad in said state, connected with and continuous of the other lines owned by it (which are described in the complaint); that it paid large sums of money for said lines, in reliance upon the then laws of Alabama, and has since continuously operated said lines, transacting a large amount of business, interstate and intrastate, and has expended large sums in maintaining the same and in improvements and betterments; that it has from year to year paid all property taxes and license taxes required by law, including the license fee of $10, by Act March 4, 1907 (Acts 1907, p. 290), required of foreign corporations only; that the tax required by Act March 7, 1907, now complained of, is exacted of foreign corporations only; that the lines operated and owned by the plaintiff in Alabama were made the basis in ascertaining the amount of said franchise tax due by plaintiff. The complaint was demurred to, the demurrers were sustained, and judgment was rendered for the defendant.

In order to determine the issues involved in this case, it is necessary, first, to ascertain the nature of the tax complained of, and, specially, whether or not it is a tax on property; counsel, in argument, placing some emphasis on this point. A franchise is a special privilege conferred by the government on individuals. Bank of Augusta v. Earle, 13 Pet. 519, 10 L.Ed. 274; People's Pass. R. Co. v. Memphis City R. Co., 10 Wall. 38, 19 L.Ed. 844. In an early case the Supreme Court of the United States said: "A franchise is property, and nothing more. It is incorporeal property, and is so defined by Justice Blackstone. * * * It is its character of property only which imparts to it value, and alone authorizes in individuals a right of action for invasion or disturbance of its enjoyment." West Bridge Co. v. Dix, 6 How. 507, 12 L.Ed. 535. In another case before the same court, in which it was held that a statute exempting all the property of a railroad corporation from taxation included the franchise, it was said: "Nothing is better settled than that the franchise of a private corporation, which, in its application to a railroad, is the privilege of running it and taking fare and freight, is property, and of the most valuable kind, as it cannot be taken, for public use even, without compensation. It is true it is not the same sort of property as the rolling stock, roadbed, and depot grounds; but it is, equally with them, covered by the general term 'the property of the company.' " Wilmington R. R. v. Reid, Sheriff, 13 Wall. 264, 268, 20 L.Ed. 568. The case just cited is quoted and reaffirmed in Gulf & Ship Island R. Co. v. Hewes, 183 U.S. 67, 77, 22 S.Ct. 26, 46 L.Ed. 86.

The case of State v. Stonewall Ins. Co., 89 Ala. 335, 338, 7 So. 753, 754, held merely that a tax on the "capital stock" of a corporation was a tax on property, and the court said: "Owing to the difficulty of distinguishing between the capital and the property in which it is invested, tests for determining whether a tax is on the property, or the franchises, may be regarded generally uncertain and unsatisfactory. * * * The usual and most certain test is whether the tax is upon the capital stock eo nomine, without regard to its value or at its assessed valuation, in whatever it may be invested. If the former, it is a franchise tax; if the latter, a tax upon property." In the case of Ph nix Assurance Co. v. Fire Department of Montgomery, 117 Ala. 631, 646, 653, 23 So. 843, 847, 850, 42 L. R. A. 468, the act in question required all insurance companies, domestic and foreign, to pay $200 before taking any premium against fire, etc., and this court considered it a "privilege or occupation tax"; the court saying: "Moreover, it is well settled that limitations have relation to the taxation of property only, property which must be assessed according to its value, and not to other subjects of taxation, such as privileges and occupations." Treating it as a privilege tax, it was upheld; the court saying: "The rule of uniformity does not require that all subjects be taxed or not taxed alike. The requirement is complied with when the tax is levied equally and uniformly on all subjects of the same class and kind." In the case of Ph nix Carpet Co. v. State, 118 Ala. 143, 151, 152, 22 So. 627, 628, 72 Am. St. Rep. 143, the tax complained of was distinctly a privilege tax, levied only on those corporations not otherwise specifically required to pay a license tax, whether domestic or foreign. The validity of the tax was questioned by a domestic corporation, on the ground that it violated the uniformity provisions of our Constitutions, first, because such privilege tax was not required of individuals doing a like business; and, second, because it was not required of all corporations. The tax was held to be valid; the court saying: It "has the properties and quality of a franchise tax. It is measured or graduated by the amount of the paid-up capital stock of the corporation, and this distinguishes it from a tax on property." It will be observed that these cases refer to privilege or occupation taxes, which, as stated, are "annexed to the franchise, as a royalty for the grant"; and it is stated that "the tax may be imposed on the creation of the corporation, but, if the charter or grant of incorporation does not expressly exempt it from taxation, a tax on the franchise may be subsequently imposed at the will of the Legislature," provided equality and uniformity is observed, which "consists in the imposition of the like tax upon all who engage in the avocation, or who may exercise the privilege taxed, and, if it be a franchise tax, upon all corporations belonging to the class upon which it is imposed."

It was said in argument that the tax on a corporate franchise is a tax on the right to be a corporation; but that is not correct, for the right to be a corporation is a right or franchise that belongs to the individuals who compose the corporation, and not to the corporation itself. The franchises of the corporation are the rights to engage in and carry on the business for which it was chartered. Fietsam, Assignee, v. Hay, 122 Ill. 293, 13 N.E 501, 502, 3 Am. St. Rep. 492; Cedar Rapids Water Co. v. City of Cedar Rapids, 118 Iowa, 234, 91 N.W. 1081, 1083; Memphis & L. R. Co. v. Commissioners, 112 U.S. 609, 619, 5 S.Ct. 299, 28 L.Ed. 837. There are so many conflicting authorities that it is a matter of considerable difficulty to know just where to draw the line between a franchise as an asset of the corporation and a franchise tax as synonymous with a license or privilege tax. In a case in New York, where a tax was imposed on "the corporate franchise or business" of all corporations, and it was sought to be imposed upon a Pennsylvania corporation which had no property in New York, but had terminal facilities, such as wharves, piers, and docks, for receiving passengers and freight to be carried to its railroad in New Jersey, and an office for issuing tickets, etc., the Court of Appeals held that the law was not violative of the interstate commerce law, because the tax was not on the property, but on the "corporate franchise or business, by the express language of the enactment," and said: "The tax, when imposed on a domestic corporation, is a tax on its corporate franchise; when imposed on a foreign corporation is a tax on its business--a distinction based on the fact that corporate franchises are only taxable within the jurisdiction which creates them, and where...