Staples v. Kirby Petroleum Co.

• Decision Date: 21 February 1923
• Docket Number: (No. 6659.)
• Citation: 250 S.W. 293
• Parties: STAPLES, Secretary of State, v. KIRBY PETROLEUM CO.
• Court: Texas Court of Appeals

250 S.W. 293

STAPLES, Secretary of State, v. KIRBY PETROLEUM CO.

(No. 6659.)

Court of Civil Appeals of Texas. Austin.

February 21, 1923.

Appeal from District Court, Travis County; Geo. Calhoun, Judge.

Proceeding in district court to fix the amount of a franchise tax against the Kirby Petroleum Company a foreign corporation. From a judgment fixing the tax, S. L. Staples, Secretary of State, appeals. Affirmed.

W. A. Keeling, Atty. Gen., and Walace Hawkins and John W. Goodwin, Asst. Attys. Gen., for appellant.

Andrews, Streetman, Logue & Mobley, of Houston, for appellee.

Findings of Fact.

JENKINS, J.

Appellee is a foreign corporation, chartered under the laws of Delaware. It has been for some time operating in this state, under a permit to do business in this state. Its principal office and place of business in this state is in Houston. It employs its entire capital in this state.

Within the time prescribed by law appellee made a sworn report to the secretary of state, showing the entire value of its authorized capital stock, surplus, and undivided profits to be $9,387,064.08. This is the correct value of all of the property owned by appellee. Appellant refused to issue a permit to appellee to continue business in this state, for the reason he claimed the actual value of the property owned by appellee was not the correct basis upon which to estimate the amount of the franchise tax due by appellee, but that the same should be estimated on the basis of $75,000,000. This contention is based upon the following fact: Appellee was chartered under the laws of Delaware. It is authorized by its charter to issue 75,000 shares of non-par value. That is to say, these so-called shares were units, upon which no value was fixed by the charter, and which the corporation might dispose of at any price it saw proper. The statute of Delaware (Rev. Code 1915, § 1918a, as added by 29 Del. Laws, c. 113, § 3) authorizing the issuance of appellee's charter is as follows:

"Sec. 4a. Stock Without Par Value.—Any corporation may, if so provided in its certificate of incorporation or in an amendment thereof, issue shares of stock (other than stock preferred as to dividends or preferred as to its distributive share of the assets of the corporation or subject to redemption at a fixed price) without any nominal or par value. Every share of such stock without nominal or par value shall be equal to every other share of such stock, except that the certificate of incorporation may provide that such stock shall be divided into different classes with such designations and voting powers or restriction or qualification thereof as shall be stated therein, but all such stock shall be subordinate to the preferences given to preferred stock, if any. Such stock may be issued by the corporation from time to time for such consideration as may be fixed from time to time by the board of directors thereof, pursuant to authority conferred in the certificate of incorporation, or if such certificate shall not so provide, then by the consent of the holders of two-thirds of each class of stock then outstanding and entitled to vote given at a meeting called for that purpose in such manner as shall be prescribed by the by-laws, and any and all such shares so issued, the full consideration for which has been paid or delivered, shall be deemed fullpaid stock and not liable to any further call or assessment thereon, and the holder of such shares shall not be liable for any further payments under the provisions of this chapter.

"In any case in which the law requires that the par value of the shares of stock of a corporation be stated in any certificate or paper, it shall be stated, in respect of such shares, that such shares are without par value, and wherever the amount of stock, authorized or issued, is required to be stated, the number of shares authorized or issued shall be stated, and it shall also be stated that such shares are without par value. For the purpose of the taxes prescribed to be paid on the filing of any certificate or other paper relating to corporations and of franchise taxes prescribed to be paid by corporations to this state, but for no other purpose, such shares shall be taken to be of the par value of one hundred dollars each."

Appellant, for the purpose of the franchise tax required by the laws of this state, estimated the 75,000 shares of appellee's nonpar stock at $100, each, or $75,000,000.

The judgment of the trial court fixed the amount upon which the franchise tax should be estimated at $9,387,064.08. The trial court further found that the franchise tax owing by appellee was $5,431.75. This is correct if, as a matter of law, the tax should be based upon the valuation of $9,387,064.08, as fixed by the act of 1919.

It is the contention of appellee that the court erred in fixing the rate under the act of 1919, but that the same should be fixed under the act of 1917 (Vernon's Ann. Civ. St. Supp. 1918, art. 7394), for the reason that the act of 1919, in so far as it undertook to change the rate as fixed by the act of 1917, was unconstitutional. Appellant contends that the valuation, for the purpose of the franchise tax due this state, should be fixed at $75,000,000.

Opinion.

There is no law in this state authorizing a charter to be granted to a corporation with non-par value of stock, but it is not denied by appellant that a foreign corporation of this character is entitled to obtain a permit to do business in this state, upon the payment of the proper amount of franchise tax. The act of 1919 (General Laws, p. 75 [Vernon's Ann. Civ. St. Supp. 1922, art. 7394]) is not different from the law of 1917 (page 168), except that it provides that the tax shall be computed upon the undivided surplus, in addition to the capital stock, and changes the rate. This latter feature of the act will be dealt with, in a subsequent portion of this opinion.

Section 1 of the act of 1919 reads as follows:

"Article 7394. Except as herein provided, each and every foreign corporation authorized, or that may hereafter be authorized, to do business in this state, shall, on or before the first day of May of each year pay in advance to the secretary of state a franchise tax for the year following which shall be computed as follows: The authorized capital stock, surplus and undivided profits, if any, of such corporation, the total gross receipts of such corporation from all its business and the total gross receipts from all of its business done in Texas for the calendar year immediately preceding shall be ascertained by the secretary of state from sworn reports of the officers of such corporation or by such other method as may satisfy the secretary of state and the capital stock of such corporation upon which the franchise tax herein provided is based shall be that proportion of the authorized capital stock, plus the surplus and undivided profits, if any, of such corporation, as the gross receipts from the Texas business of such corporation done within the state of Texas bears to the total gross receipts of such corporation from its entire business and the capital stock assignable to the Texas business and upon which the fees hereinafter provided shall be calculated and based being thus ascertained, the franchise tax which is hereby provided shall be computed as follows: One dollar on each one thousand dollars or fractional part thereof up to and including one hundred thousand dollars; fifty cents on each one thousand dollars or fractional part thereof in excess of one hundred thousand dollars up to and including one million dollars, and twenty-five cents on each one thousand dollars or fractional part thereof in excess of one million dollars; provided that the minimum franchise tax to be paid by any foreign corporation shall be twenty-five dollars; provided, however, that where such corporation has a surplus or undivided profits the same shall be added to the entire capital stock of such corporation and shall be taken and computed as a part thereof, in determining the amount of such entire capital stock; provided that where a foreign corporation applying for a permit has theretofore done no business in Texas the franchise tax herein provided shall not be payable until the end of one year from the date of such permit at which time the franchise tax shall be computed upon that proportion of the authorized capital stock, plus the surplus and undivided profits, if any, of such corporation ascertained as above required as the gross receipts from its Texas business bears to the gross receipts of the corporation from its entire business done for the same period; and the second payment of such franchise tax shall be made for the period intervening between the date of such first payment and the first day of May following, the proportion of authorized capital stock, plus the surplus and undivided profits, if any, of such corporation, upon which the same shall be computed to be the same proportion that the gross receipts from the Texas business for such period bears to the gross...