State ex rel. Attorney General v. Bodcaw Lumber Company

CourtSupreme Court of Arkansas
Citation194 S.W. 692,128 Ark. 505
Docket Number236,223
Decision Date12 March 1917

Appeal from Lafayette Chancery Court; James M. Barker, Chancellor reversed.

Judgment reversed, and cause remanded.

Wallace Davis, Attorney General, George Vaughan, Frank Pace and T. M Seawel, Special Counsel, for appellant.

1. The complaint stated a cause of action and should have been answered. If imperfect or incomplete in detail, or uncertain in its allegations, the objection should have been presented by motion--not demurrer. Kirby's Dig., § 6106; 72 Ark. 58; 93 Id. 371; 96 Id. 163; 101 Id. 350; 107 Id. 442.

2. Defendant is liable to a property tax upon its capital stock. Kirby's Digest, §§ 6872, 837, 841, 6899, 6903-4, 6906, 6936, 6873; Const., art. 2, § 23, art. 16 §§ 7, 5, 6; 46 Ark. 331; 2 Id. 291; 5 Id. 204; 25 Id. 289; 43 Id. 525; 46 Id. 312; 52 Id. 529; 62 Id. 461; 120 U.S. 97.

3. The "unit rule" of value is the true and exclusive statutory method for ascertaining the value of the capital stock for taxation purposes. Kirby's Digest, §§ 853, 6872, 6972 (3), (7b), 6873, 6899, 6904, 6923, 6906, 6910-11-12-13, 6920, 6936. This rule has been sustained by the Federal courts.

4. Certain deductions from the gross value of the capital stock are permissible, but solely to the end that "double taxation" may be avoided. Kirby's Digest, §§ 6936, subd. (4), (5), etc. The following deductions are not authorized. (1) Stock holdings in other corporations. 106 Ark. 552. (2) Property not taxable. 92 Id. 335. (3) Property out of bounds. No "double taxation" results from refusal to deduct value of real estate outside of the State. 82 N.E. 809; 97 Ark. 254, etc.; Kirby's Dig., §§ 6936-7.

5. There is no double taxation. Ib., §§ 6902, 6936-7.

6. Section 6902 only exonerates shares in the hands of individuals when an equivalent value is "taxed at the source," under § 6936.

7. The back tax act of 1887 supports and is peculiarly applicable. Acts 1887, p. 33; Acts 1911, 324; Acts 1913, p. 724; 117 Ark. 606; 119 Id. 314, 328; 106 Id. 248, 256.

8. Capital stock is "personal property." Act April 12, 1869; Kirby's Digest, § 6872, par. (7); Morawetz, Priv. Corp., § 224; 1 Cook Corp. (7 ed.), § 12, p. 57; 4 Thompson on Corp. (2 ed.), §§ 3465-71; 8 Id. (Supp.), § 3465; 10 Cyc. 346-5; 37 Cyc. 8221; 7 Rul. C. L. 196, 304; 27 Am. & E. Enc. L. (2 ed.) 935; 11 U.S. Enc. 187. The taxation of capital stock is mandatory. Kirby's Dig., § 6873; Burroughs, Tax. (1877), 188; 1 Desty on Tax. (1884) 355.

9. All property, real or personal, in this State is taxable, according to its value. Const., art. 16, § 5; Kirby's Digest, §§ 6873, 6889, 6999, 6906, 6910, 6936, 6904; 106 Ark. 552. Under our statutes all the property of a corporation is reached only once for taxation. The corporation being required to list its personal property and capital stock; the stockholders are not required to assess their shares. Kirby's Digest, §§ 6902, 6906, 6936; 90 Ky. 68; 13 S.W. 355-7.

10. Cite statutes and decisions from every State in the Union to sustain their contentions, but want of space forbids the citations. The brief is 288 pages long and must be abridged.

Henry Moore and Henry Moore, Jr., for appellee.

1. Defendant can not be required to pay once on its property in Arkansas as tangible property, and then be required to pay a second time on the same property under the guise of paying on capital stock. 76 Ill. 561; 161 Id. 132; 129 N.Y. 433; 89 Ala. 335; 95 U.S. 679; 46 Mich. 224; 74 Hun. 101; 24 A. 1107; 76 Ill. 561; 24 Wash. 351; 58 L. R. A. 514; 1 Cooley on Tax. (3 ed.) 396-7; 73 Ark. 517.

Double taxation is not allowed. 78 Ark. 192; 92 Id. 342; 94 Id. 238; 97 Id. 261; 54 U.S. (Law Ed.) 430; 57 L. R. A. 35; 2 Id. 255.

2. Property in another State can not be taxed in Arkansas. 119 Ark. 372; 198 U.S. 345; 7 Wall. 262; 14 Otto, 11; 117 U.S. 129; 141 Id. 18; 188 Id. 390; 182 Id. 558; 57 Cal. 594. Where the corporation itself pays taxes on the property that gives value to the shares, the capital stock is not taxable. 87 Ark. 484. Tangible property is subject to taxation by the State in which it is, no matter where the domicile of owner may be. 198 U.S. 306, 345; 199 U.S. 205; 222 Id. 68; 16 L. R. A. 56; 48 Id. 790; 105 N.C. 363.

3. The shares of stock are personal property and taxable at the residence of the owner. 9 Wall. 352; 18 Id. 206; 95 U.S. 697; 136 Id. 558; 177 Id. 1; 232 Id. 10; 198 Id. 229.

4. The tangible property of a corporation located in a State other than its domicile, can be taxed only in the State where located, and can not be taxed in the State of its domicile under the guise of taxing the capital stock of a corporation. 198 U.S. 341; 83 N.Y.S. 33; 199 U.S. 194; 69 L. R. A. 450, and note; 63 Ark. 586; 216 U.S. 146; 114 N.W. 565; 15 L. R. A. (N. S.) 143.

5. See also 87 Ark. 484; 92 Id. 344.

6. No cause of action is stated. The Back Tax Act does not apply, and gives no cause of action. 117 Ark. 606; 106 Id. 248.

MCCULLOCH, C. J. SMITH and HART, JJ., dissent. WOOD, J., concurring.



The Attorney General instituted this action in the chancery court of Lafayette County against the Bodcaw Lumber Company, a domestic corporation domiciled in that county, to recover taxes alleged to be due the State and its subdivisions by reason of the failure of said corporation to assess all of its property for taxation for certain years. The right to sue is predicated upon the authority of the statute embraced in Kirby's Digest, section 7204, et seq., as amended by the act of May 30, 1911 (page 324), and further amended by the act of March 12, 1913 (page 724), providing that where it is made to appear to the Attorney General that "in consequence of the failure from any cause to assess and levy taxes or because of any pretended assessment and levy of taxes upon any basis of valuation other than the true value in money of any property hereinafter mentioned, or because of any inadequate or insufficient valuation or assessment of such property or under valuation thereof, or from any other cause, that there are overdue and unpaid taxes owing to the State * * * by any corporation upon any property now in this State which belonged to any corporation at the time such taxes should have been properly assessed and paid, that it shall become his duty to at once institute a suit * * * for the collection of the same," etc.

It is alleged in the complaint that the property of the Bodcaw Lumber Company consists of its capital stock represented by and invested in real and personal property situated in certain counties in the State of Arkansas and in the State of Louisiana, and that the said corporation had failed, during certain years, to make return of all its property for taxation as provided by the statutes of this State, in that it had made no return of its capital stock and had not assessed for taxation any of its property except the tangible property situated in the State of Arkansas. It is further alleged that the capital stock of said corporation is, and has been during the years mentioned, of very great value in the aggregate, after deducting the tangible property subject to specific assessment under the statutes of the State, and that there is now due to the State the sum of $ 250,000, as the just proportion from said corporation to the State for the taxes on property which has thus escaped taxation. The court sustained a demurrer to the complaint and dismissed it for want of equity, and the Attorney General has prosecuted an appeal to this court.

Learned counsel in the case have set forth in the abstract, by way of illustration, the exact financial condition of the Bodcaw Lumber Company for many years past and the situs and value of its tangible property together with a statement of the amount of its capital stock, the number of shares and value thereof as taken from the reports filed by the president and secretary with the county clerk pursuant to statute, but that statement is not set forth in the complaint nor exhibited therewith, and we can not take notice of it. Nor do we deem it necessary to do so in order to dispose of the questions of law presented on the demurrer, for the complaint contains sufficient allegations to present for argument the questions discussed so thoroughly and ably by counsel in the respective briefs. Suffice it to say that the facts appearing from the complaint are that the Bodcaw Lumber Company has, during the years named, assessed for taxation its tangible property situated in the State of Arkansas, but it has not made any return of its capital stock for taxation, which, according to the contention of the State, is subject to taxation here without deduction of the value of property outside of this State which goes to make up the value of the stock. On the other hand, the contention of counsel for the defendant corporation is that only the tangible property of the corporation in the State is subject to taxation here and that the taxation of the capital stock, without deduction of the value of the tangible property outside of the State would be tantamount to indirectly taxing the property itself and would constitute double taxation. It must be treated as settled that there can be no double taxation in the sense that the same property may be twice assessed for taxation. That is not contemplated by the Constitution and laws of this State. Nor does it matter, in considering the question of double taxation, whether property is doubly taxed partly in one State and partly in another, for the rule against double taxation reaches to any form, and prohibits the double taxation under different sovereignties. Wright v. L. & N. Railroad Co., 195 U.S. 219. Therefore, an...

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