State ex rel. Haden v. Calco Awning & Window Corp.

• Decision Date: 04 November 1969
• Docket Number: No. 12825,12825
• Citation: 170 S.E.2d 362,153 W.Va. 524
• Court: West Virginia Supreme Court
• Parties: STATE ex rel. Charles H. HADEN, II, Tax Commissioner, Successor to G. Thomas Battle, Tax Commissioner v. CALCO AWNING AND WINDOW CORPORATION, etc., and/or Charles J. Call, its President et al.

Page 362

170 S.E.2d 362

153 W.Va. 524

STATE ex rel. Charles H. HADEN, II, Tax Commissioner Successor to G. Thomas Battle, Tax Commissioner v. CALCO AWNING AND WINDOW CORPORATION, etc., and/or Charles J Call, its President et al.

No. 12825.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 16, 1969.

Decided Nov. 4, 1969.

Syllbus by the Court

1. 'When the constitutionality of a statute is questioned every reasonable construction of the statute must be resorted to by a court in order to sustain constitutionality, and any doubt must be resolved in favor of the constitutionality of the legislative enactment.' Point 3, Syllabus, Willis v. O'Brien, 151 W.Va. 628 (153 S.E.2d 178).

2. 'To establish that a taxing statute, valid on its face, is so unreasonable or arbitrary as to amount to a denial of due process of law when applied in a particular case, the taxpayer must prove by clear and cogent evidence facts establishing unreasonableness or arbitrariness.' Point 4, Syllabus, Norfolk and Western Railway Company v. Field, 143 W.Va. 219 (100 S.E.2d 796).

Chauncey H. Browning, Jr., Atty. Gen., Paul R. Goode, Jr., Deputy Atty. Gen., C. Elton Byron, Jr., Asst. Atty. Gen., Charleston, for appellant.

Broh & Vital, Jack H. Vital, III, Huntington, for appellees.

CAPLAN, Judge.

This is an appeal by the state tax commissioner from a final judgment of the Circuit Court of Cabell County. The action resulting in such judgment was instituted in that court by the state tax commissioner against Calco Awning and Window Corporation of Huntington, an Ohio corporation, hereinafter referred to as Calco, and against Charles J. Call, Carlton E. Sagar and Ellen Jackson, its president, vice president and secretary and treasurer, to affect the collection of certain taxes alleged to be due and owing the state.

The complaint consisted of three separate causes of action, the first two of which were against Calco alone and which are not involved in this appeal. The third cause of action alleges that 'Calco Awning and Window Corporation of Huntington, an Ohio Corporation, Charles J. Call, its president, Carlton E. Sagar, its vice-president, and Ellen Jackson, secretary and treasurer, jointly and severally, are indebted to the State of West Virginia in the amount of Five Thousand, One Hundred, Forty-Five Collars and Eighty-One Cents ($5,145.81) for Consumers Sales and Service Tax under the provisions of Chapter 11, Article 15 of the Code of West Virginia of 1931, as amended.' Service of Process was not obtained on Charles J. Call and he is not a party on this appeal.

Upon the failure of Calco to plead or otherwise defend this action, a default judgment was entered against it on April 11, 1968. This judgment was in the sum of $6,752.05, the total amount alleged to be due by reason of its failure to pay business and occupation, personal income and consumers sales and service taxes.

Answering the complaint of the state tax commissioner, the remaining individual defendants, Carlton E. Sager and Ellen Jackson, deny that they are indebted to the State of West Virginia in the amount of $5,145.81 for the consumers sales tax; deny that they are properly elected officers of said corporation; deny that they are employees of Calco with the responsibility of preparing and filing any tax returns of said corporation; and affirmatively assert that the provisions of Code, 1931, 11--15--17, as amended, relating to liability of an officer for the corporation's delinquent consumers sales tax, are repugnant to the state and federal constitutions, are null and void and are of no effect on these defendants.

Each of the individual defendants filed a motion to dismiss the complaint, said motions being based on the ground that Section 17, Article 15, Chapter 11 of the Code of West Virginia, 1931, as amended, is unconstitutional. Upon argument of counsel on behalf of the parties and after submission of written briefs, the court, by order dated July 17, 1968, sustained the motions of the individual defendants and the complaint was dismissed.

The principal issue on this appeal is the constitutionality of the provisions of Code, 1931, 11--15--17, as amended. That code section, where pertinent, provides: 'If the taxpayer is an association or corporation, the officers thereof shall be personally liable, jointly and severally, for any default on the part of the association or corporation, and payment of the tax may be enforced against them as against the association or corporation which they represent.'

The tax commissioner, of course, defends the constitutionality of that section. The individual defendants take the position that the subject statute deprives them of their property without due process of law by imposing upon them a tax of a third party (the corporation) and is therefore unconstitutional as violative of the Constitution of West Virginia and the Constitution of the United States.

In addition to the issue of said alleged unconstitutionality, the defendants contend that officers of a corporation cannot be held liable for the debts of such business entity. Furthermore, they deny that they are officers of Calco, asserting that they were not elected as such by a duly held meeting of the board of directors of the corporation.

These contentions are without merit. The position of an officer of a corporation, relative to his individual liability for the debts of the corporation, is not sacrosanct. While officers ordinarily are not held responsible for corporate debts, it is well established that where a statute so provides directors or officers may be required to account personally for certain obligations of the corporation. 19 Am.Jur.2d, Corporations, Section 1354 et seq. Such liability is usually imposed by statute for some official delinquency and so long as the statute is afforded a fair and reasonable interpretation so as to give effect to the legislative intent as indicated by the language used, it is valid.

It is not a defense to individual liability for one who acts as an officer to assert that he was not properly elected as an officer of the corporation. This is well demonstrated by the following cogent language: '* * * one who assumes the character of a corporate officer cannot escape liability on the plea that his election to office was illegal. Persons ostensibly acting as officers of a corporation are ordinarily presumed to be rightfully in office; individuals elected and serving as officers may incur the statutory liability for the corporate debts of the company, even though irregularities occurred in their election, if in all other respects the evidence brings them within the category of legal default.' 19 Am.Jur.2d, Corporations, Section 1356. See Providence Steam-Engine Co. v. Hubbard, 101 U.S. 188, 25 L.Ed. 786.

Thus, in the instant case, where Code, 1931, 11--15--17, as amended, provides for individual liability of corporate officers for default on the part of the corporation in the payment of the consumers sales tax, the defendants who acted as officers of Calco cannot absolve themselves from liability by a plea that they were not properly elected.

In resolving the principal issue, the constitutionality of Code, 1931, 11-- 15--17, as amended, it is pertinent to consider the action of the trial court. From an examination of his written opinion it is apparent that the trial judge held the subject statute unconstitutional on its face without considering its application to the facts of the case as reflected by the pleadings. He based his opinion and ultimate decision on hypothetical facts which possibly could arise under the statute and thereby decided that the statute was unconstitutional. This approach is contrary to the well established principles of law relating to the consideration of the constitutionality of a statute.

'It is always to be presumed that the Legislature designed the statute to take effect, and not to be a nullity.' So declared this Court in 1875. Slack v. Jacob, 8 W.Va. 612. 'The...