State ex rel. Missouri Pac. R. Co. v. Danuser

• Decision Date: 09 April 1928
• Docket Number: 28394
• Citation: 6 S.W.2d 907,319 Mo. 799
• Parties: The State ex rel. Missouri Pacific Railroad Company v. C. M. Danuser et al., Members of State Tax Commission; L. D. Thompson, State Auditor, and C. Eugene Stephens, State Treasurer
• Court: Missouri Supreme Court

6 S.W.2d 907

319 Mo. 799

The State ex rel. Missouri Pacific Railroad Company v. C. M. Danuser et al., Members of State Tax Commission; L. D. Thompson, State Auditor, and C. Eugene Stephens, State Treasurer

No. 28394

Supreme Court of Missouri

April 9, 1928

Motion for Rehearing Overruled May 18, 1928.

Writ quashed.

Edwin J. White, Otto & Potter and James F. Green for relator.

(1) The Franchise Tax Law, adopted in the year 1917, is in violation of the Constitution of the State, in that the subject thereof is not clearly expressed in the title of the act. Sec. 28 Art. 4, Constitution; State v. Sloan, 258 Mo. 313; Williams v. Railroad, 233 Mo. 676; State v Burgdoefer, 107 Mo. 19; State v. Coffee & Tea Co., 171 Mo. 643; State ex rel. v. Hedrick, 294 Mo. 62. (2) The Franchise Tax Act provides for a property tax and constitutes a burden on interstate commerce. Int Paper Co. v. Mass., 246 U.S. 135; Southern Gum Co v. Laylin, 66 Oh. St. 578; Airway Corp. v. Day, 266 U.S. 42. (3) Subsequent to the decision of this court in the Marquette Hotel case, 282 Mo. 213, the General Assembly, by amendatory act, required "the amount of liabilities" of corporations to be reported to the State Tax Commission. Laws 1921, pp. 122, 123. The term "surplus" as used in the Franchise Tax Law implies that debts and liabilities should be deducted from assets, income and earnings in order to ascertain same. Fidelity Trust Co. v. Equalization Board, 71 N. J. 128; Green v. Eq. Ins. Co., 169 N.Y. 19; Bank of Commerce v. Tennessee, 161 U.S. 134; People v. Tax Commission, 76 N.Y. 64; Parker v. Ins. Co., 35 N. J. L. 575.

North T. Gentry, Attorney-General, and Walter E. Sloat, Special Assistant Attorney-General, for respondents.

(1) The Franchise Tax Law is not violative of Sec. 28, Art. 4, of the Constitution of Missouri, because the subject is clearly expressed in the title of the act. The title of an act must serve as a clear and comprehensive indicator of the purpose of the act, and is sufficient if the title does not mislead as to the chief topic of the act. When it sufficiently indicates the substantial purpose of the act, it will not be violative of the Constitution, and it is only necessary that the title shall indicate the subject of it in a general way without entering into details. State ex rel. v. County Court, 128 Mo. 441; State v. Whitaker, 160 Mo. 59; State v. Sloan, 258 Mo. 313; State ex rel. v. Roach, 258 Mo. 559; Coca Cola Bottling Co. v. Mosby, 289 Mo. 472; State ex inf. Barrett v. Imhoff, 291 Mo. 619; State v. Mullinix, 301 Mo. 390. (2) The franchise tax is not a property tax, and does not burden interstate commerce. (a) The great weight of authority is to the effect that a franchise tax is not a property tax. State v. Freehold Inv. Co., 264 S.W. 703; Southern Gum Co. v. Laylin, 66 Oh. St. 596; State v. Railroad Co., 45 Md. 361; Phoenix Carpet Co. v. State, 118 Ala. 151; People ex rel. v. Knight, 174 N.Y. 478; People v. Insurance Co., 92 N.Y. 344. (b) The Franchise Tax Act is not a burden on interstate commerce, and does not become a property tax because it is assessed on capital stock and surplus. A state may use any method it desires as a means of arriving at the basis for assessing a franchise tax. St. Louis-San Francisco Ry. Co. v. Middelkamp, 256 U.S. 231; Maine v. Grand Trunk Ry. Co., 142 U.S. 228; Home Ins. Co. v. People, 134 U.S. 600. (3) Subsection 14 of Sec. 9837, Laws 1921, 1 Extra Sess., page 123, which requests the amount of liabilities, was merely added to assist the Tax Commission in properly assessing the franchise tax. It cannot and does not affect the tax in any manner. (4) The franchise tax is not a property tax, hence relator is properly taxed on stock held in domestic corporations. The smaller companies owned by relator are enjoying corporate privileges, consequently, they must pay for them. The stock in other domestic corporations held by relator is carried as an asset of the corporation, and as such is taxable because it is employed in Missouri. State ex rel. Marquette Hotel v. State Tax Comm., 282 Mo. 221. Stocks owned by a corporation in another domestic corporation are assessable for the purpose of a franchise tax. People v. Campbell, 138 N.Y. 545; People ex rel. v. Knight, 174 N.Y. 475; People ex rel. v. Morgan, 178 N.Y. 433. (5) The amendment to Section 9836 which exempts bank deposits from taxation under this act, has a saving clause relative to the bank section; and the act is consequently good, even though the exemption of bank deposits is not constitutional. (a) Although part of a statute may be held bad, the remainder will stand if it sufficiently shows the legislative intent. State ex rel. v. St. Louis, 241 Mo. 247; Simpson v. Iron Works Co., 249 Mo. 391; Nally v. Home Ins. Co., 250 Mo. 467; Greene County v. Lydy, 263 Mo. 87; State ex inf. v. Duncan, 265 Mo. 45; State ex rel. v. Gordon, 268 Mo. 736; State ex rel. v. Hackmann, 275 Mo. 543. (6) What the term "surplus," as used in the Franchise Tax Act, means, is no longer open to discussion, but is stare decisis. State ex rel. Marquette Hotel Inv. Co. v. State Tax Comm., 282 Mo. 213.

Walker, C. J. All concur, Ragland, J., in the result; White and Graves, JJ., not sitting.

OPINION

WALKER

This is an original proceeding by certiorari to quash the proceedings of the State Tax Commission and the records of the officers named, in the assessment of certain franchise taxes against the railroad company for the year 1927.

The statute authorizing the collection of a corporation franchise tax was first enacted in 1917, Laws 1917, page 237. It underwent several amendments not necessary to be noted here; and as incorporated in the Revised Statutes of 1919 (Chap. 20, Art. I), the sections relative to the tax are 9836, 9837, 9838, 9839, 9840, 9841, 9843 and 9845. These sections were repealed and new sections, with like numbers, were enacted in 1921, Laws 1921, First Extra Session, pages 121-126, except as to the title to the initial act. It is with this statute we are concerned, in the determination of the matter in controversy.

It is conceded that the respondents' statement of the facts correctly submits the issues. The principal contention is in regard to the method to be used in ascertaining the basis for computing the tax. The relator contends that it should be assessed on the proportionate part of its capital stock, surplus and undivided profits employed in Missouri, without taking into account its liabilities.

The respondents contend that the tax should be assessed on the proportionate part of the relator's capital stock, surplus and undivided profits employed in Missouri, plus its liabilities; or as stated differently by respondents, "the property of the relator used in determining the tax should include its total assets, less deductions held by respondents not taxable." In conformity with the statute, in question, the relator filed its report with the State Tax Commission for the year ending December 31, 1926, as follows:

"Paid up capital stock

$ 154,639,600.00

Surplus and undivided profits

50,082,183.36

Total surplus and undivided profits

204,721,783.37

Liabilities, less capital stock and surplus

359,441,211.37"

It is the contention of the relator:

(1) That the Franchise Tax Law is invalid in that the title to the initial act in 1917 did not conform to the requirements of the State Constitution.

(2) That the Franchise Tax Law constitutes a burden on interstate commerce.

(3) That subsequent to the decision of this court in State ex rel. Marquette Co. v. State Tax Commission, 282 Mo. 213, the Legislature amended the Franchise Tax Law to require the return for taxation "of the amount of liabilities."

(4) That the word "surplus" as used in this law means that the debts and liabilities should be deducted from the gross assets and earnings to ascertain the amount of relator's property subject to the tax.

The title to the Act of 1917 is as follows:

"AN ACT requiring domestic and foreign corporations doing business in this State to pay an annual franchise tax; providing the method of procedure for ascertaining the amount thereof and for enforcing collection thereof; establishing a lien in support thereof; prescribing the duties of the State Tax Commission or of the State Board of Equalization; the State Auditor; the State Treasurer and other officers in connection therewith and prescribing the penalties and forfeitures for violations." [Laws 1917, p. 237.] Italics ours.

I. Relator's first contention is that the title to the act is in violation of Section 28, Article IV, of the State Constitution, in that it does not designate the portions of the capital stock and surplus of corporations on which the tax is to be laid. This contention misconceives the purpose of the constitutional provision, which is to require a title to present in a clear and comprehensive manner the purpose of the act, and in so doing it is not necessary to enter into details, if those omitted are germane to the principal features of the act. Under this rule, if as at bar, the act has reference to only one subject and if the title clearly indicates the same, the details looking to the enforcement of the act need not be set forth in the title. [State ex inf. Barrett, ex rel. Bradshaw v. Hedrick, 294 Mo. 21, 241 S.W. 402; State ex inf. Barrett v. Imhoff, 291 Mo. 603, 238 S.W. 122.]

As we said in effect in Coca Cola Bottling Co. v. Mosby, 289 Mo. l. c. 472, 233 S.W. 446: "The State Constitution (Sec. 28, Art. 4) is read to little purpose if it be held to require that the title of an act must present the particularity of an itemized account or the minutiae of a chemical analysis. When the Constitution provides, therefore that 'no bill . . . shall contain more than...