State v. Margay Oil Corporation

• Decision Date: 02 February 1925
• Docket Number: (No. 141.)
• Citation: 269 S.W. 63
• Parties: STATE ex rel. ATTY. GEN. v. MARGAY OIL CORPORATION. SAME v. ENFISCO OIL CORPORATION.
• Court: Arkansas Supreme Court

269 S.W. 63

STATE ex rel. ATTY. GEN. v. MARGAY OIL CORPORATION.

SAME v. ENFISCO OIL CORPORATION.

(No. 141.)

Supreme Court of Arkansas.

February 2, 1925.

Rehearing Denied with Modification March 16, 1925.

Appeal from Pulaski Chancery Court; Jno. E. Martineau, Chancellor.

Consolidated suits by the Margay Oil Corporation and another against the State, on the relation of the Attorney General. Decree for plaintiffs, and defendant appeals. Reversed and remanded.

J. S. Utley, Atty. Gen., and Sam Wassell, of Little Rock, for appellant.

Rose, Hemingway, Cantrell & Loughborough, of Little Rock, for appellees.

McCULLOCH, C. J.

The appellee in each of these two cases is a foreign corporation whose stock does not express any par value — the stock of each of the corporations being what is termed non-par value stock. Each of the corporations entered the state several years ago and paid its respective franchise tax up to the year 1923, when the present controversy arose over the basis on which the franchise tax should be imposed, and these actions were instituted by appellees to restrain the Attorney General from enforcing what is claimed by appellees to be unjust exactions with respect to this tax.

The General Assembly of 1923 enacted a statute (General Acts 1923, p. 190) authorizing the formation or reorganization or merger of corporations with shares of stock without nominal or par value. Section 8 of that statute provides that the annual franchise tax on a corporation having shares without nominal or par value "shall be treated and considered as having and being of the value actually received by the corporation for the issuance of such shares." Later during the same session of the General Assembly, another statute was enacted (Acts 1923, p. 317) which prescribed a schedule of fees for filing articles of incorporation, and also a schedule of franchise taxes, and one of the sections of that statute, after referring to the other statute just referred to, relating to corporations operating thereunder, provided that "for the purpose of the taxes or fees prescribed by law to be paid on the filing of any certificate or other paper relating to corporations, and of franchise taxes prescribed by law to be paid by corporations to the state of Arkansas, but for no other purpose, such shares shall be taken to be of the par value of twenty-five dollars each."

Each of the appellees filed with the Railroad Commission, which is now the tax commission of the state, its annual report for the year 1923, pursuant to the statute (Crawford & Moses' Digest, § 9802), including, among other things, the number of shares of its subscribed and paid-up capital stock and the value of same, and the value of its property owned and used in this state, as well as the value of its property owned and used outside of the state.

Section 9804, Crawford & Moses' Digest, provides that upon the filing of a report by a corporation, the commission "from the facts thus reported and any other facts coming to its knowledge bearing upon the question, shall determine the proportion of the authorized capital stock of the corporation represented by its property and business in this state," and shall report the same to the auditor of state, who shall charge and certify it to the treasurer, and that a tax of "one-tenth of 1 per cent. each year upon the proportion of the subscribed, issued, and outstanding capital stock of the corporation represented by property owned and used in business transacted in this state" shall be charged.

The Act of 1923, supra, provides that the franchise tax of corporations shall be "one-tenth of 1 per cent. each year upon the proportion of the subscribed, issued, and outstanding capital stock of the corporation employed in Arkansas." Pursuant to these statutes, the Railroad Commission certified to the auditor the franchise tax of each of appellee corporations for the year 1923. Appellee Margay Oil Corporation showed by its report the valuation of property owned and used in the state of Arkansas in the sum of $200,000, and the commission, in fixing the amount of its franchise tax, figured the shares of capital stock at $25 per share, in accordance with the statute, on the basis of the same proportion as the value of the property situated in Arkansas bears to the value of the entire property of the corporation. This made the tax on that corporation the sum of $2,580.42, and made the tax on the other appellee, figured on the same basis, the sum of $2,549.35.

Appellees in this suit attack the validity of the statute fixing the basis of valuation of non-par value stock. The commission followed the terms of the statute in fixing the amount of the tax, so the case turns on the question of the validity of the statute.

The only method by which the statutory requirement in basing the tax upon "the proportion of the subscribed, issued, and outstanding capital stock of the corporation employed in Arkansas" can be complied with, is to do as the commission did in computing the proportion, upon the same ratio as the value of the property in Arkansas bears to the total value of all the property of the corporation.

Appellees attack the validity of the statute as in conflict with the...