State v. Sessions

• Decision Date: 10 April 1915
• Docket Number: 19,679,19,677,19,676,19,678
• Citation: 95 Kan. 272,147 P. 789
• Parties: THE STATE OF KANSAS, ex rel. JOHN S. DAWSON, as Attorney-general, etc., Plaintiff, v. CHARLES H. SESSIONS, as Secretary of State, etc., et al., Defendant
• Court: Kansas Supreme Court

147 P. 789

95 Kan. 272

THE STATE OF KANSAS, ex rel. JOHN S. DAWSON, as Attorney-general, etc., Plaintiff, v. CHARLES H. SESSIONS, as Secretary of State, etc., et al., Defendant

Nos. 19,676, 19,677, 19,678, 19,679

Supreme Court of Kansas

April 10, 1915

Decided. January, 1915.

Original proceedings in mandamus.

Judgment rendered.

SYLLABUS

SYLLABUS BY THE COURT.

1. CORPORATIONS--Filing Annual Statements--Paying Annual Dues--Statute Applies Only to Corporations Doing Intrastate Business. The provisions of the corporation act of 1913 requiring a foreign corporation to file annual statements and to pay an annual fee, as a condition to doing business in this state, do not apply to corporations engaged solely in interstate commerce, and as to corporations engaged in both local and interstate business they relate only to the conditions upon which intrastate business may be done.

2. SAME. The tax required by that act to be paid by a foreign corporation for the privilege of doing an intrastate business is a percentage of the proportion of its capital stock devoted to that part of its business.

3. FOREIGN RAILWAY CORPORATION ENGAGED IN BOTH LOCAL AND INTERSTATE COMMERCE--How Taxable. A foreign railway corporation engaged in both local and interstate commerce may be required to pay a state tax upon the privilege of doing an intrastate business, based upon the proportion of its total capital stock which is devoted to that purpose.

4. SAME--When Fee Charged by Secretary of State is Final. The amount of the fee charged by the secretary of state against a corporation under such act is final unless an appeal is taken from his determination to the tribunal therein provided.

5. SAME--Tax Required to be Paid for 1913. Although such act was not published until April 13, 1913, it requires a payment of a tax for that year, and as so construed is valid.

6. SAME--Corporation Operated by Receiver--Receiver Must Pay the Tax. Where a receiver is carrying on the business of a corporation as a going concern he is in effect exercising its corporate franchise, and is liable for the payment of the tax imposed upon it.

7. SAME--Incorporated Cooperative Society--Within the Provisions of the Act. An incorporated cooperative society organized for the purpose of providing wires for connection with a telephone exchange, or of maintaining a system of irrigation, for the benefit of its members, is a corporation "operated for pecuniary profit," "doing business for pay," within the meaning of those phrases as used in the act referred to.

S. M. Brewster, attorney-general, and John L. Hunt, assistant attorney-general, for the plaintiff; W. P. Montgomery, and F. P. Lindsay, both of Topeka, of counsel.

Paul E. Walker, Luther Burns, both of Topeka, and Byron Clark, of Omaha, Neb., for defendant The Chicago, Rock Island & Pacific Railway Company.

William R. Smith, Owen J. Wood, Alfred A. Scott, all of Topeka, and William Osmond, of Great Bend, for defendant The Atchison, Topeka & Santa Fe Railway Company.

W. W. Brown, James W. Reid, both of Parsons, and J. G. Slonecker, of Topeka, for defendant The Missouri, Kansas & Texas Railway Company.

E. R. Thorpe, of Lakin, William Easton Hutchison, and C. E. Vance, both of Garden City, for defendant The Kearny County Farmers' Irrigation Association.

George W. Allison, of McPherson, for defendant The McPherson Rural Telephone Company.

S. C. Scott, of Olathe, T. F. Railsback, and E. C. Little, both of Kansas City, for defendant The Mid-Continent Development Company.

Ossian Cameron, of Chicago, Ill., for defendant The Great Western Refining Company.

Beardsley, Schaick & Beardsley, of Kansas City, Mo., for defendant The Altoona Portland Cement Company.

OPINION

MASON, J.:

Various companies which have paid under protest the annual fees provided by the corporation act of 1913 (Laws 1913, ch. 135, the material portions of which are set out ante, p. 261) have been made parties to some one of several actions brought in this court by the attorney-general, asking that whatever claims they may have to the sums collected be barred, and that the money be paid into the general revenue fund of the state treasurer. A number of the defendants have filed answers attacking the validity of the statute and of the fees, upon various grounds, and the cause is submitted on a motion for a judgment in favor of the plaintiff on the pleadings.

The Chicago, Rock Island & Pacific Railway Company contends that as to it and other foreign corporations doing both a local and an interstate business, the act is void because it undertakes to regulate interstate commerce. If it were given a strictly literal construction it might be open to that objection. It requires the payment of a fee which manifestly is intended as a tax upon the right of foreign corporations to do business in this state. It does not in so many words make any distinction between those which are and those which are not engaged in interstate commerce. But it was adopted after the cases of Buck Stove Co. v. Vickers, 226

U.S. 205, 57 L.Ed. 189, 33 S.Ct. 41, and Western Union Tel. Co. v. Kansas, 216 U.S. 1, 54 L.Ed. 355, 30 S.Ct. 190, had been decided. It was drawn and passed with full understanding that the state can not impose any restraint whatever on the right of a carrier incorporated elsewhere to do an interstate business here, and can not require of it, as a condition to doing a purely local business, the payment of a percentage of its capital invested in business elsewhere or in interstate commerce. The legislature in this new enactment obviously undertook to tax the right of a foreign corporation to do intrastate business, and to fix the amount according to the capital invested in that business, not as denoting the value of the right conferred by the state in this regard, but as bearing the same relation thereto that the total capital of a domestic company does to the value of its corporate franchise, and as indicating the relative value of the privilege enjoyed by the different concerns in this regard. The requirements of the statute are imposed on such foreign corporations doing business in this state as are "subject to compliance with the laws relating to the admission of foreign corporations to do business in Kansas." (§ 2.) Corporations which are engaged solely in interstate commerce are therefore wholly exempt from all its provisions, and those which do both an interstate and an intrastate business are exempt so far as concerns the former. The phrases "that proportion of such foreign corporation's issued capital stock as is devoted to its Kansas business" (§ 2), and "the issued capital stock used in Kansas," refer to the amount of capital invested in doing a purely local business. The total capital of the company is involved only as a basis for arriving at a reasonable estimate of the capital devoted to transportation originating and ending in Kansas.

It is not regarded as necessary or desirable to review at length the decisions of the United States supreme court bearing upon the general question, a phase of which is here presented. We regard the present case as falling well within the rule thus indicated:

"When the sovereign authority has exercised the right to tax a legitimate subject of taxation as an exercise of a franchise or privilege, it is no objection that the measure of taxation is found in the income produced in part from property which of itself considered is non-taxable." (Flint v. Stone Tracy Co., 220 U.S. 107, 165, 55 L.Ed. 389, 31 S.Ct. 342.)

"This court has had also to consider and determine the effect of statutes which undertake to measure a tax within the legitimate power of the State by receipts which came in part from business of an interstate character. In that class of cases a distinction was drawn between laws burdening interstate commerce, and laws where the measure of a legitimate tax consists in part of the avails or income from the conduct of such commerce." (U.S. Express Co. v Minnesota, 223 U.S. 335, 343, 56 L.Ed. 459,...