State v. Southland Hatchery, 3 Div. 553

• Decision Date: 23 March 1950
• Docket Number: 3 Div. 553
• Citation: 45 So.2d 302,253 Ala. 449
• Parties: STATE v. SOUTHLAND HATCHERY et al.
• Court: Alabama Supreme Court

Page 302

45 So.2d 302

253 Ala. 449

STATE v. SOUTHLAND HATCHERY et al.

3 Div. 553.

Supreme Court of Alabama.

March 23, 1950.

A. A. Carmichael, Atty. Gen., and M. Roland Nachman, Jr. Asst. Atty. Gen., for appellant.

Steiner, Crum & Weil, of Montgomery, for appellees.

LAWSON, Justice.

This is an appeal by the State of Alabama from a decree of the circuit court of Montgomery County, in equity, setting aside and vacating an assessment made by the State Department of Revenue on March 9, 1948, for sales tax for the period beginning January 1, 1943, and ending December 31, 1947, against appellees, Southland Hatchery, a partnership, and the individual members thereof, namely, Stanley Brindley, H. C. Appleton, and W. H. Appleton. The assessment of the Department of Revenue was based upon the proceeds of sales of products of the hatchery, baby chicks and broilers.

We will refer to appellees as the taxpayer and to appellant as the State.

The procedure followed by the taxpayer to have the assessment of the Department of Revenue reviewed is not questioned. § 140, Title 51, Code 1940; State v. Louis Pizitz Dry Goods Co., 243 Ala. 629, 11 So.2d 342; Merriwether v. State, 252 Ala. 590, 42 So.2d 465.

The bill or petition filed by the taxpayer in the circuit court of Montgomery County, in equity, was against the State Department of Revenue and the State of Alabama.

It sought to establish the taxpayer's nonliability for all the tax assessed on the grounds (1) that taxpayer was exempt from liability for the tax under the provisions of subsec. (f) of § 755, Title 51, Code 1940; (2) that taxpayer was exempt from liability for the tax under the provisions of subsec. (h) of § 755, Title 51, Code 1940, as amended by an act approved August 13, 1947, General Acts 1947, pp. 155-156.

As to the portion of the tax assessed for the period prior to February 11, 1943, the bill avers that it was barred by the statute of limitation. And as to the assessment for the month of December, 1947, it is averred that payment was made for that period prior to the date of the assessment.

The State Department of Revenue demurred to the bill on the ground that it was not a proper party to the proceedings The demurrer was sustained. This ruling is not before us as there is no cross appeal or cross assignments of error.

The State demurred to the bill as a whole and to its several aspects. The demurrer was sustained as to that aspect of the bill which sought to establish nonliability of the tax by virtue of the provisions of subsec. (h) of § 755, Title 51, Code 1940, as amended by the said 1947 act. Demurrer was also sustained as to that aspect of the bill where taxpayer sought to avoid the tax claimed prior to February 11, 1943, by virtue of the statute of limitation. Since there is no cross-appeal or cross assignment of error, these rulings of the court are not here for review.

In all other respects the demurrer of the State was overruled. The first five assignments of error challenge the correctness of the decree of the trial court in overruling the demurrer of the State to the other aspects of the bill. But no reference is made to these assignments of error in brief filed on behalf of the State, which is sufficient to justify their consideration on this appeal. Alabama Mills v. Brand, 251 Ala. 643, 38 So.2d 574; Miller v. Faust, 250 Ala. 545, 35 So.2d 162.

The other assignments of error challenge in various ways the correctness of the decree of the trial court in avoiding the assessment of the Department of Revenue on the ground that under the evidence the taxpayer was exempt by virtue of the provisions of subsec. (f) of § 755, Title 51, as it appeared in the Code of 1940, from the payment of sales tax on the gross proceeds of sales of 'baby chicks' and 'broilers.'

Section 755, Title 51, Code 1940, deals with exemptions from sales tax. Subsec. (f) thereof is in the following language: 'The gross proceeds of sales of all livestock by whomsoever sold; and also the gross proceeds of poultry and other products of the farm, dairy, grove or garden, when in the original state of production or condition of preparation for sale, when such sale or sales are made by the producer or members of his immediate family or for him by those employed by him to assist in the production thereof. Nothing herein shall be construed to exempt or exclude from the measure or computation of the tax levied, assessed or payable hereunder, the gross proceeds of sales of poultry or poultry products when not products of the farm.'

The only witness in the instant case was Mr. Stanley Brindley, one of the three partners of the Southland Hatchery, whose testimony may be thus summarized:

In 1914, witness and his father, B. M. Brindley, became the owners of 174 acres of land located in the country about three and one-half miles from Collinsville, DeKalb County. Witness and his father began operations on a small scale, hatching a few chickens in incubators located on their farm. Their operations were gradually increased and extended from time to time until 1928, when witness, Stanley Brindley, and the two Appletons formed a partnership for the purpose of operating the hatchery, the Appletons agreeing to aid in the financing of the enterprise. The partnership began operations with one incubator of 5200-egg capacity. Since that time the Brindleys have constructed 'laying houses,' 'brooder houses' and 'range shelters.'

It was agreed that for a fixed annual rental the Brindleys, who owned the land and presumably the various types of houses used in connection with the hatchery, would furnish the said buildings and so much of the land as was needed to carry on and operate the hatchery. The taxpayer usually used about ten acres of the land annually for a range. The acreage so used was changed each year so as to minimize disease. The remainder of the land was used or operated by Stanley Brindley for himself or his father, mainly as a cattle farm.

On the land used by the taxpayer various types of grasses and grains were planted on which the chickens fed. This land the taxpayer cultivated from time to time.

The principal business of the hatchery was the production and sale of 'baby chicks,' which were in the main sold to farmers; however, some of the 'chicks' were raised to the size of 'broilers' and then shipped to other points in this and surrounding states. Most of the feed for the poultry was purchased, as it was necessary to have a properly balanced diet.

Not more than two per cent of the eggs used in the hatchery were produced by hens belonging to the partnership. The other eggs were purchased from farmers living nearby, the taxpayer paying from ten to twenty-five per cent above the market price for the eggs so purchased. The taxpayer purchased eggs only from farmers with whom they had contracted. Under the terms of such contracts the taxpayer furnished the cocks or roosters to the farmers. The cocks or roosters so furnished remained the property of the taxpayer. The taxpayer, under the provisions of the contracts, supervised the flocks of the farmers, giving them blood tests and tests for lice and mites. In that way it was able to produce a stronger chicken.

One of the Appletons lived in Atlanta, Georgia; the other lived in Dadeville, Alabama. Neither of them did any manual labor or devoted any time to the actual management or operation of the enterprise, but did visit it from time to time, and they furnished the capital. It was understood between Stanley Brindley and the Appletons that the former would manage the enterprise and give it his personal attention. He gave practically his entire time to the enterprise. He was the manager and supervisor. There was some hired labor, mainly farmers who lived in the neighborhood. They were hired from time to time. The number varied according to the season. Usually there were five or six of such employees.

Stanley Brindley and the employees rendered all the services necessary in the production of the 'chicks' and 'broilers' which were sold. All such sales were made by them.

We have construed the provisions of law now codified as subsec. (f), § 755, Title 51, supra, in so far as they relate to the sale of poultry and poultry products in only one case, that of Curry v. Reeves, 240 Ala. 14, 195 So. 428. It was said in that case (1) that for the exemptions to obtain the poultry and poultry products sold must have been 'products of the farm'; (2) that the exemption was enacted for the benefit of the farmer in order to encourage a wider market for his products, and bears no relation to a mercantile business....