State v. Stonewall Ins. Co.

• Decision Date: 08 May 1890
• Citation: 7 So. 753,89 Ala. 335
• Parties: STATE v. STONEWALL INS. CO.
• Court: Alabama Supreme Court

7 So. 753

89 Ala. 335

STATE v. STONEWALL INS. CO.

Supreme Court of Alabama

May 8, 1890

Appeal from circuit court, Mobile county; WILLIAM E. CLARKE, Judge.

In the matter of the assessment of escaped taxes against the Stonewall Insurance Company for the years 1885-89, inclusive the question being the liability of the company for taxes on the amount of its capital stock invested in non-taxable Alabama bonds. It appeared among the agreed facts that the corporation, in December, 1884, went before the board or court of county commissioners, and claimed a deduction from its capital stock, as assessed for taxation, for the amount invested in Alabama state bonds; and, the claim being allowed, the amount so invested in such bonds during each of the subsequent years was not returned for taxation. In August, 1889, the tax collector of the county, deeming this deduction erroneous, returned the amount so excepted as property which had escaped taxation, and notified the corporation of his action. The corporation again appeared before the county commissioners, and claimed exemption as before; but the commissioners decided against it, and assessed the tax as reported by the collector. An appeal was taken to the circuit court, where judgment was rendered in favor of the corporation. The same issue was made in a separate proceeding as to the taxes for the year 1889. In addition to the agreed statement of facts, it was admitted that the following should be added to the special finding of facts by the court: "It appears from the books of the tax assessor of Mobile county that, whenever the shares of banks are assessed in said county, the assessor enters in his book not only the number of shares in which the capital stock is divided, but also the names of the several shareholder and the number of shares held by each, with the market value thereof, and that the shares are listed and assessed against the shareholders, respectively, and not against the bank. But the state objects to these facts as irrelevant." The state appeals, and now assigns the judgment of the circuit court as error.

Hannis Taylor and J. Little Smith, for appellant.

Overall & Bestor, for respondent.

CLOPTON J.

The record presents the single issue whether a private corporation is entitled to deduct from the value of its capital stock, when assessed for taxation, such portion thereof as is invested in bonds of the state under subdivision 9 of section 453 of the Code, which levies a tax upon "the capital stock of all corporations, companies, or associations created or existing under any law in force in this state, except such portions of the capital stock as may be invested in property which is otherwise taxed as property, the same to be paid by the corporation, company, or association; but when such corporation, company, or association pays the taxes in this chapter levied upon the shares into which its capital stock is divided, or the same is paid by the shareholders, such corporation, company, or association shall only be required to pay the taxes levied on the real and personal estate owned by it, unless its investments are otherwise herein taxed."

A controlling question, which presents itself at the outset, is whether the tax levied upon the capital stock is a tax upon the property, or upon the privileges and franchises of the corporation? Appellant insists it is a franchise tax. This insistence is based on the theory that section 478 prescribes, as the rule for determining the value of the capital stock for the purpose of of taxation the aggregate market value of the shares into which it is divided. If the contention be well founded, the case of Hamilton Co. v. Massachusetts, 6 Wall. 632, and the next two preceding cases in the same volume, apparently support the contention; but a careful examination of the opinion in the case cited above shows that the conclusion of the court is based on the settled course of decisions of the state court on the constitution and laws, by which the statute under which the tax is laid was construed as imposing a franchise tax. It is said: "Separated from the peculiar provision of the state constitution, and the long practice under the original decision, the present decision of the state court upon the subject might well be criticized as founded in unsubstantial distinctions; but when weighed as an exposition of that peculiar clause, and in view of the long practice of the state, commencing long before the prior decision was made, it is not possible to withhold from the conclusion a full and unqualified concurrence." Notwithstanding the course of decision of the state court, the chief justice and two associated justices dissented, on the ground that the tax was a tax on property.

But we do not concur in the construction of the section urged by counsel. By it the president or other chief officer is required to return all the taxable property of the corporation, in which return he shall state the market value of the capital stock,...