Superior Corp. v. Commonwealth

• Citation: 147 Va. 202
• Parties: SUPERIOR STEEL CORPORATION v. COMMONWEALTH.
• Decision Date: 20 January 1927
• Court: Virginia Supreme Court

Page 202

147 Va. 202

SUPERIOR STEEL CORPORATION v. COMMONWEALTH.

Supreme Court of Virginia, Richmond.

January 20, 1927.

1. CORPORATIONS — Franchise Tax — Maximum Authorized Capital Stock — Section 43 of the Tax Bill. — A corporation was authorized by its charter to issue capital stock to the extent of $17,000,000, of which $5,500,000 should be preferred stock and $11,500,000 common stock. The charter provided that all preferred stock should be redeemable and when redeemed should be cancelled and should not be re-issued. In the year 1925 all the preferred stock had been redeemed and in that year the State Corporation Commission assessed the franchise tax against the corporation on $17,000,000, the maximum authorized capital stock as shown in the charter instead of on its then authorized capital stock of $11,500,000.

Held: That the assessment should have been only on the $11,500,000.

2. STATUTES — Section 43 of the Tax Bill — Construction — Words Given their Ordinary Meaning. — In construing section 43 of the tax bill, we must seek the legislative intent as disclosed by the language used, giving to the words of the statute their ordinary meaning, as no contrary intent appears.

3. WORDS AND PHRASES — Authorized — Authority. — One is "authorized" when he possesses the authority to act, and he has "authority" when he has the "legal or rightful power" to act.

4. TAXATION — Corporate Franchise Tax a Privilege Tax. — The corporate franchise tax provided for in section 43 of the tax bill, is a privilege tax. The amount of stock actually issued and outstanding is of no concern in arriving at the basis of the tax. The only question is what is the maximum capital stock which the corporation has the power, under the law, to issue.

5. TAXATION — Statutes — Practical Construction — Administrative Interpretation of the Tax Bill by State Corporation Commission. — In the instant case, which arose from the refusal of the State Corporation Commission to refund to a corporation part of the State franchise tax assessed against it, the Commonwealth made the point that the interpretation which the commission placed on section 43 of the tax bill, in the instant case, was the administrative interpretation which it had always placed upon this act, and should therefore prevail in the Supreme Court of Appeals. Courts, in construing statutes, where the statute is obscure or its meaning doubtful, will give great weight to and sometimes follow the interpretation which those whose duty it has been to administer it have placed upon it. But the doctrine of administrative interpretation will not be allowed to change the plain meaning of the statute.

6. TAXATION — Corporate Franchise Tax — Duty of State Corporation Commission in Determining the Maximum Authorized Capital — Case at Bar. — In the instant case, an appeal from an order of the State Corporation Commission refusing a refund of a part of the State franchise tax assessed against a corporation, when the Commission examined the charter of the corporation to ascertain its maximum authorized capital, they saw, or ought to have seen, that the charter contained a self-executing provision by which the authorized capital stock could be decreased without instituting a proceeding for that purpose under section 3780 of the Code of 1919. Being thus put upon notice, it is the duty of the Commission in such cases to make such further investigation as may be necessary to enable them to ascertain with reasonable certainty the authorized maximum capital stock which the corporation has the authority to issue, at the time of the assessment.

Appeal from an order of the State Corporation Commission.

The opinion states the case.

Williams & Mullen, Guy B. Hazelgrove and Ralph S. Catterall, for the appellant.

John R. Saunders, Attorney General, and Leon M. Bazile and Lewis H. Machen Assistant Attorneys General, for the Commonwealth.

WEST, J., delivered the opinion of the court.

This is an appeal from an order of the State Corporation Commission, entered under section 3735 of the Code, refusing to refund $550 of the State franchise tax assessed against Superior Steel Corporation for the year 1925.

The original charter of Superior Steel Corporation authorized it to issue capital stock to the extent of $17,000,000 par value, of which $5,500,000 should be preferred stock in two classes, and $11,500,000 common stock. The charter also provides that all preferred stock shall be redeemable, and that when redeemed it "shall be forthwith cancelled and shall not be reissued, and no first preferred and no second preferred stock shall be issued in lieu thereof or in exchange therefor."

On February 15, 1924, the corporation redeemed and cancelled all of its preferred stock, and reported the fact to the Commission in a stock statement and a bond statement, which it filed with the Commission. There had been no amendment of the charter of the corporation under section 3780 of the Code, increasing or decreasing its authorized capital stock.

On January 1, 1925, the Commission made an assessment against the corporation on $17,000,000, the maximum authorized capital stock, as shown in the charter, instead of on its then authorized capital...