The State ex rel. Marquette Hotel Investment Company v. State Tax Commission

Decision Date18 April 1920
PartiesTHE STATE ex rel. MARQUETTE HOTEL INVESTMENT COMPANY v. STATE TAX COMMISSION
CourtMissouri Supreme Court

Rehearing Denied 282 Mo. 213 at 234.

Writ quashed.

Taylor Chasnoff & Willson, E. T. Miller and Lyon & Swarts for relator.

(1) The tax levied by the act is a franchise tax, and not a tax upon property. Laws Mo. 1917, pp. 237-242; Mo. Constitution, art 10, secs. 3 and 4; State v. Stonewall Ins. Co., 89 Ala. 338; Southern Gum Co. v. Laylin, 64 N.E. 564; State v. Railroad, 45 Md. 361; Phoenix Carpet Co. v. State, 118 Ala. 143; People v. Home Ins Co., 92 N.Y. 328; State ex rel. v. Schramm, 271 Mo. 223; People ex rel. v. Knight, 174 N.Y. 475. (2) By "par value of the outstanding capital stock" is meant the result obtained by multiplying the par value of a single share by the number of shares outstanding. By "surplus" is meant the excess of assets over all liabilities. People ex rel. v. Roberts, 39 N.Y.S. 448; First Nat. Bank v. Moon, 102 Kan. 334, L. R. A. 1818-C, 986; Fidelity Trust Co. v. Board of Equalization, 77 N. J. L. 128; Leather Mfgs. Natl. Bank v. Treat, 116 F. 774; People ex rel. v. Purdy, 146 N.Y.S. 646; Houston & T. C. Railroad v. McDonald, 148 S.W. 287; State v. Morristown Fire Assn., 23 N. J. L. 195; Anderson v. Trust Co., 241 F. 342; State ex rel. v. Utter, 34 N. J. L. 487; Lapsley v. Merchants Bank, 105 Mo.App. 98; Decker v. Diemer, 229 Mo. 296; So. Ins. Co. v. Milligan, 154 Ky. 216; Greeff v. Ins. Co., 160 N.Y. 19; State v. Yard, 42 N. J. L. 357; State v. Parker, 35 N. J. L. 575; Bank v. Tennessee, 161 U.S. 147; Cole, "Assets, Their Construction and Interpretation," pp. 70, 95 and 200; Century Dictionary. (3) The terms "par value of the outstanding capital stock" and "surplus" are to be taken as used in their ordinary and customary meaning, nothing appearing in the act to evidence a legislative intent to the contrary. State ex rel. v. Gorden, 66 Mo. 394; Kirby & Castle's Digest of the Statutes of Arkansas of 1916, sec. 8480; People ex rel. v. Roberts, 168 N.Y. 14; People ex rel. v. Roberts, 72 N.Y.S. 950. As friends of the court, Ball & Ryland and James E. Goodrich also filed briefs for relator; Judson, Green & Henry, filed briefs for St. Louis Chamber of Commerce; Barker, Botts, Parker & Garwood, W. R. Thurmond and Jesse Andrews filed briefs for Long-Bell Telephone Company; Samuel Mitchell filed briefs for Mercantile Trust Company of St. Louis; Fordyce, Holliday & White and Bennett Clark filed briefs for Liberty Bank of St. Louis; Jeffries & Corum filed briefs for Baden Bank, Chippewa Bank, Grand Avenue Bank and Union Station Trust Company, of St. Louis.

Frank W. McAllister, Attorney-General, John T. Gose, Assistant Attorney-General, and Lewis H. Cook, Special Assistant, for respondents.

(1) The spirit and purpose of a statute are paramount. "For as it has often been said that which is not within the spirit, though within the letter, of the statute, is not within the statute." State v. Railroad, 32 F. 724, 725, quoted in State ex inf. v. Railroad, 238 Mo. 613. See also Riddick v. Walsh, 15 Mo. 519; State ex rel. v. County Court, 41 Mo. 254; State ex rel. Ins. Co. v. King, 44 Mo. 283; State ex rel. v. Angert, 127 Mo. 462; Schawacker v. McLaughlin, 139 Mo. 342, 343; Kane v. Railroad, 112 Mo. 39; Keeney v. McVoy, 206 Mo. 68; St. Louis v. Christian Bros. College, 257 Mo. 552. It is elementary that statutes should be so reasonably construed as to give them their intended force and effect. State ex rel. Vernero v. McQuillin, 246 Mo. 517; Curtis v. Sexton, 252 Mo. 221; State ex rel. St. Louis v. Railroad, 262 Mo. 720; State ex inf. v. Duncan, 265 Mo. 26; Johnston v. Ragan, 265 Mo. 420; State ex rel. v. Gordon, 266 Mo. 394; State ex rel. v. Drainage Dist., 271 Mo. 436. (2) All asets devoted to the corporate business constitute the measure of the tax upon the privilege. The term surplus, as used in connection with the oustanding capital stock, means the surplus, excess or overplus of assets devoted to the corporate business which is in excess of, and not represented by the par value of the oustanding capital stock. North American Petroleum Co. v. Hopkins, 181 P. 627. (3) The Legislature is not to be credited with an absurdity, nor with the intention of permitting a large class of corporations to bear an unjust share of the burden imposed by the franchise tax. "The effects and consequences of a proposed interpretation of a law should be considered in trying to ascertain the intention of the Legislature." State ex rel. Macklin v. Rombauer, 104 Mo. 619; Kane v. Railroad, 112 Mo. 34; Glaser v. Rothschild, 221 Mo. 210; Endlich on Interp. of Statutes, sec. 295; Cole v. Skrainka, 105 Mo. 310. The Legislature knew when it enacted the Franchise Tax, that there were a number of very large corporations which were licensed to do business in this State, but a part of whose capital stock had no par value. The Legislature knew that the term "surplus" as applied to such corporations was meaningless; that they could have no surplus in the sense of excess of assets over liabilities used in connection with capital stock. The Legislature is not to be charged with using a term which had no meaning as applied to a large number of corporations, nor with the intention to favor such corporations by using as a measure of the tax only that part of their assets which was represented by outstanding capital stock which had a par value.

WILLIAMSON, J. Woodson and Goode, JJ., dissent; Goode, J., in separate opinion. Graves, J., concurs in separate opinion.

OPINION

In Banc

Certiorari.

WILLIAMSON J. --

This is a proceeding by writ of certiorari issuing out of this court, upon the petition of the Marquette Hotel Investment Company against the State Tax Commission, to determine the amount of tax due from relator under the act commonly known as the Franchise Tax Act. [Laws of Missouri 1917, p. 237.] The relator, as required by the act above mentioned, filed its report with the State Tax Commission, showing assets of the amount of $ 708,770.90, and liabilities in the amount of $ 700,000, consisting of its capital stock, amounting to $ 350,000, and indebtedness amounting to $ 350,000, thus showing an excess of assets above capital stock and indebtedness in the sum of $ 8,770.90. Respondent construed the Act of 1917, supra, to mean that the tax of three-fortieths of one per cent, by that act assessed, should be calculated upon the basis of $ 708,770.90, and determined the amount of the tax due from relator to be $ 531.58. Relator contends that its indebtedness of $ 350,000 should be deducted from its total assets, leaving a balance of $ 358,770.90, and that amount of the tax due from it is, when computed on this balance, $ 269.08. This sum it has tendered to the State Treasurer. The foregoing facts are substantially the facts set out in relator's application for the writ of certiorari, and upon these facts the writ was issued.

The respondent demurred to the writ, on the ground that it did not state facts sufficient to constitute a cause of action against respondent, and because upon its face it showed that relator is not entitled to the relief prayed. The cause is submitted upon the issues thus made up.

The statute in question is denominated a franchise tax in the title, and in the first section of the act. In relator's brief, the first point made is that this is a "franchise tax and not a tax upon property." Respondent in its brief states that it "readily agrees with relator that the franchise tax is not a property tax." Since the lawmaking body and the contending parties are agreed upon this point, we think we may safely assume that this is a franchise tax, and so dispose of relator's contention number one.

The real difference between the parties here is embraced within a very narrow scope. Section 1 of the act supra, in so far as it relates to the matter here in issue, is as follows:

"Every corporation organized under the laws of this State shall . . . pay an annual franchise tax to the State of Missouri equal to three-fortieths of one per cent of the par value of its outstanding capital stock and surplus . . ."

There is no controversy between the parties to this action concerning the liability of the relator to pay the tax upon the amount of its outstanding capital stock, which is $ 350,000. The whole controversy hinges upon the interpretation to be placed upon the word "surplus" as used in the statute. Surplus ex vi termini implies an excess. Relator's contention is that, as used in this act, surplus means the excess of assets over liabilities other than stock liability. Respondent, on the other hand, contends that the surplus is the excess of the gross assets over the total outstanding capital stock, and that the amount of relator's indebtedness is an irrelevant circumstance. By respondent's reasoning, the tax should be based upon the total sum of $ 708,770.90. By relator's reasoning, the amount upon which the tax should be calculated is $ 358,770.90.

We are indebted to the diligence of counsel for relator for a large number of citations of cases in which "surplus" is defined. We have read all of these cases with interest, but it must be confessed, with little profit. In each instance, the word as used in the case cited is obviously, and usually expressly, confined to the particular context in which it is used, and to the subject matter under discussion. No case cited is sufficiently analogous to be of much assistance. The result is that we are forced to turn to a study of this particular act, and to endeavor, as best we may, from its somewhat confused and cloudy phraseology, to ascertain what the real intention of the Legislature was. It goes without saying that the cardinal rule of...

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