Warrior River Terminal Co. v. State

• Decision Date: 10 April 1952
• Docket Number: 3 Div. 538
• Citation: 58 So.2d 100,257 Ala. 208
• Parties: WARRIOR RIVER TERMINAL CO. et al. v. STATE.
• Court: Alabama Supreme Court

Page 100

58 So.2d 100

257 Ala. 208

WARRIOR RIVER TERMINAL CO. et al. v. STATE.

3 Div. 538.

Supreme Court of Alabama.

April 10, 1952.

Rehearing Denied Aug. 27, 1952.

Theron Lamar Caudle, Asst. Atty. Gen., Ellis N. Slack and Berryman Green, Sp. Assts. to Atty. Gen., E. Burns Parker, U. S. Atty., and Hartwell Davis, Asst. U. S. Atty., Montgomery, for appellants.

A. A. Carmichael, Atty. Gen., and H. Grady Tiller, Asst. Atty. Gen., for appellee.

LIVINGSTON, Chief Justice.

The appeal is from a decree of the Circuit Court, in Equity, of Montgomery County, Alabama, sustaining the state's demurrer to the amended bill of complaint of the Warrior River Terminal Company, a corporation.

The sole question presented is whether the real and personal property of the Warrior River Terminal Company, an Alabama corporation all of whose capital stock is owned by the Inland Waterways Corporation which in turn is a wholly owned corporation of the United States, may be constitutionally subject to ad valorem taxation by the State of Alabama or its political subdivisions.

The pertinent facts involved, admitted by the State's demurrer, may be briefly stated as follows:

The Warrior River Terminal Company is a corporation organized as a common carrier on January 18, 1926, originally as the Port of Birmingham Railway Company, under the laws of the State of Alabama and qualified by the laws of the State to do business therein. The Inland Waterways Corporation was created by an Act of Congress approved June 3, 1924. All of the stock of the corporation is owned by the United States. It is a carrier engaged in the transportation of property in conformity with and pursuant to declared congressional purposes. Transportation Act 1920, c. 91, 41 Stat. 456, § 500, 49 U.S.C.A. § 142.

Following preliminary notice, protest and hearing, the Department of Revenue of the State of Alabama made a final assessment against the Warrior River Terminal Company on July 12, 1948, for ad valorem taxes on account of tangible property owned by the company. Thereafter, and under the provisions of Title 51, Section 140, Code 1940, the company duly perfected its appeal to the Circuit Court, in Equity, of Montgomery County.

During all the time material hereto and since the year 1926, all of the capital stock of the Warrior River Terminal Company has been and was owned by the Inland Waterways Corporation. And further, that during all the period of time pertinent hereto, and since the year 1926, the Warrior River Terminal Company and the Inland Waterways Corporation have been engaged solely in the federal purpose of transportation of property in conformity with and pursuant to an Act of Congress popularly called the 'Transportation Act of 1920.'

The State's demurrer was sustained to the bill of complaint filed by the Warrior River Terminal Company in the Circuit Court, in Equity, of Montgomery County, Alabama, and this appeal followed.

As we construe the complaint, no attempt is made to allege that the complainant is engaged solely in the transportation of property for the United States Government. We take it, that complainant is engaged in business as a common carrier, serving the public generally. For aught appearing it has its own officers, agents and servants who conduct its business as other domestic corporations. No contention is made that the taxes assessed are discriminatory. Nor is the exemption from taxation claimed under any Act of Congress.

We have found no case directly in point on the question here presented. Appellant relies principally upon the cases of Graves v. New York ex rel. O'Keefe, 306 U.S. 466, 59 S.Ct. 595, 83 L.Ed. 927, 120 A.L.R. 1466; McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579; U. S. v. Allegheny County, 322 U.S. 174; Clallam County v. U. S., 263 U.S. 341, 44 S.Ct. 121, 68 L.Ed. 328. We have considered the principles enunciated in these cases, but in our opinion they do not support the contentions of appellant because of the differences in factual background.

On the other hand, we are of the opinion that other decisions of the United States Supreme Court are more analogous to facts of the instant case and are more persuasive in determining the question involved and which we will refer to later.

It is firmly established by the authorities that a corporation is a distinct entity: that it is separate and distinct from is shareholders, and that the property representing its capital is vested in and owned by the corporation and not the shareholders.

In the case of Moore & Handley Hdw. Co. v. Towers Hdw. Co., 87 Ala. 206, 6 So. 41, 43, the foregoing principle was stated as follows:

'The general doctrine is well established, and obtains both at law and in equity, that a corporation is a distinct entity, to be considered separate and apart from the individuals who compose it, and is not to be affected by the personal rights and obligations and transactions of its stockholders, and this whether said rights accrued or obligations were incurred before or subsequent to incorporation.'

And in the case of First National Bank of Gadsden v. Winchester, 119 Ala. 168, 24 So. 351, 352, it was said:

"The courts of law, however,' * * * recognize a corporation only as one body acting in the corporate name. The individual stockholders are not, in contemplation of law, parties to contracts made by the association in a corporate capacity, nor have they any legal right or title to property vested in the corporation. At law, a corporation and its stockholders are considered as distinct from each other, * * *.

'The principle here stated, that the legal title to the property of the corporation is in the corporation itself, and not the shareholders, cannot, of course, be questioned; and the authorities, for the most part, go so far as to hold that, even when the body ceases to be an association of persons by reason of the concentration of all the stock in the hands of one owner, the corporation is not thereby dissolved, and the sole stockholder does not thereby become legal owner of the property.'

To the same effect are the decisions of the Supreme Court of the United States In Burnet, Commissioner of Internal Revenue v. Commonwealth Improvement Co., 287 U.S. 415, 53 S.Ct. 198, 199, 77 L.Ed. 399, it was said:

"The fact is that petitioner did have a separate legal existence with privileges and obligations entirely separate from those of its stockholders. The fact that it had only one stockholder seems of no legal significance. Cannon Mfg. Co. v. Cudahy, 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634.'

'Counsel for respondent concede that ordinarily a corporation and its stockholders are separate entities, whether the shares are divided among many or are owned by one. Consequently they make no effort to support any general rule under which a corporation and its single stockholder have such identity of interest that transactions between them must be disregarded for tax purposes. * * *

'Certainly the improvement company and the estate were separate and distinct entities; the former was avowedly utilized to bring about a change in ownership beneficial to the latter. For years they were recognized and treated as different things and taxed accordingly upon separate returns. The situation is not materially different from the not infrequent one where a corporation is controlled by a single stockholder.'

And in U.S. v. Strang, 254 U.S. 491, 41 S.Ct. 165, 166, 65 L.Ed. 368:

'The corporation was controlled and managed by its own officers and appointed its own servants and agents who became directly responsible to it. Notwithstanding all its stock was owned by the United States it must be regarded as a separate entity.'

Mr. Justice Holmes, in Klein v. Board of Tax Supervisors, 282 U.S. 19, 51 S.Ct. 15, 16, 75 L.Ed. 140, 73 A.L.R. 679, wrote as follows:

'But it leads nowhere to call a corporation a fiction. If it is a fiction it is a fiction created by law with intent that it should be acted on as if true. The corporation is a person and its ownership is a nonconductor that makes it impossible to attribute an interest in its property to its members.'

See also First National Bank of Boston v. Maine, 284 U.S. 312, 52 S.Ct. 174, 76 L.Ed. 313, 77 A.L.R. 1401; Elenkrieg v. Siebrecht, 238 N.Y. 254, 144 N.E. 519, 34 A.L.R. 592; 13 Am.Jur. § 6, p. 157 and p. 159.

It is also well established that property owned by a private person and used by him in performing services for the Federal government is subject to state and local ad valorem taxes. In the recent case of Oklahoma Tax Commission v. Texas Co., 336 U.S. 342, 69 S.Ct. 561, 566, 93 L.Ed. 721, Mr. Justice Rutledge, speaking for the Supreme Court of the United States as late as March 1949, stated:

'It has long been established that property owned by a private person and used by him in performing services for the Federal Government is subject to state and local ad valorem taxes.' (Citing many cases in note 18.)

Among the cases cited by Mr. Justice Rutledge in support of the above proposition is that of Choctaw O & G RR Co. v. Mackey, 256 U.S. 531, 41 S.Ct. 582, 583, 65 L.Ed. 1076, wherein Mr. Justice Brandeis stated as follows:

'The mere fact that property is used, among others, by the United States as an instrument for effecting its purpose does not relieve it from state taxation. * * *

'And even though it be granted that the federal government utilize the railroad as an instrument in working out its policy toward the Indians, the tax upon the railroad property would be none the less valid.'

In the Mackey case, supra, the railroad company made substantially the same contention that the taxpayer is making in the instant case, that is, that the railroad property was immune from state taxation.

In the Texas case, supra, Mr. Justice Rutledge referred to and relied upon the case of Thompson v. Union Pacific RR Co., 9 Wall. 579, 19 L.Ed. 792. In this case, as in the instant case, the railroad company was...