Wayne Pump Co. v. Department of Treasury, Gross Income Tax Division

• Decision Date: 28 January 1953
• Docket Number: No. 28861,28861
• Citation: 110 N.E.2d 284,232 Ind. 147
• Parties: WAYNE PUMP CO. v. DEPARTMENT OF TREASURY, GROSS INCOME TAX DIVISION.
• Court: Indiana Supreme Court

Page 284

110 N.E.2d 284

232 Ind. 147

WAYNE PUMP CO. v. DEPARTMENT OF TREASURY, GROSS INCOME TAX DIVISION.

No. 28861.

Supreme Court of Indiana.

Jan. 28, 1953.

James P. Murphy, Kennerk & Dumas, Jack W. Kenny, Ft. Wayne, Willard Shambaugh, Ft. Wayne, of counsel, for appellant.

J. Emmett McManamon, Atty. Gen., John McShane, Lloyd C. Hutchinson, Joseph E. Nowak, Robert F. Wallace, Deputy Attys. Gen., for appellee.

GILKISON, Judge.

During the years 1938, 1939 and 1940, appellant was engaged in Indiana in the business of manufacturing and selling certain pumps, equipment and machinery to the gasoline and oil trade, on conditional sales or installment contracts. On June 25, 1938 appellant entered into a contract with First Bancredit Corporation of Minneapolis, Minnesota, hereinafter called 'Bancredit', and with The Texas Company, hereinafter called 'Texaco', relative to the financing of some of its conditional sales contracts, which may herein be referred to as 'paper' or 'papers'.

On June 22, 1942, appellee assessed appellant with additional gross income tax on receipts from its financing contract with Bancredit and Texaco, for the years 1938, 1939 and 1940 in the sum of $6,760.30 and interest in the sum of $230.40, a total of $6,990.70, which sum appellant paid, and on March 30, 1944, it filed its claim for refund thereof. This claim was denied by appellee. Appellant then filed its action in the Superior Court of Allen County against appellee to recover the amount so paid, with interest and upon trial of the action a judgment was rendered for appellee and against appellant for costs.

Appellant's motion for new trial, for the reasons: (1) that the court erred in sustaining an amended motion to dismiss the first paragraph of the second amended complaint, (2) that the finding and judgment is not sustained by sufficient evidence and (3) that the finding and judgment is contrary to law, was overruled. This appeal was then taken.

Errors assigned are (1) in striking the tenth rhetorical paragraph of the first paragraph of the second amended complaint, (2) in sustaining appellee's motion to dismiss the first paragraph of the second amended complaint and (3) overruling appellant's motion for new trial. We shall discuss the alleged errors in the order given.

The first paragraph of the second amended complaint is based wholly upon the ground that the transactions upon which the alleged gross income tax is due, were transactions in interstate commerce and therefore not taxable as gross income under the Indiana gross income tax law. Rhetorical paragraph 10 of said paragraph is as follows:

'That all of said income accruing to it during the years in question and upon which said additional gross income taxes and interest were assessed and collected, and paid by this plaintiff in the amounts designated in its claim for refund as hereinabove alleged, was derived solely from business conducted by this plaintiff in commerce between this State and another State of the United States of America, and that said additional taxes and interest thereon so paid by the plaintiff to the defendant, as alleged herein, were illegally and improperly assessed and collected by the defendant.'

Appellee's reasons for asking that this rhetorical paragraph be stricken is that it is apparent on its face that it is argumentative in nature. We suppose it was stricken by the court for this reason.

We think the rhetorical paragraph 10 so stricken by the trial court, was a proper averment to be contained in this paragraph of the complaint of the theory that the transactions were in interstate commerce and as such were not taxable. Subsec. (a), § 64-2606, Burns' 1951 Replacement. It was error to strike it out.

At the conclusion of the evidence in the trial of the case on July 14, 1950, appellee orally moved for dismissal of the first paragraph of the second amended complaint and the court took the matter under advisement until September 1, 1950. On September 5, 1950, before a judge pro tempore of the court, appellee filed its 'amended motion to dismiss plaintiff's first paragraph of second amended complaint.' In the written motion so filed it is contended that the court is without jurisdiction to pass upon the interestate commerce question presented by the first paragraph because in its claim for refund filed with appellee, appellant did not claim immunity on account of the interstate commerce nature of the transactions.

The amended motion to dismiss the first paragraph of the second amended complaint was sustained on July 2, 1951.

It always has been the rule in our court that the sufficiency of a complaint cannot be tested by a motion to strike or a motion to dismiss. Yelton v. Plantz, 1948, 226 Ind. 155, 160, 77 N.E.2d 895; Huffman v. Newlee, 1919, 189 Ind. 14, 26, 124 N.E. 731; Moorhouse v. Kunkalman, 1911, 177 Ind. 471, 481, 96 N.E. 600; Guthrie v. Howland, 1905, 164 Ind. 214, 221, 73 N.E. 259 and authorities cited; Port v. Williams, 1855, 6 Ind. 219, 220. Such a motion cannot take the place of a demurrer.

It long has been the rule in this state that a court has no power to order an involuntary nonsuit. State ex rel. Hurd v. Davis, Judge, 1949, 227 Ind. 93, 98 et seq., 84 N.E.2d 181; Yelton v. Plantz, 1948, 226 Ind. 155, 160, 77 N.E.2d 895, supra; Williams v. Port, 1857, 9 Ind. 551; Booe v. Davis, 1839, 5 Blackf. 115.

The only power of a court to order a nonsuit or dismissal of a plaintiff's action on a motion of defendants or some of them is given by clause 'Fourth' of Section 2-901, Burns' 1946 Replacment as follows:

'An action may be dismissed without prejudice----

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'By the court, on the application of some of the defendants, where there are others whom the plaintiff fails to prosecute with diligence.

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'In all other cases, upon the trial, the decision must be upon the merits.'

There is no contention that appellee's motion to dismiss the first paragraph of the second amended complaint was taken under this statute; nor is there any contention that the court was without jurisdiction of the subject-matter of the action set forth in the first paragraph of the second amended complaint. We cannot allow the contention of appellee that the court was without jurisdiction because in its claim for refund it did not allege that the transactions were in interestate commerce. It was the duty of the trial court at the trial to determine the issues joined on the first paragraph of the second amended complaint upon the merits. The dismissal of the first paragraph of the amended complaint ender that part of appellant's case without a trial of the tendered issue. State ex rel. Hurd v. Davis, Judge, 1949, 227 Ind. 93, 98, 84 N.E.2d 181 supra; 17 Am.Jur., Dismissal and Discontinuance, § 42 p. 82; Brotherton Co. v. Jackson, 1925, 231 Mich. 604, 606, 204 N.W. 704; Haney v. Grand Rapids Trust Co., 1922, 221 Mich. 160, 162, 190 N.W. 684.

With respect to the second paragraph of the second amended complaint, the briefs of the parties indicate that for the years 1938, 1939 and 1940, appellant sold to various persons, on conditional sales contracts, pumps and other machinery of the gross value of $766,779.75 which contracts were transferred to Bancredit agreeable with a written contract entered into by appellant, Bancredit and Texaco, the purpose of which was to produce a plan for financing the manufacture and sale of equipment and machinery by appellant to Texaco. Bancredit was and is engaged in the business of purchasing installment obligations arising from the sale of equipment and machinery and desired to purchase such paper arising out of sales of equipment and machinery manufactured by appellant and sold to customers of Texaco.

The contract provided that Bancredit would buy such contracts in series of $200,000 each. Each contract to be accompanied by any chattel mortgage, conditional sales contract or other security device taken by appellant. Bancredit to pay face amount of paper less a discount rate of 5 1/2% on declining balances, to be billed to appellant monthly. Appellant to save Bancredit harmless from any and all taxes assessed or accruing under laws of Indiana on any paper purchased. Appellant was made agent to make collections on all paper purchased by Bancredit.

Appellant agreed to use its best efforts and its collection department facilities to collect for Bancredit all installments and payments due on paper sold under the agreement and to remit all such collections to Bancredit on the 10th day of each month, including all prepayments. To report not later than the 15th day of each month all delinquencies of thirty days or more or any other default. Bancredit and Texaco were given a right to examine appellant's records pertaining to the accounts of Bancredit or Texaco. Upon default by appellant of any of the terms of the contract, Bancredit was given the right to take over the collection of any paper being collected for it by appellant; appellant to pay Bancredit a collection charge equal to 10% of all amounts so collected by Bancredit.

Appellant further agreed to repurchase from Bancredit any paper so purchased which remains delinquent in any particular for 90 days or more and to pay Bancredit the discount provided for. Appellant reserved the privilege of repurchasing any paper which becomes delinquent before the lapse of ninety days, and the right to repurchase individual items which require special handling. If appellant should fail to repurchase any paper becoming ninety days or more delinquent, Bancredit was given the right to take over the equipment covered by the paper and to resell the same without prejudice to its other remedies--the sums received from such resales to be applied first to the payment of expenses incident to repossession and resale, and the residue to be applied upon the repurchase price appellant is bound to pay for such paper and thereupon appellant agrees to pay the balance of the...