State Ex Rel. Marquette Hotel Investment Co. v. State Tax Commission ( 1920 )

After a more thorough study of the Franchise Tax Act, in considering the motion for a rehearing, I have concluded the word "surplus" is used in it, not to denote the entire assets of a corporation in excess of its capital stock, but to denote the excess of assets over liabilities. The act is ambiguous, conflicting and difficult to interpret.

Two possible meanings of Section 10 have been propounded in the briefs: One is that as many corporations own property in this State which is not used in the business of the corporate owners, the words "whether employed in this State or not"Section 10. (which appear to contradict the prior words, "which employ all their property . . . in this State"), are intended to require such unused property to be taken into account in ascertaining the amount of the surplus assets of such corporations. The other interpretation offered to reconcile the contradictory phrases of the section, is that it was copied from a section in a similar act of Arkansas, but by oversight some words of the Arkansas statute were omitted and thereby confusion was caused in the language of the section in the Missouri Statute. [Kirby Castle's Ark. Digest 1918, sec. 8480.] The argument is that the words "and any corporation which" should be inserted in Section 10, so it would read as follows:

"All insurance companies, building and loan associations, and other corporations, the fees of which are fixed at lump sums by this act, and all corporations which employ all their property and all their outstanding capital stock in this State (and any corporation which) shall report and pay the fees on all its outstanding capital stock, whether employed in this State or not, shall not be required to set out in the report required by this act, the value of its property within this State or without the State."

Neither of those ingenious suggestions can be adopted as the sense of Section 10, without adding to the language of it, or giving a meaning to the language that it does not easily bear. The first one would require the words "capital stock" to be interpreted as meaning "property" or "assets" — the total property or assets of a corporation. The second would require words to be interpolated in the section at a place where it is by no means obvious they, or their equivalent, were intended to be inserted, and were omitted by mistake.

The section appears to relieve from the duty to report the value of property, within or without this State, not only insurance companies, building and loan associations and other corporations taxed in a lump sum, but also "all corporations which employ all their property and all their outstanding capital stock in this State." And if such corporations, which comprise most of those subject to the franchise tax, are not required to report the value of their assets, the logical and natural conclusion is that the Legislature did not intend that their franchise tax should be measured by their assets.

Paragraph 12 of Section 2 requires every corporation liable to the tax prescribed in Section 1, to report the clear market value of its property and assets in this State, and Paragraph 13 of Section 2 requires it to report "the clear marketOther value of its property and assets without thisParagraphs. State." I perceive no way to reconcile those two paragraphs of Section 2 with Section 10, except by the construction that Section 10 so far limits said Paragraphs 12 and 13 as to exact a report of total assets only from corporations which employ part of their assets or capital stock outside of this State; a construction hardly permissible, because it would reduce so largely the number of companies required to report their assets as to render it improbable the Legislature intended such a consequence.

Be that matter as it may, a strong reason is found for concluding "surplus" does not mean total assets, in the circumstance that Paragraph 14 of Section 2 distinguishes "surplus" from "property and assets," for it requires a corporation to report the "clear market value of its total capital stock, surplus, property and assets." Besides, in Paragraph 10 of Section 2, the word "surplus" is used along with the words "undivided profits," in requiring a report of "the amount of surplus and undivided profits."

The first of those paragraphs shows, in my opinion, that the word "surplus" was not used in the sense of total property and assets; for if it was the Legislature indulged in a useless repetition.

The tenth paragraph of Section 2, in speaking of "surplus and undivided profits," indicates that those terms were employed to mean what they do in commercial circles; namely, the amount of assets over liabilities, whether the excess of assets is carried by the company under the name of "surplus" or of "undivided profits."

The decisions to which we have been cited relate mainly to the meaning of "surplus" in bankers' parlance, but in so far as they bear upon the present case they tend to support the view that the word was used in the Franchise Tax Act to denote the excess of the assets of a corporation over its liabilities, except its liability to shareholders on the shares of stock held by them. [Bank v. Moon, L.R.A. 1918 Cow. 986; Leather Mfrs. Nat. Bank v. Treat, 116 F. 774, 128 F. 262; Anderson v. Loan Trust Co., 241 F. 322.]

Much is said about the bad effect that will come from one or the other construction of this act; sometimes a proper matter for consideration in construingHardships. statutes. But in the present case, undesirable results have been reasoned out in the briefs of the parties as likely to follow either construction, and it has seemed best to determine the meaning of the act solely from its terms. The majority opinion is not without support in some of the provisions of the law; but for the reasons stated, I think the intention of the Legislature was not to give to the word "surplus" the meaning given to it in that opinion, from which I respectfully dissent.