uation of the capital stock of the corporation other than its original capital stock. The pleadings in the case, therefore, present the question whether a domestic corporation, in returning its capital stock for tax STATE ex rel. ATTORNEY GENERAL v. FT. SMITH LUMBER CO. (Nos. 157, 163.) (Supreme Court of Arkansas. Oct. 15, 1917. On Rehearing, Nov, 19, 1917.) 380-CORPORATIONS-"CAPITAL ation, may deduct investments of its surplus in shares of stock in other corporations in the state. The right to make such deduction is asserted under authority of the statute, which provides that TAXATION A domestic corporation, in returning its capital stock for taxation, cannot deduct investments of its surplus in shares of other corporations, since "capital stock" includes surplus; and Kirby's Dig. § 6902, providing that persons shall not be required to list investments in stock of corporations which are required to return their capital for taxation, does not authorize such a deduction. [Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Capital Stock.] Wood & Hart, JJ., dissenting. The question involved seems to have been Appeal from Sebastian Chancery Court; fully decided against defendant's contention in W. A. Falconer, Chancellor. the case of Dallas County v. Home Fire InSuit by the state of Arkansas, at the rela-surance Co., 97 Ark. 254, 133 S. W. 1113, tion of the Attorney General, against Ft. where it is said: Smith Lumber Company. Decree for defendant, and relator appeals. Reversed and remanded. Jno. D. Arbuckle, Atty. Gen., T. W. Campbell, Asst. Atty. Gen., George Vaughan, Frank Pace, and T. M. Seawell, all of Little Rock, for appellant. Hill, Brizzolara & Fitzhugh, of Ft. Smith, for appellee. "So, if one corporation purchases shares of stock in another corporation, it does not pay taxes on the shares so purchased, for the cor poration which issued the shares must pay the taxes on its own property; but it does not follow that the first corporation is not required to as cause it has invested all or a part of it in the sess and pay taxes on its own capital stock be stock of another corporation. In such case the corporation differs from an individual, in that it has capital stock on which it must pay taxes and an individual has not. To hold otherwise MCCULLOCH, C. J. This suit was insti- would be to exempt the property of the first cortuted in the name of the state ex rel. the At-poration from taxation, which it cannot be pretorney General, against the Ft. Smith Lum- sumed that the Legislature intended to do, and which it has no power to do." ber Company, a domestic corporation, to recover taxes which escaped adequate assessment for former years. It is alleged in the complaint that the said corporation failed to assess the whole of its capital stock for taxation, as required by statute, and deducted from the value of the capital stock as assessed amounts invested in shares of stock in certain other domestic corporations. The allegations are that the defendant owned shares of stock in the Central Railway Company, an Arkansas corporation, of the value of $260,000, and also owned shares of stock in the Choctaw Investment Company, another domestic corporation, of the value of $104,000, and that in assessing its property for taxation it deducted the value of all those shares of stock from its capital stock. The defendant denied in the answer that any of its property had escaped taxes for former years, but admitted that it owned shares of stock in the other corporations named, and alleged that those shares of stock were purchased with proceeds of the earnings of the corporation, not with the original capital stock, and that it has regularly assessed for taxation its original capital stock at par value, as well as its other property, except the shares of stock in the other corporations. It is admitted in the answer that the value of the shares of stock in other corporations is not assessed, but is deducted from the val It is insisted that the decision just referred to applies only to assessments of the original capital stock of a corporation, and that the words "capital stock," as used in that decision, meant only the par value of the aggregate shares of stock, not including earned surplus. In the recent case of State ex rel. v. Bodcaw Lumber Co., 194 S. W. 692, we defined the term "capital stock" as used in the statute to mean "the aggregate value of the shares of stock in the hands of the shareholders," which would, of course, include the value augmented by the earned surplus. The two decisions must be considered together, and when that is done it is plain that they lead irresistibly to the conclusion that defendant is wrong in its assertion of the right to deduct from its assessment of capital stock the value of the shares of stock in the other corporations. We are unable to discover any reason for distinction in refusing to allow this deduction from the earned surplus and from the par value of the capital stock, for our statute makes no provision for separate assessment of the par value of capital stock. The aggre gate value is assessed, and the value of tangible property in which the capital is invested is deducted, but the amount thus obtained is not reducible by the value of investments in nonassessable property. That was decided by For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes original capital stock was invested in certificates of stock of other domestic and foreign insurance companies. The court reach the other insurance companies were not taxable in the hands of the Home Fire Insurance Company, but that the original capital stock of the Insurance Company was subject to taxation. this court in the Bodcaw Lumber Co. Case, I considering the subject of taxation of an insupra, and the same principle was announced surance company where practically all of the in First National Bank of Batesville v. Board of Equalization of Independence County, 92 Ark. 335, 122 S. W. 988. Nor does this construction of the statute operate as a discrimi-ed the conclusion that the shares of stock in nation against a corporation and in favor of individual owners of shares of stock. The capital stock of a corporation has its own value. It is assessable as such for taxation, and the failure to deduct investments in shares of stock of other corporations does not constitute double taxation. The two elements of value are separate and distinct, for the shares of stock themselves are not assessed for taxes. Of course, it would constitute double taxation, as was said in the Dallas County Case, to tax the shares of stock in other corporations held by this corporation and also its capital stock, but the failure to deduct the value of such shares of stock from the capital stock is not tantamount to assessing the shares of stock in the other corporations. An individual is not required to return in his assessment the value of the shares of stock in a corporation, and his investment in such shares of stock is therefore not directly taxed; but, as pointed out in the Dallas County Case, a corporation has a separate assessable valuation in its capital stock which is not possessed by an individual, and it constitutes no discrimination against a corporation to fail to deduct the value of such shares of stock held in other corporations from the assessment of its capital stock. The question of the right of corporations to hold shares in another corporation has been zealously argued by counsel on both sides, but we think it is unnecessary to pass upon that question, in view of our conclusion that it is the aggregate value of the capital stock of the corporation which is assessable, and it is unimportant whether it has been rightfully or wrongfully invested in shares of stock in other corporations. We are of the opinion, therefore, that the learned chancellor erred in overruling the demurrer to the answer, and the decree is reversed, and the cause remanded for further proceedings not inconsistent with this opin ion. WOOD and HART, JJ., dissent. HART, J. (dissenting). Judge WOOD and myself dissent from the opinion of the majority in this case, because we believe it is in direct conflict with the principles announced in State v. Bodcaw Lumber Co., 194 S. W. 692. The opinion of the majority relies for its support upon the case of Dallas County v. Home Fire Insurance Co., 97 Ark. 254, 133 S. W. 1113. In the first place, it may be said that we do not think that case is susceptible of the construction now placed upon it by In the first-mentioned case the words "capital stock" were used to denote the money which the shareholders paid into the corporation when it was organized. In the Bodcaw Lumber Case the words "capital stock" were used in a much broader sense, and the court adopted an entirely different system of valuing the capital stock of a corporation for taxation. The court said that the words "capital stock" mean shares of a corporation in their aggregate, and not the capital of the corporation as represented by its tangible assets. The meaning thus given to the words “capital stock" does not change their meaning as used in the Dallas County Case. When that case is considered, the words must still be considered to mean what the court intended them to mean in that case. But it would be useless to stop here and discuss the soundness or unsoundness of the opinion in the Dallas County Case. If the construction now placed upon it by the majority is to obtain, it is manifest that it is in conflict with the majority opinion in State v. Bodcaw Lumber Co., 194 S. W. 692, and to the extent that it conflicts with that opinion it is modified or overruled. Inasmuch as two of the judges dissented in the Bodcaw Lumber Co. Case, the opinions of the Chief Justice and Judge WOOD must be read together to determine the opinion of the majority. Judge WOOD attempted to sum up the opinion of the majority, and clearly stated the principles adopted by them as follows: "The tangible property of the corporation outside of the state is not taxed here at all, and where it is located. But such property is only could not be, for that is taxed in the jurisdiction considered in so far as it contributes to give value to the shares of stock which the state has a right to tax, at their source; that is, the domicile of the corporation. But the rule is different as to tangible property within this state. The state has the right to tax the value of the shares of capital stock once, as ascertained by the method indicated, and, inasmuch as the tangible assets within the state have been considered once in making up this value, the rule adopted by this court to prevent double taxation is to deduct the tangible property taxed here as such from the aggregate value of the shares of stock taxed as capital stock, because that has to be considered and is embraced in the calculation making up the total value of the shares of stock. Not to deduct the local tangible assets, taxed as such, would be equivalent to taxing the value of such assets twice. But all of this is clearly set forth and argued in the opinion of the Chief Justice." The opinion of the Chief Justice is too therefrom show that he had the same view oferty would be twice taxed if it was not dethe law as Judge WOOD. He said: ducted from the total valuation of the shares "The words 'capital stock,' used in the statute, of stock. To illustrate, let us suppose a mean the aggregate value of the shares of stock corporation is formed with capital stock of in the hands of the shareholders, though the val- $400,000, divided into 4,000 shares, of a par ue of the shares of stock themselves do not constitute the limit of taxation. The purpose of value of $100 each. At the outset we will asthe lawmakers was to merge the separate valua-sume that both the shares of stock and the tion of the shares of stock into the aggregate capital stock are worth $400,000. A part of valuations of the whole, and thus constitute the compound, as a basis for fixing the valuation for the assets of the corporation may then be taxation purposes, after deducting the value of invested in the shares of stock of other corthe tangible property which is to be specifically porations and in real estate situated in this assessed separately. In this way the lawmakers have provided a scheme for taxation of all of the state, and a part of its assets may be invested elements of value of this property one time, and in real estate situated in another state. only once, and the tax is levied at the source These may be fortunate investments, and and paid there without any assessment being add greatly to the value of the shares of levied against the individual shareholders. The scheme absolutely excludes any idea of double stock of the corporation, and all are to be taxation, but it does provide an adequate means taken into consideration in estimating the of including all the elements of value contained value of the shares of stock. According to the in the shares of stock and the tangible property rule laid down in the Bodcaw Lumber Co. of the corporation itself, merged into a composite Case, there will be no deduction on account of whole. The assessment of the property is in name only against the corporation, for it in- the real estate situated in another state, becludes the elements that go to make up the value cause, although it may be taxed in that other of the shares of stock themselves." state, it is only taxed once in this state. own shares of stock, and to require the corporation purchasing its shares of stock to also pay taxes on them would be to tax substantially the same property twice in the same jurisdiction, and that, according to the trend of all our decisions, is double taxation, and is contrary to the letter and spirit of our Constitution. If, by any refinement of reasoning or otherwise, it may be said that the case of Dallas County v. Home Fire Insurance Co., supra, is against this conclusion, it is manifest, from the excerpts we have quoted from in the Bodcaw Lumber Co. Case, that the opinion in the former case, in so far as it is contrary to the views we have just expressed, is modified or overruled by the opinion in the Bodcaw Lumber Co. Case. Indeed, one ground of dissent by the writer was that the principles of law in the two cases were in necessary conflict in the respect herein stated. Thus it will be seen in the Bodcaw LumOn the other hand, it is admitted that real ber Co. Case the court proceeded upon the estate situated in this state is to be deducted, theory that the combining of the shares of for otherwise substantially the same property the capital stock of a corporation and its would be twice taxed in the same jurisdiccorporate principal for the purpose of taxa- tion. The same reasoning holds good in the tion, whereby all are taxed as a unit, could case where the corporation has purchased not be considered as double taxation. The shares of stock in another domestic corporatheory of the court was that the principletion; for that corporation pays taxes on its against double taxation had no application because that is confined in operation to such taxation in the same jurisdiction. The writer recognized in that case that, in strict legal theory, double taxation does not exist, unless the double tax is levied upon the same property in the same jurisdiction; but he dissented from the opinion on the ground that, whatever the strict legal theory is, the practical effect of the decision was to tax substantially the same property twice, and this he believed was against our whole system of taxation as heretofore established and construed by the court. If the question in the present case had been an issue in the case, it is evident that the property would have been deducted from the aggregate value of the shares of stock taxed as capital stock. We think the only logical result of the decision in that case is that, when a corporation invests part of its assets in property of any kind situated in or out of the state, that property is to be considered in estimating the value of the shares of stock of the corporation for taxation in this state, and that where McCULLOCH, C. J. Counsel for appellee such property is situated outside of the state now disclaim any intention of asserting a disit is not to be deducted from the total valua- tinction between the right of a corporation to tion, but that where it is situated within the deduct from its assessment of original capital state it is to be deducted from the total value, stock the value of shares of stock in another when the corporation assesses its property corporation and the right to make such deducfor taxation. This is so because, where the tion from accumulated surplus, and they take property is situated outside of the state, the broader position that a corporation has there can be no double taxation in legal the right to such deduction either from the theory, because the tax upon substantially the original capital stock or from accumulated same property is not levied by the same juris- surplus. That contention is answered by the diction. But, in case the property is situated decision of this court in the case of Dallas within the state, substantially the same prop-County v. Home Fire Ins. Co., 97 Ark, 254, On Rehearing. 133 S. W. 1113, as shown in the former opin- [struction of frame buildings. The effort on ion in the present case. The force of that decision was not impaired by the recent case of State ex rel. v. Bodcaw Lumber Co., 194 S. W. 692. On the contrary, we think that the two decisions are in harmony. 1. MUNICIPAL CORPORATIONS 60 ORDINANCES-AUTHORITY. Ordinances of cities and towns depend for their validity on the authority granted by the Legislature. the part of the officers of the town is to prevent plaintiff from putting a new roof on his house because it is not constructed in accordance with the terms of the ordinance. Ordinances of cities and towns depend for their validity upon the authority granted by the Legislature. The sole power conferred upon municipal corporations with respect to regulating the building of houses is as follows: "Sec. 5439. They shall have the power to regulate the building of houses; to make regulations for the purpose of guarding against accidents by fire, and to prohibit the erection of any building or any addition to any building unless the outer walls thereof be made of brick or mortar, or stone and mortar; and to provide for the removal of any building or addition erected contrary to such prohibition." Kirby's Digest, § 5439. It will be observed that the statute relates only to the building of houses and additions thereto, and contains no authority to prevent the repairing of houses constructed prior to the passage of the ordinance. The author 2. MUNICIPAL CORPORATIONS 601-ORDI-ity "to make regulations for the purpose of NANCES BUILDING AND REPAIRS. Kirby's Dig. § 5439, empowering municipal guarding against accidents by fire" does not corporations to regulate the building of houses, relate to the construction or repair of houses. to make regulations for the purpose of guarding Of course, the power to regulate the buildagainst accidents by fire, and to prohibit the ing of houses carries with it, impliedly, the erection of any building or addition thereto, unless it be brick, stone, or mortar, does not relate power to prevent complete renewal of a structo repair of a house, and so does not authorize ture so as to constitute an evasion of the orprohibition by ordinance of repairs of an exist-dinance by converting the house into a new ing building not amounting to an evasion of pro- one in defiance of the provisions of the ordihibition of building. nance. We have not, however, such a case Appeal from Logan Chancery Court; W. A. presented by the facts now before us, for the Falconer, Chancellor. evidence in the case shows that the building Action by Geo. A. Hall against the In- is a very substantial structure, in good concorporated Town of Paris. Decree for plain-dition, and that the attempt to repair it does tiff, and defendant appeals. Affirmed. not constitute an evasion of that portion of Sid White, of Paris, for appellant. J. H. the ordinance which relates to building Evans, of Booneville, and Robert J. White, of Paris, for appellee. McCULLOCH, C. J. The plaintiff, Geo. A. Hall, owns a two-story frame building in the incorporated town of Paris, Ark., and instituted this action in the chancery court of that county to restrain the mayor and other officers of the town from interfering with him in making repairs on said building by putting a new roof on it. The officers of the town assert the right to prevent plaintiff from making repairs on his house under an ordinance passed prohibiting the building or repairing of houses within certain prescribed fire limits of the town, except such buildings constructed in conformity with the ordinance. [1, 2] There was an ordinance in force prior to the institution of the suit, but a new one was passed after the institution of the suit, but before the decree, and the correctness of the decree must, of course, be tested by the legal effect of the ordinance in force at the time of its rendition. The last ordinance created a fire limit which embraced plaintiff's property and prohibited the repairing or con houses. We need not enter into a discussion now as to how far the Legislature can go in conferring authority on municipal corporations to regulate the repairing of houses constructed prior to the passage of any regulatory ordinance. There being no power conferred on the incorporated town to interfere with plaintiff in making repairs to his house, it follows that the decree of the chancellor in restraining such interference on the part of the officers was correct. Affirmed. VAUGHAN v. HINKLE et al. (No. 224.) evidence must be given its strongest probative In an action for purchase price of cattle, evidence held not to warrant direction of verdict for defendant on the issue of whether a cattle buyer was an agent of defendant. For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes While agency cannot be established by declarations of the alleged agent, yet it is competent to show such agency and their authority by such agents. 3. PRINCIPAL AND AGENT 21, 121-RELA- and executed checks on the First National TION-PROOF BY AGENT. Bank of Batesville, which checks were not paid. Vaughan also attached to his complaint an affidavit, under the provisions of chapter 101 of Kirby's Digest, to have the property, which he alleged was in the possession of the appellees, impounded and held by the sheriff subject to the orders of the court. 4. PRINCIPAL AND AGENT 23(1) CLOTHING WITH AUTHORITY-SUFFICIENCY OF EVI DENCE. Evidence held sufficient to warrant a finding that defendant had clothed a cattle buyer with authority to represent him. 5. SALES 53(2)-MEETING OF MINDS-EVI 7. CHATTEL MORTGAGES 219 TITLE OF BUYER-CONSENT OF MORTGAGEE. Where a mortgagee orally consented to a sale of mortgaged cattle, there was no cloud on the title of the buyer. 8. SALES 39-SALES OF MORTGAGED PER SONALTY-CONSENT OF MORTGAGEE. Where a mortgagee consented to a sale of mortgaged cattle, there was no fraud on a buyer, because in such case the title was clear. 9. SALES ~345 ACTION FOR PURCHASE PRICE-IMPOUNDING CATTLE. Under Kirby's Digest, § 4967, providing that a vendor, suing for the price of property in the vendee's possession, may have an order directing the sheriff to take the property and hold the same subject to the orders of the court, where payment of a check given for cattle was stopped, and the seller sued for the price, no bond was required as a condition precedent to impounding the property, and it was error to quash the writ in advance of the determination by the jury of the issues as to whether there was a completed sale, and whether or not the property was in possession of defendants when plaintiff petitioned that it be impounded. Appeal from Circuit Court, Independence County; Dene H. Coleman, Judge. Suit by C. P. Vaughan against John A. Hinkle, Elmer Hinkle, and Bernard Hinkle, doing business as the Hinkle Live Stock Company. Judgment for defendants, and plaintiff appeals. Reversed and remanded. The appellees answered, in substance, denying the allegations of the complaint, and denying that Crownover and Cole were the agents of the appellees, and alleging that they had no authority to act for them, and further averring that as soon as they ascer tained that appellant had sold the live stock to Crownover and Cole they notified appellant that Crownover and Cole had no authority to act for them, and that thereupon appellant immediately took the live stock back into his possession, and that the appellees had never at any time had possession of the live stock, and that at the time of the alleged sale the live stock were under mortgage to the Citizens' Bank & Trust Company, and that no information as to such mortgage was given to Crownover and Cole, and that therefore even if Crownover and Cole were the agents of the appellees the concealing from them the fact that the property was then under mortgage would be a fraud on the appellees and render the sale absolutely void. The undisputed evidence shows that Crownover and Cole purchased the cattle on the 9th day of February, 1917, from the sons of the appellant, and that they represented themselves as the agents of the appellees and executed two checks in the sum of $1,941.88 each, one of the checks being signed, "Hinkle Live Stock Company, by W. R. Crownover," and the other being signed, "Hinkle Live Stock Company, by S. N. Cole"; that these checks were indorsed on the back: "Payment stopped by Hinkle Live Stock Company on the 10th of February, 1917." At the conclusion of the testimony the appellees moved the court to direct the jury to return a verdict in their favor, and before the court ruled upon the motion the appellant asked the court to grant certain prayers for instructions presented by him, which the court refused, and to which the appellant duly excepted. Thereupon the court gave to the jury the following instruction: "Gentlemen of the jury, under the law applicable to this case and the facts in this case I instruct you to return a verdict for the defendants." C. P. Vaughan, through his sons, who were authorized by him to do so, sold to W. R. Crownover and S. N. Cole, who claimed to be the agents of and acting for the Hinkle Live Stock Company, a firm composed of John A. Hinkle, Elmer Hinkle, and Bernard Hinkle, 106 head of cattle. This suit was instituted by C. P. Vaughan, appellant, against the appellees, to recover of appellees the sum of $3,883.75, the purchase price of the cattle. Vaughan alleged, in substance, that the sale was negotiated on his part through his sons as his agents and on the part of the appellees through Crownover Samuel M. Casey, of Batesville, for appeland Cole, who represented themselves as the lant. Joe McCaleb, John B. McCaleb, and agents of the appellees; that Crownover Lyman F. Reeder, all of Batesville, for apand Cole took the cattle in their possession, pellees. The appellant duly excepted, and from a judgment in favor of the appellees, this appeal has been duly prosecuted. Other facts stated in the opinion. For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes |