32 N.W.2d 694 | Mich. | 1948
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *428 Plaintiff, a Michigan corporation, filed this bill of complaint in the circuit court for Wayne county in chancery to enjoin the secretary of State from levying upon any of plaintiff's property for the purpose of collecting any gasoline taxes, and from taking any action against the plaintiff as a wholesale distributor of gasoline under Act No. 150, Pub. Acts 1927, as amended. After answer filed, and during the course of a hearing on the reference to a circuit court commissioner, amendments to the bill of complaint were allowed setting up further claims by the plaintiff, praying that an accounting be had, and that plaintiff be allowed certain refunds, credits and offsets. After issue was joined on the amended bill of complaint a further extended hearing was held before the circuit court commissioner, resulting in the filing by the commissioner of comprehensive findings of fact and of law. The commissioner recommended that the temporary restraining order be dissolved and that the bill of complaint be dismissed. This was confirmed by the court and from the decree entered accordingly the plaintiff appeals. *430
An extended review of the pleadings and the testimony set out in over 400 pages of the printed record would be of no benefit to the profession and would needlessly encumber this opinion. Certain questions of law are involved, and a summary of the facts essential to decision thereon follows. The case results from an audit by the secretary of State's office of the plaintiff's records for the period from September 1, 1939, to October 31, 1940. The law and the facts stated herein are as of that period of time. The plaintiff Charles E. Austin, Inc., is a Michigan corporation with an authorized capital of $10,000. The sole shareholder is Margret P. Austin, the wife of Charles E. Austin, who holds all of the stock as trustee for her children. She is also president and secretary of the company. It is engaged in the wholesale gasoline business in the city of Detroit. As a wholesale distributor, it is required to secure a wholesale distributor's license each year from the secretary of State under the State gasoline-tax act. This case involves said statute as it stood in 1940.*
The plaintiff during said period filed monthly reports with the secretary of State and paid the gasoline taxes due according to such reports. As a wholesale distributor of gasoline, it also operated a "boat terminal transfer" within the meaning of said gasoline-tax act, as well as a "bulk storage plant." This plant consisted of four storage tanks of varying capacity, the largest (tank No. 1) having a capacity of 4,200,000 gallons. The real estate and tanks were owned by Margret P. Austin and the tanks were *431 leased by her to Charles E. Austin, Inc. Tank No. 1 was qualified as a "boat terminal transfer." Tank No. 3 was a "bulk storage" tank. Tanks Nos. 2 and 4 were leased to the Joy Oil Company, Ltd., by Margret P. Austin during the navigation season and were used by that company for the storage of gasoline pending transshipment to Canada. The said Joy Oil Company, Ltd., is a corporation organized under Canadian law. Margret P. Austin is also the president and secretary of this company, and also owns all of its shares of stock except a few qualifying shares. It carries on no operations within the State of Michigan except that during the period here involved it stored gasoline in tanks Nos. 2 and 4, and possibly on one occasion in tank No. 3, pending transshipment by boat to Canada. It is not authorized to do business in Michigan, and does not hold a wholesale distributor's license in Michigan. Plaintiff concedes that to some extent there was a commingling of its gasoline with that of the Joy Oil Company, Ltd., in the four tanks. The Joy Oil Company, Ltd., obtains gasoline from suppliers in Michigan and, also, by railroad tank cars from outside the State of Michigan. When the gasoline was shipped by rail to Detroit it was stored in the tanks leased by it from Margret P. Austin pending transshipment by boat to Canada. For further detailed facts, see Joy OilCompany, Ltd., v. State Tax Commission, ante, 335.
Plaintiff Charles E. Austin, Inc., claims that inasmuch as at least part of the gasoline in question was ordered by the Joy Oil Company, Ltd., and stored in tanks owned by Margret P. Austin pending transshipment to Canada, Charles E. Austin, Inc., is not liable for the gasoline tax on the same. But the record shows that some of said gasoline was commingled with gasoline owned by Charles E. Austin, Inc., that on occasion Charles E. Austin, *432 Inc., purchased tank cars of gasoline from Joy Oil Company, Ltd., and also gasoline accumulated in storage tanks pending transshipment to Canada when the plaintiff wished to use the storage tanks. It was also shown that Charles E. Austin, Inc., for several months paid suppliers for gasoline purchased by Joy Oil Company, Ltd., later being reimbursed therefor. On some occasions Joy Oil Company, Ltd., did not have sufficient gasoline in storage to make a full boatload for transshipment to Canada and purchased gasoline from Charles E. Austin, Inc., to fill the boat. Plaintiff also sold Joy Oil Company, Ltd., large quantities of gasoline transported by tank truck to Windsor, Canada. The largest storage tank, designated as tank No. 1, was originally designated as "boat terminal transfer." Gasoline so stored in a "boat terminal transfer" under section 1** of the gasoline tax act, while in process of transfer, is exempt from payment of gasoline tax, under section 88224 of the act. As of January 1, 1940, the auditor for the secretary of State classified tank No. 1 as "bulk storage" instead of "boat terminal transfer" and assessed a tax on its contents. During January and February, a total of nearly two million gallons of gasoline was unloaded from tank cars into tank No. 1, commingled and blended with "boat" gasoline therein. On July 24, 1940, at which time said auditor reclassified tank No. 1 as "boat terminal transfer," there were 223,000 gallons of gasoline remaining in the tank. Tank-car gasoline, subject to the gasoline tax, was thus commingled and blended with "boat" gasoline, tax-exempt. It is apparent from the record that gasoline received at the tanks was commingled at the convenience of these parties *433 regardless of whether it came by boat, by tank car, or by truck. Some of it was withdrawn for retail sale in Michigan, liable for the tax. Some of it was withdrawn for transshipment to Canada, and so far as reasonably possible the secretary of State considered this as tax-exempt and made refunds accordingly. Except that it was for the convenience and benefit of the plaintiff, by commingling the gasoline for transshipment with tax-liable gasoline, the tax-exempt gasoline would doubtless have been stored separately, and thus have avoided the confusion brought about by the manner in which the gasoline storage was handled.
We are not impressed with any merit in plaintiff's claim that under the circumstances of this case the gasoline stored in the tanks pending transshipment to Canada is not liable for the gasoline tax, interest and penalties imposed by the State. Tax-exempt gasoline and taxable gasoline was commingled by the plaintiff and Joy Oil Company, Ltd., and there was a break in the continuity of transportation of the gasoline in interstate and foreign commerce, for the convenience and benefit of plaintiff. Counsel relies on A.G. Spalding Bros. v. Edwards,
Nor is there merit in plaintiff's claim that Charles E. Austin, Inc., a separate corporation, is not liable for the gasoline tax on gasoline transshipped by Joy Oil Company, Ltd. The conclusion reached in Joy Oil Company, Ltd., v. State Tax Commission,supra, is equally applicable here. Furthermore, the separate existence of the two corporations will be ignored and both will be regarded as one where they are so organized and carried on that one is a mere instrumentality or agent or adjunct of the other. In re Culhane's Estate,
In Joy Oil Company, Ltd., v. State Tax Commission, supra, the plaintiff unsuccessfully sought to avoid payment of ad valorem taxes on gasoline stored in said tanks on the ground that the gasoline was a commodity in foreign commerce. In the case at bar plaintiff seeks the aid of equity to prevent the collection *435
of certain gasoline taxes, penalties and interest on gasoline stored in said tanks during the period covered by the secretary of State's audit. Under the involved circumstances here shown, where there are two corporations in both of which the wife of Charles E. Austin is the owner of the corporate shares as well as the president and secretary of both corporations, and who also individually owns all of the storage facilities and leases the same to said corporations, equity will look through and behind the corporate entities to ascertain the true situation. Furthermore, plaintiff admits that Margret P. Austin individually owns a number of retail gasoline filling stations in Detroit, and that Charles E. Austin, Inc., is her source of supply. It is a fair inference that the interlocking corporate and individual ownership and leasing arrangements here shown, have been conceived and carried on for the purpose of evading payment of taxes. We have frequently said that equity looks to the substance rather than to the form. Foster v. Ypsilanti Savings Bank,
Plaintiff contends that the secretary of State had no right to change the classification of tank No. 1 as a "boat terminal transfer" to that of "bulk storage" and assess a gasoline tax on its contents. The deferral of tax on gasoline in a boat terminal transfer is an exception in the law, which relieves the *436
taxpayer from tax until distribution. Such an exception is to be strictly construed. St. Joseph's Church v. City of Detroit,
Several other questions were injected into the case by the amendments which the trial court allowed the plaintiff to make during the hearing before the circuit court commissioner. Issue was joined on these matters, and the plaintiff argues that they were not decided correctly by the trial court. The same questions are raised here on the appeal. They relate to refunds to which plaintiff claims it is entitled, for claimed overpayment of gasoline taxes. Section 8 of the gasoline-tax act, as amended (Comp. *437 Laws Supp. 1940, § 3583, Stat. Ann. § 7.298), provides for an allowance of three per cent. for evaporation and loss. The difficulty in the determination of loss caused by volatility of gasoline by evaporation, and accurate volume measurement of large quantities of gasoline, doubtless was the reason for the statutory allowance of a flat three per cent. loss. It is the only allowance in the act, for such loss, and was so determined by the trial court.
Plaintiff's claims for refund of gasoline taxes already paid, without protest, because of plaintiff's own claimed errors in its reports to the secretary of State find no basis for allowance in the gasoline-tax act. Plaintiff's claim of casualty losses is not supported by the record. The taxes paid by plaintiff were in the amount computed and reported by plaintiff, and there is no averment or proof of fraud or mutual mistake. The very comprehensive findings, report and recommendation of the circuit court commissioner, wherein plaintiff's claims for refunds were reviewed at length, were properly confirmed by the trial court.
Affirmed, with costs.
BUSHNELL, C.J., and SHARPE, REID, NORTH, BUTZEL, and CARR, JJ., concurred.
DETHMERS, J., did not sit.
