187 P. 742 | Cal. | 1920
The defendant appeals from a judgment in favor of the plaintiff in an action to recover the sum of $675 levied by the state as taxes for the year 1912 upon a franchise which the state claims the defendant held and enjoyed during that year, described in the complaint as the right to do business as a corporation in the state of California.
The tax was levied in pursuance of the provision of the constitution that "all franchises, other than those expressly provided for in this section, shall be assessed at their actual cash value, in the manner to be provided by law, and shall be taxed at the rate of one per centum each year" (art. XIII, sec. 14, subd. d), and of The Tax Act of 1911 enacted in furtherance thereof. (Stats. 1911, p. 530.) The Tax Act provides that the franchises to be taxed under the constitution shall include "the actual exercise of the right to do business as a corporation in this state when such right is exercised by a corporation incorporated under the laws of any other state or country." (Sec. 5.)
The defendant claims that it did not have, or exercise within this state, any taxable franchise to do business as a corporation within this state during the year 1912, and that in consequence of this fact the tax so levied is invalid. The soundness of this claim is the only point to be determined in the case.
The defendant is a corporation organized and existing under and by virtue of the laws of the state of Maine. In the year 1906, in compliance with section 408 of the Civil Code, it filed with the Secretary of State its articles of incorporation and designated a person residing within the state as the person upon whom process against it could be served, as provided in section 405. The said act of 1911 authorized the state board of equalization to determine the value of the franchises held by any person or corporation taxable under the constitution, and to levy a tax thereon at the rate fixed, and further, that the record of the assessment showing unpaid taxes against any person or corporation assessed by the *205 state board "is prima facie evidence of the assessment upon the property and franchises, the delinquency, the amount of the taxes, penalties, and costs due and unpaid to the state, and that the company, person, or association is indebted to the people of the state of California in the amount of taxes and penalties therein appearing unpaid, and that all the forms of law in relation to the assessment and levy of such taxes have been complied with." (Sec. 24.)
Upon the trial the state introduced in evidence the record of the assessment referred to in said section for the year 1912, showing the assessment of the taxes for which recovery was asked in the complaint. As a defense the deffendant offered to prove that when it filed its articles of incorporation and designated its agent in 1906 it began the operation of steamships running between San Francisco and ports in Oregon and Washington, constituting interstate commerce, and also running between San Francisco and Los Angeles in California; that in December, 1910, it entirely abandoned the operation of the line from San Francisco to Los Angeles, and that thereafter and ever since it has done no business in this state, except in connection with and as a part of the operation of steamships running between San Francisco and ports in the states of Washington and Oregon and engaged exclusively in interstate commerce. Upon objection on behalf of the plaintiff, the court below excluded the evidence of these facts. If the facts were material to the case, the evidence should have been admitted. As there is no dispute concerning the facts, we may consider the case on the assumption that they exist as shown by the evidence offered.
The claim of the plaintiff is that by filing its articles of incorporation with the Secretary of State and designating its resident agent upon whom process against it may be served, as required by the Civil Code, the defendant acquired from the state a franchise to do business as a corporation within the state; that it thereafter at all times continued to hold and possess such franchise, whether it exercised the same or not, and that such franchise is taxable property within the meaning of the constitutional provision aforesaid.
That such a franchise, if it existed in this state, would be taxable as property therein is not disputed. The claim of the defendant is that the right to do interstate business, so far as it is exercised in this state, is not taxable for state purposes; that such taxation would be a burden upon interstate *206 commerce and is not allowed by the United States constitution and laws; that with respect to the right to carry on other business permitted by its corporate charter, the defendant does not possess any franchise which can be considered as property existing within this state, except while it carries on some business here in the exercise of such corporate powers, and that inasmuch as the defendant ceased to do any other than interstate business in 1910, and has not since engaged in any other business, it did not, in 1912, possess any corporate franchise in this state, except its non-taxable franchise to carry on interstate commerce business.
[1] A corporation of another state derives its power to do business from its articles of incorporation and the laws of the state under which it was organized. [2] By coming into this state and filing its articles of incorporation here and otherwise complying with our laws regarding foreign corporations it obtains no grant of power or franchise of any character from this state. Its powers are those only which it possesses by virtue of the laws of the state in which it was created. [3] It is permitted to do business and exercise its corporate franchises and powers in this state by comity only. (American etc. Co. v. Superior Court,
The defendant, when it came into this state far the purpose of doing an interstate and intrastate business as a common carrier of freight and passengers, was required by our laws to file its articles and designate its resident agent in order to enable it to maintain actions for the protection and enforcement of its rights and acquire and convey real property *207
necessary for the business. [5] Its right to carry on the interstate business and to acquire and convey the real property necessary therefor and maintain actions to protect its rights therein is not subject to taxes by the state. "No state has the right to lay a tax on interstate commerce in any form, whether by way of tax laid on the transportation of the subjects of that commerce, or on the receipts derived from that transportation, or on the occupation or business of carrying it on, and the reason is that such taxation is a burden on that commerce, and amounts to a regulation of it, which belongs solely to Congress." (Leloup v. Port of Mobile,
A pertinent illustration of this principle is found in the cases relating to section 19, article XI, of the constitution, as it existed prior to 1911, providing that in any city where no public works were owned or controlled by the municipality for supplying water or light to the inhabitants, any individual, or any domestic corporation duly authorized to do so, should have the right to use the public streets for laying pipes and conduits with which to carry on such public service. This is a general grant of the franchise to lay such pipes in the streets to every person or authorized corporation, but until it is exercised it is not property of any person or corporation. In Bank of California v. San Francisco,
Our conclusion is that the potential right which the defendant had during the year 1912 to carry on intrastate commerce in this state, but which it did not exercise, was not taxable property within this state, and that the court below erred in excluding the evidence to show that it did not exercise such right during the year 1912, for which the tax in question was levied.
[7] We cannot agree with the contention of the plaintiff that the defendant is estopped to show the facts concerning its possession of the franchise by reason of its report made in the year 1911, as required by the said Tax Act, nor by its payment, under protest, of the tax levied for the year 1911 on the same franchise, nor by its failure and refusal to make the report in the year 1912 and the consequent arbitrary assessment made on the claimed franchise by the state board of equalization and which is the subject of this suit. No element of estoppel appears to us to arise from these facts. In fact, the protest accompanying the payment of taxes in 1911 gave to the state officers the information that the defendant claimed that it was engaged only in interstate *211 commerce and that its franchise to do business was not taxable.
The judgment is reversed.
Lennon, J., Wilbur, J., Angellotti, C. J., and Lawlor, J., concurred.
Mr. Justice Olney, being disqualified, did not participate.
Rehearing denied.
All the Justices concurred, except Olney, J., who did not participate.