Writ of Certiorari Denied December 10, 1956. See 77 S.C. 263.
The State Department of Revenue made an assessment for franchise taxes under the provisions of § 348, Title 51, Code of 1940, covering the tax year 1952 against Plantation Pipe Line Company, a corporation, in the amount of $22,655. Plantation Pipe Line Company appealed from the foregoing final assessment to the Circuit Court of Montgomery County, in Equity. In the Circuit Court of Montgomery County, in Equity, Plantation Pipe Line Company filed its bill of complaint to which the State filed a demurrer. The court entered a decree in which the court sustained the demurrer to certain aspects of the bill of complaint which are now not under consideration and at the same time overruled the demurrer to other aspects of the bill. The aspects of the bill of complaint to which the demurrers were overruled are stated in the decree to be:
Thereafter the State filed its answer to the foregoing bill of complaint. Attached to the answer of appellant were exhibits A, B and C, which were made a part of the answer. These exhibits were introduced in evidence as a part of the record through a stipulation wherein it was agreed that such documentary evidence could be introduced without objection as to form.
On a hearing of the issues made by the bill of complaint and the answer the court rendered its final decree and in doing so made certain findings of fact and conclusions of law. In substance the court declared the final assessment of franchise tax made against Plantation Pipe Line Company for the tax year 1952, was invalid in its entirety and ordered the Comptroller of the State of Alabama to refund to Plantation Pipe Line Company the amount of $22,655 which the company had paid for the sake of taking the appeal as provided in § 140, Title 51, Code of 1940, together with interest on the aforesaid amount from December 12, 1952, and ordered the costs to be paid by the appellant.
In its answer the State pleaded, among other things, res adjudicata to the bill, which was made a part of the answer. The State attached as Exhibit "B" a copy of the bill of complaint which Plantation Pipe Line Company had filed in Case No. 13040 in the Circuit Court of Montgomery County, in Equity, setting up, in substance a cause of action claimed to be identical in all respects with the cause of action here involved, except that the tax involved was for the year 1942. In that case the court held that Plantation Pipe Line Company was due to pay the State of Alabama the sum of $7,849.73 as franchise tax for the year 1942. We shall consider the issue of res adjudicata separately from the other matters considered in this opinion and shall hereinafter outline the contention as to res adjudicata at greater length.
The case was tried orally before the court and we have given careful consideration to the evidence introduced in the cause. We find that the facts as summarized by the court in its decree are substantially
Plantation Pipe Line Company is a corporation which was organized under the laws of the State of Delaware on July 8, 1940. On July 30, 1941, 55 Stat. 610, Congress enacted a law which provides in part, "Whenever the President finds that the construction of any pipe line for the transportation and/or distribution of petroleum or petroleum products moving in interstate commerce, or the extension or completion of any such pipe line already wholly or partly constructed, is or may be necessary for national-defense purposes, he shall by proclamation declare such finding." Section 2. The President, on August 23, 1941, issued a Proclamation, No. 2505, 55 Stat. 1670, to that effect, as to the pipe line proposed to be constructed by Plantation Pipe Line Company, which contained among other things the statement that the President does "hereby find and proclaim (1) that it is necessary for national defense purposes that there be constructed and completed a pipe line system for the transportation and distribution of petroleum and petroleum products moving in interstate commerce, * * * commencing in the vicinity of Baton Rouge, Louisiana, and extending in a north-easterly direction through the States of Louisiana, Mississippi, Alabama, Georgia, and South Carolina, and into North Carolina to a point in the vicinity of Greensboro, North Carolina, with branch lines extending to Montgomery and Birmingham, Alabama, Columbus and Macon, Georgia, and Chattanooga and Knoxville, Tennessee, (2) that Plantation Pipe Line Company, a private corporation organized under the laws of the State of Delaware, has commenced to work necessary for the construction of such a pipe line system and represents that it is prepared to undertake the construction of and will complete said pipe line system * * *."
The pipe line as originally contemplated and as described by the President of the United States in his proclamation was completed and put into operation during the year 1942. The pipe line could not have been financed, organized and the project completed and put into operation except by means of a corporation organized for that purpose and having the customary charter powers, such as the right to issue securities to represent the investment, continuity of existence, etc.
Plantation Pipe Line Company qualified to do business in Alabama in 1941.
Plantation Pipe Line Company was in 1952 and at all times has been a common carrier pipe line company within the meaning of the Interstate Commerce Act, operating solely under tariffs filed with the Interstate Commerce Commission.
Plantation Pipe Line Company has never filed nor sought approval of its rates and tariffs by the State of Alabama or any other state and the State of Alabama has never asserted any regulatory authority or jurisdiction over any of the rates or practices of the Plantation Pipe Line Company.
During the year 1952 Plantation Pipe Line Company owned and operated a pipe line running from Baton Rouge, Louisiana, to Greensboro, North Carolina, with lateral lines from Helena, Alabama, to Birmingham and Montgomery, Alabama, and from Bremen, Georgia, to Columbus and Macon, Georgia, and to Chattanooga and Knoxville, Tennessee. The length of the lines, with laterals, was approximately 1,968 miles, of which approximately 483 miles were located in Alabama. The total investment in carrier property, including construction work in progress as of January 1, 1952, was approximately $69,615,442.47 for the entire system and within the State of Alabama on the same date was approximately $17,095,063.34.
The business of Plantation Pipe Line Company is and was in 1952 conducted as follows. It receives at Baton Rouge, Louisiana, in tanks owned by it, gasoline and petroleum oil distillate for transmission to terminals, located in other states specified
After the products are pumped into the pipe line at Baton Rouge, the flow gradually slows down as the product moves, requiring the use of pumps located at intervals to maintain the flow. Three pumping stations were operated in Alabama in 1952 with stand-by facilities at four points in the State of Alabama.
Plantation Pipe Line Company had four delivery terminals in Alabama in 1952, at Moundville, Birmingham, Montgomery and Oxford. It did not make delivery of any products shipped through its pipe line at any point in Alabama other than at these terminals. This was in conformity with its tariff. Plantation did not maintain any storage tanks at any delivery terminal or elsewhere in Alabama. As required by the tariff, shippers receive their products from the pipe line without delay.
The pipe line through Alabama consists of an 18-inch pipe line and a 12-inch pipe line. The line from Helena to Birmingham is an 8 inch line and the line from Helena to Montgomery is a 4-inch line. Due to the difference in size between the main pipe line passing through Helena and the branch lines to Birmingham and Montgomery, it is impossible to take the product directly from either main line into the branch lines. Accordingly, Plantation Pipe Line Company maintains at Helena seventeen tanks into which are diverted the products from the main lines destined for the terminals at Birmingham and Montgomery. This number of tanks is necessary to insure that the identity of the products being transported be maintained. From the tanks at Helena the product is pumped into the pipe line to Birmingham or Montgomery at high pressure.
Quantities of products destined for Birmingham and Montgomery are not sufficient to require or permit the constant use of the branch lines and therefore the Birmingham and Montgomery delivery terminals are not always open, the products remaining in the tanks at Helena for an average of two or three days before continuing to final destinations. Products are never stored at Helena at the request of a shipper and no deliveries are made there. These tanks are not used for storage and reshipment but are in fact only necessary parts of the transportation facilities without which the deliveries of products received in Louisiana could not be made to the tariff destinations. The tanks at Helena are used in the same way as railroad classification or marshalling yards and the products in the tanks are at all times considered to be and are in fact still in the course of interstate transportation. The tariff does not provide for in transit storage.
In order to assure uninterrupted operation of the pipe line, it is necessary that the person in charge of each pumping station and stand-by facility be on duty or on call at all times and for this purpose the company maintains at each station one house which it requires the responsible employee to occupy and for which he is charged rent in an amount less than the annual depreciation and repairs.
At each of the operating pumping stations there is a water tank primarily for fire protection. Water from the tank is never sold commercially but is used, incidentally
The company maintains at Helena a warehouse where are stored maintenance materials for the operation of the pipe line. It also maintains a fire truck at Helena.
Plantation Pipe Line Company had 82 employees in Alabama on January 1, 1952, and 68 on January 1, 1953. The only employees in Alabama in 1952 were those engaged solely and directly in the service of constructing, maintaining and operating the pipe line. The company had three trucks at Akron and a truck at Helena and Silver Run in 1952, which were used only to carry employees from place to place in connection with their work in the construction, maintenance and operation of the pipe line, to carry needed supplies and for other purposes directly connected with the construction, maintenance and operation of the pipe line.
Some construction was carried on in 1952 by an independent contractor, consisting of enlarging the pumping facilities on the main lines. Similar work was done at Helena in 1951 and some clean-up work in connection with such construction was done at Helena in 1952.
To keep its pipe line system in operation Plantation Pipe Line Company maintained by means of lines leased from others a communications system between its terminals, pumping stations, and its chief operating office in Atlanta. Plantation Pipe Line Company has never maintained any general or corporate office in Alabama. Its statutory domicile is and has been Delaware and its principal corporate and operating office is and has been in Atlanta, Georgia. Plantation Pipe Line Company has never kept any records in Alabama except pumping station and terminal operating records necessary to the transportation of products received into the pipe line in Louisiana. It has never performed any functions in Alabama except those of constructing, maintaining and operating the pipe line.
All of the business, activities and operations of the Plantation Pipe Line Company in Alabama are carried on solely in furtherance of and are inherent, integral and necessary parts of the interstate transportation of petroleum products. All of the property of Plantation Pipe Line Company located in Alabama, both real and personal, is committed to and used solely in said interstate business. Plantation does not, and did not in 1952, engage in any local or intrastate business or activity whatsoever in Alabama.
Plantation Pipe Line Company has paid all ad valorem taxes assessed by proper state authority on its property located in Alabama, income taxes to the State of Alabama on its net income allocated to the interstate business done by Plantation Pipe Line Company in Alabama and unemployment compensation taxes with respect to its employees in Alabama. Prior to 1952, Plantation Pipe Line Company had paid into the State of Alabama ad valorem taxes aggregating $384,866.74; income taxes aggregating $144,466.06 and unemployment compensation taxes aggregating $26,653.88. For the year 1952, it paid ad valorem taxes of $97,219.36; income taxes of $19,408.59, and unemployment compensation taxes of $1,268.55.
On January 7, 1952, Plantation Pipe Line Company made application for a permit and paid, under protest, to the State Department of Revenue a permit fee for the year 1952 in the amount of $100, disclaiming any desire for a permit to do or any intent to do any business in Alabama except that of interstate commerce.
Plantation Pipe Line Company duly filed on forms prescribed by the State Department of Revenue a franchise tax return for the year 1952, stating on the face of the return that the kind of business conducted in Alabama was interstate transportation by pipe line of products refined from petroleum and disclaiming the transaction of or any intention of transacting any local
The trial court made no findings of fact with reference to the issue of res adjudicata raised by the State. As was said, this matter will be separately considered later in this opinion.
The questions involved in this case may be stated as follows: (1) Was Plantation Pipe Line Company engaged solely in interstate commerce in Alabama in 1952? (2) Assuming that the first question is answered in the affirmative, does the Alabama Foreign Corporation Franchise Tax purport to levy a tax on a foreign corporation engaged solely in interstate commerce in Alabama? (3) Is the Alabama Franchise Tax as here imposed unconstitutional as violative of the Interstate Commerce Clause of the United States Constitution, art. 1, § 8, cl. 3? (4) Are the proceedings with respect to the 1942 Franchise Tax res adjudicata on the issue in this case? The court held the answer to question one to be in the affirmative, to question two in the negative, to question three in the affirmative and the answer to question four to be in the negative.
I. Was Plantation Pipe Line Company engaged exclusively in interstate commerce in Alabama in 1952? With respect to this issue the lower court concluded:
Taking the undisputed facts in the case, we consider that the court correctly held that Plantation was engaged exclusively in interstate commerce in Alabama in 1952.
In Spector Motor Service, Inc., v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573, the Supreme Court of the United States held Spector was engaged exclusively in interstate commerce in Connecticut. The facts upon which this conclusion was based were clearly stated by the Supreme Court of Connecticut in Spector Motor Service, Inc., v. Walsh, 135 Conn. 37, 61 A.2d 89, as follows:
It is obvious from this statement of the Connecticut Court that the activities of Spector in Connecticut were substantially similar to the activities of Plantation in Alabama in 1952. Spector was a common carrier of freight in interstate commerce. Plantation is a common carrier of petroleum products in interstate commerce. Spector had employees in Connecticut, some of whom solicited business, straightened out complaints and in general promoted the plaintiff's business. Plantation had employees in Alabama who were engaged solely in the construction, maintenance and operation of its pipe line. Spector had two terminals in Connecticut at which goods destined for Connecticut consignees were unloaded from large trucks for further transportation by smaller pickup trucks or at which goods to be shipped out of the state were brought by pickup trucks so that they could be loaded into large trucks. The products carried by Plantation are delivered direct to the shipper by Plantation at delivery terminals in Alabama. Spector used pickup trucks registered in its own name with the Motor Vehicle Department of Connecticut. Plantation used trucks with Alabama license tags for purposes directly connected with the construction, maintenance and operation of its pipe line. Spector had to maintain its facilities and equipment in Connecticut. Plantation had to maintain its pipe line in Alabama. Spector received goods for shipment in Connecticut. Plantation did not receive in Alabama any products for shipment.
As we understand the situation the State insists that the operation of the lateral lines from Helena to Birmingham and Montgomery is not interstate commerce. This overlooks the indisputable fact that the product moving in such lines is received by Plantation at Baton Rouge, Louisiana, for transportation to Birmingham and Montgomery as tariff destinations, and that such lines are an integral part of its interstate transportation system. Spector maintained two terminals in Connecticut where goods were brought from out of the state in large trucks. The goods were unloaded from such large trucks at the terminal and then placed on smaller trucks for delivery to the ultimate consignee but this was held to be merely a necessary and incidental part of the interstate delivery and not intrastate commerce. It certainly appears that Plantation's use of smaller lines to deliver products received by it in Baton Rouge, Louisiana, is no less incidental and necessary to the completion of its interstate delivery.
In Ozark Pipe Line Corporation v. Monier, 1925,266 U.S. 555,45 S.Ct. 184,69 L.Ed. 439, the activities of the corporation in Missouri were described by the court substantially as follows. Ozark Pipe Line Corporation was a Maryland corporation which owned and operated a pipe line extending from within Oklahoma through Missouri to points in Illinois, with certain lines in Oklahoma. Through this line crude petroleum was conducted to Illinois and there delivered. Oil was neither received nor delivered within the State of Missouri. Since it began its operation it had been assessed and had paid general property taxes upon that portion of its line and upon its other assets in Missouri. It maintained its principal office in Missouri where it kept its books and bank accounts from which it paid its employees within and without the State, purchased supplies, employed labor, maintained telephone and telegraph lines, entered into contracts for transportation of crude oil and carried on various other activities connected with and in furtherance of its pipe line operation. Along the pipe line in Missouri there were three pumping stations, the sole use of which was to accelerate the passage of oil through the line. It owned and operated passenger and truck automobiles but these, as well as its other property in Missouri, were used exclusively in prosecution of its interstate business. In
The facts of the Ozark case and the facts of the instant case are similar in that in the state which sought to impose the tax both companies owned and operated a pipe line, both had pumping stations to accelerate the passage of the product through the line, both carried essentially the same product, both employed labor and maintained communications facilities in connection with the operation of the pipe line, both owned and operated trucks which were used exclusively in prosecution of its interstate business, both paid the ad valorem taxes assessed by the taxing authorities and both were qualified to do business in the state in which the tax was sought to be imposed.
A study of the difference in the facts between the Ozark case and the facts in the case at bar is worthwhile. Ozark maintained in Missouri its principal office where it kept its books and bank accounts from which it paid its employees within and without Missouri. Plantation maintained its principal office at Atlanta, Georgia, and kept no books or records in Alabama except such as were necessary to the transportation and delivery of products in Alabama. Ozark entered into contracts for the transportation of products in Missouri. Plantation did not enter into any contracts in Alabama for the transportation of products. It seems to us conclusive that if Ozark was engaged exclusively in interstate commerce in Missouri under the facts outlined above, and it was so held by the Supreme Court of the United States, then Plantation necessarily was engaged exclusively in interstate commerce in Alabama in 1952.
In United Air Lines, Inc. v. Joseph, 282 App.Div. 48, 121 N.Y.S.2d 692, affirmed 307 N.Y. 762, 121 N.E.2d 557, United Air Lines operated in many states from coast to coast and even beyond the continental boundaries of the United States. Its main and financial office was in Illinois, its chief maintenance base in Wyoming. It carried air mail, passengers and freight in interstate and foreign commerce. It carried no intrastate traffic in New York. The sale of passenger tickets in New York City averaged over $2,000,000 each year. It was estimated that an equal amount was sold outside the city for transportation into the city. It operated in New York City the usual facilities including three traffic offices, a hangar, a stock room of parts and supplies and a repair and maintenance shop. It employed about 300 persons in New York City including a district traffic manager.
It was contended that the vast business establishment of the United Air Lines within the city as has been described, "the depositing and checking out of moneys in local banks, the handling of baggage and the conveniences of passengers at the terminal, * * * constitute such a separation, distinction and localizing of its generally interstate operations as to subject" United Air Lines to a tax by the city on its gross receipts.
In holding that the United Air Lines was engaged solely in interstate commerce in New York the court held:
It is well to observe that United maintained in New York City stock rooms of parts or supplies and a repair and maintenance shop, and it was held that those aspects of its business could not be "localized" and disassociated from its interstate operations. So in the present case, the existence of a warehouse at Helena where there are stored goods necessary for the operation of the pumping and other transportation facilities located there does not change the fact that Plantation is engaged solely in interstate commerce in Alabama.
The State also emphasizes that there were tank facilities at Helena. The seventeen tanks at Helena are integral parts of the transportation system. They are necessary to insure that the identity of the products being transported to Birmingham and Montgomery will be maintained. Quantities of products destined for Birmingham and Montgomery are not sufficient to require the constant use of the lines to those two terminals and, therefore, such terminals are not always open. Products which are destined for either Birmingham or Montgomery stay in the tanks at Helena for an average of two or three days before being placed in the branch pipe line to either of these delivery terminals. While the shipments are held at Helena they are still in the course of interstate transportation. The shipments are never stored at Helena at the request of a shipper. So we point to the recent opinion of the Supreme Court of Illinois in Mississippi River Fuel Corp. v. Hoffman, 4 Ill.2d 468, 123 N.E.2d 503, 505, certiorari denied Wright v. Mississippi River Fuel Corp., 349 U.S. 935, 75 S.Ct. 785, 99 L.Ed. 651, wherein the court said:
Far more mechanically necessary than the gas storage fields referred to in the foregoing authority, the Helena tanks are essential parts of the transportation facilities
Even in the situation where gasoline is brought into a state by truck or rail and put into storage tanks pending further distribution to ultimate consumers in a regular "flow of trade," interstate commerce is not interrupted. Standard Oil Co. v. Federal Trade Commission, 340 U.S. 231, 238, 71 S.Ct. 240, 95 L.Ed. 239, 245.
It cannot be asserted that interstate commerce, to be immune from taxation, must be conducted in some sort of vacuum without tangible property, personnel or incidental activities within the boundaries of the state. The fallacies of such contention was demonstrated in Ozark Pipe Line Corporation, supra, where the Court said:
A consideration of the foregoing authorities causes us to reach the conclusion that Plantation was engaged exclusively in interstate commerce in Alabama in 1952.
II. The Alabama franchise tax on foreign corporations is not applicable to foreign corporations doing an exclusively interstate business in Alabama. In Anglo-Chilean Nitrate Sales Corp. v. State of Alabama, 288 U.S. 218, 53 S.Ct. 373, 374, 77 L.Ed. 710, the court held that the Alabama franchise tax on foreign corporations is laid upon the actual doing of business and "not upon the authorization, right, or privilege to do business in Alabama". It will be recalled that a permit to do business in Alabama was issued by the state authorities under protest of Plantation on the ground that it was engaged in doing an exclusively interstate business in Alabama.
A study of the history of the franchise tax, including amendments made after the Anglo-Chilean decision, supra, and the constitutional provision under which it was levied and the decisions of this court demonstrate to us that the franchise tax on foreign corporations is only applicable to foreign corporations actually doing an intrastate business in this State.
Article XIV, Section 4, of the Constitution of 1875 provided:
Article 12, Section 232, of the Constitution of 1901 provides:
These sections relate to a foreign corporation that "does business" in Alabama or to foreign corporations that "do any business in this state". The decisions of this Court hold that these words are construed as holding that a foreign corporation doing an exclusively interstate business in Alabama does not "do any business in this state" and that the constitutional provision is not applicable to such a corporation. Ware v. Hamilton Brown Shoe Co., 92 Ala. 145, 9 So. 136; Nelms v. Edinburg-American Land Mortgage Co., 92 Ala. 157, 9 So. 141; Hurst v. Fitz Water Wheel Co., 197 Ala. 10, 72 So. 314; Puffer Mfg. Co. v. Kelly, 198 Ala. 131, 73 So. 403; Cobb v. York Ice Machine Corp., 230 Ala. 95, 159 So. 811 and Ewart Lumber Co. v. American Cement Plaster Co., 9 Ala.App. 152, 62 So. 560. This Court well stated the rule in the Hurst case supra, when it said, "The constitutional and statutory provisions under consideration were not intended and cannot be made to interfere with, or to apply to, interstate commerce."
The Constitution of 1901 provides for the payment of a franchise tax by "such corporation." The words "such corporation" can only apply to foreign corporations that "do any business in this state" or to a foreign corporation that "does business" in Alabama. As previously shown, these words do not apply to a foreign corporation doing exclusively an interstate business in Alabama.
In 1907 the legislature levied, Act No. 334, General Acts of 1907, p. 418, a franchise tax on "every foreign corporation authorized to do business in this State under the laws of the State of Alabama, except strictly benevolent, educational or religious corporations". After the 1907 Act was declared unconstitutional in Southern Railway Co. v. Greene, 216 U.S. 400, 30 S.Ct. 287, 54 L.Ed. 536, the legislature enacted the forerunner of our present franchise tax law, Section 12 of Act No. 216, Acts of 1911, p. 170. As for domestic corporations the Act provided for a franchise tax on "All corporations organized under the laws of this State". As for foreign corporations the Act provided for a franchise tax on "All corporations organized under the laws of any other State, nation or territory, and doing business in this State". While the language of the franchise tax statute has changed some since 1911, the quoted words have always been contained in each statute. Since 1911 the enactment of the foreign franchise tax "implementing [State v. Travelers Ins. Co., 256 Ala. 61, 53 So.2d 745, 746] this constitutional provision" has been "In conformity to the mandate of the Constitution", State v. Jackson Securities & Inv. Co., 243 Ala. 83, 8 So.2d 573, and "in the words of the Constitution, indicating the purpose of the Legislature to make the statutory levy conform with the Constitution." International Paper Co. v. Curry, 243 Ala. 228, 9 So.2d 8, 11. The words "doing business in this State" as used in the franchise tax cannot have any different meaning from the words "do any business" or "does business" in the Constitution.
Before the enactment of any franchise tax in Alabama this Court held that a license tax "for `doing business as a corporation'" was a tax for "`doing business as a corporation,' and not for the mere privilege of existing as a corporation." State v. Anniston Rolling Mills, 125 Ala. 121, 27 So. 921. This decision establishes a basic distinction. The Court distinguished between a tax on the privilege of using the corporate
The question now under discussion came before this Court in State v. National Cash Credit Association, 224 Ala. 629, 141 So. 541, 545, where the taxpayer argued in brief that,
In response to this argument this Court on rehearing held:
This is an express holding that the Alabama franchise tax on foreign corporations is only applicable when the foreign corporation is doing business in Alabama. The holding of the United States Supreme Court in the Anglo-Chilean case, supra, is in harmony with the decision of this Court in the National Cash Credit Association case, supra. The United States Supreme Court held that the Anglo-Chilean Nitrate Sales Corporation was engaged solely in interstate commerce in Alabama and that therefore the Alabama foreign corporation franchise tax was not applicable to such corporation, even though it had qualified to do business in Alabama.
In State v. Southern Natural Gas Corporation, 233 Ala. 81, 170 So. 178, 190, this Court again reviewed the Alabama franchise tax as it existed prior to the 1935 amendment, General Acts 1935, p. 388. After considerable discussion it was said, "We hold that the franchise tax here exacted and being considered is * * * laid on the exercise of corporate functions, or on the privilege of exercising corporate functions within the state". The Court held that Southern Natural was doing an intrastate business in Alabama and was therefore liable for the tax. If the tax had been laid merely on the right of a foreign corporation to exercise its functions solely within the State of Alabama or the right to do business in Alabama in corporate form, the Court could have held the tax applicable without considering or deciding the question of whether or not the company was doing an intrastate business since Southern Natural had qualified in Alabama and thus obtained such rights. The Southern Natural Gas case was affirmed by the United States Supreme Court, 301 U.S. 148, 57 S.Ct. 696, 698, 81 L.Ed. 970, after it found that Southern Natural "carried on in Alabama activities of an intrastate character."
After the decision in the Anglo-Chilean case the Alabama legislature in 1935 added Section 318 of Act No. 194, General Acts of 1935, p. 388, containing the following proviso to the foreign corporation franchise tax:
This proviso has remained a part of the law ever since. Section 348, Title 51, Code of 1940.
This proviso makes it clear that after 1935 the Alabama franchise tax is not, if it ever was, laid on the bare right of a foreign corporation to exercise its corporate functions within the State of Alabama or the right to do business in Alabama in corporate
In Hollingsworth & Whitney Co. v. State, 241 Ala. 96, 1 So.2d 387, 388, the franchise tax as amended was before the Court and this Court said: "The franchise tax is not a condition or qualification to `doing business'" and "We have often noted that this tax is an excise for the privilege of doing business in Alabama." And analyzing the record further the court continued: "We think that this status shows a doing of business in Alabama, by the taxpayer, so as to subject it to a franchise tax."
We are satisfied that the franchise tax is only applicable to foreign corporations doing intrastate business in Alabama.
III. The Alabama franchise tax if applicable to a foreign corporation engaging exclusively in interstate commerce in Alabama would be unconstitutional. The question here presented is controlled by the recent decision of the Supreme Court of the United States in Spector Motor Service, Inc., v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573. In that case the same kind of tax with the same operating incidence as the Alabama tax involved in this case was held invalid. The foregoing decision is the result of lengthy litigation in which the various facts and issues were fully considered. It appears that there were seven decisions rendered before the Supreme Court of the United States finally held that the Connecticut franchise tax contravened the Commerce Clause when applied to a corporation qualified to do business in Connecticut, doing exclusively an interstate business. We cite these decisions because they will add an understanding to the final decision.
The Connecticut Corporation Business Tax of 1935 imposed a tax upon every corporation "carrying on business in this state". Gen.St.Supp. Conn. 1935, § 418c. This act was amended in 1937 so as to impose the tax on every corporation "carrying on, or having the right to carry on, business in this state". Gen.St.Supp. Conn. 1939, § 354e. We refer now to Spector Motor Service, Inc., v. McLaughlin, D.C., 47 F.Supp. 671; Spector Motor Service, Inc., v. Walsh, 2 Cir., 139 F.2d 809; Spector Motor Service, Inc. v. McLaughlin, 323 U.S. 101, 65 S.Ct. 152, 89 L.Ed. 101; Spector Motor Service, Inc. v. Walsh, Tax Commissioner of Conn., 15 Conn.Sup. 205; Spector Motor Service, Inc., v. Walsh, 135 Conn. 37, 61 A.2d 89; Spector Motor Service v. McLaughlin, D.C., 88 F.Supp. 711; Spector Motor Service, Inc., v. O'Connor, 2 Cir., 181 F.2d 150.
This brings us to a consideration of the final decision of the Supreme Court of the United States which granted certiorari "because of the fundamental nature of the issue and the apparent conflict between the judgment below and previous judgments of this Court." 340 U.S. 602, at page 605, 71 S.Ct. 508, at page 510, 95 L.Ed. 573, at page 576. A brief resume of the basic positions of the various Federal judges who considered the matter will bring into proper
The Supreme Court adopted the interpretation of the Supreme Court of Connecticut as to the incidence of the tax and pointed out that its decision as to the validity of the tax was the same without regard to the amendment. In holding that the tax as applied to Spector Motor Service, which was engaged, according to the Court, exclusively in interstate commerce, contravened the Commerce Clause of the United States Constitution, the Court, speaking through Justice Burton, said:
Justices Clark, Black and Douglas dissented on the ground that a tax even on exclusively interstate commerce is valid when fairly apportioned and nondiscriminatory.
In holding that a tax upon the franchise of a corporation for the privilege of carrying on or doing business was unconstitutional when applied to a qualified foreign corporation engaged exclusively in interstate commerce, the Court followed that "`unbroken line of decisions'", including Ozark Pipe Line Corp. v. Monier, supra, and Alpha Portland Cement Co. v. Commonwealth of Massachusetts, supra, Joseph v. Carter & Weekes Stevedoring Co., 330 U.S. 422, 67 S.Ct. 815, 91 L.Ed. 993, and Freeman v. Hewitt, 329 U.S. 249, 67 S.Ct. 274, 91 L.Ed. 265. The first two of these cases had been considered by a majority of the Second Circuit to be outmoded by recent "trends." However, the Supreme Court reaffirms or, as one commentator (20 Ford L.R. 217 at 218) put it, "explicitly `restores to full vigor'" the decisions in Ozark Pipe Line Corp. and Alpha Portland Cement Co., supra.
In an effort not to prolong unreasonably this opinion, attention will be directed to only one of the foregoing cases, namely, Ozark Pipe Line Corp. v. Monier, supra, as the facts of that case closely parallel the facts in the case now before us.
The Supreme Court of the United States in the following manner stated the position of the taxing authorities:
However the Court held that Ozark Pipe Line Corporation was not liable for the tax and said:
The opinion of the Supreme Court in the Spector case clarifies the disparity of views between the Justices that appeared in 1949 in the case of Interstate Oil Pipe Line Co. v. Stone, 337 U.S. 662, 69 S.Ct. 1264, 1266, 93 L.Ed. 1613. The facts of the case are simple. A Delaware corporation owned and operated pipe lines in Mississippi. It picked up oil in the oil fields in Mississippi and transported it to railroad loading tracks also in Mississippi. At the loading tracks the oil was pumped into railroad cars for shipment out of the State. The pipe line company acted as agent of the owners of the oil in transporting it and in arranging with the railroad for the out-of-state shipment. The State of Mississippi imposed "annual privilege taxes, measured by the amount or volume of business done," Code 1942, § 10105, upon a wide variety of enterprises. With respect to persons transporting oil or gas in pipe line for compensation or hire between two points in the State, the tax levied was 2% of the gross income of the business. The Mississippi court held this tax validly applicable to the business of the pipe line company.
Mr. Justice Rutledge delivered an opinion in which he was joined by Justices Black, Douglas and Murphy. These Justices found it unnecessary to decide whether the activity of the pipe line company was technically interstate or intrastate commerce; in either event, they said, Mississippi had the power to impose the tax. They rejected the contention that the tax was invalid merely because it imposed "a `direct' tax on the `privilege' of engaging in interstate commerce" and argued that the Commerce Clause did not invalidate the tax. This position was not accepted by a majority of the court and was repudiated by the Spector case.
In a separate opinion Mr. Justice Burton concluded that the tax was upon the privilege of transporting oil in intrastate rather than interstate commerce. Such conclusion enabled him to uphold the validity of the tax without further consideration of its actual effect upon interstate commerce. On that basis he stated that it was unnecessary to decide whether or not a privilege tax could validly be imposed upon the privilege of transporting oil in Mississippi in interstate commerce. He expressly
Mr. Justice Reed delivered an opinion in which he was joined by Chief Justice Vinson and Justices Frankfurter and Jackson. In the first part of the opinion he concluded that the pipe line company actually was engaged in interstate commerce. In the second part of the opinion he concluded that a privilege tax for carrying on a wholly interstate transportation business measured by a fairly apportioned part of the gross receipts was invalid. In so concluding he observed:
So by virtue of the limited approval of Mr. Justice Burton of the Mississippi Court's decision, and not for the reasons advanced by Justice Rutledge, did the decision of Justice Rutledge temporarily (until Spector) become the decision of the Court.
In the Spector case the Court followed the opinion of Mr. Justice Reed in the Interstate Oil Pipe Line case, and not that of Mr. Justice Rutledge. Thus, the quotations from the Interstate Oil Pipe Line case in the State's brief are now not controlling and Justice Reed's pertinent statement quoted above controls the decision in the case at bar. Later decisions of the Supreme Court of the United States and other decisions since Spector have reaffirmed without question that the holding that a tax on the privilege of doing an exclusively interstate business contravenes the Commerce Clause of the Constitution of the United States. Memphis Steam Laundry Cleaner, Inc., v. Stone, 342 U.S. 389, 72 S.Ct. 424, 96 L.Ed. 436; Railway Express Agency, Inc., v. Commonwealth of Virginia, 347 U.S. 359, 74 S.Ct. 558, 98 L.Ed. 337.
In the case at bar the State has sought to emphasize the fact that Plantation has qualified to do business in Alabama and has obtained an annual permit. These facts are immaterial. Plantation qualified and sought under protest a permit to engage only in "interstate transportation by pipe line of products refined from petroleum." In the Spector case, Spector qualified to do business in Connecticut and the tax was on the doing of business and the privilege of doing business. As a matter of fact Plantation has followed the exact procedure followed by the taxpayer in Ozark Pipe Line Corp. v. Monier, supra, in which the imposition of the tax was held invalid.
We note that the State also relies upon decisions by this Court in Sanford v. City of Clanton, 244 Ala. 671, 15 So.2d 309, and Sanford v. City of Andalusia, 256 Ala. 507, 55 So.2d 856. These cases are
IV. The appellant appears to insist upon its plea of res judicata claiming that the decree in the Plantation Pipe Line case involving the 1942 franchise taxes, Case No. 13040, is binding upon Plantation with respect to its franchise tax for 1952.
It appears that by agreement between Plantation Pipe Line and the State, Plantation settled its tax liability for 1942-48 for franchise taxes and permit fees. The agreement of the parties with respect to that settlement is set forth in a letter dated December 30, 1948. The agreement, according to this letter, provided:
The letter is dated December 30, 1948. It states that a consent decree dismissing the appeal with respect to the year 1942 initialed by the attorney for Plantation at a conference in Montgomery on December 28th will be entered today or tomorrow. The consent decree which was entered on December 30, 1948, bears in the lower lefthand corner opposite the Judge's signature "OK J.F.J." It now appears that there is a misunderstanding about the matter and the State takes the position that the statement contained in the letter is purely unilateral as there is no evidence to the effect that the State ever agreed to any such thing. The lower court made no finding or determination as to any question of fact in connection with the settlement of Plantation's 1942 franchise tax liability. Accordingly, we are unable to say that the present suit is concluded by the former adjudication since we do not know that the matters of the two suits are the same and the issues in the former suit were broad enough to have comprehended all that is involved in the second suit. Tankersley v. Pettis, 71 Ala. 179.
There is an annotation on the question of "Judgment in tax cases in respect of one period as res judicata in respect to another period" in 150 A.L.R., beginning at page 5. A statement of applicable principles as here set forth is sufficient to disclose that the consent decree with respect to the 1942 franchise tax is not res judicata in this proceeding.
The settlement with respect to 1942 was by agreement. Assuming that the State is not legally bound by agreement that Plantation would have the right to litigate with respect to other years, there is no finding in connection with 1942 specifying the grounds upon which the conclusion as to taxability was predicated. In fact there is no judicial finding or determination as to any question of fact in connection with the agreed settlement of Plantation's 1942 franchise tax liability.
In Gillespie v. Commissioner of Internal Revenue, 10 Cir., 151 F.2d 903, 906, the court in speaking of the doctrine of res judicata, said:
Under the circumstances we do not consider that the consent decree of 1942 constitutes res adjudicata of the issues in the present case.
It results that the decree of the lower court is due to be affirmed.
MERRILL, J., concurs.
LIVINGSTON, C. J., concurs in the result.
LAWSON, J., concurs specially.
LAWSON, Justice (concurring specially).
I concur in the opinion prepared for the Court by Mr. Justice STAKELY except insofar as it treats of the constitutionality of the statutes here involved. Since the Court holds those statutes to be applicable only to intrastate business and that the taxpayer is engaged exclusively in interstate business, there is no occasion to write to the constitutional question as to whether those statutes would be constitutional if construed as applying to interstate commerce. We have a long line of cases which hold that the constitutionality of a statute will not be determined unless absolutely necessary to determine the merits of the suit in which the constitutionality of such statute has been drawn in question. Smith v. Speed, 50 Ala. 276; Shehane v. Bailey, 110 Ala. 308, 20 So. 359; Smith v. Mc-Queen, 232 Ala. 90, 166 So. 788; State ex rel. Bland v. St. John, 244 Ala. 269, 13 So.2d 161; Moses v. Tarwater, 257 Ala. 361, 58 So.2d 757; Donaghey v. Owen, 259 Ala. 376, 66 So.2d 895. See Alabama State Federation of Labor, Local Union No. 103, etc., v. McAdory, 325 U.S. 450, 65 S.Ct. 1384, 89 L.Ed. 1725. The opinion in this case shows no reason why this salutary rule is not applicable and I feel that to ignore that rule will result in having the instant case cited in the future as showing that the Court followed the rule only when it feels it convenient to do so.