
    INVESTMENTS SECURITIES CO. OF TEXAS v. MEHARG, Secretary of State.
    (No. 619—4388.)
    (Commission of Appeals of Texas, Section B.
    April 28, 1926.)
    Taxation <@=>378(2)— Franchise tax on foreign corporation doing business entirely within the state, and having outstanding both par and no par value stock, should be computed on total gross assets (Rev. St. 1925, art. 7085).
    Under Rev. St. 1925, art. 7085, -franchise tax on foreign corporation doing business entirely within the state, and having outstanding both par and no par value stock, should he computed on total gross assets, and not on entire authorized capital stock, surplus, and undivided profits fixing value of no par value stock at what was actually received therefor.
    Mandamus on the relation of Investments Securities Company of Texas against Mrs. Emma G. Meharg, Secretary of State.
    Writ denied.
    Coke & Coke, of Dallas, for relator.
    Dan Moody, Atty. Gen., and Geo. B. Christian, Ass’t Atty. Gen., for respondent.
   SHORT, J.

This suit involves the proper construction of article 70S5, tit. 122, e. 3, of the Revised Civil Statutes of 1925, which was article 7394 of the previous statutes, proscribing franchise taxes to be paid by foreign corporations, and is a mandamus proceeding, in which the precise question presented by tbe petition of the relator is:

‘What is the proper basis for a franchise tax on a foreign corporation doing all of its business in this state, part of whose authorized capital stock has- a par or nominal value and part having no fixed value?”

Tbe relator contends that the proper answer to this question is:

“The basis for the tax is the entire authorized capital stock, surplus, and undivided profits of such corporation; that the shares which have a fixed or par value should be valued as such shares are ordinarily valued for the purpose of the franchise tax, namely, by multiplying the number of such shares authorized by the par value; and that shares which have no fixed value should be valued according to what value the corporation has actually received for them, except that, where some of such shares have not yet been issued, such unissued shares should be taken to have the same value as those issued.”

The respondent has refused to accept the amount of the tax upon this basis, for the reason that the total gross assets of said corporation is greater than the valuation upon this basis, and tbe sum tendered is insufficient to pay the franchise taxes, claiming that those taxes should be based on tbe total gross assets of tbe corporation, which is shown to be something more than double the valuation used as a basis for tbe estimation of the franchise tax -by tbe relator. And so, if tbe relator has tendered the correct 'amount of tax due by it under said article, the writ should be awarded; otherwise it should not be. This statute was concededly passed with particular reference to- par value stock corporations, and the only difficulty in applying it to a corporation like that of the relator arises out of this fact: The relator was chartered under the laws of Delaware, but does business exclusively in Texas, having no assets other than in this state, the amount of such gross assets being $692,272.04, while the relator claims that its only taxable assets are its stock, which it values at $300,000, there being no surplus or undivided profits. The relator arrives at this valuation by multiplying its 2,500 shares of preferred stock, by its par value of $100 per share and adding thereto the result of a multiplication of 5,000 shares of common stock of no par value at $10 per share, some of which had been issued fpr $10 per share and the remainder offered at that price, aggregating $300,000.

In the case of American Refining Co. v. Staples, 269 S. W. 420, Section A of the Commission of Appeals, in an opinion which was adopted by the Supreme Court, in construing this article in so far as it applied to corporations having no par value stock, held that the franchise tax should be based on the total gross assets of the corporation. At the time this article was enacted, no nonpar value stock corporations were known in Texas, and in the use of the term, “authorized capital stock, surplus, and undivided profits,” it would appear that the Legislature intended to include all of the assets of par value corporations. Thus the franchise tax levied on such corporations was to have for its basis the total gross assets employed by the corporation in the transaction of its business in Texas, and the measure of such assets was fixed by the Legislature as the authorized capital stock, surplus, and undivided profits. No difficulty is presented in those cases where corporations .have capital stock of par value, and under the authority of the American Refining 'Co. v. Staples, supra, no difficulty is now presented in those cases of corporations all of whose capital stock is of no par value. In determining the basis of the franchise tax in cases of corporations having both no par value stock and par value stock, in all cases of foreign corporations operating in Texas, the total gross assets of the corporation (all such being exclusively within the state) furnish a basis for the computation of the tax. In the case of corporations having only par value stock, the Legislature has said that all the gross assets of the corporation shall consist of the authorized capital stock, surplus, and undivided profits. And, in the case of corporations having stock of no par value, it has been determined, in the absencé of a special statute applicable to no par value stock corporations, that the above article, in so far as it may apply to such corporations, must be equitably interpreted to provide for the payment of a franchise tax based upon the total gross assets of the corporation. In determining what are the gross assets of a corporation of the character mentioned, if we could eliminate the term “no par value stock,” the total gross assets of the corporation would be its authorized capital stock having par value, its surplus, and undivided profits. If we could eliminate the term “having par value,” and consider alone the no par value stock, then its total gross assets would be the par-value of all the assets employed in its business. In the case of American Refining Co. v. Staples (Tex. Com. App.) 269 S. W. 420, the court said:

- “We think the basis adopted by the Court of Oivil Appeals [referring to the same case (260 S. W. 614) ] would be inequitable, for the reason that, as we understand the provisions of the charter of a no par value stock corporation, the corporation could have issued the whole of the 100,000 authorized shares for the property conveyed to it, and such basis would require the corporation to pay double the franchise tax that it would have had to pay if it had simply issued the 100-,OOO shares instead of the 50,000 shares in payment for said property. Also, as we understand it, the corporation could have issued 25,000 shares or any other number of shares not less than 10, in payment for the property conveyed to it by the owner of the property, and this we think clearly demonstrates that the basis suggested by the Court of Civil Appeals could not be sufficiently substantial and fixed that it could be adopted as a proper basis upon which such corporation should pay its franchise tax.”

The legislation with reference to no par value stock corporations with full paid and nonassessable shares in the different states of the Union, is set forth at some length in the opinion of Chief Justice McClendon in the case of American Refining Co. v. Staples, Secretary of State, 260 S. W. 614, and some of the decisions of some of the states bearing upon this subject are discussed by him, which statement and discussion are illuminating, but the length-of which precludes its inclusion in this opinion, though it.must be remembered that the conclusion reached by the Chief Justice'has not been followed in the case of Refining Co. v. Staples, supra. By using the basis of computing the tax laid' down in the case last mentioned, the corporation must pay -its franchise tax upon that capital which it has actually used in the conduct of its .business. The purpose of the law is to determine the gross assets.of the corporation in order that the franchise tax may be based thereon, and, in the absence of a special statute applicable to corporations, a part of whose stock is of no par value and a part of par value, the equitable interpretation of the law applied by the Supreme Court in the case of American Refining Co. v. Staples, supra, in so far as it applies to no par value stock corporations, is applicable to this case, from which it follows that a corpora-, tion, a part of whose stock has no par value and a part p-ar value, should pay its Texas franchise tax based on the total gross assets, all of which it appears is used exclusively by the relator in its Texas business; it appearing that it conducts no business in any other state.

It being our opinion that the relator has not tendered to the respondent a sufficient amount to cover the franchise tax due by it at the time the same was tendered, we recommend that the writ he denied.

CURETON, C.. J.

Opinion of the Commission of Appeals adopted, and mandamus refused.  