Ecorse Screw MacHine Products Co. v. Corporation & Securities Commission

Michigan Supreme Court

Ecorse Screw MacHine Products Co. v. Corporation & Securities Commission

145 N.W.2d 46, 378 Mich. 415, 1966 Mich. LEXIS 80

CourtMichigan Supreme Court

DecidedOctober 4, 1966

DocketCalendar 3, Docket 51,333

StatusPublished

Cited by22 cases

This text of 145 N.W.2d 46 (Ecorse Screw MacHine Products Co. v. Corporation & Securities Commission) is published on Counsel Stack Legal Research, covering Michigan Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Ecorse Screw MacHine Products Co. v. Corporation & Securities Commission, 145 N.W.2d 46, 378 Mich. 415, 1966 Mich. LEXIS 80 (Mich. 1966).

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Opinion

Smith, J.

Leave was granted from a decision of the Court of Appeals which decision is fully reported in 1 Mich App 414. The facts are stated in that report and need not be repeated in full. It is sufficient .to' note that plaintiff filed articles of incorporation December 22, 1959, with authorized capital stock of 50,000 shares having a par value of $1Q per share. In its annual report filed with the com *417 mission on or about May 15, 1960, plaintiff listed assets as of the tax date, December 31, 1959, consisting solely of stock subscriptions receivable in the amount of $350,000 (35,000 shares at $10 per share). A corresponding entry was made on the liability side of the report showing $350,000 for capital stock subscribed. The stock was paid up on or about February 1, 1960. The question is (as it was in the Court of Appeals) whether stock subscribed for but not paid up may be considered paid-up capital or surplus and thus subject to the annual corporate privilege tax under CL 1948, § 450.304, as amended by PA 1959, No 276 (see Stat Ann 1959 Cum Supp § 21.205), which reads, in pertinent part, as follows:

“Every * * * profit organization organized or doing business under the laws of this state, * * * shall pay, at the time of filing the annual report with the Michigan corporation and securities commission * * * an annual fee of 5 mills upon each dollar of its paid-up capital and surplus, but such franchise fee shall in no case be less than $10.00.” (Emphasis supplied.)

We affirm the decision of the Court of -Appeals insofar as it holds that stock subscribed for but not paid up is neither paid-up capital nor surplus within the meaning of the cited statute, under circumstances presented by such a skimpy record.

The statute does not, by reasonable construction, cover this situation, where the partners in a partnership are in a transitional phase at tax time, the, articles of incorporation having been filed and stock subscribed for by the partners-incorporators, and the partnership assets not having been transferred from the partnership to the corporation (in satisfaction of the partners-incorporators stock subscriptions). No violence should be done to the well- *418 settled meanings of “paid-up capital” and “surplus” by heavy-banded judicial construction; this is a matter which must await legislative clarification.

What is more, in doubtful cases, revenue statutes must be construed against the taxing authority. Consumers Power Company v. Corporation and Securities Commission, 326 Mich 643 (16 ALR2d 1084).

Affirmed. No costs, a public question being involved.

T. M. Kavanagh, C. J., and Dethmers, Kelly, Souris, O’Hara, and Adams, JJ., concurred with Smith, J. Black, J., concurred in the result.

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Smith, J.

Leave was granted from a decision of the Court of Appeals which decision is fully reported in 1 Mich App 414. The facts are stated in that report and need not be repeated in full. It is sufficient .to' note that plaintiff filed articles of incorporation December 22, 1959, with authorized capital stock of 50,000 shares having a par value of $1Q per share. In its annual report filed with the com *417 mission on or about May 15, 1960, plaintiff listed assets as of the tax date, December 31, 1959, consisting solely of stock subscriptions receivable in the amount of $350,000 (35,000 shares at $10 per share). A corresponding entry was made on the liability side of the report showing $350,000 for capital stock subscribed. The stock was paid up on or about February 1, 1960. The question is (as it was in the Court of Appeals) whether stock subscribed for but not paid up may be considered paid-up capital or surplus and thus subject to the annual corporate privilege tax under CL 1948, § 450.304, as amended by PA 1959, No 276 (see Stat Ann 1959 Cum Supp § 21.205), which reads, in pertinent part, as follows:

“Every * * * profit organization organized or doing business under the laws of this state, * * * shall pay, at the time of filing the annual report with the Michigan corporation and securities commission * * * an annual fee of 5 mills upon each dollar of its paid-up capital and surplus, but such franchise fee shall in no case be less than $10.00.” (Emphasis supplied.)

We affirm the decision of the Court of -Appeals insofar as it holds that stock subscribed for but not paid up is neither paid-up capital nor surplus within the meaning of the cited statute, under circumstances presented by such a skimpy record.

The statute does not, by reasonable construction, cover this situation, where the partners in a partnership are in a transitional phase at tax time, the, articles of incorporation having been filed and stock subscribed for by the partners-incorporators, and the partnership assets not having been transferred from the partnership to the corporation (in satisfaction of the partners-incorporators stock subscriptions). No violence should be done to the well- *418 settled meanings of “paid-up capital” and “surplus” by heavy-banded judicial construction; this is a matter which must await legislative clarification.

What is more, in doubtful cases, revenue statutes must be construed against the taxing authority. Consumers Power Company v. Corporation and Securities Commission, 326 Mich 643 (16 ALR2d 1084).

Affirmed. No costs, a public question being involved.

T. M. Kavanagh, C. J., and Dethmers, Kelly, Souris, O’Hara, and Adams, JJ., concurred with Smith, J. Black, J., concurred in the result.

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145 N.W.2d 46, 378 Mich. 415, 1966 Mich. LEXIS 80, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ecorse-screw-machine-products-co-v-corporation-securities-commission-mich-1966.

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