The State of New Mexico, on relation of the State Corporation Commission, appeals from an adverse ruling, in an action wherein it sued the Old Abe Company to recover franchise taxes in the amount of $60.00, levied and assessed against the corporation for the year 1937, under Chapter 116 of the 1935 Session Laws.
The case was tried below on the appellant's complaint, appellee's answer, and a stipulation of facts. These documents disclose the facts to be as follows: That the appellee is a corporation organized under the laws of New Mexico, that it has authorized, issued and outstanding 12,000 shares of fully paid up stock of the par value of $5 per share, and having a total par value of $60,000; that assets consist of certain patented lode mining claims, claims to unpatented placer mining claims and coal lands, all located in the State of New Mexico, together with personal property, and improvements to be used in connection with the same; that said appellee corporation was organized for the purpose of mining said claims and lands, and for the purpose of extracting therefrom coal and other minerals; that during the year 1937, the only activity of appellee was to hold a stockholders' meeting for the purpose of appraising the corporation's financial condition and electing officers; the holding of an annual directors' meeting for organization purposes only; the borrowing of sufficient money to pay taxes, and the actual payment of taxes; the filing of reports and tax schedules required by governmental agencies; and the filing of notice to hold an unpatented placer mining claim pursuant to Act May 18, 1933, 48 Stat. 72, U.S.C.A. Title 30, Section 28a note. That appellee received no income during the year 1937, maintained no office, except as required by law to maintain corporate existence, and paid no salaries, although a nominal salary was voted to the president, but not paid.
Appellee defended on the ground that it was not engaged in business during the year 1937, so as to be liable for the tax, and it was the contention of the appellant that the tax accrued whether or not appellee engaged in any business activity, since the tax is one levied on the "privilege of carrying on, doing business, or the continuance of its charter within this State", and not upon the doing of business, and secondly, that if the doing of business is a condition to liability for the tax, the appellee was actually engaged in doing business, so the liability attached.
We thus have two questions presented for decision, viz:
1. Does the tax levied by Chapter 116 of 1935 Session Laws attach whether or not the corporation is carrying on any of the activities for which it was incorporated; and *Page 370
2. If the tax is conditioned on the carrying on of corporate activities, was the appellee so engaged so as to be liable for the tax during the year 1937?
The material portions of the Act to be construed are as follows:
"An Act to Levy an Annual Franchise Tax on Domestic and Foreign Corporations for Profit Doing Business in This State, for the Privilege of Carrying on, Doing Business, or the Continuance of its Charter Within This State; to Provide for Reports to the State Corporation Commission by Said Corporations, and to Provide for the Determination and Collection of Said Tax; to Provide for Penalties for Failure to Comply with the Provisions of This Act; to Provide for the Payment of the Same into the `Relief Fund', and to Repeal Chapter 10, of the Laws of 1935 (Senate Bill 47, Approved February 5, 1935.)
"Section 1. * * * The term `domestic corporation for profit' means any corporation, joint stock company or association organized under the laws of the State of New Mexico, except state banks, insurance companies, and those corporations organized and conducted for religious, charitable, educational or social purposes, and not for profit. * * *
"Section 2. Every domestic or foreign corporation for profit engaged in any business in this State, beginning with the calendar year 1935, shall pay to the Corporation Commission on or before the first day of May of each year, an annual franchise tax at the rate of One ($1.00) Dollar for each One Thousand ($1,000.00) Dollars, or fraction thereof, of the par value of that proportion of its authorized and issued capital stock represented by its property and business in this state, to be assessed by the State Corporation Commission as provided in this Act. The tax hereby imposed shall be in addition to all property taxes and other taxes and fees now or hereafter required by law."
The controversy arises because in the title to the Act it is stated that the tax is one on "the Privilege of Carrying on, Doing Business, or the Continuance of its Charter Within This State", whereas, Section 2 levies the tax upon "every domestic * * * corporation for profit engaged in any business in this State, * * *."
The same question was discussed in the case of Lowden v. State Corporation Commission, 42 N.M. 254, 76 P.2d 1139, 1140, recently decided by this court, but in that case there being an even division in the court, the proposition was not decided, it being stated there by Mr. Justice Brice, concurred in by Mr. Justice Bickley: "It is a privilege tax, not upon the right to be a corporation or to exist, and not on the actual doing of business, but for the right or privilege to do the business and exercise the franchise granted by its permit to do business in this state, whether it transacts business or not; that being a matter about which the state is not concerned in assessing the tax." *Page 371
Mr. Justice Sadler, in an opinion concurred in by Mr. Justice Zinn, took a different view, saying: "It will thus be seen that I disagree with the main opinion in its conclusion that this is a tax on the right to do business whether any business is transacted or not. In my view, the tax is essentially on the enjoyment of the privilege, the exercise of the corporate franchise, rather than upon the mere privilege itself."
Being again called upon to decide the proposition, we undertake a re-examination of the act, in an effort to determine the intention of the legislature, and to give the same effect as intended, this being the proper test in circumstances such as we have here. State v. Southern Pac. Co., 34 N.M. 306, 281 P. 29.
Disregarding for the moment the language of the title to the present act, we find that many states, as well as the United States, have franchise tax acts, none of which have been determined to be identical with ours, but which should be of assistance in arriving at an understanding of our own act.
The United States in 1909 passed a "corporation tax" law. 36 Stat. 11, 112-117, Chap. 6, U.S.Comp.Stat.Supp. 1909, pp. 659, 844-849, which law was first before the Court in the case of Flint v. Stone Tracy Co., 220 U.S. 107, 31 S. Ct. 342, 346,55 L. Ed. 389, Ann.Cas. 1912B, 1312.
The law there in question was not unlike Chap. 116 of 1935 Session Laws, providing "That every corporation * * * organized for profit * * * and engaged in business in any State * * *, shall be subject to pay annually a special excise tax with respect to the carrying on or doing business by such corporation * * *."
The Court held that the tax was one levied on the conducting of a business, and that such conduct of the business was a necessary condition to liability for the tax. Quoting from the decision:
"While the mere declaration contained in a statute that it shall be regarded as a tax of a particular character does not make it such if it is apparent that it cannot be so designated consistently with the meaning and effect of the act, nevertheless the declaration of the law-making power is entitled to much weight, and in this statute the intention is expressly declared to impose a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association, or insurance company. It is therefore apparent, giving all the words of the statute effect, that the tax is imposed not upon the franchises of the corporation, irrespective of their use in business, nor upon the property of the corporation, but upon the doing of corporate or insurance business, and with respect to the carrying on thereof, in a sum equivalent to 1 per centum upon the entire net income over and above $5,000 received from all sources during the year; that is, when imposed in this manner it is a tax upon the doing of business, with the advantages which inhere in the peculiarities of corporate or joint stock organizations of the *Page 372 character described. As the latter organizations share many benefits of corporate organization, it may be described generally as a tax upon the doing of business in a corporate capacity. In the case of the insurance companies, the tax is imposed upon the transaction of such business by companies organized under the laws of the United States or any state or territory, as heretofore stated."
Decided the same day as the case of Flint v. Stone Tracy Co., supra, was the case of Zonne v. Minneapolis Syndicate,220 U.S. 187, 31 S. Ct. 361, 362, 55 L. Ed. 428, holding that the corporation there in question "was not doing business in such wise as to make it subject to the tax imposed by the act of 1909." The same result was reached under the Federal Statute in the case of McCoach v. Minehill S.H.R. Co., 228 U.S. 295,33 S. Ct. 419, 57 L. Ed. 842, and in the case of United States v. Emery, Bird, Thayer Realty Co., 237 U.S. 28, 35 S. Ct. 499,59 L. Ed. 825.
In New York a statute, Tax Law, Consol. Laws, c. 60, § 182, imposing a tax "For the privilege of * * * exercising its corporate franchises in this state" upon "every corporation, joint-stock company or association, doing business in this state" was held to be applicable only when business was actually conducted, the court saying in People ex rel. Lehigh N.Y.R. Co. v. Sohmer, 217 N.Y. 443, 112 N.E. 181: "The language of the statute, as it has been since 1906, does not warrant the assertion of the respondent. It is, in the particular under consideration, precise, clear, and unambiguous. It states plainly and accurately that every corporation doing business in this state shall pay the tax for the privilege of doing business or exercising its corporate franchises. It creates, without dubiety, the liability from the two facts of (a) doing business in the state (b) in a capacity other than individual. The courts have so declared." (Citing cases.)
In Georgia a tax levied by a statute providing that "All corporations organized under the laws of Georgia, and doing business therein, (with certain exceptions) in addition to all other taxes now required of them by law, are hereby required to pay each year an annual license or occupation tax * * *", was held not to be due or collectible from a corporation which was not "doing business". Harrison v. Forsyth Hunter Co.,170 Ga. 640, 153 S.E. 758. To the same effect is Norman v. Southwestern R. Co., 42 Ga. App. 812, 157 S.E. 531.
In a note at 40 A.L.R. 1451, are gathered cases involving the question of whether or not "holding companies" are "doing business" so as to be liable for taxes levied on corporations under the Federal law. From these cases it can be seen that pure holding companies are held not to be "doing business" so as to be liable, and that "doing business" is in every case necessary to liability.
The appellant, in addition to relying upon the views expressed by Mr. Justice *Page 373 Brice in Lowden v. State Corporation Commission, supra, cites as authority the Michigan case of In re Detroit Properties Corp., 254 Mich. 523, 236 N.W. 850, 851, as supporting its position that actual engaging in business is not a condition to liability for the tax levied.
The statutes there involved provided that every corporation "shall * * * for the privilege of exercising its franchise and of transacting its business within this state, pay * * * an annual fee * * *," Comp. Laws Mich. 1929, § 10140, and in the case cited it was held that actual transaction of business by a corporation was not a condition of the tax, the tax being an "excise tax, not upon the right to be a corporation, but upon the activities of the corporation in exercise of its corporate franchise, or, as it is sometimes expressed, upon the franchise `to do,' not upon the franchise `to be.'"
This view was followed in the case of Michigan v. Michigan Trust Co., 286 U.S. 334, 52 S. Ct. 512, 76 L. Ed. 1136, the court pointing out that it was bound by the interpretation placed upon the act by the Michigan Court in In re Detroit Properties Corp., supra. Again in the case of Detroit International Bridge Co. v. Corporation Tax Appeal Board, 287 U.S. 295, 53 S. Ct. 137,77 L. Ed. 314, 315, this rule was adhered to. However in this later case, it is pointed out that the statute there construed (differing thus from our own) provides "It is the intent of this section to impose the tax herein provided for upon every corporation, foreign or domestic, having the privilege of exercising corporate franchises within this state, irrespective of whether any such corporation chooses to actually exercise such privilege during any taxable period." Pub. Acts, Mich. (1921), No. 85 as amended by Pub. Acts, Mich. (1929), No. 175, 2 Comp. Laws, Mich., 1929, § 10140.
An examination discloses that the Michigan statute differs further from the New Mexico statute in that it recites in its body that it is imposed upon every corporation (1) "organized" (2) "or doing business" in Michigan, and is levied "for the privilege of exercising its franchise and of transacting its business within this state", and also that the tax is imposed on every corporation "having the privilege * * * irrespective of whether any such corporation chooses to actually exercise such privilege * * *"; whereas, it appears the New Mexico statute is simply imposed upon "every domestic or foreign corporation * * * engaged in any business in this State." That the differences between the Michigan statute and our own have dictated the conclusions reached in cases construing the Michigan statute is demonstrated by a mere reading of two cases arising under it. See Detroit International Bridge Co. v. Corporation Tax Appeal Board, cited supra, construing the statute as amended by Pub.Acts Mich., 1929, No. 175, and In re G.H. Hammond Co., 246 Mich. 179,224 N.W. 655, 656, construing Pub.Acts, Mich., 1921, No. 85, as it existed prior to the 1929 amendment. *Page 374 In the Hammond case the court's decision turned on one of the very differences noted above between the Michigan statute and our own. The court said: "Much reliance is also placed by the appellant on the case of People ex rel. Lehigh N.Y.R. Co. v. Sohmer, 217 N.Y. 443,112 N.E. 181. The importance of this authority is stressed on the ground that the New York corporation tax statute is `similar' to that of Michigan. For our present purpose, we do not find it at all similar, and in the lack of similarity is found the reason underlying the New York decision. The statute of that state imposes a privilege fee only upon those corporations `doingbusiness in' New York. The Michigan statute provides that every corporation (1) organized, or (2) doing business under the laws of this state, shall pay excise tax. The appellant falls under the first subdivision as a corporation `organized' under the laws of this state. * * *"
Appellant also cites and relies on the case of New York v. Jersawit, 263 U.S. 493, 44 S. Ct. 167, 168, 68 L. Ed. 405. In that case the United States Supreme Court was passing on Sec. 209 of the Tax Law of New York, Consol. Laws, c. 60, which provided: "For the privilege of exercising its franchise in this state in a corporate or organized capacity every domestic corporation * * * shall annually pay in advance for the year beginning November first * * * an annual franchise tax, to be computed by the tax commission upon the basis of its entire net income for its fiscal or the calendar year next preceding." And because no New York cases were found interpreting the statute, placed its own construction thereon, recognizing, however, that the New York decisions, if there were any, would be controlling.
"On the main question the Circuit Court of Appeals rightly recognized that the construction of the state law by the State Courts should control, but found nothing nearer than People ex rel. Mutual Trust Co. v. Miller, 177 N.Y. 51, 69 N.E. 124, where a different statute was held to tax the privilege of carrying on the business as actually exercised and therefore to create an apportionable liability. If the State Court should decide that the present act was to be construed in the same way we should bow, but until it does so we must regard the meaning as tolerably plain. The amount to be paid is not determined by the business done during the period taxed but by the net income of the year before. It is made a legal duty, by what the Courts below rightly held to be a penalty, to pay the tax in advance. When the law discussed in the Mutual Trust Co.'s Case, supra, was amended so as to provide that the tax should be payable in advance, the Court of Appeals said that the amendment changed the character of the tax and that the grounds of the former decision were no longer applicable. People ex rel. New York, Cent. H.R.R. Co. v. Gaus, 200 N.Y. 328, 93 N.E. 988. It hardly can be supposed that if the tax had been paid the State would recognize a claim for a proportionate return. We are of opinion that the tax is a tax upon the right *Page 375 conferred, not upon the actual exercise of it, that it was due when the petition in bankruptcy was filed, New Jersey v. Anderson, 203 U.S. 483, 27 S. Ct. 137, 51 L. Ed. 284, [287], and that the claim of the State for the whole sum should have been allowed."
We have already cited and quoted from People ex rel. Lehigh N YR. Company v. Sohmer, supra, a New York case from the Court of Appeals of New York, decided in 1916, interpreting Sec. 182 of the Tax Law of New York, which section clearly is more comparable to our own act than the section passed on in New York v. Jersawit, supra, since it includes the words "doing business in this state," which words are comparable to "engaged in any business" contained in Chapter 116.
Appellant lastly cites and relies on the dissenting opinion of Justice Cardozo in the case of Anglo-Chilean Nitrate Sales Corp. v. State of Alabama, 288 U.S. 218, 53 S. Ct. 373, 375,77 L. Ed. 710, 711, wherein an Alabama statute was under consideration. The opinion of the court points out that Alabama exercised its taxing power under the statute on the theory that the corporation was actually doing business in Alabama, and points out that the statute in Alabama differs from the Michigan statute which was interpreted as being imposed for "the mere right to transact business". We find nothing in the dissent of Justice Cardozo indicating that actual engaging in business was not a condition to liability for the tax, but on the contrary that it was: "True indeed it is that the corporation will be relieved of the burden if no business is transacted and no capital employed [citing cases]. If the state has conferred a privilege which it is competent to tax, the competence is not lost, and the validity of the tax destroyed, because the privilege is to be free when the corporation is inactive."
Our attention has not been directed to, and neither have we discovered, any case in which under statutes such as ours it has been held that the words "engaged in business" did not mean actively doing some acts other than the mere retention of corporate status.
Only on one basis could a different rule be contended for, and that must be based on the fact that the title to the act by its language purports to levy a tax "for the Privilege of Carrying on, Doing Business, or the Continuance of its Charter Within This State." If there was nothing contained in the enactment which led us to a contrary conclusion we might, basing our conclusions on the language of the title, arrive at the same result as the United States Supreme Court did in the case of New York v. Jersawit, supra, where the tax was "for the privilege of exercising its franchise", as nothing appears to be said about engaging in business.
However, it is our view that the nature and extent of this enactment should not be determined upon an examination of the title alone, and that it is necessary that we look to the substance of the act as well. We take it that the title is quite *Page 376 properly to be considered a part of an act, particularly where it is a constitutional requirement that every act have a title, as is true in this state. Art. IV, Sec. 16, N.M. Const. See, also, note in 37 A.L.R. 927.
This court has stated that "in construing statutes, if the meaning thereof is doubtful, the title, if expressive, may have the effect to resolve the doubts by extension of the purview or by restraining it, or to correct an obvious error." State ex rel. Sedillo v. Sargent, 24 N.M. 333, 171 P. 790, 791. And in State v. Moore, 40 N.M. 344, 59 P.2d 902, 903, it was stated that titles to acts "are an aid to determine the legislative intent and to resolve any doubts as to their meaning."
No one would assert that legislation should be interpreted in the light of the title, to the complete exclusion of the obvious meaning of words used in the enactment proper, yet in effect, this is what appellant would have us do in the instant case, by contending that the words "engaged in any business" contained in Section 2 of the act are not significant and should to all intents and purposes be disregarded. With this view we cannot agree. It is our conclusion that the act is clearly an excise tax on the right of a corporation to carry on its business. From the decisions already cited it is clear that the language "engaged in any business" has a clear and well understood meaning when used in legislation of this type. In Flint v. Stone Tracy Co., supra, it was said: "`Business' is a very comprehensive term and embraces everything about which a person can be employed * * *" and again, it is "`That which occupies the time, attention, and labor of men for the purpose of a livelihood or profit.' * * * We think it is clear that corporations organized for the purpose of doing business, and actually engaged in such activities as leasing property, collecting rents, managing office buildings, making investments of profits, or leasing ore lands and collecting royalties, managing wharves, dividing profits, and in some cases investing the surplus, are engaged in business within the meaning of this statute, and in the capacity necessary to make such organizations subject to the law."
See, also, Von Baumbach v. Sargent Land Co., 242 U.S. 503,37 S. Ct. 201, 61 L. Ed. 460; Zonne v. Minneapolis Syndicate,220 U.S. 187, 31 S. Ct. 361, 55 L. Ed. 428.
The tax in the instant case accordingly is a franchise tax. 61 C.J. 252, § 241; Home Ins. Co. v. New York, 134 U.S. 594,10 S. Ct. 593, 33 L. Ed. 1025; Southern Pacific Co. v. State Corporation Commission, 41 N.M. 556, 72 P.2d 15.
The rights and privileges upon which such a tax is laid are by grant of the state, and as such are taxable by it. That the instant tax is payable only when the corporation is "engaged in any business" in no way affects the nature of the tax. This is a tax upon the privilege, due when the corporation having such privileges and rights exercises the same by *Page 377 engaging in business and not otherwise. In this connection we find it to be most like the law interpreted in People ex rel. Lehigh N.Y.R. Co. v. Sohmer, supra, and also approve the language of Justice Cardozo, dissenting in the case of Anglo-Chilean Nitrate Sales Corp. v. State of Alabama, supra, quoted above, and cited to us by appellant.
In Lowden v. State Corporation Commission, supra, Mr. Justice Sadler said: "In my view, the tax is essentially on the enjoyment of the privilege, the exercise of the corporate franchise, rather than upon the mere privilege itself." We now say that the tax is on the privilege when exercised, which is in effect the same thing, because without its being exercised there can be no liability for the tax.
In passing, we might point out that various franchise tax acts, more or less comparable, have received differing interpretations as to their nature from different courts. The late Mr. Justice Cardozo has clearly pointed out the situation in this regard in his opinion in the case of Michigan v. Michigan Trust Co., supra, where he had the following to say [286 U.S. 334, 52 S. Ct. 514,76 L. Ed. 1136]:
"The tax is laid upon the corporation `for the privilege of exercising its franchise and of transacting its business within this state.' Whether a corporation does exercise its franchise or transact its business within the meaning of a statute so framed when it does business through a receiver is a subject on which much subtle argument has been expended by state and federal courts. Distinctions have been drawn between receivers appointed to carry on the business of a corporation with a view to the continuance of its corporate life, and receivers appointed in aid of the dissolution of the corporation or the liquidation of its business. See, e.g., Collector of Taxes v. Bay State St. Ry.,234 Mass. 336, 125 N.E. 614; Ohio v. Harris [144 C.C.A. 174] 229 F. 892, 901. Other distinctions have been drawn between taxes on a franchise to exist as a corporation and a franchise for transacting business, or, as many of the cases put it, between a franchise to `be' and a franchise to `do.' See, e.g., Cobbs Mitchell v. Corporation Tax Appeal Bd., 252 Mich. 478, 481,233 N.W. 386. Even where the tax is on a franchise to `do,' there is wide diversity of judgment. The wording of some statutes has been read by some courts as importing the doing of business in the usual course by agents and officers appointed in the usual way. United States v. Whitridge, 231 U.S. 144, 149, 34 S. Ct. 24,58 L. Ed. 159 [162]. Wording only slightly different has been thought by other courts to include the operations of a business conducted by receivers. Central Trust Co. v. New York City N.R. Co.110 N.Y. 250, 18 N.E. 92, 1 L.R.A. 260; New York Terminal Co. v. Gaus, 204 N.Y. 512, 98 N.E. 11; In re United States Car Co.60 N.J. Eq. 514, 43 A. 673; Armstrong v. Emmerson, 300 Ill. 54,132 N.E. 768, 18 A.L.R. 693; People of State of New York v. Hopkins [2 Cir.], 18 F.2d 731. Other wording not unlike has *Page 378 been held to import the imposition of a burden on the mere privilege to `do,' though no business was in fact transacted by the directors or by any one (In re G.H. Hammond Co., 246 Mich. 179, 224 N.W. 655; New York v. Jersawit, 263 U.S. 493, 495, 44 S. Ct. 167, 68 L. Ed. 405 [406]), a construction whereby the tax on the privilege to do becomes closely assimilated, in respect of domestic corporations, to one on the privilege to be. In re G.H. Hammond Co. supra. * * *"
It is thus apparent that if we are to give effect to the words "engaged in any business" contained in the body of the act in determining its application, we cannot escape the conclusions as hereinbefore expressed; and likewise, if we are to give effect to the language contained in the title to the act, in determining the nature of the tax imposed, the results announced are inescapable.
Having so determined, it becomes necessary for us to pass to the second point raised on this appeal, and that is, was the corporation in the instant case "engaged in any business" during the year 1937, so as to be liable for the tax?
In the instant case appellee did nothing except such acts as were necessary to retain its corporate existence, with two possible exceptions, viz: it borrowed money to pay its taxes, and it filed a notice to hold an unpatented placer mining claim pursuant to U.S.C.A. Title 30, Section 28a note.
A long line of federal decisions holds that merely doing acts necessary to maintain corporate existence, and holding of property, and receiving and distributing proceeds of such property, does not result in engaging in business so as to have liability attach. United States v. Emery, Bird, Thayer Realty Co., supra; McCoach v. Minehill S.H.R. Co., supra. See, also, Von Baumbach v. Sargent Land Co., supra, where the following is said [242 U.S. 503, 37 S. Ct. 204, 61 L. Ed. 460]: "It is evident, from what this court has said in dealing with the former cases, that the decision in each instance must depend upon the particular facts before the court. The fair test to be derived from a consideration of all of them is between a corporation which has reduced its activities to the owning and holding of property and the distribution of its avails, and doing only the acts necessary to continue that status, and one which is still active and is maintaining its organization for the purpose of continued efforts in the pursuit of profit and gain, and such activities as are essential to those purposes."
New York has so held, People ex rel. Butterick Co. v. Gilchrist, 241 N.Y. 591, 150 N.E. 567, affirming 213 A.D. 533,211 N.Y.S. 75; People ex rel. Lehigh N.Y.R. Co. v. Sohmer, supra.
To like effect are the holdings in Georgia, Harrison v. Forsyth Hunter Co., 170 Ga. 640, 153 S.E. 758, and Norman v. Southwestern R. Co., supra; and in Alabama, State v. Anniston Rolling Mills,125 Ala. 121, 27 So. 921. Massachusetts has so held. Attorney General v. Ware River R. Co., *Page 379 233 Mass. 466, 124 N.E. 289; Attorney General v. Boston A.R. Co., 233 Mass. 460,124 N.E. 257; and in Vermont, State v. Bradford Sav. Bank Trust Co.,71 Vt. 234, 44 A. 349. See, also, annotations in 40 A.L.R. 1451 and in 98 A.L.R. 1511.
Appellant cites the State of Arkansas as authority for a contrary rule. An examination of the case cited discloses that during the year for which the tax was levied the corporation transferred certain of its property to another corporation for the purpose of effecting a loan, which would be advantageous to the corporation taxed, and also that the court based its opinion, at least partially, on the fact that the tax was based on the amount of capital stock "employed" in the State, thus disclosing, as the Court saw it, that the legislature considered the employment of capital stock as constituting the doing of business under its franchise. In addition the Court looked to another statute for support of its conclusions.
We quote from the opinion in Arkansas Anthracite Coal Co. v. State, 149 Ark. 28, 231 S.W. 184, 185, as follows: "The purpose is to exact the payment of a tax on the exercise of the franchise * * * and a corporation necessarily exercises its franchise in the investment of its capital in other property, for it derives its authority to make the investment from the franchise granted by the state. * * * A corporation may have been duly organized and may remain or become inactive and dormant, but if it functions at all it is, as before stated, alive and active. This view of the meaning of the statute is strengthened by the fact that the tax is laid according to the amount of capital stock `employed' in this state, which shows that the employment of capital stock was construed as constituting the doing of business in the exercise of the franchise."
Appellant also cites the case of Carlos Ruggles Lumber Co. v. Commonwealth, 261 Mass. 450, 158 N.E. 899, wherein it was held that a corporation actively engaged in buying and selling lumber in other states than Massachusetts, but organized under the laws of Massachusetts, having its only office there, and carrying on all of its business from there, was engaged in business in Massachusetts, so as to be liable for the tax. The difference between that case and this is obvious. In addition to this it might be pointed out that the Court did not mention the case of Attorney General v. Boston A.R. Co., supra, or Attorney General v. Ware River R. Co., supra, decided just eight years before, in which it held that doing of such acts as were necessary to maintain corporate existence, receiving lease money and distributing it as dividends did not constitute "doing business for profit."
Also cited is the case of Fore River Shipbuilding Corp. v. Commonwealth, 248 Mass. 137, 142 N.E. 812, 813. From the following quoted from the decision it is apparent that the rule of law applied in Massachusetts is the same as in the other states cited, and that the activities of the *Page 380 corporation were in excess of those which might be described as for the mere purpose of retaining its property and corporate existence. It was engaged in fulfilling certain contracts, either itself or through an agent. We quote from the decision: "The governing statute imposes an excise only upon corporations which are carrying on or doing business. Mere possession of the franchise to be a corporation is not made subject to this tax. * * * It is the carrying on and doing of business alone upon which is levied the present excise. It may be assumed that, when a corporation has leased all its property and assets and does nothing more than to receive and distribute the rental among its stockholders, it is not carrying on or doing business. [Citing cases.] The petitioner was doing much more. It was the principal in its contracts with the government of the United States."
The case of Springdale Finishing Co. v. Commonwealth,242 Mass. 37, 136 N.E. 250, was a case where the corporation had been actively engaged in doing all the things for which it was organized, during the period for which the tax was assessed, and consequently is not in point.
The cases of Rhode Island Hospital Trust Co. v. Rhodes,37 R.I. 141, 91 A. 50, and Commonwealth v. Wilkes-Barre H.R. Co.,251 Pa. 6, 95 A. 915, are both cases where holding companies organized for the purpose of dealing in the holding of stocks, bonds, and securities did all the things for which they were organized, and were held to be doing business in the states where such activities were carried on.
Quoting from these two cases: "While we would not hold the company is bound to do business somewhere, and therefore by a process of elimination it must be doing business in Pennsylvania, it does appear defendant is engaged in the exercise of one of the purposes for which it was incorporated, namely, buying and holding the stock and bonds of certain Pennsylvania corporations, and is thus, in effect, operating these companies as one of its objects of incorporation." Commonwealth v. Wilkes-Barre H.R. Co. 251 Pa. 6, 95 A. 915, 916; and "The test under the law was whether the corporation exercised any of the functions, powers, or franchises which it was intended to perform, or was engaged in the transaction of the business or any part thereof which it was organized to transact." Rhode Island Hospital Trust Co. v. Rhodes, 37 R.I. 141, 91 A. 50, 58.
However, these cases are not in point, since the appellee corporation was one organized for mining and the extracting of metals, none of which things were done during 1937. See annotation in 98 A.L.R. 1511, as to when holding companies are considered to be within the taxing statutes.
From all the foregoing it should be clear, that under the authorities a corporation which does only those things which are necessary to retain its property intact, and to maintain its corporate existence, is not "engaged in any business" so as to be *Page 381 liable for a tax such as the one levied by Chapter 116, Session Laws of 1935.
We suggested that the borrowing of money to pay taxes or the filing of notice to hold an unpatented placer mining claim pursuant to U.S.C.A. Title 30, Sec. 28a note, might be activities outside of the sphere which could be described as for the purpose of retaining its property or corporate status. However, if taxes could be paid out of income, is there any difference in the nature of the act if money is borrowed when no income is available? It is clear that the action was not one looking to a profit, but was purely for the purpose of retaining the property of the corporation intact. It is comparable to the purchasing of insurance on property owned by the corporation, which action was held not to be engaging in business in the case of State v. Anniston Rolling Mills, supra.
We are of the opinion that the same thing is true of the notice filed pursuant to U.S.C.A. Title 30, Sec. 28a note. The notice is required in order for the corporation to have exemption from the annual assessment work, otherwise required by law to be performed on unpatented placer claims. In effect, it is no different from the payment of taxes to retain property, and cannot, under the decisions hereinbefore cited, be held to be an activity in furtherance of the corporate purposes, or looking to a profit.
The Attorney General suggests in passing that if it is concluded that the tax is only payable when a corporation is actively engaged in operations looking to a profit, the administrative difficulties in connection with it will be multiplied. This may or may not be true, but even if it is true, the problem is one for the legislature and not for the Court.
It is also pointed out by the Attorney General that a corporation may file a certificate of suspension under Sec. 32-149 (6) N.M. Stat. Ann. 1929, when it is inactive, and thus escape the tax. Even though we recognize that this is true, it could not result in a corporation not engaged in business being liable for a tax which attaches only to corporations "engaged in any business," even though the corporation did not avail itself of the means at hand for being declared inactive under said Section 32-149 (6).
In view of all the foregoing, we are of the opinion that the ruling of the trial court was correct, and that its order dismissing the complaint was proper, and should be affirmed, and it is so ordered.
ZINN and SADLER, JJ., concur.