cupied. Whether there was an express or methods of taxation refers to clearly distin implied covenant by Taylor and wife for the guishable classes of business.

ed to enforce view that mercantile manufacturing company should have invested more of Its capital in manufacturing branch.

quiet possession of their tenants does not ap- 2. Taxation 319(1)—Officers not authoriz. pear; but that question is immaterial, because they waived their claim to the proceeds of the crops for the express purpose of enabling the tenants to create a lien in favor of the appellant, and thus secure credit for the fertilizer. Under these circumstances the appellant must in equity be given the benefit of his lien.

In the nature of the subject, the authorities do not attempt other than general definitions of an equitable lien. For example, the text in 19 Am. & Eng. Ency. L. (2d Ed.) p. 12, after stating the doctrine in general terms, pertinently adds:

"This is not very definite, but, as has been said by a distinguished English jurist, 'the words equitable lien are intensely undefined.''

In Dulaney v. Willis, 95 Va. 608, 29 S. E. 324, 64 Am. St. Rep. 815, the court said:

"Whatever the form of the contract may be, if it is intended thereby to create a security, it is an equitable mortgage, and enforced upon the principle that equity will treat that as done which, by agreement, is to be done."

In Brown v. Ford, 120 Va. 233, 245, 91 S. E. 145, 149, this court, quoting with approval from 2 Pom. Eq. (2d Ed.) § 1235, said:

"The doctrine may be stated in its most general form that every express executory agreement in writing, whereby the contracting party sufficiently indicates an intention to make some particular property, real or personal, or fund, therein described and identified, security for a debt or other obligation, * *

creates

* lien upon the property so indicated which is enforceable against the property." The case before us falls within the influence of the general principles recognized in the foregoing authorities.

The decree complained of will be reversed, and this court will direct that the trustee in bankruptcy of John W. Taylor (to whom the fund in controversy has already been paid) shall pay the same over to the appellant. Reversed.

Only so much of the capital of a manufacturing merchandising corporation as was in fact devoted by it to its manufacturing business is required to be taxed as capital under Tax Bill (Acts 1915, c. 148) §§ 45, 46, the representatives of the commonwealth not being vested with authority to enforce their view that the corporation should have invested in the manuthan it in fact had found necessary for the confacturing branch of its business more capital duct of such business, or that such branch of the business should incur the expense of distributing the goods when the corporation chose to charge such expense to its mercantile branch.

Error to Corporation Court of Lynchburg. Suit by the Commonwealth of Virginia against the Craddock-Terry Company. From decree for defendant, the Commonwealth brings error. Affirmed.

Jno. R. Saunders, Atty. Gen., and J. Vaughan Gary, of Richmond, and Jro. L. Lee and Volney E. Howard, both of Lynchburg, for the Commonwealth.

Harrison & Long, of Lynchburg, for defendant in error.

PRENTIS, J.

This suit was brought by the state for the recovery of the taxes on capital alleged to have been omitted by the Craddock-Terry Company, as manufacturers of shoes, for the years 1903-1915, inclusive, and under the authority of chapter 425 of the Acts of Assembly of 1916, p. 729. There is no controversy as to the facts, and both litigants rely upon the same circumstances to justify their respective claims.

The Craddock-Terry Company, a corporation, commenced its business in the city of

the year 1898, purchasing all of its goods Lynchburg as a wholesale shoe merchant in from manufacturers and reselling the same

as wholesale merchants to other dealers. Nearly 4 years later, about the year 1901, the company commenced the business of manufacturing a portion of the shoes which it sold as a merchant. It increased its business of manufacturing shoes and related goods rapidly, so that soon it manufactured the larger part of the merchandise, which it also sold as a wholesale merchant, and at the time this controversy arose the proportion of goods thus annually manufactured by it greatly exceeded the proportion bought by it for

sale from other manufacturers.

Under Tax Bill (Acts 1915, c. 148) §§ 45, 46, a manufacturer which is also a merchant its manufacturing business which is liable The true amount of its capital invested in is required to make an absolute severance of its manufacturing capital from the capital to the state for an ad valorem tax is to be which it uses in its own mercantile business, determined. Its method was to treat the because the provision for two entirely different manufacturing business as separate in every

(105 S.E.)

respect from its mercantile business; there capital for the years referred to. These being different places of business, a separate voluntary returns have been accepted as organization, and a different set of books correct by the local board of review and by for each branch of its business. For the state the trial court, which entered a decree, adit is claimed that the goods so manufactured judging "that the capital of the defendant by the company and actually transferred company invested in its manufacturing busifrom its factories to its mercantile establish- ness is taxable on the ad valorem basis, and ment nevertheless continued to be capital of that the method adopted by the local board the company invested in its manufacturing of review in ascertaining the amount of the business and taxable as such until sold, same for taxation for the year 1915, and also whereas the company claims that when it in ascertaining the amounts omitted from thus delivered the manufactured goods to its taxation for the years 1903 to 1914, inclusive, mercantile establishment for sale, they be was correct, and that there is no further licame thereafter a part of their stock in trade ability on the defendant company for taxes as merchants, commingled with the goods on said capital for said years," and dismissed which it bought from other manufacturers, the bill. It is of this decree that the commonand that therefore they no longer represented wealth is here complaining. capital invested in the manufacturing busi

ness.

As is well understood, the method of taxation of merchants in Virginia is different The question thus raised must be deter- from the method of taxation of manufacturmined by the true construction to be put upon ers. The merchants' tax for many years has certain taxing statutes. We are not author- been and is at present a graduated license ized to determine what would be a good or tax, based upon the gross amount of the better method of taxation, or whether the purchases made by the merchant and reportmethod prescribed by law affords to a manu-ed to the taxing officials under oath, and such facturer who is also engaged in the mercantile business an opportunity to reduce the gross amount of his taxes by such a method of conducting the several branches of his business, but simply to inquire what the statutes require or permit, and in such an inquiry all fair doubts must be resolved in favor of the taxpayer, for no tax can be collected by the state except such as is authorized by law.

Having commenced business as wholesale merchants, the company has from the inception of its manufacturing business always claimed the right to allocate a certain part of its capital to the manufacturing branch, and has paid taxes upon the ad valorem basis upon the amount of its capital so allocated. This was not a bookkeeping method merely adopted by the company as a means of evading or reducing its tax obligations. It became necessary in order to comply with the taxing statutes, for while authorized to conduct both branches of business, that portion of its capital which was employed in manufacturing was subjected to an ad valorem tax, while that employed in the mercantile business was not; so that the true amount of the capital thus employed in its manufacturing business could not have been determined unless this, or some other adequate method, had been devised which would truthfully show the amount of its capital which was thus diverted from its mercantile business. This severance of capital was however, not made in an accurate or proper way, for it appears that after this controversy arose, but before this suit was instituted, the company accepted the privilege afforded by the act of March 22, 1916 (Acts 1916, p. 826), amending section 508 of the Code, and voluntarily disclosed certain sums as omitted

license tax is "in lieu of all taxes for state purposes on the capital actually employed in the business (Tax Bill, § 46, Acts 1915, p. 234), whereas the method of taxation of manufacturers is an ad valorem tax imposed upon the amount of capital invested in that business not otherwise taxed (Tax Bill, Schedule C. § 8, cl. 3, Acts 1915, p. 161). Prior to the year 1915 the manufacturer was liable to no other tax upon goods manufactured and sold by him, so that up to 1915 the Craddock-Terry Company paid its license taxes as a merchant based only upon purchases made by it from others. In 1915 the statute imposing merchants' license taxes (Tax Bill, §§ 45, 46, Acts 1915, p. 233) was amended, and the change, together with the interpretation thereof by the auditor of public accounts, is embodied in a circular referred to in the case of Commonwealth v. Armour & Co., 118 Va. 242, 87 S. E. 610, affirmed by the Supreme Court of the United States, Armour & Co. v. Virginia, 246 U. S. 1, 38 Sup. Ct. 267, 62 L. Ed. 547. The auditor in 1916 also issued his circular of instructions following that decision, which is in this record and reads thus:

"A manufacturer engaged in business in this the business may, without a merchant's license, state, who is taxed upon the capital employed in sell at the place of manufacture, but nowhere else, except by sample, the goods, wares and merchandise manufactured by him and a nonresident manufacturer, establishing a place of manufacture in this state, and taxed by this state on his capital employed in that business, nonresident manufacturer or a resident manuwould have the same privilege. If either a facturer desires to sell the goods, wares and merchandise manufactured by him at a definite place or store other than the place of manufacture, then such manufacturer, either resi

dent or nonresident, must, as aforesaid, take out a merchant's license even though this definite place or store be located in the same city or town in which his place of manufacture is established.

"When a manufacturer establishes a place or store for the sale of his goods other than at his place of manufacture, the state merchant's license tax required by sections 45 and 46 of the Tax Laws is graded according to his purchases, and all goods, wares and merchandise manufactured by such merchant and sold, or offered for sale, at a place other than his place of manufacture shall be considered as

purchases. In other words, both the resident

and nonresident manufacturer who establishes

a store or place of sale other than the place of manufacture is required to take out a state merchant's license, and the amount of the state license tax is to be graded not only by the amount of the purchases made by such manufacturer from other manufacturers, but also by the goods, wares and merchandise manufactured by him and sent from the place of manufacture to his store for sale; and he is required to report to the commissioner not only the amount of goods purchased by him from other manufacturers and offered for sale, but also the amount of the goods manufactured by him either within or without this state and offered for sale by him at his store or definite place in this state other than the place of manufacture.

that this merchant's license tax thus imposed upon manufacturers who thus sell their own products, is a lawful exercise of the taxing power. We are to determine from these statutes whether or not the Craddock-Terry Company has already paid all of the taxes which may be lawfully demanded of it as a manufacturer. This presents a question of fact, and it becomes necessary to ascertain the amount of capital which this company had invested in its manufacturing business during the years referred to.

and records, and it is from these, as inter[1] The company exhibited all of its books preted by the parol evidence introduced, that the issue is to be determined. It seems perfectly clear to us that the Legislature has expressly required a manufacturer, who is also a merchant, to make an absolute severance of its manufacturing capital from the capital which he uses in his own mercantile business, because it has provided for the two entirely different methods of taxation referred to as to those two clearly distinguishable classes of business. These taxes are to be assessed against one who is engaged in both classes of business just as they would be if there were two entirely independent persons or corporations, one engaged in manufacturing and the other in merchandising. In this "The Supreme Court of Appeals of Virginia, case the company exercised its right to transin the case of Commonwealth of Virginia v. Armour & Co., decided, on January 13, 1916, that fer from the manufacturing branch to the the construction placed by the auditor of pub-mercantile branch all of the goods manulic accounts upon the tax law relating to purchases, as set out above, was correct in every particular.

"Therefore, every resident and nonresident manufacturer who, on and after June 19, 1914, maintained in your district a definite place of business, other than the place of manufacture, for the sale of goods, wares and merchandise manufactured by such manufacturer, should be required to make report of purchases, as defined above, and pay the merchant's license tax required by law for the period between June 19, 1914, and May 1, 1916, that such manufacturer was engaged in business as a merchant in your district; and every such manufacturer should, for the license year commencing May 1, 1916, be required to report purchases, as above defined, and pay the license tax required by law of a merchant for the conduct of the business of a merchant at a definite place of business in your district, other than the place of manufacture."

It is observed that the change thus made requires that manufacturers who sell their goods at a place or store, other than the place of manufacture, even though such place be located in the same city or town, were there after required to include such goods as a part of their purchases, upon which they were taxed as merchants for the privilege of thus conducting their business, and the merchants' license law expressly provides that there shall be no other tax upon the capital of merchants employed in the mercantile business. In the case of Commonwealth v.

1

factured by it, charged at the prime cost of manufacture, and thus to diminish the amount which would otherwise be invested in its manufacturing business; or, expressed otherwise, imposed upon its mercantile branch the entire expense of selling and distributing its manufactured goods, thereby relieving the manufacturing branch of this expense. Unless forbidden by statute, expressly or impliedly, this right thus to conduct its business must be conceded, since the act of 1915, hereinbefore referred to, appears to expressly recognize and sanction this precise method, and this method is certainly justified by obvious considerations of convenience and econ

omy.

The view of the company is thus expressed in the testimony of its president, Mr. John W. Craddock:

the same company is operating both as mer"The law explicitly requires, where one and chants and manufacturers, that they shall be taxed separately. The functions of a manufacturing establishment, when operated in connection with a mercantile establishment to which it furnishes and sells its finished product, are, first, the erection and equipment of the factory which is otherwise assessed, then comes the elements of raw material, labor, overhead charges, goods in process and finished goods, if the tax date. On the other hand the mercantile any are on hand and owned by the factory upon establishment takes these goods from the factory as produced, furnishes the warehouse to

(105 S.E.)

force (which, in the case of the company, rep-[ charged as capital invested in manufacturing, resents over one hundred salesmen), extends and hence liable to an ad valorem tax, and the necessary credits in the sales of its shoes, what other proportion thereof was fairly to and performs all other distinctly mercantile be considered as chargeable to and therefore operations. Under this method the one depart-invested in the mercantile business, and hence ment cannot be charged with the elements of factors necessary to the other. On this point it should be borne in mind that if the CraddockTerry Company factories were owned by some one else other than the defendant company and manufactured its goods in the same amount and under the same conditions, and sold them to other wholesale houses who paid for them upon delivery as is done in this case, the amount of capital used and required by the factory would be exactly as that stated in 'Exhibit J. W. C. No. 2' and 'Exhibit J. W. C. No. 7' filed with the answer. This method of doing business between the factories and the mercantile house is not peculiar to Craddock-Terry Company, but is the rule rather than the exception with large shoe manufacturing concerns throughout the country."

covered by the merchant's license tax. Several ventures into this field of speculation have been made by the witnesses for the commonwealth, and no two of them agree precisely in results. There is, we think, no escape from this uncertainty, because the books of the company were not kept with the view of showing what proportion of the mercantile expense was thus incurred in distributing the goods which they manufactured themselves and what proportion thereof to the goods which they bought from others. Both classes of merchandise were commingled, became a single stock, and such expense was always treated by the company as properly chargeable to the mercantile business as a whole. It is not just to the company to charge it with an attempt to evade taxes, if it has made its taxable returns in the method authorized by law. The corporation does a very large business, and has for many years paid large amounts into the state and local treasuries as taxes upon both branches of its business, ascertained by the method which it believed and which we adjudge was authorized by law.

We do not deem it necessary to pursue or to elaborate the question further. If we had determined the contention of the commonwealth to be correct, it would be necessary to go into the questions discussed in much greater detail, and to refer to the complicated figures and statements showing the magni

[2] Now as heretofore indicated, we are not authorized to inquire whether this was the best method of taxation, but only to determine whether any taxes which the Legislature has imposed have been evaded or omitted by this corporation. It seems to us manifest that only so much of the capital of the company as was in fact devoted to its manufacturing business is required to be thus taxed as capital. The representatives of the commonwealth are not vested with authority to enforce their view that, as a matter of equity and good conscience, the company ought to have invested in the manufacturing branch of its business more capital than the company found necessary for the conduct of that business, and that this branch of the business should incur the expense of distrib-tude of the business which the record preuting the goods when the company, in the absence of any legal inhibition, determined that it would maintain its original status as a mercantile company and impose the entire expense of sale upon its mercantile branch rather than upon its manufacturing branch. The question as to what was the true amount of capital actually invested in the manufacturing business constantly recurs. It is not necessary, as we view the case, for us to follow the mass of figures exhibited in the record, from which the agents of the commonwealth undertake to ascertain by comparison and estimate precisely or approximately the amount of expense of the mercantile business which they think should have been properly

sents; but, as we do not agree with this contention, and as in our view of the evidence it sufficiently appears that the company has returned as capital invested in its manufacturing business the full amounts which it had actually thus invested in the conduct of that branch of the business, we find no difficulty in agreeing with the conclusions of the local board of review and with the learned trial judge. The controversy is not over the facts, but over the proper conclusions to be drawn therefrom, and we conclude that there is no error in the decree.

Affirmed.

BURKS, J., absent.

(129 Va. 216)

Walter Clark, a negro, who was being sought QUEEN INSURANCE CO. OF AMERICA v. by the police for some offense he was alleged PERKINSON. to have committed, took refuge in the house

(Supreme Court of Appeals of Virginia. Jan. which he had rented and which was his

20, 1921.)

1. Appeal and error 215(1)-Party
ing to instruction must do so at trial.
A party objecting to an erroneous instruc-
tion must do so at the trial; otherwise he
will be considered as having waived his ob-
jection.

2. Appeal and error 1068(1)-Proper
dict will not be set aside as conflicting with
erroneous charge.

Where the verdict is right, it will not be
set aside because conflicting with an errone-
ous ruling or instruction of the court.
3. Insurance

665(4)-Evidence held to show fire set by policeman in consequence of mayor's order.

home. It is manifest that he intended to resist to the last. When policemen went to the object-house to arrest him, he fired from within the house, killing Policeman McCray, seriously wounding Deputy Sergeant Boisseau, and slightly wounding Policeman Lewis. The news of the shooting spread rapidly throughout the city, and the house was soon surver-rounded by policemen, firemen, and an everincreasing crowd of citizens, many of whom were armed. Efforts were then made to obtain access to Clark, but without avail. Pending these efforts Clark again fired from his place of concealment, this time wounding two policemen and a citizen. An attempt was then made to dynamite the house, and at least three sticks of dynamite were successively, or at different times, thrown into the house, two of which exploded, doing considerable damage, but failed of their purpose to either kill Clark or run him out of the building. No fire ensued from the dynamiting. In the meantime the crowd outside the building had greatly increased and was ever increasing. The chief of the fire department had hose attached to a fire plug and "water in the hose." Some half hour after the dynamiting, the chief of the fire department inquired for the mayor saying, "I want to fire the building to get this negro out of here." To which the commonwealth's attorney replied, "Go ahead and fire it; I will see the mayor." The chief then attempted to

In an action to recover under a fire policy providing the insurer should not be liable for loss caused by order of any civil authority, evidence held to show that the building was not burned by a mob endeavoring to get a negro who had taken refuge therein when pursued, but that the fire was set by a policeman as a result and consequence of an order of the mayor.

Sims, J., dissenting.

Error to Circuit Court of City of Danville. Action by Laura E. Perkinson against the Queen Insurance Company of America. Judgment for plaintiff, and defendant brings error. Reversed, and judgment dismissing

the action entered.

ant in error.

fire the house, but failed in his efforts. The ders were give to fire the building, first by he was present when the building was fired, himself, and afterwards by the mayor, that

commonwealth's attorney testified that or

and that it was fired by Sergeant Martin and BURKS, J. This is an action on a fire in- Mr. Tucker of the police force. When the surance policy to recover for damage done building was thoroughly afire and burning by fire to a dwelling house in the city of fiercely, Clark appeared at the door, with Danville. The policy was the "standard pol- his head afire and a gun in his hand. He icy," and provided, amongst other things, was met by a volley of 500 or 1,000 shots, so that the company should not be liable for many that the witnesses say that his body loss caused directly or indirectly by riot, or was momentarily suspended in the air by by order of any civil authority, "or (unless the force of the missiles, and he was infire ensues, and in that event for damages stantly killed and fell to the ground. An by fire only) by explosion of any kind." The officer pulled the body from the edge of the company pleaded the general issue, and also, burning building, when several persons by special pleas and by statement in writing grabbed it by the legs and dragged it down of its grounds of defense, set up the further the street, followed by a crowd estimated at defenses that the loss was caused by riot, 500. When near the courthouse, Policeman that it was caused by order of civil author- Tucker got the body and stood upon it to ity, and that it was caused by explosion from keep the crowd back, and pretty soon other which the fire did not ensue. Issue was tak-policemen arrived and formed a circle around en on these pleas, and there was a verdict it in order to prevent its mutilation or reand judgment for the plaintiff for $1,000, and of this the insurance company complains.

The circumstances under which the fire occurred were as follows: On October 12, 1917,

moval. One witness, a police sergeant, says they "wanted to shoot him and cut him up and one thing and another." The chief of police testified, "They were liable to tear the