Assessments v. Hancock County Fed. Sav.

• Decision Date: 02 March 1943
• Docket Number: (No. 9382)
• Citation: 125 W.Va. 426
• Court: West Virginia Supreme Court
• Parties: In Re: Tax Assessments Against Hancock CountyFederal Savings and Loan Association.

125 W.Va. 426

In Re: Tax Assessments Against Hancock County Federal Savings and Loan Association.

(No. 9382)

Supreme Court of Appeals of West Virginia.

Submitted January 13, 1943.

Decided March 2, 1943.

1. Taxation

Under Section 1, Article X of the Constitution of West Virginia, all property not exempt by legislative action thereunder, is required to be taxed.

2. Taxation

Section 1, Article III of Chapter 118, Acts of the Legislature, 1939, relating to the assessment of property of building and loan and federal savings and loan associations for purposes of taxation, properly construed, requires that the surplus, undivided profits and reserves of such association be taken into consideration and included in the assessment of its property by the assessor of the county in which its principal office is located.

Error to Circuit Court, Hancock County.

Proceeding in the matter of tax assessments against Hancock County Federal Savings and Loan Association. From a judgment reducing the assessment to $2,267, 839.96, the State Tax Commissioner appeals.

Reversed.

Rose, Judge, and Riley, President, dissenting.

William S. Wysong, Attorney General, Kenneth E. Hines, Assistant Attorney General, and Howard J. Gibson, for appellant.

W. W. Ingram and Handlan, Garden & Mathews, for appellee.

Fox, Judge:

This appeal involves the interpretation and application of Section 14-a, Article 3, of Chapter 118 of the Acts of the Legislature, 1939, relating to the assessment for the purposes of taxation of the property of building and loan associations and federal savings and loan associations. The particular question at issue is the assessment for the year 1941 of the property of the Hancock Federal Savings and Loan Association, the principal office of which is in Hancock County, West Virginia.

The assessment complained of was made upon a consideration of the following statement stipulated in the record, and was reached by art examination of the books of the loan association. We copy the stipulation:

"It is stipulated and agreed by counsel representing the respective interests in these proceedings that instead of the original return used by the Assessor in making up the personal property books for 1941, and testified to by said witnesses Robert A. Douglass and Kenneth Hill, being filed as an exhibit herein, that same be copied into and made part of the record, and read and considered as part of the evidence in this cause, which said return reads as follows:

Name Hancock County Federal Savings and Loan Association of Chester Hancock County.

Optional saving Shares $1,887, 689.96

Free Shares_____________________........ 658, 300.00 $2,545, 989.96

Surplus ___ _____. ______________ 360, 540.33

Undivided Profits 145, 735.05

Federal Ins. Reserve ___ 140, 000.00 Uncollected Interest 4, 627.97 650, 903.35

Capital Stock or Shares

Other Capital

Total

$3,196, 898.31

Deductions

Assessed value of real

estate _____________________________.

Other Deductions_________

278, 150.00 30, 000.00

Borrowed Money__________ 50, 000.00

Total Deduc. _________________________________________ 358, 150.00

Net Value _ _____________ $2,838, 743.31."

Another stipulation, not entirely clear to us, immediately follows the above, and reads:

"It is further stipulated and agreed that instead of the original return made by the petition and testified to by said witnesses Robert A. Douglass and Kenneth Hill being filed as an exhibit herein, that same be copied into and made part of the record, and read and considered as part of the evidence in this cause, which said return reads as follows:

Schedule D Capital Stock or Shares Optional Savings Par $100.00

Amount __________________________________________________________$1,887, 689.96

Full paid Par $100.00 Amount__________ 658, 300.00

Total Free Shares_____________________________________$2,545, 989.96

Deductions Assessed value of real

estate __________________________________$278,150.00

Other Deductible

Liabilities ________________________ 79, 000.00 357, 150.00

Net Capital Value____________ $2,188, 839.96

30% Deduction ________________ 656, 651.99

Net Value ____________________________ $1,532, 187.97."

We proceed on the assumption that these stipulations represent the contentions of the parties, although the record discloses that the association claims that there should be a further deduction of $139,162.02 representing the difference between the amount at which its real estate was carried on its books, and its assessed value, and at one point in the testimony the claim is made that the assessment value should be fixed at $1,332, 152.77. The principal points of difference are $650,903.35, being the aggregate of surplus, undivided profits, reserves and uncollected interest, and the arbitrary deduction of thirty per cent from what is termed the "Net Capital Value" of the stock or shares being assessed, and amounting to $656,651.99, and based on the contention that other property in Hancock County, particularly real estate, was not assessed in excess of seventy per cent of its value.

The assessor, disregarding the odd figures under $100.00, assessed the property of the loan association at $2,838, 700.00 under classification No. 1. An appeal from this assessment was prosecuted before the county court, acting ex officio as a Board of Review and Equalization, which body sustained the action of the assessor. The Circuit Court, on appeal from the board's ruling, reduced the assessment made by the assessor to the sum of $2,267,-839.96, or a net reduction of $570,803.35, by disallowing the deductions of $30,000.00 and $50,000.00 designated in the stipulated statement above as "Other Deductions", and "Borrowed Money", and allowing a deduction of $650,-903.35 covering the items of surplus, undivided profits, reserves and uncollected interest. From this finding and order, the State Tax Commissioner prosecutes this appeal.

The question of the assessment of the property of building and loan associations has been twice before this Court. In 1896, in Ohio Valley B. & L. Assn. v. County Court, 42 W. Va. 818, 26 S. E. 203, we held: "Building and loan associations are not to be assessed with a capital stock. The members are to be assessed with their shares." In Charleston Federal Savings and Loan Association v. James, 120 W. Va. 781, 200 S. E. 845, we held: "Both state and federal building and loan associations are incorporated companies within the meaning of Code, 11-3-12, and are corporations within the meaning of Code, 11-3-13. Therefore, their intangible and other personal property is subject to taxation." The decision in this case was reached on a consideration of decisions from other jurisdictions, rendered subsequent to the decision first above referred to, and by reasons of fundamental changes in our tax laws which, in our opinion, made our first decision inapplicable. Loan Assn. v. James, supra, was de- cided in December, 1938, and the Legislature, at its session next following, enacted a statute specifically providing for the assessment of the property of building and loan and federal loan associations. The pertinent provisions of this statute read as follows:

"Sec. 14-a. Assessment of Capital and Realty of Building and Loan Association, and Federal Savings and Loan Association. The capital of every building and loan association and federal savings and loan association, as represented or evidenced by the investment shares and investment accounts in such association, shall be assessed at its true and actual value, according to the rules prescribed by this chapter, to such building and loan association or federal savings and loan association in the county, district, and town where such association is located: Provided, however, That such shares and such accounts held by the United States government or any of its agencies shall not be included in determining the assessment. The real and actual value of such capital, represented by the market value of such investment shares and investment accounts as aforesaid, shall be ascertained according to the best information which the assessor may be able to obtain whether from any return made by such association to any officer of this State or the United States, from actual sales of such investment shares and investment accounts, from answers to questions by the assessor, as hereinafter provided, or from other trustworthy sources.

The real estate of any such building and loan association or federal savings and loan association shall be assessed as in other cases, and a proportionate share of such assessed value shall be deducted in ascertaining the market value of such investment shares and investment accounts, but in ascertaining the true and actual value of such capital as represented by such investment shares and investment accounts as aforesaid, the assessor shall take into consideration all earned reserves and undivided profits of any such association."

It will be noted that the statute quoted refers to "The real and actual value of such capital, represented by the market value of such investment shares and investment accounts". The record before us shows that the investment shares have no market value in the sense in which that term is usually employed. The value of the shares are frozen at par, and may be purchased from the association at any time at that price. Therefore, the price at which such shares may be purchased fixes their sale value, and affords no useful criterion in fixing their real value. We do not think this provision was intended to be all controlling, and certainly not to the extent of permitting a loan association to escape taxation on assets which make the shares possess an actual value beyond their value in the market place. In this instance, if we were assessing these shares to the owner, as distinguished from the association, the price at which they could be sold would be their actual value; but when we assess the association, we assess all of its property, as under...