Bennett v. Finkbine Lumber Co.

• Decision Date: 04 April 1924
• Docket Number: 35813
• Citation: 198 N.W. 1,199 Iowa 1085
• Parties: E. R. BENNETT, County Treasurer, Appellant, v. FINKBINE LUMBER COMPANY, Appellee
• Court: Iowa Supreme Court

198 N.W. 1

199 Iowa 1085

E. R. BENNETT, County Treasurer, Appellant, v. FINKBINE LUMBER COMPANY, Appellee

No. 35813

Supreme Court of Iowa, Des Moines

April 4, 1924

REHEARING DENIED APRIL 8, 1925.

Appeal from Polk District Court.--JAMES C. HUME, Judge.

THIS is an action at law, brought by the county treasurer, to recover taxes from the stockholders of a corporation on shares of stock which it is claimed were withheld from taxation. The trial court dismissed the plaintiff's petition, and the plaintiff appeals.

Affirmed.

E. A Lingenfelter and Vernon R. Seeburger, for appellant.

Nourse & Nourse and Clinton L. Nourse, for appellee.

FAVILLE J. ARTHUR, C. J., EVANS, PRESTON, STEVENS, and VERMILION, JJ., concur. DE GRAFF, J., not participating.

OPINION

FAVILLE, J.

Appellee is a corporation, which was duly organized under the laws of the state of Iowa in 1901. It is engaged in the production, manufacture, and sale of lumber and kindred commodities. Its capital stock is $ 400,000, divided into 4,000 shares of the par value of $ 100 each. The tax sought to be levied is against the shares of stock in said corporation for the years 1917, 1918, 1919, and 1920. It appears that, during said period of time, appellee owned a large amount of timber land in the state of Mississippi, and operated two mills in connection therewith, and the necessary logging railroads for the movement of logs and lumber on its premises. It was also engaged in the business of distilling turpentine. It paid taxes upon its real estate and personal assets in the state of Mississippi during each of said years, in large amounts.

I. We first consider the question of the procedure upon which this action is based.

It appears from the record that, notwithstanding the provisions of Chapter 66 of the Acts of the Thirty-fourth General Assembly (Section 1407-f, Code Supplement, 1913), prohibiting the making of such a contract, the board of supervisors of Polk County entered into a contract with an attorney for the discovery of property that had been omitted from taxation and for the collection of taxes on the same.

On or about August 27, 1921, appellant, as county treasurer, signed a written instrument, in the form of a notice and demand. This was addressed to the appellee corporation and its officers, and contained the statement that, during each of the years 1917, 1918, 1919, and 1920, the corporation had a total capital stock of $ 400,000, of a taxable value of $ 2,000,000, taxable at a rate of .005; that the taxes for each of said years were $ 10,000; and the interest for each of said years on said amount was computed and set forth. This instrument recited that the county treasurer demanded payment of the amount of said taxes, together with six per cent interest thereon from the time they would have become due and payable had the property been listed and assessed; and also notified appellee that, upon failure to pay such sum within thirty days after the 29th of August, proceedings would be commenced against appellee, "as provided by law."

The county treasurer testified that said notice was prepared by the attorney employed by the board of supervisors, who presented the same to the treasurer for signature. The treasurer testified that he made no investigation of the matter, and did nothing whatever except sign the paper. On cross-examination, he testified that he made no record; that he spread nothing upon his books; and that the only record he had in the office in respect to said matter was the one sheet of typewritten paper, which was the notice and demand, with the registry receipt pinned to it. He also testified that he did not tell the attorney to prepare this notice; that the latter brought it to him, together with copy thereof, and he signed it.

After the expiration of thirty days from the time fixed in the said notice and demand, this action was commenced. The proceedings were had under Section 1374 of the Code, which is as follows:

"When property subject to taxation is withheld, overlooked, or from any other cause is not listed and assessed, the county treasurer shall, when apprised thereof, at any time within five years from the date at which such assessment should have been made, demand of the person, firm, corporation or other party by whom the same should have been listed, or to whom it should have been assessed, or of the administrator thereof, the amount the property should have been taxed in each year the same was so withheld or overlooked and not listed and assessed, together with six per cent interest thereon from the time the taxes would have become due and payable had such property been listed and assessed, and upon failure to pay such sum within thirty days, with all accrued interest, he shall cause an action to be brought in the name of the treasurer for the use of the proper county, to be prosecuted by the county attorney, or such other person as the board of supervisors may appoint, and when such property has been fraudulently withheld from assessment, there shall be added to the sum found to be due a penalty of fifty per cent upon the amount, which shall be included in the judgment. The amount thus recovered shall be by the treasurer apportioned ratably as the taxes would have been if they had been paid according to law."

It is contended that, in the application of this statute authorizing the county treasurer to assess omitted property for the purpose of taxation, nothing more is required on the part of the treasurer, to effectuate such an assessment, than to merely sign and serve upon the taxpayer a demand of the kind disclosed in this record. Section 1374 is found in the general chapter on "assessment of taxes."

Code Section 1312 provides that every inhabitant of the state, of full age and sound mind, shall list for the assessor all property subject to taxation in the state of which he is the owner or has the control or management.

Section 1313 of the Code provides:

"Moneys and credits, notes, bills, bonds, and corporate shares or stocks not otherwise assessed, shall be listed and assessed where the owner lives."

Under the general and universal rule with regard to the taxation of property, it is essential that there be a listing and assessing and a levy, in order to constitute a valid tax.

In McCready v. Sexton & Son, 29 Iowa 356, 388, in discussing an action involving a tax sale, we held that four things, (1) a listing and assessing, (2) a levy, (3) a tax warrant, or statutory provision for collection, and (4) a sale, were essential to effectuate a sale of property for taxes, and said:

"These are essential and jurisdictional, and every other provision of every revenue law may safely be said to be directory only, and not essential to the exercise of the taxing power."

In Moore v. Cooke, 40 Iowa 290, we said:

"The levy is a very essential step in the imposition of a tax. In McCready v. Sexton & Son, 29 Iowa 356, 389, it is likened to a judgment in rem. It would be a dangerous principle to adopt, that proof of such fact may rest in parol, notwithstanding the fact that the statute positively directs that the memory of it shall be preserved by a record in the proper book."

See, also, Hintrager v. Kiene, 62 Iowa 605, 15 N.W. 568.

At this point, the question is as to whether or not the mere giving of a written notice to a taxpayer, by the county treasurer, and a demand that he pay the taxes claimed to be due on omitted property, are the valid listing and assessment and levy of a tax.

It is also the universal rule that it is essential to the validity of a tax levy that a written record of it should be made and kept by some proper authority.

The "demand" which the statute requires the treasurer to make upon the delinquent taxpayer is not directed to be made in writing. Ordinarily, a demand may be made orally, as well as in writing. Does this statute permit an oral demand by the county treasurer and a subsequent suit for omitted taxes, without more? Can this be done without any entry of a tax?

There is some analogy between this statute and Section 1398 of the Code, which provides that:

"The treasurer shall assess any real property subject to taxation which may have been omitted by the assessor, board of review or county auditor, and collect taxes thereon, and in such cases shall note, opposite the tract or lot assessed, the words 'by treasurer.'"

That an assessment in some form is a prerequisite step to an action for the recovery of taxes is well settled by the authorities. Worthington v. Whitman, 67 Iowa 190, 25 N.W. 124; Appanoose County v. Vermilion, 70 Iowa 365, 30 N.W. 616; Thornburg v. Cardell, 123 Iowa 313, 319.

It is contended by appellant that, in Galusha v. Wendt, 114 Iowa 597, 87 N.W. 512, we construed Section 1374, and held that:

"The demand by the treasurer amounts to an assessment, and the action which he is authorized to bring is for the collection of taxes found due on that assessment."

A statement to that effect is in the syllabus of the reported case, but no such statement is contained in the opinion. In the opinion we said:

"It is true that assessment is a step essential to the validity of a tax" (citing authorities).

We also said:

"Without an assessment, there is no debt from the taxpayer, and there is no obligation on his part which can be enforced in an action."

Also, we said:

"But the failure of the property owner to return his property for assessment, although subjecting him to various penalties, did not obviate the necessity of some assessment as a basis for the collection of the taxes on property omitted. * * * The effect of the new provision in the Code of 1897 which we are now considering is to authorize the treasurer to demand the amount of the tax...