Braden v. Senior.
| Decision Date | 08 January 1934 |
| Citation | 193 N.E. 80,48 Ohio App. 255 |
| Parties | Braden Et Al., Tax Commission Of Ohio, Et Al. v. Senior. |
| Court | Ohio Court of Appeals |
Taxation - Intangible tax law - Sections 5323 et seq., General Code (114 Ohio Laws, 714) - State cannot tax real or personal property outside state - Land trust certificates taxable - Income from share in equitable interest in land outside state, taxable - Interest evidenced by transferable certificate owned by resident of state - Double taxation of land not involved - Constitutional law - Article XII, Section 2, Constitution - Article XIV, Amendments, U.S. Constitution - Exemption of other interests in land not discriminatory when.
1. State has no authority to tax personal property or real estate outside state.
2. Tax on income from share in equitable interest in land outside state evidenced by transferable certificate owned by resident of state held not invalid as attempt to tax real estate outside state, since tax was on equitable property right (Section 5322, and Sections 5323, 5388 and 5389, General Code [114 Ohio Laws, 715, 720, 721]; Article XII, Section 2 Constitution).
3. Tax on income from share in equitable interest in land evidenced by transferable certificate owned by resident of state held not to involve double taxation of land, since equitable interest was distinct from legal title to land (Section 5322 and Sections 5323, 5388 and 5389, General Code [114 Ohio Laws, 715, 720, 721]; Article XII, Section 2, Constitution).
4. Double taxation is not prohibited by Ohio Constitution.
5. Where statute taxed income from equitable interest in land divided into shares evidenced by transferable certificates exemption of other interests in land from tax held not discriminatory, since such equitable interest was not "interest in land" (Section 5323, General Code [114 Ohio Laws, 715]; Article XII, Section 2, Constitution).
6. Statute taxing income from equitable interest in land divided into shares evidenced by transferable certificates and exempting all other interests in land from tax held not invalid as creating unreasonably discriminatory classification (Section 5323, General Code [114 Ohio Laws, 715]; Article XIV, Amendments, U.S. Constitution).
Court of Appeals for Hamilton County.
Mr. John W. Bricker, attorney general, Mr. Raymond J. Kunkel and Mr. Thomas C. Lavery, for the Tax Commission of Ohio.
Mr. Louis J. Schneider, prosecuting attorney, and Mr. Walter M. Locke, for the Auditor and Treasurer of Hamilton county.
Messrs. Paxton & Seasongood, for defendant in error.
This is a proceeding in error from the Court of Common Pleas of Hamilton county, wherein judgment was rendered for the plaintiff, Max Senior, enjoining the several taxing authorities now appearing as plaintiffs in error from assessing or collecting certain taxes upon interests of defendant in error represented by so-called land trust certificates, and declaring to be unconstitutional and void the laws of Ohio purporting to tax equitable interests in land only when such interests are evidenced by transferable certificates.
The answer of the tax commission denied generally the allegations of the petition, and denied specifically that the facts alleged gave the court jurisdiction.
The answer of the County Auditor and County Treasurer asserted the ownership of the certificates by the defendant in error, that he had received the alleged income therefrom, and that the tax will be assessed and collected unless enjoined.
It appears, taking a typical instance of one of the classes of interests in property outside Ohio, designated the Clarke Randolph Building Site Trust, that Wm. G. Pohl and Cecelia Pohl leased to Leo M. Sage certain real estate with the improvements thereon for a period of ninety-nine years; such lease being renewable forever. This real estate was located in Chicago, Illinois. Thereafter the fee in such real estate was transferred to the Chicago Title & Trust Company, of Chicago, Illinois, and simultaneously with the execu-tion of such deed the Pohls and the trust company executed a trust agreement for the benefit of Pohl and such others as might become parties thereto by acceptance of certificates of equitable ownership in which it was provided that the trust company, as trustee, should collect the rents and profits incident to the real estate in question and distribute the "net rentals" to holders of certificates of equitable ownership. In the event the lease should become inoperative through default, or termination of the period of the lease, the trustee agreed to sell the property and distribute the net proceeds of such sale to the certificate holders. There was also a provision for the impounding of certain securities of the lessee with the trustee, and provision was made for the distribution to the certificate holders of the proceeds of these also. An election was reserved to the trustee to distribute interests in the land in lieu of the sale thereof, if the lease should terminate through lapse of time or by consent.
The certificates incorporated the provisions of the trust agreement by reference.
The original certificate to Pohl in consideration of the deed to the trustee provided for 3,250 shares. This evidenced the entire equitable ownership of the trust estate. The defendant in error acquired a certificate calling for a 5/3250 interest of the equitable ownership and beneficial interest in the property constituting the trust estate held by the trust company.
Another trust agreement involved real estate located in the state of Ohio. This is known as the Lincoln Inn Court Trust. The provisions of the trust agreement involved in this instance vary little in substance and effect from the Chicago agreement, hereinbefore noted, except that the real property under this agreement is located in Cincinnati, Ohio, and the beneficial interests are incorporated in "certificates of interest in ground rent", instead of "land trust certificates".
The statutes of Ohio define investments, in part, as follows:
Section 5323. "* * * Annuities, royalties and other contractual obligations for the periodical payment of money and all contractual and other incorporeal rights of a pecuniary nature whatsoever from which income is or may be derived, however evidenced, excepting (1) patents and copyrights and royalties derived from each, (2) interests in land and rents and royalties derived therefrom, other than equitable interests divided into shares evidenced by transferable certificates * * *." 114 Ohio Laws, 715.
The following sections are also pertinent:
Section 5388. "* * * In listing investments, the amount of the income yield of each for the calendar year next preceding the date of listing shall, excepting as otherwise provided in this chapter, be stated in dollars and cents and the assessment thereof shall be at the amount of such income yield * * *." 114 Ohio Laws, 720.
Section 5389. "* * * 'Income yield' as used in section 5388 of the General Code and elsewhere in this title means the aggregate amount paid as income by the obligor, trustee or other source of payment to the owner or owners, or holder or holders of an investment, whether including the taxpayer or not, during such year * * *." 114 Ohio Laws, 721.
Section 5322. "The terms 'real property' and 'land' as so used, include not only land itself, whether laid out in town lots or otherwise, with all things contained therein but also, unless otherwise specified, all buildings, structures, improvements, and fixtures of whatever kind thereon, and all rights and privileges belonging, or appertaining thereto."
Article XII, Section 2, of the Ohio Constitution, provides that: "* * * Land and improvements thereon shall be taxed by uniform rule according to value * * *."
It is contended by the defendant in error that the property sought to be taxed, evidenced by the certificates, is in reality in those instances involving land outside of Ohio an interest in land outside of Ohio, and as to the land in Ohio is a tax upon an interest in land in Ohio; that in the first case, being real property outside the state, it is beyond the jurisdiction of Ohio taxing authorities, and in the case of the Ohio property, being paid by the owners in possession, the tax upon defendant in error amounts to double taxation.
It is further contended that the classification adopted is discriminatory, unfair, and illegal, in that legal interests in land, whether divided into shares and evidenced by transferable certificates or not, are specifically exempted in the statute, as well as equitable interests in land not divided into shares evidenced by transferable certificates (Section 5323, General Code), while equitable interests in land divided into shares evidenced by transferable certificates are made taxable by the exception within the exception in the section of the Code just noted. In other words, the tax is leveled at the particular interests last mentioned only, and there is no material mark of distinction or differentiation except the division of the interest into shares evidenced by a transferable certificate.
Taking the first contention, that the tax is in effect an attempt to tax real estate outside the jurisdiction of the state of Ohio, as it is applied to the interests in trust involving land lying without the state, we consider this matter now disposed of by the case of Rowe v. Braden, et al., Tax Comm., 126 Ohio St. 533, 186 N.E. 392, in which case the identical section of the statutes herein involved was considered.
There is no more authority in a state to tax personal property without the state than there is to tax real estate. Anderson v. Durr, Aud., 100 Ohio St. 251, 126 N.E 57, 17 A.L.R. 82; Southern Pacific Co. v. Com- monwealth...
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