City of Detroit v. Kresge

Decision Date28 March 1918
Docket NumberNo. 143.,143.
Citation200 Mich. 668,167 N.W. 39
PartiesCITY OF DETROIT v. KRESGE.
CourtMichigan Supreme Court

OPINION TEXT STARTS HERE

Error to Circuit Court, Wayne County; P. J. M. Hally, Judge.

Action by the City of Detroit against Sebastian S. Kresge to recover takes assessed against defendant. There was judgment for defendant on a directed verdict, and plaintiff brings error. Affirmed.

Argued before OSTRANDER, C. J., and BIRD, MOORE, STEERE, BROOKE, FELLOWS, STONE, and KUHN, JJ. Walter Barlow, of Detroit (Harry J. Dingeman and Divie B. Duffield, both of Detroit, of counsel), for appellant.

Donnelly, Lyster & Munro and John H. Brennan, all of Detroit, for appellee.

MOORE, J.

In this case it was stipulated as follows:

‘Mr. Kresge is a resident of Detroit. The board of assessors in April, 1917, in making up the personal tax rolls, assessed him in the amount of $20,000. Subsequently the board of review increased his assessment to $3,000,000, after notice to him of their intention so to do. Mr. Kresge petitioned the board of review to reduce his proposed assessment of $3,000,000 to $5,429.18. In his sworn statement Mr. Kresge, in answer to question No. 12, therein lists 66,548 shares of the common capital stock of the S. S. Kresge Company of the par value of $100 per share. This company is a Michigan corporation formed under Act 232 of the Public Acts of 1903, as amended, commonly known as the Denby Act. The company has an authorized and outstanding capital stock of $2,000,000 preferred stock and $10,000,000 common stock, shares worth $100 each, par value. In the tax statement, Mr. Kresge expressly claimed that the shares of stock in this company were exempt from taxation in this state. The board of review denied his petition and confirmed the assessment at the sum of $3,000,000. Mr. Kresge had an interview with the board of review, in which his shares of stock in the above company were discussed, and the board of review was advised by Mr. Barlow, chief assistant corporation counsel, that the shares of stock belonging to the petitioner were taxable, not for their cash value, but for a proportionate amount depending upon the proportion between the taxable property of the corporation outside of the state to its taxable property inside the state. Mr. Kresge, being asked what proportion of the property of the company was outside the state, stated that to the best of his opinion it amounted to about 80 per cent. and 20 per cent. is located within this state. The amount of the assessment made by the board of review was based upon the amount of the property of the company so stated to be outside the state. It is conceded that Mr. Kresge's entire personal assessment for the year 1917 is based upon his ownership of these shares of stock.

‘Mr. Kresge appealed from the decision of the board of review to the board of state tax commissioners, who sustained the assessment.

‘The company is engaged in conducting mercentile establishments and stores for the sale of goods not only in Michigan, where it has quite a number of stores, but also has stores in 21 other states and in the District of Columbia; that the company owns no real estate, but has personal property at its stores in Michigan and in the other states, consisting principally of its stock of goods for sale at its several stores, and of the furniture and fixtures used in connection with the stores; that its property is of the same character in other jurisdictions as in Michigan, and that the company pays taxes upon such property wherever it maintains a store, not only in Michigan, but in other states. The articles that constitute the stock of goods on sale at the several stores of the S. S. Kresge Company outside of Michigan are not, as a general rule, shipped from or supplied from a depot or warehouse in this state, but are shipped direct from the manufacturer or parties from whom they are purchased, to the particular store where they are to be kept for sale.

‘The S. S. Kresge Company is licensed to do business in the 21 other states and District of Columbia mentioned above, and does business there in its own name as a Michigan corporation.

‘It was proven on the trial that there was a general city tax of $41,426.64 levied against the defendant by the board of assessors of the city of Detroit on the basis of a personal property valuation of $3,000,000 assessed against him for the year 1917, and that there was a penalty of 1 per cent. $414.26 to be added thereto by reason of the nonpayment of said original tax during the month of July, 1917, within which month Detroit city taxes are payable without addition thereto under the provision of the city charter. The total amount of the tax due to the plaintiff from the defendant, if anything, was therefore $41,840.90 at the date of the trial.’

The court directed a verdict in favor of the defendant. The case is here by writ of error.

Counsel are agreed that the only question involved is whether the court should have directed a verdict in favor of the plaintiff in the sum of $41,840.90, instead of directing a verdict in favor of the defendant.

The claim of counsel for the appellant is clearly and concisely stated as follows:

‘It is double taxation for the same state, as Michigan, to tax the property and stock of the same corporation, whether domestic or foreign; but it is not double taxation for one state to tax property, and another state to tax the stock of the same corporation.

‘Illustrations: The stock of a foreign corporation, owned by a citizen of Michigan, is taxable by this state, though such corporation pays taxes to another state on all its property. Bacon v. Board of State Tax Commissioners, 126 Mich. 22 [85 N. W. 307,60 L. R. A. 321, 86 Am. St. Rep. 524]. The stock of a foreign corporation, owned by a citizen of Michigan, is not taxable by this state, if all of its property is taxed in Michigan. Stroh v. Detroit, 131 Mich. 109 . The stock of a foreign corporation, owned by a citizen of Michigan, is taxable in Michigan, though such corporation pays taxes in Michigan on part of its property and taxes to other states on the rest; but it is so taxable less a pro rata reduction for the value of its property taxed in Michigan. Thrall v. Guiney, 141 Mich. 392 [104 N. W. 646,113 Am. St. Rep. 528]. Shares of stock of foreign and domestic corporations have been, and are taxable alike, notwithstanding the apparent difference in the wording of the statutory provisions. Stroh v. Detroit, supra, 131 Mich. 115 .

‘General Principle: It is legal for this state to tax stock of corporations whether foreign or domestic, to its citizen stockholders, in so far as it does not tax their property to such corporations, viz. if all of the corporate property is inside Michigan, Michigan may not tax the stock at all; of the corporate property is outside Michigan, Michigan may tax the full value of the stock; and if part of the property is inside Michigan and part outside, Michigan may tax part of the value of the stock, but only part, for allowance must be made for the corporate property taxed in Michigan. In all three of these leading Michigan cases the court applied the rule of equitable taxation by giving the shareholders in the corporations therein mentioned the benefit of the exemptions specified in subdivision 7 of section 4002 of our statute. The corporations in those cases were all foreign corporations, and giving subdivision 9 of said section a literal or strict construction all of the shares of foreign corporations owned by residents here would be subject to taxation here whether such corporations paid taxes on their property here or not. Subdivision 7 of this section of the statute exempts shares of stock in a corporation from taxation only so far as the property of the corporation located here is exempt from taxation, and in so far as taxes are paid on such property in this state. The payments of taxes on its property here is the reason why its shares of stock are not taxable to its shareholders residing here.’

In Bacon v. State Tax Commissioners, supra, Justice Long, speaking for the court, said:

‘There are the questions of policy and abstract justice involved, both protesting against double taxation but the Legislatures of the states are judges of both policy and propriety so long as Constitutions have not forbidden it, and the weight of authority supports the claim that, in the absence of clear and express prohibition, they have not.’

The stock assessed in that case was stock in a foreign corporation, and the assessment was sustained for the reason that section 9 provides for the assessment of ‘all shares in foreign corporations, except in national banks, owned by citizens of this state.’ There is a clear intimation that a different result would have been reached had the stock been that of a domestic corporation. Clearly that case is not controlling of the instant case. In Stroh v. City of Detroit, supra, Justice Hooker, in speaking for the court, said:

‘The Constitution of this state requires that there be a uniform rule of taxation, and we have held that this forbids double taxation; and while double taxation may occur under any law, and that fact may, perhaps, not invalidate an act not intended nor calculated to impose it, and may not invalidate assessments made under it and according to its provisions, a law which in its terms necessarily requires it, under ordinary conditions, must be held invalid, or so construed as to avoid it. Comstock v. City of Grand Rapids, 54 Mich. 641 (20 N. W. 623);Attorney General v. Board of Supervisors of Sanilac Co., 71 Mich. 16 (38 N. W. 639);Standard Life & Accident Ins. Co. v. Board of Assessors of Detroit, 95 Mich. 468 (55 N. W. 112);Detroit Citizens' St. Ry. Co. v. Common Council of Detroit, 125 Mich. 675 (85 N. W. 96,86 N. W. 809 ). * * * The taxation of shares to the shareholder, and property to the corporation, is clearly double taxation, within the spirit of the constitutional provision, and...

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4 cases
  • Shapero v. State Dep't of Revenue
    • United States
    • Michigan Supreme Court
    • 8 d3 Setembro d3 1948
    ...would have resulted in double taxation under the authority of Stroh v. City of Detroit, 131 Mich. 109, 90 N.W. 1029;City of Detroit v. Kresge, 200 Mich. 668, 167 N.W. 39, and other case cited by Mr. Justice Carr in the foregoing opinion. Act No. 301, Pub.Acts 1939, as amended by Act No. 233......
  • Holmes v. Borgen
    • United States
    • Minnesota Supreme Court
    • 28 d5 Maio d5 1937
    ...body. Well-considered decisions so hold. Commonwealth v. Fidelity Trust Co., 147 Ky. 77, 143 S. W. 1037; City of Detroit v. Kresge, 200 Mich. 668, 167 N.W. 39; Board of Commissioners v. Ryan, 107 Okl. 278, 232 P. 834; Dupuy v. Johns, 261 Pa. 40, 104 A. 565; Tennessee Fertilizer Co. v. McFal......
  • Voorheis v. Walker
    • United States
    • Michigan Supreme Court
    • 2 d1 Junho d1 1924
    ...was a Michigan corporation, and its stock was not liable to general taxation in the hands of Michigan holders. City of Detroit v. Kresge, 200 Mich. 668, 167 N. W. 39. In Rolling Stock Co. v. People, 147 Ill. 234, 35 N. W. 608,24 L. R. A. 462, it was said: ‘Important as is the duty of every ......
  • Dir. of Dep't of Ins. & Fin. Servs. v. Pavonia Life Ins. Co. of Mich.
    • United States
    • Court of Appeal of Michigan — District of US
    • 25 d4 Março d4 2021
    ...is considered the property of the stockholder separate and distinct from the property of the issuing corporation. Detroit v Kresge, 200 Mich App 668, 673; 167 NW 39 (1918). Here, the stock is held by and, therefore, owned by third party GBIG. In addition, MCL 500.8101(3) directs, in part, t......
1 books & journal articles
  • Coming to terms with strict and liberal construction.
    • United States
    • Albany Law Review Vol. 64 No. 1, September 2000
    • 22 d5 Setembro d5 2000
    ...this role is debatable, but the role is perhaps unavoidable because of their semantic effects. (75) See, e.g., City of Detroit v. Kresge, 167 N.W. 39, 41 (Mich. 1918) (speaking loosely of "a literal or strict construction" of a particular provision and using the terms "literal" and "strict ......

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