City Of Roanoke v. James W. Michael's Bakery Corp.

• Decision Date: 09 September 1942
• Citation: City Of Roanoke v. James W. Michael's Bakery Corp., 180 Va. 132, 21 S.E.2d 788 (1942)
• Court: Virginia Supreme Court
• Parties: CITY OF ROANOKE. v. JAMES W. MICHAEL'S BAKERY CORPORATION et al.

21 S.E.2d. 788

180 Va. 132

CITY OF ROANOKE.

v.JAMES W. MICHAEL'S BAKERY CORPORATION et al.

Supreme Court of Appeals of Virginia.

Sept. 9, 1942.

HOLT, J., dissenting.

Error to Hustings Court of City of Roanoke; J. L. Almond, Jr., Judge.

Suit by James W. Michael's Bakery Corporation against Commonwealth of Virginia and City of Roanoke for the correction of alleged erroneous assessments of taxes for the years 1938 and 1939 on its delivery trucks, furniture and fixtures.To review a judgment determining that the Commonwealth of Virginia had exclusive right to assess plaintiff's property for taxation, the City of Roanoke brings error.

Affirmed.

Before CAMPBELL, C. J., and HOLT, HUDGINS, GREGORY, and EGGLES-TON, JJ.

C. E. Hunter, of Roanoke, for plaintiff in error.

Abram P. Staples, Atty. Gen., and W. W. Martin, Asst. Atty. Gen., for the Commonwealth.

Frank G. Louthan, of Richmond, for Virginia Manufacturers Ass'n, amicus curiae.

J. Gordon Bohannan, of Petersburg, for City of Petersburg, amicus curiae.

C. O'Conor Goolrick, of Fredericksburg, for City of Fredericksburg, amicus curiae.

T. Gibson Hobbs, of Lynchburg, for City of Lynchburg, amicus curiae.

Horace H. Edwards and Henry R. Miller, Jr., both of Richmond, for City of Richmond, amicus curiae.

Morton L. Wallerstein, of Richmond, for League of Virginia Municipalities, amicus curiae.

Charles W. Crush, of Christiansburg, for League of Virginia Counties, amicus curiae.

EGGLESTON, Justice.

James W. Michael's Bakery Corporation, engaged in the bakery business in the city of Roanoke, filed a petition in the court below under Tax Code, § 410, ¹ for the correction of alleged erroneous assessments of State taxes for the years 1938 and 1939 on its delivery trucks, furniture and fixtures.The assessment complained of was made under sections 68and73 of the Tax Code, ² which classify such property as "intangible personal property" and define it as a part of the "capital" used in "trade or business."

The petition alleged that such classification and assessment violate sections 168and171 of the Constitution of Virginia(as amended in 1928), which, it said, segregate such property for local taxation only.Since the city of Roanoke had likewise assessed the property for taxation it was made a partydefendant to the petition.The trial below developed into a contest between the Commonwealth of Virginia and the city of Roanoke, in which each claimed the exclusive right to assess the property for taxation.The lower court decided the issue, purely a legal one in favor of the Commonwealth and the city of Roanoke has appealed.Before us the issue is the same and the real parties are the same.

The pertinent sections of the Constitution, as amended, read as follows:

"§ 168.Taxable property; taxes shall be uniform as to class of subjects and levied and collected under general laws.-- All property, except as hereinafter provided, shall be taxed; all taxes, whether State, local or municipal, shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax, and shall be levied and collected under general law.The general assembly may define and classify taxable subjects, and, except as to classes of property herein expressly segregated for either State or local taxation, the general assembly may segregate the several classes of property so as to specify and determine upon what subjects State taxes, and upon what subjects local taxes may be levied."

"§ 171.Real estate and tangible personal property, except the rolling stock of public service corporations, segregated for local taxation exclusively.--No State prop-erty tax for State purposes shall be levied on real estate or tangible personal property, except the rolling stock of public service corporations.Real estate and tangible personal property, except the rolling stock of public service corporations, are hereby segregated for, and made subject to, local taxation, only, and shall be assessed or reassessed for local taxation in such manner and at such times as the general assembly has heretofore prescribed, or may hereafter prescribe, by general laws."

The pertinent provisions of the Tax Code are copied in the margin.

Tax Code, § 7, ³ segregates for local taxation only, among others, real estate, tangible personal property, and the capital of merchants.

Tax Code, § 8, ⁴ segregates for State taxation only, among others, "taxable intangible personal property."

Tax Code, § 68, ⁵ after recognizing that "Intangible personal property having been segregated for State taxation only, " undertakes to define and specify, in subsequent sections, what items are "intangible personal property."Among these are: "Bonds, notes, other evidences of debt, " etc., Tax Code, § 69;Money, Tax Code, § 70;Shares of stock, Tax Code, § 71; Bonds of counties, cities and towns, etc., Tax Code, § 72; and "Capital of any trade or business of any person, firm or corporation, except the capital of any trade or business which capital is otherwise specifically taxed or specifically exempt from taxation."Tax Code, § 73.⁶

Among the items classified and defined as capital under section 73 are:

"First.The inventory of stock on hand, which shall include all materials for use in the business * * *.

"Second.The excess of all bills and accounts receivable over bills and accounts payable.

"Third.All money on hand and on deposit.

"Fourth.All other taxable personal property of any kind whatever, * * * but excluding the property hereinafter specifically mentioned in this section."

The section(Tax Code, § 73) then excludes certain items of property from capital.Among these are: (1) Real estate which "shall not be held to be capital under this section, but shall be listed and taxed as other real estate;"(2)"Machinery and tools used in a manufacturing or mining business taxable on capital under this section, " which "shall be listed for local taxation exclusively"; and (3)"Personal property, tangible in fact, used or employed in the trades and businesses hereinafter specifically mentioned in this section, " namely, "Amusement business, including theatres of every kind and class; auctioneers;" etc.

According to the testimony of the State Tax Commissioner, State taxes on capital, under Tax Code, § 73, are paid largely by corporations engaged in the manufacturing or mining business.

Tax Code, § 283, ⁷ classifies tangible personal property segregated for local taxation.

The contention of the city of Roanoke is that section 171 of the Constitution, in plainand unambiguous language, provides that, "No State property tax for State purposes shall be levied on * * * tangible personal property, " that such property is "segregated for, and made subject to, local taxation, only, " and is to be "assessed * * * for local taxation" in such manner as the General Assembly may provide.Moreover, it says, under the provisions of section 168 of the Constitution, the General Assembly's power to define and classify taxable subjects is subject to such segregation.Hence, it says, when sections 68and73 of the Tax Code undertake to define and classify certain items of personal property, such as delivery trucks, furniture and fixtures, which are tangible in fact, as "intangible personal property, " and to levy a tax thereon, on the theory that they are a part of the "capital" used in business, these legislative acts run counter to the plain language of section 171 of the Constitution and are void.

There is great force in this argument, but upon consideration we shall see that the matter is not so simple nor can it be so easily disposed of.

The position of the Commonwealth is that the last sentence of section 168 of the Constitution, as amended, gives to the General Assembly the broad power ⁸ to "define and classify taxable subjects"; that the terms "tangible personal property" and "intangible personal property, " as used in our tax laws, have had a meaning, well defined and understood by the General Assembly by the courts, by the tax officials, and by the people for many years prior to the amendment of these sections of the Constitution in 1928; that under our tax laws capital used in business, as a composite whole, although including some items of personal property tangible in fact, has for a long time been classified as "intangible personal property"; and that the draftsman of the amendment to section 171 of the Constitution, in segregating "tangible personal property" to the localities for taxation, and in prohibiting the levying thereon of a State tax, used the term in the same sense in which it had been and was currently used and understood in our tax laws, --that is, excluding capital in business which had theretofore been classified as "intangible personal property."

In considering the constitutionality of an act of the General Assembly we must bear in mind these principles:

(1)A statute is not to be declared unconstitutional unless the court is driven to that conclusion.Richmond Linen Supply Co. v. City of Lynchburg, 160 Va. 644, 647, 169 S.E. 554, In re Richmond Linen Supply Co., affirmed 291 U.S. 641, 54 S. Ct. 437, 78 L.Ed. 1039.

(2)"Courts uphold acts of the Legislature whenever their constitutionality is debatable: presumptions are in their favor."West Bros. Brick Co. v. City of Alexandria, 169 Va. 271, 288, 192 S.E. 881, 888, appeal dismissed302 U.S. 658, 58 S. Ct. 369, 82 L.Ed. 508.Or stating theproposition in another way, "Every reasonable doubt should be resolved in favor of the constitutionality of an act of the Legislature."Hunton v. Commonwealth, 166 Va..229, 236, 183 S.E. 873, 876.

(3) Framers of the Constitution are presumed to have been aware of prior decisions of their own courts and of legislative acts construing words or phrases, and to have used such words or phrases in the light of such construction.Shenandoah Lime Co. v. Governor of Virginia, 115 Va. 865, 871, 872, 80 S.E. 753, Ann. Cas.l915C, 973.

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