Columbus Mut. Life Ins. Co. v. Gullatt

• Decision Date: 13 March 1940
• Docket Number: 13108,13115.
• Citation: Columbus Mut. Life Ins. Co. v. Gullatt, 8 S.E.2d 38, 189 Ga. 747 (Ga. 1940)
• Parties: COLUMBUS MUT. LIFE INS. CO. v. GULLATT, Tax Assessors, et al. GUARDIAN LIFE INS. CO. OF AMERICA v. SAME.
• Court: Georgia Supreme Court

8 S.E.2d 38

189 Ga. 747

COLUMBUS MUT. LIFE INS. CO. v. GULLATT, Tax Assessors, et al.

GUARDIAN LIFE INS. CO. OF AMERICA v. SAME.

Nos. 13108, 13115.

Supreme Court of Georgia

March 13, 1940

Syllabus by the Court.

1. Promissory notes of citizens of this State, secured by Georgia land, are not taxable here if owned by a non-resident corporation and held at its domicile in another State, unless they accrue out of or are incident to property owned or a business conducted by such non-resident, or its agent, in this State.

2. The proper procedure for contesting the taxability of unreturned property assessed or sought to be assessed by a board of county tax assessors is by petition in equity.

3. The board of arbitration provided for in the Code, § 92-6912 has no authority to pass upon questions of taxability of such property.

4. The petitions in these cases were not brought prematurely.

Bryan Middlebrooks & Carter, Grover Middlebrooks, and Wm. H. Mewbourne, all of Atlanta, for plaintiff in error in No. 13108.

Bryan, Middlebrooks & Carter, Haas, Gambrell & Gardner, Grover Middlebrooks, and Leonard Haas, all of Atlanta, for plaintiff in error in No. 13115.

Spalding, Sibley, Troutman & Brock, E. H. Sheats, W. S. Northcutt, and Standish Thompson, all of Atlanta, for defendants in error in both cases.

BLANTON FORTSON, Judge.

These two cases present for determination questions relating to the situs for taxation of intangible property of non-residents and whether a petition in equity may be brought by the owner of unreturned intangible property to contest its taxability, when a county board of tax assessors is preparing to assess it for taxation.

The Columbus Mutual Life Insurance Company and the Guardian Life Insurance Company of America, each brought an equitable petition in Fulton superior court against the members of the Fulton County Board of tax assessors, the attorney for the board, and the tax receiver of Fulton County, alleging, that the board and its attorney have demanded of the plaintiffs that they return for taxation all promissory notes secured by real estate in Fulton County, held by the plaintiffs during the years 1931 to 1937, inclusive, which the plaintiffs contend are not taxable in Georgia; that the board of assessors and its attorney have notified the plaintiffs that unless the plaintiffs make the returns demanded, the board will assess the notes and enter the assessments upon the county tax-digest at a specified time; that each plaintiff is a non-resident corporation owning promissory notes secured by loan deeds on real estate in Fulton County, setting forth in detail how the notes had been acquired and handled, asserting that the notes and deeds are held at the respective home offices of the plaintiffs outside of the State of Georgia; and that neither of the plaintiffs has at any time carried on any loan business in Georgia which would give a local situs to any of the notes. The Guardian Company alleges that while it has lent money secured by Georgia real estate, its only business in this State is life insurance. The Columbus Company alleges that it has never done any business of any character in Georgia, and bought its promissory notes in question from the payee of the notes who is a resident of Georgia. Both plaintiffs allege that they are entitled to proceed in a court of equity, because the provision for arbitration (Code, § 92-6912) contained in the law under which the board of tax assessors are proceeding, affords no method by which a taxpayer can contest the taxability of property assessed by a county board; and that, due to the fact that there is so much confusion, doubt, and uncertainty in the tax laws of Georgia, the plaintiffs would be called on to bring separate actions to cancel and nullify each year's assessments if they should be made for each of the seven years, as threatened, thus causing a multiplicity of suits.

The plaintiffs further allege, that the law under which the defendants are proceeding (Code, §§ 92-6910, 92-6911, 92-6913, as amended by act of 1937 (Georgia Laws 1937, pp. 517-524, §§ 1-3), violates the due-process clauses of the State and Federal constitutions (Const.Ga. art. 1, § 1, par. 3; Const.U.S. Amend. 14) for the reason that there is no provision in the law for notice to the taxpayer before assessment is made and penalty added, or, except as to the current year, for any notice to the taxpayer after assessment is made, thus depriving him of an opportunity to be heard as to the correctness and fairness of the assessment; that the due-process clauses are violated because the section relating to arbitration (92-6912) provides that the county commissioners, who name the board of tax assessors, fix the tax rate, and have charge of the county's fiscal affairs, are permitted to name the third arbitrator in the event the arbitrators named by the taxpayer and the assessors fail to agree upon a third, thus giving the taxing authority two arbitrators to the taxpayer's one; that during each of the years 1931 to 1937, inclusive, they made returns of all property they owned in Fulton County, including valuable real estate, and paid all taxes due on that property; that if the defendants are permitted to assess the notes in question and enter the assessments on the tax books, such action would place a cloud on the title of the plaintiff's real estate; that neither of the plaintiffs has ever established a commercial domicile in Georgia; that, before the time when the assessments in these cases were threatened, the interpretation of our laws by all of the taxcollecting authorities in the State has been that mortgage notes owned by non-residents are not taxable in Georgia. The plaintiffs attack the law under which the county board of assessors is proceeding, as violating the due-process clauses, on the ground that the section relating to arbitration (92-6912) does not give the arbitrators the power to compel the attendance of witnesses, to administer oaths to witnesses, or to compel the production of documents; and therefore that the arbitrators would not constitute an adequate tribunal to pass on the legal rights of the plaintiffs, especially as to the question of taxability of the notes in question.

Upon presentation of these petitions the judge granted orders temporarily restraining the defendants from making the assessments. Afterward the Columbus Company amended its petition by alleging that after the board of tax assessors was notified of the restraining orders they nevertheless did make the threatened assessments of the notes, and by praying that such assessments be set aside; whereupon the court passed an order setting aside the assessments and ordering them expunged from the record. The defendants filed general and special demurrers to the petitions, on various grounds, only one of which was passed on by the court, that being 'because this action is premature, it appearing from the petition that the action is based on anticipated wrong which may never be done, especially in view of the allegations that the threatened assessments are void.' The court sustained this ground of demurrer and dismissed the petitions. The plaintiffs excepted and brought the case here for review.

1. The first question to be decided is whether, under the allegations of the petitions, the promissory notes in question are taxable in Fulton County; for it is conceded that if they are taxable there, the plaintiffs would have no right to ask the aid of a court of equity to enjoin their assessment by the county board of tax assessors, and that the petitions presented no cause of action. It has long been settled by rulings of this court that a promissory note of a citizen of this State, owned by a non-resident and held at his domicile outside of this State, is taxable here only if it accrues out of or is an incident to property owned or a business conducted by the non-resident, or his agent, in Georgia. Armour Packing Co. v. Clark. 124 Ga. 369, 52 S.E. 145; Armour Packing Co. v. Augusta, 118 Ga. 552, 45 S.E. 424, 98 Am.St.Rep. 128; Armour Packing Co. v. Savannah, 115 Ga. 140, 41 S.E. 237; City Council of Augusta v. Dunbar, 50 Ga. 387; Cary v. Edmondson, 44 Ga. 651; Collins v. Miller, 43 Ga. 336. See Ga.Laws, Ex.Sess.1937-1938, pp. 156, 160, for present law as to tax situs of intangible property. Applying that principle to the allegations of the petitions in these cases, we find no difficulty in holding that if the plaintiffs can establish the allegations of their petitions by proof, the notes in question are not taxable in Fulton County; for they allege in substance that neither of them has at any time kept the notes in Georgia, except temporarily, or had any agent in Georgia authorized to invest its funds or to deal in any manner with the notes, and that none of the notes has arisen out of or been used as a part of any property owned or business conducted by the plaintiffs, or their agents, in this State. Therefore they have alleged causes of action which entitle them to be heard.

2, 3. The next question is, have the plaintiffs chosen the proper forum, or should they have contested the taxability of the notes in question by resorting to the method of arbitration provided in the law under which the defendants are alleged to be proceeding to tax them? That law, frequently called the tax-equalization act, was enacted in 1913, and is now, as amended, codified in chapters 92-69 and 92-70 of the annotated supplement to the Code. It created a board of tax assessors in each county, with the duty to examine all tax returns in the county; and if in their opinion the properties listed in any returns are incorrectly valued, to equalize and correct them. They are also authorized to seek out all property not...