Commercial Credit Co. v. O'Brien

• Citation: 146 P.2d 637,115 Mont. 199
• Decision Date: 07 October 1943
• Docket Number: 8343.
• Parties: COMMERCIAL CREDIT CO. v. O'BRIEN, County Treasurer, et al.
• Court: United States State Supreme Court of Montana

146 P.2d 637

115 Mont. 199

COMMERCIAL CREDIT CO. v. O'BRIEN, County Treasurer, et al.

No. 8343.

Supreme Court of Montana

October 7, 1943

As Amended on Denial of Rehearing March 24, 1944.

Appeal from District Court, Second District, Silver Bow County Jeremiah J. Lynch, Judge.

Action by the Commercial Credit Company against George O'Brien Treasurer of Silver Bow County, Bernard A. Holland, as City Treasurer of the City of Butte, and others, to perpetually enjoin defendants from collecting an ad valorem tax levied on credits and receivables and assessed as property of plaintiff. Judgment for plaintiff, and defendants appeal.

Reversed and remanded with directions.

I. W Choate, of Helena, R. V. Bottomly, Atty. Gen., and Frank J. Roe, Co. Atty., and P. E. Geagan, City Atty., both of Butte, for appellants.

R. F. Gaines, of Butte, for respondent.

Weir, Clift & Bennett, of Helena, and Poore & Poore, of Butte, for respondent on petition for rehearing only.

ADAIR Justice.

This is an appeal by the county of Silver Bow, the city of Butte and the treasurer of each, from an adverse judgment in an action instituted by Commercial Credit Company, a corporation, to perpetually enjoin the said county, city and their tax gathering officers from collecting an ad valorem tax levied on credits and receivables valued by the county assessor of said county at $574,735 and assessed, as of the first Monday in March, 1937, as the property of Commercial Credit Company.

The tax has not been paid and the district court, by judgment and order, has perpetually enjoined the defendants county of Silver Bow, city of Butte and the respective treasurers of each from collecting the tax. As is correctly said in Miami Coal Co. v. Fox, 203 Ind. 99, 176 N.E. 11, 13, 79 A.L.R 333, where as here the plaintiff "admits by stipulation that it has not paid the tax cast against the assessed valuation of the property, to prevail in its suit to enjoin the collection of the tax, it must show by allegation and proof that the property upon which the tax is assessed is not subject to taxation."

The plaintiff Commercial Credit Company contends that the assessor has assessed the property against the wrong Commercial Credit Company; that while the plaintiff Commercial Credit Company originally purchased, owned and held all of the receivables so found by the assessor yet plaintiff had divested itself of its title and ownership before the first Monday in March, 1937, by assigning and transferring same under a "contract" to another Commercial Credit Company that owns all the stock of the plaintiff Commercial Credit Company; that the assignee Commercial Credit Company cannot be taxed with the property because it does no business in Montana and that the plaintiff or assignor Commercial Credit Company cannot be taxed with the property because it had assigned the intangibles before the first Monday in March, 1937.

In other words, plaintiff Commercial Credit Company contends that on the first Monday in March, 1937, it did not own these receivables but that they were then owned by the Commercial Credit Company that owns plaintiff and all plaintiff's stock.

Commercial Credit Company is the confusing, confounding and identical name employed by both the plaintiff and its alleged transferee who are engaged in precisely the same business. The business consists of financing the sale of manufactured products, principally motor vehicles and refrigerators, (1) from manufacturers to distributors and dealers and (2) from these to the ultimate consumer. Lien obligations given by the purchasers of the motor vehicles or refrigerators are bought from dealers, who are required to execute a full or limited guaranty of the credit or obligation or a repurchase agreement.

The alleged assignee Commercial Credit Company was, on May 29, 1912, organized as a corporation under the laws of the state of Delaware. As of December 31, 1936, its assets totaled $252,088,254.37, of which amount, $183,481,689.92 was in notes and accounts receivable.

The plaintiff or assignor Commercial Credit Company was, on June 6, 1931, organized as a corporation under the laws of the state of Montana. It has an authorized capital stock of only $5,000 and a surplus of only $6,174.17. All of assignor's stock is owned by the assignee Commercial Credit Company so incorporated under the laws of Delaware. The plaintiff assignor has continuously engaged in business in Montana since its incorporation and for each of the years 1932, 1933, 1934, 1935, 1936 and 1937, it has annually earned net profits in varying amounts.

Over three millions of dollars were, from March 1, 1936, to February 28, 1937, collected by the plaintiff Commercial Credit Company in Montana from makers, signers and guarantors of conditional contracts of sale, promissory notes and trust receipts executed in Montana and here delivered to plaintiff in connection with the financing by it of sales made in Montana of motor vehicles, refrigerators, etc., to consumers, dealers and distributors in Montana. $2,753,350 of the collections so made in Montana during such period was by plaintiff sent out of this state being remitted, in cash, to the assignee Commercial Credit Company. The vast amount so remitted was in addition to collections of $197,729.93 for which the assignor Commercial Credit Company gave the assignee Commercial Credit Company credit on account of the assignee's indebtedness to the assignor.

The plaintiff Commercial Credit Company submitted to the county assessor of Silver Bow county a list, under oath, which purports to correctly set forth "all merchandise, furniture and fixtures, solvent credits, money, credits, bonds, securities, warrants and all personal property in its possession at 12 o'clock noon on the first Monday in March, 1937." The only property therein listed is cash on hand $100; cash in bank $434.11; accounts receivable automobiles $33,201.98; other solvent credits $2,272.99 and furniture and fixtures $225. Plaintiff for the year 1937 paid taxes only on the property so listed by it of $109.98 to the city treasurer of Butte and $190.54 to the county treasurer of Silver Bow county.

It is represented that the plaintiff Commercial Credit Company on January 2, 1934, entered into a "contract" with the assignee Commercial Credit Company for the sale of plaintiff's receivables at a rate of discount therein stated, the "contract" providing that:

"Due to the seasonal variation of charges of Montana Company to dealers in respect to Notes and Contracts arising out of the sale of wholesale to dealers of Motor vehicles and other forms of merchandise, it is hereby agreed that the parties hereto, from month to month or at such other period as may be agreed upon, will mutually determine and agree upon the rate of discount under which Delaware Company will purchase wholesale Notes and Contracts from Montana Company. ***

Montana Company agrees to endorse and assign Notes and Contracts to Delaware Company in form and manner satisfactory to Delaware Company and Montana Company does hereby guarantee payment of Notes and Contracts in accordance with the terms thereof, provided however, that Delaware Company agrees that a loss of Montana Company by reason of its guarantee of Notes and Contracts shall not exceed Two Percent (2%) of the face amount of Notes and Contracts purchased hereunder by Delaware Company during any calendar year, commencing with the date hereof. All losses shall be considered in connection with the year during which the Notes and Contracts out of which such losses arose, were purchased, irrespective of when such losses may accrue. Montana Company shall submit to Delaware Company, for purchase under this Agreement, on or about the first (1st) day of each month, the Notes and Contracts purchased by it during the month immediately preceding such settlement date. Notes and Contracts shall be listed upon and attached to schedules in such form as may be agreed upon by the parties hereto. ***

If, in the course of collection or liquidation of any Note and/or Contract purchased by Delaware Company hereunder, in the judgment of Montana Company it becomes necessary to resort to legal action for the enforcement of such a Note and/or Contract, Montana Company agrees to purchase from Delaware Company forthwith such Note and/or Contract for the full amount unpaid and owing thereon.

Montana Company covenants and agrees that it will use its best efforts in the interest of Delaware Company in effecting collection and liquidation of the Notes and Contracts purchased hereunder, but Montana Company shall in no way be responsible or liable for its failure or inability to effect such collections, except as expressly provided herein. On or about the first (1st) day of each month, Montana Company will notify Delaware Company as to Notes maturing during the preceding month upon which it has been unable to effect collection."

Plaintiff represents that pursuant to the above "contract" and immediately upon purchasing in Montana conditional sales contracts, notes and trust receipts, such "Receivables are transferred and delivered by the Montana Company to the Delaware Company by listing the same on schedules giving the name of the maker, the payer, the amount of each receivable, and the number of installments in which each is payable by shipping daily or several times each week such schedules to the Delaware Company at San Francisco, California, pursuant to Exhibits 1, 2, 3, 4 and 5."

By this prompt and speedy shipping of such schedules and lists of receivables out of the state of Montana the plaintiff contends it absolutely divested itself of ownership of all the receivables and credits so listed on such schedules. Notwithstanding these...