Commonwealth v. Home & Savings Fund Co. Bldg. Ass'n

• Decision Date: 13 December 1907
• Citation: 127 Ky. 537,106 S.W. 221
• Parties: COMMONWEALTH v. HOME & SAVINGS FUND CO. BLDG. ASS'N.
• Court: Kentucky Court of Appeals

106 S.W. 221

127 Ky. 537

COMMONWEALTH v. HOME & SAVINGS FUND CO. BLDG. ASS'N.

Court of Appeals of Kentucky.

December 13, 1907

Appeal from Circuit Court, Jefferson County, Common Pleas Branch Second Division.

"To be officially reported."

Action by the commonwealth against the Home & Savings Fund Company Building Association to recover taxes on alleged omitted property. From a judgment for defendant, the commonwealth appeals. Reversed and remanded.

Johnson & Hieatt, for the Commonwealth. John S. Jackman, for appellee.

O'REAR C.J.

This was a proceeding in the Jefferson county court by the auditor's agent against appellee, a building and loan association organized under the laws of this state, to have assessed for taxation for county and state purposes what was claimed by the auditor's agent to constitute parts of the surplus fund and undivided profits of the association which had been omitted in its tax assessment for the years 1901 to 1905. Upon the agreed facts which will be adverted to presently, the county court refused to list the assets mentioned, which action, upon appeal to the circuit court was affirmed.

Omitting from the agreed statement of facts what appears to us to be mere bookkeeping features, the following, for the year 1904 will serve to illustrate the situation, showing assets and liabilities of the corporation for that year, as of September 1, 1904:

Assets. ,T1Mortgage loans $777,500 00 ,T1Pass Book Loans 15,658 00 ,T1Real Estate 2,591 30 ----------- ,T1 Total Assets $795,749 30 Liabilities. Cash overdrawn .............. $ 6,522 70 Dues ......................... 653,000 04 Paid up stock ................. 47,500 00 Bonds outstanding ............. 64,900 00 Interest on bonds .............. 1,298 00 Sundry expenses ................... 40 00 $773,268 74 ------------ ----------- ,T1 Excess of assets over liabilities $ 22,480 56 Reserve Fund ................ $ 10,918 94 Balance ....................... 11,561 62 22,480 56 ------------ ----------- ,T1 Total Assets $795,749 30 Paid in by stockholders: Dues ........................ $653,000 04 Paid up stock ................. 47,500 00 700,500 04 ------------ ----------- ,T1 Surplus and undivided profits $ 95,249 26 Amount listed by taxation 1905: Personalty .................. $ 11,068 94 Real Estate .................... 3,070 00 14,138 94 ------------ ----------- ,T1 Balance $ 81,110 32

Now it is contended by appellant that the difference between the book assets and stock liabilities of the association constituted its undivided profits and surplus, being $95,249.26; that, as only $14,138.94 were assessed ($3,070 of the sum representing real estate), the balance of $81,110.32 is the unassessed or omitted surplus and undivided profits.

It becomes necessary at this point to examine the statutes under which this assessment was made. They are:

Section 4093, Ky. St. 1903: "That the shares of building associations or building and loan associations shall be taxed as other individual personal property, and shall be listed with the assessor for that purpose by the owners of said shares, the amount so listed by every owner or shareholder to correspond with the amount paid in and not withdrawn by the said shareholders on the fifteenth day of September of every year: Provided, that the borrowing members shall not be required to list their shares, if the amounts borrowed by certain members equal or exceed the amount paid in on their respective shares. The shares of infants shall be listed by the parents or guardians of such infants."

Section 4094, Ky. St. 1903: "The president or secretary of every such building association or building and loan association shall list with the assessor the amount of such surplus funds and undivided profits as the association may have on hand and undistributed on the fifteenth day of September of every year."

It will be at once perceived by those who are familiar with the taxing statutes of this state that there is not only a specific, but a different, mode provided for assessing building association shares and other property. But the difference exists only in the method of assessment. There was neither purpose nor power in the Legislature to discriminate in favor of either class. The general policy of taxation in this state is to tax all property once, and once only, for each fiscal year. It is well recognized that, in spite of the minute pains of the Legislature and taxing officials, it sometimes happens that some property is not taxed at all, while other kinds are sometimes indirectly taxed twice. Still, the general purpose prevails, and it is believed is attained. It must be conceded that the Legislature has, and must have, a free hand in adopting methods of assessment best calculated to further the great purpose of equal and just taxation. It must be manifest that no system could well be adopted applicable alike to all property that would afford equal taxation. The system of assessment adapted to one kind of property would be wholly inadequate for another kind. Numerous instances are afforded by the statute of such dissimilarity.

Building and loan associations are a peculiar kind of corporation. They are usually aggregations of people who deal exclusively among themselves in accumulating a kind of savings fund for investment in homes. They are not commercial bodies in the large or popular sense of the term. They are, rather limited, co-operative, home building co-partnerships. The chapter of the statutes providing for their organization treats them differently from other corporations. So the taxing statutes treat them with respect to their real character. It is recognized that property invested in such associations should be taxed once for each unit of government under which it exists. In devising a just system of reaching this property, and to tax it only once, the Legislature has looked below the mere apparent thing, and ignored as far as was practical, the corporate entity. It required the shareholders' or members' interest to be assessed against such owner, where it was susceptible...