Gen. Disc. Corp. v. City of Detroit, 5.

• Decision Date: 11 October 1943
• Docket Number: No. 5.,5.
• Citation: 306 Mich. 458,11 N.W.2d 203
• Parties: GENERAL DISCOUNT CORPORATION v. CITY OF DETROIT et al.
• Court: Michigan Supreme Court

306 Mich. 458

11 N.W.2d 203

GENERAL DISCOUNT CORPORATION

v.CITY OF DETROIT et al.

No. 5.

Supreme Court of Michigan.

Oct. 11, 1943.

Action by the General Discount Corporation, a Michigan corporation, assignee of Federal Discount Corporation, a Delaware corporation, against the City of Detroit and another to recover taxes paid by the assignor. From a judgment for defendants, plaintiff appeals.

Affirmed.Appeal from Circuit Court, Wayne County; Guy A. Miller, judge.

Before the Entire Bench.

Isidore Geo. Stone, of Detroit (Harold M. Shapero, of Detroit, of counsel), for appellant.

Paul E. Krause, Corp. Counsel, and Veno E. Sacre, Asst. Corp. Counsel, both of Detroit, for appellees.

BUTZEL, Justice.

General Discount Corporation, plaintiff, a Michigan corporation, is the assignee of Federal Discount Corporation, a Delaware corporation, which on December 1, 1932, gave the General Discount Corporation a bill of sale of all of its assets. This would include any claims the Federal Discount Corporation had against the defendant city of Detroit. On February 18, 1936, the Federal Discount Corporation petitioned the common council of the city of Detroit for a refund of $122,792.11 and claimed that for the years from 1921 up to and including the year 1932, the Federal Discount Corporation had paid personal taxes illegally assessed against it for large amounts and that it had only $5,000 of tangible personal property assessable in the State of Michigan during each of these years. The record does not show why the petition was denied on May 1, 1936, though it does show that the Federal Discount Corporation had disposed of all of its assets in 1932. The General Discount Corporation then waited until January, 1938, before it filed a petition for refund claiming that the board of assessors of the city of Detroit had placed discriminatory, fraudulent and illegal assessments upon intangibles belonging to it, a foreign corporation, from the years 1921 to and including 1932, and that petitioner had paid taxes on account of such assessments in the sum of $122,792.11. In the petition the General Discount Corporation did not state, as in the first petition of its assignor, that each year it had $5,000 of tangible personal property. The petition was denied January 31, 1938. Plaintiff thereupon began a law action against the city of Detroit and its treasurer to recover the foregoing amount. Plaintiff appeals from a judgment for defendants.

It appears that the board of assessors of the city of Detroit had for years made it a practice to assess the intangible personal property of foreign corporations having an office and doing business in the city of Detroit and where the intangibles were allocated as being in Michigan. In 1929, when the Reliable Stores Corporation, a Maryland corporation, sought a reduction of its personal property tax for the year 1927 because it had been assessed on its intangibles, the corporation counsel's office rendered an opinion upholding the legality of assessing intangible assets arising out of business done in Michigan and belonging to a foreign corporation having an office in the city of Detroit. In a suit brought by the Reliable Stores Corporation, this court, on September 16, 1932, held that such intangible property belonging to a foreign corporation was not taxable in the State of Michigan. Reliable Stores Corp. v. City of Detroit, 260 Mich. 2, 244 N.W. 208. No further assessments on intangibles were made against foreign corporations nor against the plaintiff after 1932.

The present suit was not instituted until February 15, 1938, so that all claims for refund of taxes paid up to 1932 would be outlawed unless there had been a fraudulent concealment from plaintiff or its assignor of the cause of action, giving plaintiff an additional two years after discovering the fraud in which to bring suit. We find no fraud in the fact that an illegal tax was levied. The assessors at most were mistaken as to the law, and it was not until a final decision was obtained from this court that they ceased making this error. Plaintiff claims, however, that the fraud consisted of discrimination and concealment of the fact that certain other foreign corporation were not assessed on intangibles arising from business done in Michigan. While a disparity of assessments may create a presumption of fraud, the record shows neither such inequality as to amount to discrimination nor actual collusion between the taxing officials and the allegedly favored corporations. In most instances the annual reports of such corporations are set forth in the record rather than the returns made to the board of assessors. A few of the reports, which are somewhat incomplete, disclose what should have been taxable intangibles under the construction of the law at that time, but in other reports of the same corporations the accounts and notes payable arising from business done in Michigan more than offset the receivables. Plaintiff makes the blanket charge of discrimination against the assessments for each year from 1921 to 1932 but inasmuch as the record does not disclose many such instances, we cannot find such fraud as to toll the statute of limitations as claimed by plaintiff. Except in a few instances no effort was made during the trial to support the charge of fraud with a detailed analysis of the financial structure of the corporations affected and their tax returns. It was shown that the assessment against a large corporation was reduced in 1932 from $500,000 to $7,500 following our decision in the Reliable Stores case without a similar reduction of plaintiff's assessment. But the annual report of that corporation for 1932, submitted in the record, showed no intangibles subject to assessment. Although the city of Detroit did not tax the ‘Michigan’ intangibles of every foreign corporation during some of the years in which plaintiff's assignor was taxed, nevertheless a member of the board of assessors listed in his testimony...