Holmes v. Borgen
| Decision Date | 28 May 1937 |
| Docket Number | No. 31147.,31147. |
| Citation | 273 N.W. 623,200 Minn. 97 |
| Parties | HOLMES et al. v. BORGEN, County Auditor. |
| Court | Minnesota Supreme Court |
Appeal from District Court, St. Louis County; C. R. Magney, Judge.
Action for declaratory judgment by Donald S. Holmes and others against Walter H. Borgen, as auditor of St. Louis county, Minn. From an adverse judgment, the plaintiffs appeal.
Reversed and remanded, with directions.
Baldwin, Holmes, Mayall & Reavill, of Duluth, for appellants.
Sanborn, Graves, Appel, Andre & Morton, of St. Paul, amicus curiae.
William S. Ervin, Atty. Gen., John A. Pearson, Asst. Atty. Gen., Thomas J. Naylor, Co. Atty., of Duluth, and Roy C. Smelker, Asst. Atty. Gen., for respondent.
Action for declaratory judgment. Each party moved for judgment on the pleadings. Plaintiffs' motion was denied and defendant's granted. Plaintiffs appeal from the judgment.
The pleadings disclose that Newell F. Russell died testate January 25, 1935, a resident of St. Louis county, this state, and that plaintiffs are the duly qualified executors of his will. Borgen, the defendant, is the county auditor of St. Louis county, this state. When Russell died and prior to 1929 he was and had been the owner of 2,303 shares of the common stock of Bridgeman-Russell Company, a corporation organized under the laws of this state, having its principal place of business at Duluth, Minn., where most of its stockholders reside. When the corporation organized all its assets were in Minnesota, and 60 per cent. thereof are still here, but 40 per cent. are located outside the state. The assets of the corporation within the state have always been assessed and the taxes paid thereon each year since its organization. Defendant now proposes, upon an opinion of the Attorney General given in 1933, to tax the shares of stock mentioned, held by Russell's executors, as omitted moneys and credits for each of the years 1929 to and including 1934, at a percentage of its fair equivalent value to the percentage of its property not assessed or taxed in this state. The complaint alleged that, prior to the opinion of the Attorney General, rendered in 1933, the opinions rendered by the incumbents of that office had been that the shares of stock in domestic corporations whose property was assessed and taxed in the state were not subject to a moneys and credits tax against resident holders thereof. The allegations of the complaint were admitted by the answer, and defendant joined plaintiffs in asking the court to determine whether the shares of stock held by plaintiffs were subject to the moneys and credits tax under sections 1980 and 2337, Mason's Minn.St. 1927. The court made findings and conclusions of law, the latter of which are incorporated into the judgment, to the effect that the statutes just referred to were valid and in full force; that their meaning was that shares of stock in a corporation, foreign or domestic, having property assessed or taxed in this state, and also having property outside the state not taxed or assessed in this state, are taxable as credits, the value of each share of such stock for tax purposes being that percentage of the full value of such share of stock which the total value of the property of said corporation located outside the state and not assessed or taxed in this state bears to the total value of all the property of the corporation. And that during each of the years 1929 to 1934 the shares of stock of Bridgeman-Russell Company, which belonged to decedent, at the time of his death "were and now are taxable as credits at the percentage of their full cash value above described, said Bridgeman-Russell Company being a Minnesota corporation having property assessed or taxed in the state of Minnesota, and also having property located outside the said state, and not assessed or taxed therein."
The conclusions of law thus embodied in the judgment plaintiffs assailed by motion for amended conclusions, and here, by the assignments of error, they are attacked. The problem of taxation is wholly with the Legislature. The assessing and taxing officials derive their authority from statutory provisions and must pursue the methods thus prescribed. The court has no right to devise means to supply what may be deemed omissions in the statute, so as to make the tax burdens more equitable. In territorial times and during the early history of the state the taxation of the ordinary private corporation was more simple and of less importance than in later times. Many corporations have since been formed by our citizens in other states where the liabilities of stockholders were less onerous than in this state. Such corporations were intended to have their principal office in this state where also was located the corporate property and business. Then we have both foreign and domestic corporations, part of whose property only is within this state subject to taxation. It, of course, is elementary that tangible property may only be taxed by the state wherein it is found. There may not be so much difficulty in reaching all taxable property of corporations within the state, be they foreign or domestic; but the trouble begins when a tax is also required of a resident holder of shares of corporate stock. If it be shares of stock in a corporation the property of which is assessed and taxed in this state, our statutes as well as decisions are clear that such shares are not taxable, not because exempt, but because to do so would be double taxation contrary to our taxation policy from the very beginning. Chapter 12, section 13, Rev.Terr.St.1851, provided: "The owner, or holder, of stock in any incorporated company, which is taxed on its capital, shall not be taxed as an individual for such stock." The Revised Statutes of 1866, c. 11, § 3, subd. 9, declared that no person shall be required to list for taxation "any share or portion of the capital stock or property of any company or corporation which is required to list or return its capital and property for taxation in the state." By chapter 11, § 7, G.S.1878, it was enacted: "Every person * * * shall list all his moneys, credits, bonds or stock, shares of stock, of joint-stock or other companies (when the property of such company is not assessed in this state)" etc. The Revised Laws of 1905, § 797, subd. 10, required the listing for taxation: "All shares in foreign corporations owned by residents of this state." And so does our present statute, section 1979, subd. 10. So far as taxing resident holders of shares of stock in foreign corporations, there is no legal obstacle because of double or duplicate taxation, even though the corporation has been assessed and taxed on all its property in the state of its domicile. There is no statute directly requiring a listing by a resident holder of shares of stock in a domestic corporation. Under our present statutes a domestic corporation needs have a place of business and officers here who are required to list all its property here located for taxation, together with such personal property as follows the domicile of its owner, viz., its real and tangible personal property within the state, its moneys and credits must be assessed, and even its good will, as reflected in its income derived from all its property, whether in this state or outside, is taxed. Bemis Bros. Bag Co. v. Wallace, 197 Minn. 216, 266 N.W. 690; State v. First Bank Stock Corporation, 197 Minn. 544, 267 N.W. 519, 269 N.W. 37. But, even in this situation, it may be true that, if a domestic corporation has some tangible property outside the state, the resident holders of shares therein may be legally taxed proportionately, as the trial court directed, if the taxing statutes provided a method therefor. While to the resident shareholder of corporate stock it is in fact double taxation whenever he is called on to pay taxes on his shares when the corporation has paid the tax on all its property, no matter what state has received the whole or part of the tax, yet, in a legal sense, he has no right to object to the double taxation except as to that proportion of the assessment on his shares which represents his interest in the property of the corporation taxed by this state. The above propositions, in respect to the policy of the state to avoid double taxation and its limitation, appear not only from the statute law referred to, but also from our decisions.
Board of Commissioners of Rice County v. Citizens' National Bank, 23 Minn. 280; State v. St. Paul Union Depot Co., 42 Minn. 142, 43 N.W. 840, 6 L.R.A. 234; State v. Nelson, 107 Minn. 319, 119 N.W. 1058; State v. Northern Pacific Ry. Co., 130 Minn. 377, 153 N. W. 850; Dunnell, Minn.Dig. §§ 9146-9148.
The statutes directly involved are certain parts of sections 1980 and 2337, Mason's Minn.St.1927. So far as applicable to this case the language is the same in both sections, defining credits to be listed for assessment and taxation to include "all shares of stock in corporations the property of which is not assessed or taxed in this state." The adoption of the three mill money and credits tax by chapter 285, Laws 1911, and the amendment thereof by chapter 130, Laws 1917, and by chapter 102, Laws 1923 (sections 2337-2349 of the Code) necessitated the change in section 1980. It is plain that sections 2337-2349 provide for the listing for taxation of shares of stock in corporations held by a resident differently from other personal property. The rate is fixed at three mills. It is to be listed separately from other personal property (section 2338) and section 2337 provides: "As hereinbefore defined,...
To continue reading
Request your trial