McNeill v. Hagerty

• Court: Ohio Supreme Court
• Writing for the Court: SPEAR, J. (after stating the facts).
• Citation: McNeill v. Hagerty, 51 Ohio St. 255, 37 N. E. 526 (Ohio 1894)
• Decision Date: 24 April 1894
• Parties: McNEILL v. HAGERTY, Auditor. GOEBEL v. SCHOTT, Treasurer.

37 N.E. 526

51 Ohio St. 255

McNEILL v. HAGERTY, Auditor.

GOEBEL v. SCHOTT, Treasurer.

Supreme Court of Ohio.

April 24, 1894

Error to circuit Court, Hamilton county.

An action by Aaron McNeill against John Hagerty, auditor of Hamilton county, to enjoin him from placing upon the tax duplicate the assets in the hands of plaintiff; and an action by one Goebel, trustee, against Schott, treasurer of Hamilton county, for the same purpose. Judgments rendered for plaintiffs in the court of common pleas were reversed in the circuit court, and both plaintiffs bring error. Reversed.

The case of McNeill, assignee, was commenced by the filing in the court of common pleas of Hamilton county of a petition, of which the following is a copy, viz: ‘ The said plaintiff, Aaron McNeill, says that he is the assignee of the Metcalfe & Mackey Company, a corporation duly organized under the laws of Ohio for manufacturing purposes, but which is now insolvent, and duly assigned all its property and assets to this plaintiff in trust for the benefit of creditors. That the amount of property and assets in the hands of this plaintiff, as such assignee, on the 10th day of April, 1892, being the day preceding the second Monday in April in said year, was as follows: Notes received for property sold by this plaintiff, as such assignee, amounting to $16,290; other notes and accounts, probably collectible amounting to $2,620; making a total amount of notes and accounts in the hands of this plaintiff, as such assignee as aforesaid, at the time aforesaid, $18,910. This plaintiff also had in bank, to his credit, as such assignee, the sum of $7,000.90; making a total of cash, notes, and accounts comprising the entire assets in the hands of this plaintiff as such assignee, of $25,910.90. That claims have been presented to this plaintiff, as such assignee, by creditors of said the Metcalfe & Mackey Company, duly proven aggregating the sum of $65,000. That the assets in the hands of this plaintiff, as such assignee, after paying the necessary costs and expenses of such assignment, will only pay a dividend of between thirty and thirty-five per cent. upon the claims so proven and allowed, as valid claims, against the said assignor, by this plaintiff. That the said defendant, John Hagerty, as auditor of Hamilton county, Ohio, has duly made demand upon this plaintiff, as such assignee, to return said assets to him, as such auditor, to be placed upon the tax duplicate of Hamilton county, Ohio, for taxation. That this plaintiff refused to make such return until said auditor threatened to take legal steps against this plaintiff for failing to make such return, and thereupon this plaintiff made a statement and return to the said auditor of the assets in his hands, as such assignee, as hereinbefore set forth, and also of the amount of the claims proven against said the Metcalfe & Mackey Company, as hereinbefore set forth; and the said defendant, as such auditor, thereatens and is about to place upon the tax duplicate of said county of Hamilton the amount of said assets, for taxation, against this plaintiff, as such assignee, and, unless restrained from so doing, will place on the tax duplicate of said county the sum of $25,910.90, the taxes upon which will be charged to this plaintiff, as such assignee. The said plaintiff denies that the said assets in the hands of plaintiff, as such assignee, are, under the laws of Ohio, taxable, and denies the right of defendant to place the same upon the tax duplicate, as subject to taxation. The amount of said assets, being far less then the amount of the liabilities of said assignor, and the said assets being the hands of this plaintiff, as an officer of the probate court, subject to an order of distribution by said court, as soon as the same can be made, and to the extent of the value of the claims against said assignor of the creditors of said assignor, are, under the laws of Ohio, required to be returned for taxation by said creditors, and not by this plaintiff, as such assignee; and to charge the taxes upon said assets against this plaintiff, as assignee, would be a great and irreparable injury, for which this plaintiff has no adequate remedy at law. Said plaintiff therefore prays that a temporary injunction may be allowed herein, enjoining and restraining the said defendant, as such auditor of Hamilton county, Ohio, from placing upon the tax duplicate the said assets in the hands of this plaintiff, as such assignee, the taxes upon which to be charged against this plaintiff, as such assignee, and that, upon the final hearing hereof, said injunction may be made perpetual; and for such other and further relief as may be just and equitable.’ In Goebel, trustee, against the treasurer, the property was described as moneys subject to draft, and as moneys invested in bonds, stocks, joint-stock companies, and otherwise. In other respects, the petition was substantially the same in its allegations as the one copied above, and as to relief desired. A demurrer to the petition in each case was overruled by the court, and, defendant not desiring to plead, judgment allowing perpetual injunction was rendered against defendant, and for costs. On error to the circuit court the judgment in each case was reversed for error in overruling the demurrer and giving judgment for plaintiff; that court holding that the common pleas erred in ruling that the money and the bonds, certificates of stock, etc., were not subject to taxation, as against the assignees. To reverse these judgments the present proceedings in error are prosecuted.

Personal property, held by assignee of insolvent debtor, whose estate is being settled in probate court, is not subject to taxation.

Syllabus by the Court

Personal property, whether in the form of moneys, bills receivable, bonds, certificates of stock, or otherwise, held by an assignee of an insolvent debtor, whose estate is being settled in the probate court, is not subject to taxation; and it is not the duty of such assignee to make return of the assets of such estate to the county auditor for taxation.

Follett & Kelley, Goebel & Bettinger, and Archer & McNeill, for plaintiffs in error.

Spiegel & Bromwell, County Sols., for defendants in error.

SPEAR, J. (after stating the facts).

It was the judgment of the circuit court that, by force of the statutes relating to taxation, it became the duty of an assignee for the benefit of creditors, acting under our insolvent laws, to return for taxation all moneys, the proceeds of the sale of assets of the assignor, which he might, as such assignee, have on hand, or on deposit in bank on the day preceding the second Monday of April, and all investments in bonds, stocks, joint-stock companies, or otherwise, held by him as assignee, which, under the law, would be taxable if held by an individual, resident of the state. That court was further of opinion that, from the value of such property so to be returned, the assignee could not legally deduct the sum of the legal bona fide debts owing by his assignor at the time of making such return. The reasoning in support of these conclusions is, in substance, that it was the purpose of the statute, enacted conformably with section 2 of article 12 of the constitution, that the assignee should represent the estate of his assignor, and that the return for taxation should be made by the assignee substantially in the same manner as if the property still stood as that of the assignor, and that this purpose is expressed by the statute itself, (section 2731), that ‘ all property whether real or personal in this state, and whether belonging to individuals or corporations; and all moneys, credits, etc., * * * of persons residing in this state, shall be subject to taxation, except only such as may be expressly exempted therefrom.’ No exemption existing in favor of property so held, it must be regarded as included within the language quoted. Although the statute does not seem to make taxes on personal property a lien thereon, yet it does provide that ‘ all personal property subject to taxation shall be liable to be seized and sold for taxes.’ And if the tax levied by reason of the return made by the assignee is paid by him, he could, under the provisions of section 6357, be allowed for such payment as part of the legitimate expenses of the trust; and, in default of payment, that distraint might be made by the tax collector by force of the authority above quoted. The mere fact that the assignee or trustee of an insolvent estate is not specially mentioned in section 2734, which points out who shall list personal property, is not a legislative declaration that such trustee is not bound to return personal property in his hands for taxation, because the statute says it shall be returned by the trustee for every person for whose benefit property is held in trust, and this is not limited to cases where the trustee has the assets invested in some permanent form from which income or interest may be derived. The moneys so on hand receive the protection of the state, and ought to pay their proportion of the taxes levied to furnish that protection. The fund does not belong to the individual creditors until the estate is settled, and order of distribution made; nor does the mere fact of insolvency of the assignor put the fund in any different position with respect to the claims of creditors. If the fund represented credits, then debts might be deducted, and, as the latter exceed the former, there would be nothing to return; but the fund on hand is not a credit. Nor are the investments in bonds, stocks, etc., credits. Large amounts, in the aggregate, are at all times in the hands of assignees, and the legislature could not have contemplated the escape of so...