Packard Motor Car Co. v. City of Detroit

• Citation: 205 N.W. 106,232 Mich. 245
• Decision Date: 01 October 1925
• Docket Number: No. 42,April Term.,42
• Parties: PACKARD MOTOR CAR CO. v. CITY OF DETROIT.
• Court: Supreme Court of Michigan

232 Mich. 245

205 N.W. 106

PACKARD MOTOR CAR CO.

v.CITY OF DETROIT.

No. 42, April Term.

Supreme Court of Michigan.

Oct. 1, 1925.

Error to Circuit Court, Wayne County; Dewitt H. Merriam, Judge.

Action by the Packard Motor Car Company against the City of Detroit. To review judgment of dismissal, plaintiff brings error. Reversed.

Argued before McDONALD, C. J., and CLARK, BIRD, SHARPE, MOORE, STEERE, FELLOWS, and WIEST, JJ. Henry E. Bodman, of Detroit, for appellant.

Walter Barlow, of Detroit (Charles P. O'Neil, of Detroit, of counsel), for appellee.

WIEST, J.

In this suit plaintiff seeks to recover taxes it claims defendant illegally exacted under Act No. 297, Public Acts 1921, and paid by it under protest. On motion of defendant, the suit was dismissed in the circuit and is here by writ of error.

No trial upon the merits having been had, we must accept the averments of fact in the declaration as true. Briefly stated, the issue is whether the bona fide and unconditional debts of the company should be deducted from its taxable credits, irrespective of consideration of tax exempt securities held by it. This involves the validity of the following italicized provision of the act of 1921:

‘For the purposes of taxation, personal property shall include: * * * All credits of every kind belonging to inhabitants of this state, whether such indebtedness is due from individuals or from corporations, public or private, and whether such debtors reside within or without the state, except such as are expressly exempted from taxation by law. * * *

‘The following personal property shall be exempt from taxation, to wit: * * * So much of the debts due or to become due as shall equal the amount of bona fide and unconditional debts by the person owing: Provided, that if such person shall be the owner of credits that are exempt from taxation such proportion only of his indebtedness shall be deducted from debts due or to become due as is represented by the ratio between taxable credits and total credits owned, whether taxable or not.’

At the time of the tax in question (1923) the company had $6,541,620 in credits outside of its tax exempt securities, and its bona fide debts amounted to $9,391,045. It therefore claimed it should pay no tax upon its ‘taxable credits' because its bona fide debts exceeded such credits.

Acting under the provision of the statute mentioned, the assessor, finding plaintiff's total credits, taxable and nontaxable, amounted to $18,814,094, determined there should be deducted from its taxable credits only that portion of its debts represented by the ratio which its taxable credits bore to its total credits, taxable and exempt, and in assessing the taxable credits deducted only 34.8 per cent. of its debts; in other words, of its $9,391,045 of debts only allowed $3,268,083 in reduction of its taxable credits, leaving $3,273,537 of its credits of $6,541,620 subject to tax. By this method plaintiff claims it was illegally assessed and made to pay $73,552.80. This suit is to recover that amount.

The provision under which this tax was levied and collected is void. The tax here involved is a property tax. Cases involving franchise, inheritance, and succession tax have no application. Tax exempt credits cannot be taxed, directly or indirectly. In laying a tax on property, tax exempt credits must be treated as nonexistent. The Legislature may not make use of, or permit consideration to be taken of tax exempt credits as a factor in determining taxes to be paid by...