Peoples Finance & Thrift Co. v. Pima County

• Decision Date: 07 December 1934
• Docket Number: Civil 3246
• Citation: 38 P.2d 643,44 Ariz. 440
• Parties: PEOPLES FINANCE & THRIFT COMPANY, a Corporation, Appellant, v. PIMA COUNTY, a Municipal Corporation of the State of Arizona, Appellee
• Court: Arizona Supreme Court

38 P.2d 643

44 Ariz. 440

PEOPLES FINANCE & THRIFT COMPANY, a Corporation, Appellant, v. PIMA COUNTY, a Municipal Corporation of the State of Arizona, Appellee

Civil No. 3246

Supreme Court of Arizona

December 7, 1934

APPEAL from a judgment of the Superior Court of the County of Pima. Fred W. Fickett, Judge. Judgment affirmed.

Messrs Mathews & Bilby and Mr. T. K. Shoenhair, for Appellant.

Mr Clarence E. Houston, Mr. Carlos G. Robles and Mr. Odin B Dodd, for Appellee.

Messrs Struckmeyer & Jennings and Mr. Harold Baxter, Amici Curiae.

OPINION

ROSS, C.J.

The People's Finance & Thrift Company, a domestic corporation, whose principal place of business is Tucson, Pima county, Arizona, was assessed, so it alleges, for the years 1927, 1928, 1929 and 1930 upon both its real and personal property and the shares of its capital stock. It paid the taxes under protest, and thereafter brought this action against Pima county to recover the sum paid on the shares of its capital stock, contending that the law does not authorize or permit the county to assess and collect taxes on such shares. The defendant's answer consists of a general demurrer and a special demurrer, the latter raising the statute of limitations. The general demurrer was sustained, and, the plaintiff electing to stand on its complaint, judgment was entered for the defendant, from which this appeal is prosecuted.

The plaintiff, according to the allegations of its complaint, is engaged only in the business of loaning to divers persons its money obtained from the sale of its capital stock to its various shareholders. It is not engaged in the business of a bank, a savings bank, trust company or building and loan association, and does not receive money on deposit. Some of its capital, it alleges, is invested in personal and real property.

The assessment of the shares of the capital stock, it is alleged, was for the years 1927, 1928 and 1929, made under the provisions of paragraph 4850, Revised Statutes of 1913 (Civil Code), and for the year 1930 under the provisions of section 3069, Revised Code of 1928; the latter being a revision of the former, with identical meaning so far as the question here involved is concerned. Plaintiff insists (1) that such sections of the statutes were not intended to authorize the taxing of the shares of the capital stock of corporations, such as itself, engaged only in lending their money; (2) that, if the statutes grant such authority, they are unconstitutional and void as being contrary to the equal protection clause of the Fourteenth Amendment to the Federal Constitution, and the uniformity rule of section 1, article 9, of the state Constitution; and (3) that such a construction would permit double taxation. The revision, as contained in section 3069, supra, reads:

"The property of corporations shall be assessed and taxed, and no assessment shall be made of the shares of stock of corporations, nor shall any holder thereof be taxed for such shares. The foregoing provision shall not apply to a banking corporation, and a corporation or association engaged in the business of using money wherewith to make money for the owners of its shares (other than a building and loan corporation or association) the shares of stock of which shall be assessed and taxed as other property, in the name of the shareholders of the several shares thereof, to be entered and taxed in the name of, and be payable by, such corporation or association."

Section 3070, Revised Code of 1928, provides that the officers "in charge of any such banking corporation or such corporation or association engaged in the business of using money wherewith to make money" shall make a return to the assessor, upon his demand, showing the names of shareholders, their residence, number of shares owned by each, etc. It also requires the shareholder to make a return of his shares, together with certain data enumerated, and provides that the taxes due on shares shall be paid by the corporation or association, which shall have a lien against the shares of stock, and that the corporation shall not pay any dividend to or permit the transfer of any stock on its books of any shareholder in default.

The method here provided for taxing banking corporations and institutions of kindred nature is one generally in vogue. It does not undertake to assess or tax the corporation's capital stock or assets.Federal Land Bank of Berkeley v. Yuma County, 42 Ariz. 45, 22 P.2d 405. The tax is assessed against and imposed upon the shares of stock of the shareholders, and the corporation is designated or constituted as a kind of agent through which to collect the tax from the shareholders. Home Sav. Bank v. Des Moines, 205 U.S. 503, 27 S.Ct. 571, 51 L.Ed. 901; Merchants' & Manufacturers' Nat. Bank v. Pennsylvcania, 167 U.S. 461, 17 S.Ct. 829, 42 L.Ed. 236. Plaintiff is in error in alleging that the assessment of shares of stock was against it or its property. The statute does not authorize the assessment of plaintiff's property.

It is elaborately argued that sections 3069 and 3070 do not permit or authorize the taxation of the shares of the plaintiff's capital stock; that the method of taxing it is prescribed in the first sentence of section 3069, in other words, that the language "no assessment shall be made of the shares of stock of corporations, nor shall any holder thereof be taxed for such shares," applies to plaintiff. This, it is argued, is the method of taxing corporations generally, and the subsequent provision of the section does not take plaintiff out of that category. It is reasoned that the corporations to which "the foregoing provision" does not apply are commercial banks, savings banks, and trust companies, as defined by section 209, Revised Code of 1928, or banks of deposit engaged, among other things, in lending the money of their depositors to make money. In arriving at such conclusion, it is reasoned that the expression "and a corporation or association engaged in the business of using money wherewith to make money for the owners of its shares" means banks or institutions that accept deposits and use them wherewith to make money, and not corporations or associations engaged only in lending their money realized from stock sales.

The legislature, we will assume, used the words "banking corporations" with a knowledge of their meaning, and by the words "corporation or association" added thereto another class of institution not falling strictly within the definition of a banking corporation but performing some of its functions, such as lending money. We think the allegations of the complaint bring the plaintiff within the class of corporations whose stockholders are assessed on their shares, and not the class where the property of the corporations is assessed and...