Shapero v. State Dep't of Revenue

• Citation: 322 Mich. 124,33 N.W.2d 729
• Decision Date: 08 September 1948
• Docket Number: No. 13.,13.
• Parties: SHAPERO et al. v. STATE DEPARTMENT OF REVENUE.
• Court: Michigan Supreme Court

322 Mich. 124

33 N.W.2d 729

SHAPERO et al.

v.STATE DEPARTMENT OF REVENUE.

No. 13.

Supreme Court of Michigan.

Sept. 8, 1948.

OPINION TEXT STARTS HERE Appeal from Circuit Court, Wayne County; Thomas F. Maher, judge.

Proceeding by Samuel Shapero and another against the State of Michigan, Department of Revenue, to recover taxes paid under protest. From a judgment, plaintiffs appeal.

Affirmed.

CARR, REID, and DETHMERS, JJ., dissenting.

Before the Entire Bench.

Shapero & Shapero, of Detroit, for plaintiffs and appellants.

Edmund E. Shepherd, Sol. Gen., of Lansing, and T. Carl Holbrook and Daniel J. O'Hara, Asst. Attys. Gen., for appellee.

Raymond J. Kelly, Corp. Counsel, and John H. Witherspoon and Helen W. Miller, Asst. Corporation Counsels, all of Detroit, for City of Detroit.

Dickson, Wright, Davis, McKean & Cudlip, of Detroit, amicus curiae.

BUTZEL, Justice.

The judgment of the circuit court upholding the validity of the intangible tax on the shares of stock held by plaintiffs in Michigan corporations should be affirmed. There is no question but that if an ad valorem tax had been levied against such stock, it would have resulted in double taxation under the authority of Stroh v. City of Detroit, 131 Mich. 109, 90 N.W. 1029;City of Detroit v. Kresge, 200 Mich. 668, 167 N.W. 39, and other case cited by Mr. Justice Carr in the foregoing opinion.

Act No. 301, Pub.Acts 1939, as amended by Act No. 233, Pub.Acts 1941, and Act No. 165, Pub.Acts 1945, Comp. Laws 1945 Supp. § 3658-1 et seq., Stat.Ann., 1945 Cum.Supp. § 7.556(1) et seq., commonly referred to as the Michigan Intangible Tax Law, was enacted by the legislature long after the decisions in Stroh v. City of Detroit, supra, and other cases affecting ad valoram taxes on shares of stock were rendered.

The questions raised by this case were before us in Shivel v. Vidro, Kent County Treasurer, 295 Mich. 10, 294 N.W. 78, 81, where we unanimously held that the tax in question was ‘specific’ in nature, which determination fully disposes of the instant case. Justice Wiest, speaking for the court, said:

‘The tax is specific, being levied directly by legislative enactment upon ownership of designated personal property and cannot be held arbitrary, discriminatory or inequitable, and the rule of uniformity required by art. 10, § 3, of the Constitution, in case of ad valorem tax, has no applicability.

‘In C. F. Smith Co. v. Eitzgerald, 270 Mich. 659, 672, 259 N.W. 352, 357, we held:

“The rule of uniformity does not extend to property paying specific taxes. The Legislature is given authority to impose specific taxes which shall be uniform upon the classes upon which they operate. Section 4, art. 10, Const.1908.'

‘The tax in question is uniform upon the classes upon which it operates.’

It is the rule of uniformity prescribed by Art. 10, § 3, which forbids double taxation. Attorney General v. Board of Supervisors, 71, Mich. 16, 38 N.W. 639; Stroh v. City of Detroit, supra; First National Bank of Wyandotte v. Common Council of City of Detroit, 253 Mich. 89, 234 N.W. 151;C.F. Smith Co. v. Fitzgerald, 270 Mich. 659, 259 N.W. 352. And this rule of uniformity has no application to property paying specific taxes under the plain language of the constitutional provision.

Stress is placed by appellants upon the fact that in section 3, as amended by Act No. 165, Pub.Acts 1945, there still appears the following provision:

‘(b) The following shall be exempt from the tax imposed by this act: * * *

‘(13) Intangible personal property which represents other property taxed under this act or other laws of this state and is so closely identified therewith that to impose an additional tax under this act would be unconstitutional as double taxation.’

However, the same act provides in express terms for a specific tax on the ownership of shares of corporate stock. We believe the clause we have quoted does not exempt from such taxation shares of stock in Michigan corporations, for if it did the provision in regard to the specitic tax on shares of stock would be meaningless. The quoted clause probably was inserted so as to prevent an ad valorem tax on shares of stock in Michigan corporations.

We shall not discuss the history of taxes on intangibles in this State prior to the enactment of the present specific tax on intangibles. The prior laws brought about unjust, discriminatory and in many respects confiscatory results and led to attempts at evasion, and, as pointed out in the briefs, resulted in the flight of capital from this State. The question of the wisdom of the tax, however, is not before us. We have the unanimous opinion of this Court in Shivel v. Kent County Treasurer, supra, that the rule of uniformity prescribed by Article 10, § 3, of the Constitution does not apply to this intangible tax as it does in the case of an ad valorem tax. This, in my opinion, settles the question

The judgment of the lower court in favor of defendant is affirmed, but without costs, a public question being involved.

BUSHNELL, C. J., and SHARPE, BOYLES, and NORTH, JJ., concurred with BUTZEL. J.

CARR, Justice (dissenting).

The facts in this case are not in dispute. During the calendar year 1945 plaintiffs were the owners of shares of stock in certain Michigan corporations. In March, 1946, they advised defendant with reference to such ownership, making claim at the same time that the shares were not taxable under the provisions of Act No. 301, Pub Acts 1939 as amended by Act No. 233, Pub Acts 1941 and Act No. 165, Pub. Acts 1945, Comp.Laws Supp.1945, § 3658-1 et seq., Stat.Ann.1945 Cum.Supp. § 7.556(1) et seq., commonly referred to as the Michigan intangibles tax act. Said statute has been further amended by Act No. 175, Pub. Acts 1947, but for obvious reasons such amendment has no bearing on the issues in the case.

The department of revenue took the position that, under the provisions of the amendatory act of 1945, such shares were taxable, and made an assessment accordingly. Thereupon plaintiffs paid the taxes under protest, as expressly authorized by section 13 of the law as originally enacted in 1939, Comp.Laws Supp.1940, § 3658-13, and brought suit in circuit court to recover the amount so paid. The department filed its answer, admitting the facts averred in the declaration except as to the actual payment of taxes by the corporations under the general property tax law of the state, and denying the right to the relief sought. Thereupon the parties entered into a stipulation setting forth that the facts were as pleaded by plaintiff except that one of the corporations had not actually paid the taxes assessed against it on its property. Plaintiffs moved for judgment on the pleadings and defendant did likewise. The trial court concluded that plaintiffs' claim was not well founded and rendered judgment accordingly. From such judgment plaintiffs have appealed.

It is the claim of plaintiffs that the intangibles tax act may not properly be construed as undertaking to impose a tax on shares of stock in Michigan corporations the property of which is located in this state and is taxed under the general property tax law. It is urged that the imposition of such tax rusults in double taxation and that as such it is forbidden by the Constitution of the state. Reliance is placed on article 10, §§ 3 and 4, of the Michigan Constitution. Said sections are as follows:

‘Sec. 3. The legislature shall provide by law a uniform rule of taxation, except on property paying specific taxes, and taxes shall be levied on such property as shall be prescribed by law: Provided, That the legislature shall provide by law a uniform rule of taxation for such property as shall be assessed by the state board of assessors, and the rate of taxation on such property shall be the rate which the state board of assessors shall ascertain and determine is the average rate levied upon other property upon which ad valorem taxes are assessed for state, county township, school and municipal purposes.

‘Sec. 4. The legislature may by law impose specific taxes, which shall be uniform upon the classes upon which they operate.’

It is the position of the plaintiffs that the tax imposed by the statute above cited. on intangible personal property, is a property tax, that the shareholders are the corporation and as such own its property, and that taxing both the shares of stock and the property violates the requirements as to uniformity imposed by the Constitution, notwithstanding that one tax is on an ad valorem basis while the other is specific. Attention is directed to the fact that the provisions in question were carried forward into the present Constitution for the Constitution of 1850 and it is claimed that this was done in the light of the construction placed thereon by this Court in prior decisions. In further support of the claim that the statute does not contemplate the taxation of the shares of stock, plaintiffs call attention to section 3(b) of the intangibles tax act, as amended, wherein are listed several exemptions including the following:

‘(13) Intangible personal property which represents other property taxed under this act or other laws of this state and is so closely identified therewith that to impose an additional tax under this act would be unconstitutional as double taxation.’ Comp.Laws Supp.1945, § 3658-3(b)(13).

This provision was included in the statute as enacted in 1939, appearing therein as section 3(b)(14). In substance plaintiffs contend that the language of the intangibles tax act must be construed to accord with the above quoted sections of the Constitution as construed in prior decisions of this Court, and effect given to the statutory provision quoted.

The title of the act as originally enacted in 1939 indicated the purpose to be ‘the imposition and the collection of a specific tax upon the ownership of intangible personal property.’ Section 2, Comp.Laws Supp.1940, § 3658-2, which provided for the levying of the tax, followed the language of the...