State ex rel. Rankin v. Harrington

• Decision Date: 16 July 1923
• Docket Number: No. 5290.,5290.
• Parties: STATE EX REL. RANKIN, ATTY. GEN., v. HARRINGTON, COUNTY ASSESSOR (THORNTON, INTERVENER).
• Court: Montana Supreme Court

68 Mont. 1

STATE EX REL. RANKIN, ATTY. GEN.,

v.HARRINGTON, COUNTY ASSESSOR (THORNTON, INTERVENER).

No. 5290.

Supreme Court of Montana.

June 25, 1923.

On Motion for Rehearing July 16, 1923.

Mandamus by the State, on the relation of Wellington D. Rankin, Attorney General, against Ed. J. Harrington, to compel respondent, as County Assessor of Silver Bow County, to assess for taxation certain shares of stock owned by W. D. Thornton, intervener. Proceeding dismissed.

Wellington D. Rankin, Atty. Gen., for the State.

W. B. Rogers, D. M. Kelly, and John V. Dwyer, all of Butte, for respondent Harrington and intervener Thornton.

Sydney Sanner and Kremer, Sanders & Kremer, all of Butte, amici curiæ.

CALLAWAY, C. J.

In this action the Attorney General, as relator, seeks a writ of mandate to compel Ed. J. Harrington, as assessor of Silver Bow county, to assess for the purpose of taxation certain shares of stock of the Inspiration Consolidated Copper Company and of the United Verde Extension Mining Company, which the intervener, W. D. Thornton, owned on the first Monday of March, 1923. Upon the admitted facts gathered from the petition, answer of Harrington, and complaint in intervention filed by Thornton, the latter was on the first Monday of March, 1923, and for many years prior thereto had been, a legal resident of the city of Butte. On that date he was the owner of the shares of stock named, and these have never been listed for assessment in the state of Montana. The Inspiration Consolidated Copper Company is incorporated under the laws of the state of Maine, and the United Verde Extension Mining Company under the laws of Delaware. The entire property of these corporations is within the state of Arizona. Neither corporation has ever owned or had any interest in any property within the state of Montana, nor has either ever transacted any business of any nature within this state. The stocks of these companies have been for many years, and are now, listed for sale upon the New York, Boston, and other stock exchanges, and large numbers of the shares of these companies have been daily bought and sold for many years upon and through the medium of these stock exchanges.

In 1906 Thornton closed out his business affairs in this state which required his personal attention and went to the city of New York. There he engaged in the business of buying and selling upon his own account shares of stock of corporations, both domestic and foreign to the state of New York, together with such other bonds, notes, and securities as are usually dealt in in a business of that character. In order to carry on his business he has borrowed large sums of money from banks and trust companies located in that city and from citizens and residents of the state of New York, part of which has been secured by collateral owned by him and belonging to his business, none of which has even been within the state of Montana, and all of which was owned and used by him as a part and in connection with his New York business. None of the capital or moneys invested by him in that business, or stocks, bonds, notes, or securities connected therewith, has ever been within the state of Montana or secured or derived from his investments in Montana. The stocks in question were purchased by him with money and capital invested in his New York business, are a part of that business, and have never been actually within this state.

Ever since 1906 and up to and including the present time Thornton has been absent almost continuously from the city of Butte and from the state of Montana, and has been within the city of New York, returning to this state only at infrequent intervals, usually for a period of four or five weeks during each year. While he has been a legal resident of this state, his business as distinguished from his legal residence has been in the city of New York.

Upon the foregoing statements, admitted to be true for the purpose of this case, the intervener alleges that the stocks in question are not property in the state of Montana, are not subject to assessment by the officers of this state, are not taxable here, but the same are localized and have their situs in the city of New York, being property exclusively within the territorial limits of the state of New York, and subject to the jurisdiction of that state for the purposes of taxation.

The concrete question presented is whether the laws of Montana command the assessment of the shares of stock of a resident of this state, even though they have a business situs in another state. The question is one of first impression in this state.

Section 1, art. 12, of the Constitution, declares:

“The necessary revenue for the support and maintenance of the state shall be provided by the legislative assembly, which shall levy a uniform rate of assessment and taxation, and shall prescribe such regulations as shall secure a just valuation for taxation of all property, except that specially provided for in this article. * * *”

And section 1997, Revised Code of 1921, provides:

“All property in this state is subject to taxation, except as provided in the next section.”

No question as to exemption from taxation is involved in this controversy.

The taxing power of the state does not extend beyond its territorial limits. Hayes v. Smith, 58 Mont. 306, 192 Pac. 615. It is essential to the validity of a tax that the property subject to it shall be within the territorial jurisdiction of the taxing power. Union Transit Co. v. Kentucky, 199 U. S. 194, 26 Sup. Ct. 36, 50 L. Ed. 150, 4 Ann. Cas. 493.

“Whatever may be said of its vast character and sweeping extent, the power of taxation, of necessity, must be limited to subjects within the jurisdiction of the state, or, as otherwise characterized, to subjects which have acquired a situs within the state for the purpose of taxation.” Hayes v. Smith, supra.

Section 17 of article 12 of the Constitution declares:

“The word property as used in this article is hereby declared to include moneys, credits, bonds, stocks, franchises and all matters and things (real, personal and mixed) capable of private ownership, but this shall not be construed so as to authorize the taxation of the stocks of any company or corporation when the property of such company or corporation represented by such stocks is within the state and has been taxed.”

Respecting section 17 this court has said:

“This latter section, in its definition of that which may be made subject to taxation, is sufficiently comprehensive to include all matters and things, visible and invisible, tangible and intangible, corporeal and incorporeal, capable of private ownership.” Northwestern Mut. Life Ins. Co. v. Lewis and Clark County, 28 Mont. 491, 72 Pac. 982, 98 Am. St. Rep. 572.

Subdivision 1 of section 1996, Revised Codes of 1921, is practically a reiteration of the language of section 17 foregoing. That the section gives affirmative recognition to the policy that shares of stock may have an independent status for the purpose of taxation is too clear to admit of discussion, and that such shares, if within this state, whether belonging to residents or nonresidents, are proper subjects of taxation is beyond question.

By the provisions of section 2002, Revised Codes 1921, the assessor is required to ascertain the names of all taxable inhabitants, and all property in his county subject to taxation, except such as is required to be assessed by the state board of equalization, and to assess such property to the persons by whom it was owned or claimed or in whose possession or control it was at 12 o'clock noon of the first Monday of March next preceding.

Section 2003 directs the assessor to require from each person a statement under oath setting forth specifically all the real and personal property owned by such person, or in his possession or under his control at 12 o'clock noon on the first Monday of March. Then follow sections relating to the property of absent or unknown owners (2008, 2009), to property situated in another county (2010), and section 2012 provides:

“When a person is assessed as agent, trustee, bailee, guardian, executor, or administrator, his representative designation must be added to his name, and the assessment entered on a separate line from his individual assessment.”

By section 2013 it is provided that--

“The property of every firm and corporation must be assessed in the county where the property is situate, and must be assessed in the name of the firm or corporation.”

Section 2015 provides that--

“The capital stock and franchises of corporations and persons, except as otherwise provided, must be listed and taxed in the county, town, or district where the principal office or place of business of such corporation or person is located; if there be no principal office or place of business in the state, then at the place in the state where any such corporation or person transacts business.”

By the provisions of section 2016, “the personal property belonging to the business of a merchant or of a manufacturer must be listed in the town or district where his business is carried on,” and by section 2017 the personal property of express, transportation and stage companies, steamboats, vessels and other water craft must be listed and assessed in the county, town or district where such property is usually kept. And, after providing for the assessment of railroads, telegraph, telephone, and electric light lines (2021, 2022), the first sentence of section 2023 declares:

“All other taxable property must be assessed in the county, city, or district in which it is situated.”

The foregoing statutes demonstrate the emphasis laid upon the actual situs of property for purposes of taxation by the lawmaking power, and also indicate a clear intention to include the property of nonresidents which has a situs here.

While the Attorney General admits that the stocks are and always have been in New York, he urges that, as Thornton...