State Tax Commission v. Cord, 4842

• Decision Date: 22 July 1965
• Docket Number: No. 4842,4842
• Citation: 81 Nev. 403,404 P.2d 422
• Parties: STATE TAX COMMISSION of Utah, Appellant, v. Errett L. CORD, aka E. L. Cord, and Virginia Cord, Respondents.
• Court: Nevada Supreme Court

Page 422

404 P.2d 422

81 Nev. 403

STATE TAX COMMISSION of Utah, Appellant, v. Errett L. CORD, aka E. L. Cord, and Virginia Cord, Respondents.

No. 4842.

Supreme Court of Nevada.

July 22, 1965.

Rehearing Denied Aug. 17, 1965.

Daniel R. Walsh, Carson City, Phil L. Hansen, Atty. Gen., and F. Burton Howard, Asst. Atty. Gen., Salt Lake City, Utah, for appellant.

Woodburn, Forman, Wedge, Blakey, Folsom & Hug and Roger W. Jeppson, Reno, Edward D. Neuhoff, San Marino, Cal., for respondents.

ZENOFF, District Judge:

The Utah Tax Commission brought suit in Nevada against Errett and Virginia Cord to recover money claimed to be due under the Utah state income tax law. The complaint is in three counts. The first count alleges that an income tax warrant for $30,261.25 was docketed as a judgment in accordance with Sections 59-14-59 and 60, Utah Code Annotated 1953, and is constitutionally entitled to full faith and credit in Nevada. The second count, an alternative count, asserts that a deficiency assessment for $21,327.29 was made against the defendants in accordance with Utah statutory provision and, as an official record of that state, is to be accorded full faith and credit in Nevada. The third claim for relief, also an alternative claim, alleges that the defendants sold uranium properties located in Utah for the total sum of $17,000,000 on an installment note resulting in an income tax liability for the years 1958 and 1959; that the defendants, in filing a nonresident income tax return, claimed nonallowable business deductions, causing the commission to levy a deficiency assessment for $21,327.29 which has not been paid and has become final.

The lower court granted the defendants' motion to dismiss each claim for relief. In our view its ruling was correct as to the first two counts, but in error as to the third.

Errett and Virginia Cord are residents of Nevada. They have never been residents or domiciliaries of Utah. Their income tax liability to Utah arose from an isolated installment sale of uranium property located there. They paid the tax which they believed to be due for the years in question. Since that sale neither defendant has owned real or personal property in Utah. As stated, the first two claims for relief rest solely upon the full faith and credit clause of the federal constitution. It is contended by the Utah Tax Commission that the income tax warrant for $30,261.25 which was docketed as a 'judgment' is constitutionally entitled to full faith and credit in Nevada. The same claim is made as to the deficiency assessment, i. e., that it is a public 'record' of Utah within the ambit of the full faith and credit clause. Neither contention is valid.

We agree with the lower court in dismissing the first two claims for relief. It is sufficiently established that due process of law requires that there be jurisdiction of the person or subject matter by the home state where the judgment was entered for full faith and credit to apply. Though the doctrine of Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565, has been eroded to some extent (See International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, and the cases therein cited), it still rules the case at bar.

Since it is permissible to look behind a sister state's judgment for jurisdiction, Williams v. State of North Carolina, 325 U.S. 226, 65 S.Ct. 1092, 89 L.Ed. 1577, we must determine whether Utah has a law granting jurisdiction over a nonresident because of an act committed by him within the state. A state can exercise through its courts jurisdiction over an individual who has done an act within the state if, by the law of the state at the time when the act was done, a person by doing the act subjected himself to the jurisdiction of the state as to such cause of action. Restatement, Conflict of Laws § 84; Reese & Galston, Doing an Act or Causing Consequences as Bases of Judicial Jurisdiction, 44 Iowa L.Rev. 249.

Utah Code Ann. § 78-27-20 states that:

'Every nonresident person other that insurance organizations doing business in this state in one or more places, either in his own name or a common trade name, and said businesses are conducted under the supervision of a manager, superintendent, or agent, shall file or cause to be filed annually, on or before January 15th * * * a certificate under oath setting forth the name of and address of the manager, superintendent, or agent upon whom service of process may be had in any action arising out of the conduct of such business.'

However, the case law of Utah indicates that much more than a single transaction within the state is needed before Utah will obtain jurisdiction by virtue of a nonresident doing business within the state. In Conn v. Whitmore, 9 Utah 2d 250, 342 P.2d 871, a resident of Utah purchased three horses from a resident of Illinois, the transaction taking place in Illinois. That state permits personal service of summons on any person outside of the state who in person or through an agent transacts any business with said state. A dispute arose from which the seller obtained a judgment in Illinois by service in the manner set out in the statute. Defendant, the Utahan, did not appear in the action, but contested the enforcement of the judgment in Utah. The Utah court held that the one transaction was not enough to meet the 'doing business' requirements, that 'three must be some substantial activity which correlates with a purpose to engage in a course of business or some continuity of activity in the state so that deeming the defendant to be present therein is founded upon a realistic basis and is not a mere fiction. That this is so and that a single act or transaction does not suffice unless it fits into the above pattern is well established.' See also International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95; Wein v. Crockett, 113 Utah 301, 195 P.2d 222; Dykes By and Through Dykes v. Reliable Furniture & Carpet Co., 3 Utah 2d 34, 277 P.2d 969; Alward v. Green, 122 Utah 35, 245 P.2d 855. Therefore, the law of Utah does not consider the act done by the Cords an act sufficient to permit jurisdiction over them.

'[T]he validity of every judgment depends upon the jurisdiction of the court before it is rendered * * *.' Pennoyer v. Neff, supra, 95 U.S. at 728. In each of the cases relied upon by the appellant, the court considered whether jurisdiction had been obtained. And in every case, the court decided that it had jurisdiction, either by statute which granted jurisdiction because certain acts were done within the state, or because of jurisdiction over the person.

In City of New York v. Shapiro, D.Mass., 129 F.Supp. 149, it was held that the comptroller who levied the tax in New York had personal jurisdiction of the taxpayers because they appeared before him and participated in the proceedings. In State of Ohio Dep't of Taxation v. Kleitch Bros., Inc., 357 Mich. 504, 98 N.W.2d 636, the court held that Ohio had jurisdiction of the taxpayer because the corporation submitted to the terms of the tax statute, including its summary judgment provisions, by applying for a license and using the highways. In Owens v. Superior Court, 52 Cal.2d 822, 345 P.2d 921, 78 A.L.R.2d 388, it was held that California had personal jurisdiction of a former resident by virtue of a statute giving the state personal jurisdiction over a former domiciliary who was a resident when the cause of action sued upon arose.

The appellant contends that the docketed warrant judgment imposing personal liability on the Cords is a public record of Utah which must be given full faith and credit. We will not enforce a personal liability imposed by another state on a resident of our state without jurisdiction over him simply because the imposition of liability is called a record and not a judgment. The jurisdictional requirements shall be met whether the matter is regarded as a 'judicial proceeding' or a 'record.' See Magnolia Petroleum Co. v. Hunt, 320 U.S. 430, 64 S.Ct. 208, 88 L.Ed. 149.

It is therefore our conclusion that the tax herein imposed being a personal tax requiring in personam jurisdiction, the single business engagement of the Cords was not a continuous course of conduct needed to satisfy the Utah requirements and is not entitled to full faith and credit as a judgment or public record.

There no longer is serious contention that one state will not enforce the tax laws of a sister state. Time, history and review have virtually erased the contentions that taxes are penal in nature and that one state need not enforce the taxes...