State Tax Commission v. Shattuck, Civil 3449

• Decision Date: 27 November 1934
• Docket Number: Civil 3449
• Parties: STATE TAX COMMISSION and STATE BOARD OF EQUALIZATION OF THE STATE OF ARIZONA; M. A. MURPHY, FRANK LUKE and THAD M. MOORE, Members of Said Commission and Board, Appellants, v. SPENCER S. SHATTUCK and W. F. HOLWAY, Appellees; Appellants Same as in Cause No. 3449, v. GEORGE KINGDON Appellee
• Court: Arizona Supreme Court

38 P.2d 631

44 Ariz. 379

STATE TAX COMMISSION and STATE BOARD OF EQUALIZATION OF THE STATE OF ARIZONA; M. A. MURPHY, FRANK LUKE and THAD M. MOORE, Members of Said Commission and Board, Appellants, v. SPENCER S. SHATTUCK and W. F. HOLWAY, Appellees; Appellants Same as in Cause No. 3449, v. GEORGE KINGDON Appellee

Civil No. 3449

Supreme Court of Arizona

November 27, 1934

APPEAL from a judgment of the Superior Court of the County of Yavapai. M. T. Phelps, Judge. Affirmed.

Mr Arthur T. La Prade, Attorney General, and Mr. Charles L Strouss, Assistant Attorney General, for Appellants.

Messrs Sutter & Gentry, Messrs. Cornick & Crable, and Mr. Martin Gentry, for Appellees.

Messrs Favour & Baker, Mr. A. H. Favour, Mr. A. G. Baker and Mr. A. M. Crawford, Amici Curiae.

OPINION

ROSS, C.J.

The purpose of these two suits is the same, and for that reason they have been presented, argued, and submitted together. They seek to enjoin the state tax commission from assessing and taxing the plaintiffs' intangible property under the provisions of "the Intangible Property Tax Act of 1933" (Laws 1933 [1st Sp. Sess.], chap. 16), the said commission being the body named to administer the act, for the reason, as they assert, that the said act in many of its provisions violates the state and federal Constitutions, and is so uncertain, unintelligible and indefinite as to be incapable of interpretation or construction.

Both parties made motions for judgment on the pleadings, which consisted of the complaint and answer. The motion of plaintiffs was granted, and, the defendants electing to stand on their answer, judgment was entered in favor of plaintiffs as prayed, from which judgment the defendants have appealed.

The contention of the appellants is that the Intangible Property Tax Act is a valid piece of legislation and capable of enforcement, whereas the appellees contend that, for all the reasons set out in their complaint, and for others, it is invalid and unenforceable. The question involved is the sufficiency of the complaint to state a cause of action for injunction against the enforcement of the act. We think the motion by the defendants for judgment on the pleadings, under the circumstances, served the same purpose as a general demurrer. Therfore, if the complaint, for the reasons therein assigned, is good, whether it be the reason or reasons upon which the trial court based its decision or not, it to that extent states a cause for equitable relief.

Those provisions of the act, the validity of which the complaint challenges, we will consider in the order hereinafter followed. We wish first, however, to observe that, until the Intangible Property Tax Act, being chapter 16, First Special Session of the Eleventh Legislature, Laws of 1933, was passed, all property, tangible and intangible, with certain constitutional exemptions, was taxed upon an ad valorem basis at its full cash value. Sections 3066, 3067 and 3068, Rev. Code 1928. However, in the practical administration of the law, either because of the difficulty of locating it or the indifference of assessing officers, intangibles were not often or ever assessed. Tangible property, being easily located, was made to bear all the tax burden. The Intangible Property Tax Act was passed to correct this unjust and unfair discrimination and to make each class bear a fair proportion of the property tax. With the wisdom or unwisdom of the law the court has nothing to do. Its duty is confined to a determination of the power of the legislature to enact the law in its present form and its proper interpretation or construction.

1. It is said that the state Constitution, sections 3 and 9 of article 9, provides that every law imposing a tax shall distinctly state the tax and the objects to which it shall be applied, and that the Intangible Property Tax Act fails to do that, and is therefore void. The pertinent part of section 3 reads:

"No tax shall be levied except in pursuance of law, and every law imposing a tax shall state distinctly the object of the tax, to which object only it shall be applied."

Section 9 reads:

"Every law which imposes, continues, or revives a tax shall distinctly state the tax and the objects for which it shall be applied; and it shall not be sufficient to refer to any other law to fix such tax or object."

Section 3 of the Intangible Tax Act defines the object of the tax to be "to assist in defraying the cost of maintenance of the state government, and to lessen the burden in this regard resting upon tangible property," and provides that the tax shall be paid into the state treasury to the credit of the general fund and applied on appropriations for the maintenance of the state government. The object of the tax as here stated is as general as the purposes for which taxes may be imposed to support the state government. In a revenue bill such as this one, it would be impracticable, if not impossible, more definitely to state the object or objects for which the tax is imposed or levied. Cooley on Taxation, 4th ed., vol. 2, § 500, in discussing constitutional provisions requiring the object of the tax to be stated in the law, says:

"But the purposes of government are so infinite in variety that the specification must for the most part be very general, or the constitution could not be complied with; and it has been held that a statement in a tax law, that the money to be raised is to be paid into the treasury to the credit of the general fund, is a sufficient compliance with the requirement."

This text finds support in the following cases: People v. Supervisors of Orange County, 17 N.Y. 235; People v. Home Ins. Co., 92 N.Y. 328; In re Gross Production Tax of Wolverine Oil Co., 53 Okl. 24, 154 P. 362, L.R.A. 1916F 141; Westinghausen v. People, 44 Mich. 265, 6 N.W. 641; Hillman Land & Iron Co. v. Commonwealth, 148 Ky. 331, 146 S.W. 776, L.R.A. 1915C 929; People v. New York, C. & St. L.R. Co., 353 Ill. 518, 187 N.E. 443.

The law involved in People v. Supervisors of Orange County, supra, provided that the money to be raised should be paid into the treasury of the state, to the credit of the general fund, and this was held a sufficient statement of the object of the tax. The court's reasoning, in part, is as follows:

"The only question is whether the object of the tax is also sufficiently stated. I think it is. The rate of taxation is stated. To state the amount which the tax would produce was of course impossible. This amount, whatever upon the collection of the tax it may prove to be, is not only to be paid into the treasury, but is to be credited to that fund whose office it is to support the state government. Suppose the legislature, instead of merely declaring the general object to which the amount raised by the tax should be devoted, had attempted to accommodate its action to the construction of the constitution for which the defendants now contend, and had not only declared the object of the tax, as it has done, but had gone on to appropriate it as well as it might without knowing what amount would be raised, what would have been the result? Suppose it had been declared in the law, as it was suggested by the distinguished counsel who represented the defendants upon the argument it should have declared, that the money to be raised by the tax should be appropriated to the payment of the salaries of the judiciary, and the expenses of the executive and legislative departments of the government, what then would have been effected more than has now been done? The taxpayers would then have learned, as they now learn, that the general fund was deemed insufficient to defray the expenses of the government and that it was necessary to increase its revenues by taxation. The tax to be collected under such a law would, as under the law in question, be paid into the general fund and would be appropriated as now to the payment of the expenses chargeable upon that fund. In short, the object of the tax in that case would not appear any more distinctly than it now appears. All that could be said in such a case in respect to the object of the law would be, that in the judgment of the legislature, the fund charged with the payment of the expenses of the government needed to be replenished by taxation. This object appears distinctly upon the face of the present law."

We should remember that:

"Every presumption and intendment is in favor of the constitutionality of the act, and the courts will not adopt a doubtful construction to nullify it.... Whenever an act of the legislature can be construed so as to give it effect and avoid a conflict with a constitutional provision, the court will give it such construction." People v. Gilroy, 9 N.Y.S. 686, 688.

In holding that the Intangible Property Tax Law states the object of the tax with sufficient definiteness to comply with the requirements of sections 3 and 9 of article 9 of the Constitution, we have not departed from the rule laid down in Tillotson v. Frohmiller, 34 Ariz. 394, 271 P. 867. A reading of that case will show that the law not only failed to state the object of the tax but that it delegated to the board of directors of state institutions the legislative power of selecting such object.

2. Appellees assert that the power of the legislature to provide taxes is limited by section 3 of article 9 of the Constitution to an annual tax sufficient, with other sources of revenue, to defray the necessary ordinary expenses of the state for each fiscal year; and that the Intangible Tax Act violates such provision by providing for a continuing recurrent, annual ad valorem tax at the same rate each year, regardless of the needs of the state. It is true the tangible property of the state is revalued each year and that the...