State v. London & Northwest American Mortgage Company

• Decision Date: 22 June 1900
• Docket Number: 12,214 - (263)
• Citation: State v. London & Northwest American Mortgage Company, 83 N.W. 339, 80 Minn. 277 (Minn. 1900)
• Parties: STATE v. LONDON & NORTHWEST AMERICAN MORTGAGE COMPANY
• Court: Minnesota Supreme Court

83 N.W. 339

80 Minn. 277

STATE v. LONDON & NORTHWEST AMERICAN MORTGAGE COMPANY

Nos. 12,214 - (263)

Supreme Court of Minnesota

June 22, 1900

Proceeding in the district court for Ramsey county for collection of delinquent personal property taxes for 1898.The case was tried before Kelly, J., who made findings of fact, and as conclusion of law found that plaintiff was entitled to judgment for $6,349.86, being the amount of the tax on a valuation of $302,374.47.On application of defendantthe court certified to the supreme court for its determination the points stated in the opinion.Modified.

SYLLABUS

Taxes -- Credits Owned by Nonresident Corporation.

A nonresident owning credits in this state which are retained here in the hands of an agent to close up a loaning business may be required to list the same for taxation, and the situs of such property for taxation is the taxing locality where such agent has his office for the transaction of such business.

Taxes -- Insolvency of Corporation -- Winding Up Business.

The fact that such nonresident becomes insolvent, and there is a change of agent, but there remains in the state a portion of such property while in the process of closing up such business, does not relieve such property from contributing its share to the common burdens of taxation.

Taxes -- Deductions for Debts -- Procedure.

Deductions for indebtedness are authorized by the stateconstitution but a statement of such indebtedness must be furnished to the assessor at the time the credits and loans are listed; and it is too late, after the board of equalization has acted upon the assessment, to raise the objection that such deductions have not been in fact made, where such statement was not so furnished.

Taxes -- G.S. 1894, §§ 1526,1527.

The provisions of G.S. 1894, §§ 1526,1527, which require claims for deductions for indebtedness to be made in the first instance to the assessor, as held in State v Willard,77 Minn. 190, are not in violation of sections 1and3, article 9, of our state constitution.

Excessive Valuation -- Reduction by Court.

Where the assessed valuation of personal property is so excessive as clearly to indicate unfairness and injustice, as shown by proof to the trial court upon review, such assessment should be reduced to the actual value of the property, which is a judicial question not controlled by the action of the assessor or board of equalization.

Sp. Laws 1876, c. 212, § 5 -- Action by State Auditor.

Under the provisions of G.S. 1894, § 1652, no abatement of taxes under the provisions of Sp. Laws 1876, c. 212, § 5(applicable only to Ramsey county), is effective without the approval of the state auditor.

W. H. Yardley and F. B. Tiffany, for defendant.

Defendant's credits, evidenced by notes secured by mortgages on real estate situate in Minnesota, were not personal property within the state for purposes of taxation, and were not assessable and taxable as such.As defendant was not a resident of this state, there was no jurisdiction over it.In matter of Jefferson, 35 Minn. 215;State v. Scottish-American Mort. Co.,76 Minn. 155.A credit, which cannot be regarded as situated in a place merely because the debtor resides there, is, as a rule, deemed to have its situs where it is owned, that is, at the domicile of the creditor.An exception, indeed, to this general rule has been recognized, to-wit: Where a nonresident creditor places his credit in the hands of a resident agent for collection or renewal, with a view to reloaning the money and keeping it invested as a permanent business, in such case the creditor is regarded as having given it a "business situs" within the state, and the credit is deemed to have its situs where and so long as it is so controlled, -- that is, at the domicile of the agent.In matter of Jefferson, supra;State v. Scottish-American Mort. Co., supra.The mere fact that the notes and mortgages are or are not in the possession of the agent is immaterial in determining whether the credit has a "business situs," except in so far as the possession of the instruments might be an element in establishing the nature and extent of the control exercised by him.SeeBristol v. Washington Co., infra.Hence credits, though evidenced by promissory notes and mortgages belonging to a nonresident, and in the hands of an agent in the state where the debtor resides for collection, do not thereby acquire a business situs, and are not liable to taxation in the latter state.Myers v. Seaberger,45 Oh. St. 232;Herron v. Keeran,59 Ind. 472;City v. Armour(Miss.)24 So. 224;Finch v. County, 19 Neb. 50.

The taxability of credits belonging to nonresidents has been before this court in City of St. Paul v. Merritt,7 Minn. 198 (258); In matter of Jefferson, supra;State v. Scottish-American Mort. Co., supra.The decisions in these cases establish the following propositions: (1) Except for G.S. 1894, § 1515, subd. 2, requiring agents and attorneys to list personal property by them "invested, loaned, or otherwise controlled," and section 1516 providing that personal property shall be assessed "where the agent resides," there is no legislative authority for assessing or taxing credits belonging to nonresidents.(2) Credits belonging to nonresidents cannot be taxed in Minnesota unless they are in the hands of an agent or attorney whose duty it is to list them as personal property by him "invested, loaned, or otherwise controlled."These decisions also show the limits of the general rule, which exists independently of statute and declares that credits belonging to nonresidents are not properly within the state, and of the exception in the case of credits having a business situs; and show that the present case falls within the rule and not within the exception.The distinction between cases like the Jefferson case, where the agent is compelled to list credits controlled by him as a permanent investment, and cases like the Scottish-American Mortgage Co. case and the present case, where the agent's authority does not extend beyond collection, and he is hence not compelled to list them, is further illustrated by the following cases from other jurisdictions, in most of which the statutory provisions were substantially identical with those in force in Minnesota; and in which the principles declared in the Minnesota cases are affirmed.Myers v. Seaberger, supra;Walker v. Jack,60 U.S. App. 124, 31 C.C.A. 462, 472, note (reversingJack v. Walker,79 F. 138), 96 Fed 578;Goldgart v. People,106 Ill. 25;Finch v. County, supra;City v. Armour, supra;Bristol v. Washington Co.,177 U.S. 133.There is no continuance of a business situs of a credit irrespective of the control of the agent.In matter of Jefferson, supra;Goldgart v. People, supra;Myers v. Seaberger, supra. New Orleans v. Stemple, 175 U.S. 309, is not in point, since it arose under statutes totally different from those of Minnesota, which expressly authorized the taxation of notes and mortgages when found in concrete form within the state.

Under G.S. 1894, §§ 1526,1527, the owner of credits who fails to claim deduction on account of indebtedness when listing the credits with the assessor and in the manner therein provided, is not thereby precluded from thereafter making such claim, although no excuse for such failure be shown.G.S. 1894, §§ 1526,1527, as construed by the trial court, are invalid, on the ground that they are in conflict with Const. art. 9, §§ 1,3."Credits," as used in the constitution, is the excess (if any) of the taxpayer's demands over his debts.State v. Moffett,64 Minn. 292.If no such excess exists, no "credits" exist.Hence, if G.S. 1894, §§ 1526,1527, authorize the assessor in such cases, whenever no claim for deduction was made as therein provided, to make an arbitrary assessment upon "credits," which shall be final, then these sections authorize the taxation of property which does not exist.SeeMcCormick v. Fitch, 14 Minn. 185 (252).

In all cases of arbitrary assessment the taxpayer has, at least, the right to appear before the proper board of equalization, and if it be shown that the excess in the assessor's valuation was so gross that it cannot be accounted for on any ground of mere bona fide misjudgment of value, but must have resulted from fraud, or from demonstrable mistake of fact or of law, or that his valuation did not express any bona fide estimate or opinion on his part as to the value of the property, the assessment must be reduced by the board to such sum as in its bona fide judgment is the true value; and if the board refuses so to do, it is the duty of the district court to pass upon the question and to reduce the assessment when the facts are made to appear upon answer to the citation.County of Otter Tail v. Batchelder,47 Minn. 512;State v. William Deering & Co.,56 Minn. 24.See alsoState v. Board of Public Works,27 Minn. 442;State v. District Court,29 Minn. 62.Failure to list does not deprive the owner of the right to apply for a correction of the assessment to the board of equalization.Thompson v. Tinkcom,15 Minn. 226 (295).To sustain an assessment on "totally worthless" credits would be practically confiscation; and this portion at least of the credits did not exist in any sense that would make it the duty of the owner to list them or that could lawfully make them the subject of taxation.Exchange v. Hines, 3 Oh. St. 1. G.S. 1894, § 1536, in so far as it attempts to compel the valuation of absolutely valueless credits at their face value, or of credits at their face value when it exceeds their true value, is in conflict with Const. art. 9, § 3.McCurdy v. Prugh, 59 Oh. St. 465.

Defendant was entitled to the benefit of the abatement of city and county taxes...