State v. McPhail (In re Personal Property Tax in St. Louis Cnty., 1912)

• Decision Date: 23 January 1914
• Citation: 145 N.W. 108,124 Minn. 398
• Parties: In re PERSONAL PROPERTY TAX IN ST. LOUIS COUNTY, 1912. STATE v. McPHAIL.
• Court: Minnesota Supreme Court

124 Minn. 398

145 N.W. 108

In re PERSONAL PROPERTY TAX IN ST. LOUIS COUNTY, 1912.STATE

v.McPHAIL.

Supreme Court of Minnesota.

Jan. 23, 1914.

Appeal from District Court, St. Louis County; Homer B. Dibell, Judge.

In the matter of personal property tax proceedings in St. Louis County for 1912. S. A. McPhail having objected to an assessment of his membership in the Duluth Board of Trade as personal property, and the same having been approved, he appeals from an order denying his motion for a new trial. Affirmed.

Syllabus by the Court

A membership in the Duluth Board of Trade is property.

It is property which the Legislature, under the Constitution of the state, might by appropriate laws tax.

Rev. Laws 1905, s 794, providing that all real and personal property in this state and all personal property of persons residing therein, except exempt property, is taxable, means that all personal property of whatever nature not exempt from taxation shall pay taxes. Under this section a membership in the Duluth Board of Trade was properly taxed as personal property of the member.

Rev. Laws 1905, s 797, providing that ‘personal property shall be construed to include,’ and naming eleven classes of property, does not exempt from taxation or render not subject to taxation personal property not included within any of the classes named.

There has been no such settled construction of the statutes referred to as to justify the application here of the doctrine of practical construction.

The taxation of such a membership does not violate any provision of the federal or state Constitution. Francis W. Sullivan, of Duluth, for appellant.

Charles E. Adams, of Duluth, for the State.

BUNN, J.

Defendant on May 1, 1911, was the owner of one membership in the Duluth Board of Trade. The assessor of the city of Duluth on May 1, 1911, assessed this membership at the sum of $500; $100 was allowed defendant as an exemption, leaving a total assessment of $400. Defendant protested against the assessment of such membership to the assessor, the Board of Equalization, and the Board of Review. In these proceedings to enforce the collection of personal property taxes for 1911, defendant answered the citation served upon him, and the issues were tried by the court. Its decision was that the membership was personal property subject to taxation, and properly taxed under the laws of this state. Defendant moved for a new trial. The motion was denied, and this appeal taken from the order.

[1] 1. The question at the threshold is whether a membership in the Duluth Board of Trade is ‘personal property.’

The general nature of the business of the Duluth Board of Trade is to establish and maintain uniformity in commercial usages; to enforce proper conduct in trade; to adjust controversies and disputes among its members; to acquire and disseminate valuable business information; and to furnish a commercial exchange at Duluth, Minn., in the furtherance of its business pursuits. The Board of Trade has no capital stock. It has a membership of 200, and a certificate of membership is issued to each member. It does not engage in the grain business for profit, but furnishes facilities and conveniences for the transaction of the grain business by its members. It owns and maintains a building and trading room, and furnishes to its members telegraphic and other information as to matters important in the grain trade; it keeps a record of actual transactions upon the board, provides means for arbitrating and settling differences, and does such things as facilitate trading in grain in the same general way as do the various exchanges and boards of trade throughout the country. Its members are required to pay annual dues.

Membership in the Board of Trade can only be transferred upon certain conditions expressed in the articles of incorporation, rules, and by-laws, all of which regulations are intended to prevent men of unfit business character and standing to become members of the board; but such memberships are bought and sold, and have a recognized fluctuating value from time to time and are used as collateral at the banks, and are valued by the Board of Trade in fixing the assets of one of its members. On May 1, 1911, a membership was of the value of from $3,000 to $3,500, and at times prior and after that date the value ranged from $3,000 to $4,800. On May 1, 1911, the Duluth Board of Trade owned real and tangible personal property of the value of $450,000 to $500,000, and taxes were assessed and paid thereon.

We hold that a Board of Trade membership is ‘property.’ We adopt as a part of this opinion the following succinct analysis of the question in the memorandum of the trial court: ‘There is no difficulty in holding that a membership in the Board of Trade is property. It confers a right to do particular business in a particular and advantageous way. It brings the holder in contact with men with whom he may deal. The right to trade upon the floor of the board is substantially essential to the conduct of the grain buying and selling business. A membership has a use value and a buying and selling or market value. It is bought and sold. Its value is considered by the Board of Trade in determining the assets of a member. There is a lien upon it for balances due members. It is used as collateral at the banks. It passes by will or descent and by insolvency or bankruptcy. A few memberships represent in actual cash value more than the lifetime savings of an ordinary active and thrifty man. It is true that there are certain restrictions in the ownership and use of a membership. These may increase or decrease its value, probably in the case of a Board of Trade membership greatly enhance it. They do not prevent its being property.’

The authorities support this view. Hyde v. Woods, 94 U. S. 523, 24 L. Ed. 264, in which Mr. Justice Miller said there could be no doubt that a membership in the San Francisco Stock and Exchange Board was property. Sparhawk v. Yerkes, 142 U. S. 1, 12 Sup. Ct. 104, 35 L. Ed. 915 (seat in New York Stock Exchange); Page v. Edmunds, 187 U. S. 596, 23 Sup. Ct. 200, 47 L. Ed. 318 (membership in Philadelphia Stock Exchange). In these cases it is held that such a membership is property which passes to the trustee in bankruptcy of the member's estate, because it could be ‘transferred’ by the member, was of decided value, and could be sold subject to election by the exchange. ‘While the property is peculiar and in its nature a personal privilege, yet such value as it may possess, notwithstanding the restrictions to which it is subject, is susceptible of being realized by creditors.’ Sparhawk v. Yerkes, supra. In Powell v. Waldron, 89 N. Y. 328, 42 Am. Rep. 301, it was held that a seat in the New York Cotton Exchange was property, and as such passed to a receiver in supplementary proceedings on execution against the owner. In Platt v. Jones, 96 N. Y. 24, a seat in the New York Stock Exchange was held property which passed to the owner's assignee in bankruptcy. In the Matter of Hellman, 174 N. Y. 254, 66 N. E. 809,95 Am. St. Rep. 582, it was held that a seat in the New York Stock Exchange is property subject to the inheritance transfer tax prescribed by a law of the state which defined the words ‘estate’ and ‘property,’ as used in the law, as including ‘all property or interest therein situated within or without the state.’ Further cases to the same effect are: Odell v. Boyden, 150 Fed. 731, 80 C. C. A. 397,10 Ann. Cas. 239;In re Currie, 185 Fed. 263, 107 C. C. A. 369;Nashua Savings Bank v. Abbott, 181 Mass. 531, 63 N. E. 1058,92 Am. St. Rep. 430. That such a membership is a species of property is recognized by decisions of this court. State v. Chamber of Commerce, 77 Minn. 308, 79 N. W. 1026;Evans v. Chamber of Commerce, 86 Minn. 448, 91 N. W. 8;McCarthy v. Chamber of Commerce, 105 Minn. 497, 117 N. W. 923,21 L. R. A. (N. S.) 589.

Defendant points to the definitions of the word ‘property’ in the dictionaries, law dictionaries, and decided cases, and insists that the right to alienate or transfer is an essential incident to property. As has been shown, there is a right to transfer a Board of Trade membership, though such right is subject to the right of the board to disapprove the sale. It is true that the right to dispose of the membership, as well as the right of the member to retain it and use it, is subject to the rules of the board; as expressed in Evans v. Chamber of Commerce, supra, ‘clogged with conditions.’ But that the membership is still ‘property’ we think is true. Whether it is property that is taxable under the laws of the state is another question and will be treated separately. Defendant calls a membership in the Board of Trade a mere personal privilege, and compares it to a membership in a social club, or church. The distinction is, we think, obvious. And the same is true of the reputation of a lawyer, physician, or banker. All these things have a value to the owner, but there is nothing tangible that he may sell for a consideration, put up as collateral, or which may be reached by his creditors. But a membership and seat in a Chamber of Commerce, Board of Trade, or Stock Exchange, not only is often of great value, and may be alienated by the owner, but under the decisions cited, may be reached by his creditors. It may be pledged as collateral, and passed by will or descent. As stated by the trial court and in some of the decisions, the fact that there are restrictions upon the ownership and transfer bears more upon the question of value than it does upon the question whether the membership is property.

[2] 2. And we think that such a membership is personal property of a character that is properly taxable. That is, that the Legislature, under the provisions of the Constitution, has the power to tax property of this character. The Constitution of the state, at the time of the enactment of the laws hereinafter considered, provided that ...