State v. Pioneer Sav. & Loan Co.

• Decision Date: 02 December 1895
• Citation: 65 N.W. 138,63 Minn. 80
• Court: Minnesota Supreme Court
• Parties: STATE v. PIONEER SAVINGS & LOAN CO.

63 Minn. 80

65 N.W. 138

STATE

v.PIONEER SAVINGS & LOAN CO.

Supreme Court of Minnesota.

Dec. 2, 1895.

(Syllabus by the Court.)

Held that section 35, c. 236, Laws 1889 (section 2889, Gen. St. 1894), and sections 34, 35, c. 131, Laws 1891 (sections 2888, 2889, Gen. St. 1894), are unconstitutional, for they exempt from taxation in this state a substantial portion of the personal property of building and loan associations doing business within and without this state, contrary to the provisions of section 3, art. 9, of the constitution.

Case certified from district court, Hennepin county; Robert D. Russell, Judge.

Action by the state of Minnesota against the Pioneer Savings & Loan Company. Judgment having been ordered for plaintiff, the cause was certified to the supreme court. Affirmed.

George D. Emery, Cross, Carlton & Cross, Rea, Hubachek & Healey, A. Ueland, H. W. Benton, C. H. Childs, B. Sutherland, Haynes & Chase, and Benton & Molyneaux, for appellant.

H. W. Childs, Atty. Gen., Geo. B. Edgerton, Asst. Atty. Gen., A. H. Nunn, and F. M. Nye, for the State.

START, C. J.

The defendant is a building and loan association, incorporated under the general laws of this state, having its general office and place of business at Minneapolis, and doing business within and without the state, as a national association. On May 3, 1893, it having been required by the assessor to return to him a statement of its personal property for taxation, it returned only one item, viz. office furniture and fixtures, of the value of $500. The assessor was not satisfied with the return, and, after due notice to the defendant, added to its assessment the aggregate amount of $45,800 for moneys and credits, and on this basis it was assessed for taxes on personal property for the year 1893. The taxes were not paid, and proceedings were instituted in the district court of the county of Hennepin for their collection; and upon a trial thereof the court found that the amount so added by the assessor was excessive in the sum of $10,289, and reduced the amount of the taxes accordingly, and ordered judgment against the defendant for the balance. At the request of the defendant, the trial court certified the case to this court, under the provisions of section 1589, Gen. St. 1894. As we construe the certificate of the trial court, the statement of facts, and decision attached thereto, there is only one question before us for decision, viz. the constitutionality of sections 34 and 35 of chapter 131 of General Laws of 1891 (sections 2888, 2889, Gen. St. 1894). They read as follows:

“Sec. 34. Every such association shall be assessed for and pay taxes upon its office furniture and fixtures, and all real estate acquired in the course of its business.

“Sec. 35. The amount standing to the credit of each member of any such association upon its books shall be considered and held as the individual credit of such member; and each member shall list the shares held by him, for taxation, at their real value in money, in the county of his residence, the same as other credits are listed, except shares on which loans have been made or money advanced by the association.”

It is conceded by both parties that these provisions apply to the defendant, and, if they are constitutional, that none of its personal property can be assessed to it and taxed, except its office furniture and fixtures, and that its return to the assessor was correct, and his action in adding to it was unauthorized. The state, however, contends that these provisions of the statute impinge on sections 1 and 3, art. 9, of the constitution, the here material parts of which are as follows:

“Section 1. All taxes to be raised in this state shall be as nearly equal as may be, and all property on which taxes are to be levied shall have a cash valuation and be equalized and uniform throughout the state.”

“Sec. 3. Laws shall be passed taxing all moneys, credits, investments in bonds, stock, joint-stock companies or otherwise, and also all real and personal property, according to its true value in money.”

These provisions of the fundamental law of the state are imperative, and require that taxes shall be uniform and equal, as near as may be, and that all property not exempted by the constitution shall be taxed according to its true value in money. The method of securing these results is left with the legislature, and the mere fact that the statute here in question seeks to take building and loan associations of the class to which the defendant belongs out of the operation of the general tax laws of the state does not make the statute unconstitutional, provided it secures substantial equality of taxation of all of the property held or owned by the class for whose benefit the law was enacted. But, whatever the method adopted, the legislature cannot, directly or indirectly, exempt any property from taxation which the constitution does not so exempt. The test, then, of the validity of the statute we are considering is whether or not it, in effect, exempts from taxation any substantial part of the property of the building and loan associations to which it applies. These associations, including the defendant, are corporations of this state. Their legal existence, right to do business, to hold property, and to protect and enforce their property rights, all depend upon our laws. Their moneys, credits, and other property within this state, no matter what the relations, duties, or obligations of the associations to their shareholders may be, are therefore subject to taxation in this state. All of their moneys, although they are received from a large number of shareholders, widely separated, and must be returned to them, with accrued profits, are, nevertheless, the property of the association, which is protected by our laws, and has a situs in this state. In re Jefferson, 35 Minn. 215, 28 N. W. 256.

This brings us to the pivotal question in this case. Do these sections 34 and 35 (sections 2888, 2889, Gen. St. 1894) provide a method whereby substantially all of the property of these associations are taxed? Counsel for the defendant answer the question in the affirmative, and support their conclusion by four printed briefs, in which the question is exhaustively and ably discussed, and authorities cited. We cannot here review the several arguments in detail. They may, however, be fairly summarized as follows: (a) While the constitution requires all property not exempted by it to be taxed according to its true value in money, the method of taxation is left with the legislature, and it may provide for the taxation of each item of the property of a corporation specifically, or substitute for this method the taxation of its stock, which represents its property; that double taxation ought to be avoided, and that, where a law exempts from taxation the specific items of the personal property of a corporation, but provides for the taxation of its entire stock, the law is constitutional. (b) That the legislature, by section 35, has provided for the taxation of all of the stock of these associations. (c) Therefore, section 34, which, by necessary implication, exempts from taxation the personal property of such associations, except their office furniture and fixtures, is...