Stevenson v. Metsker

• Decision Date: 19 March 1930
• Docket Number: 29,522
• Citation: 130 Kan. 251,286 P. 673
• Parties: I. C. STEVENSON, Plaintiff, v. J. F. METSKER, as County Treasurer of Douglas County, Defendant
• Court: Kansas Supreme Court

286 P. 673

130 Kan. 251

I. C. STEVENSON, Plaintiff, v. J. F. METSKER, as County Treasurer of Douglas County, Defendant

No. 29,522

Supreme Court of Kansas

March 19, 1930

Decided January, 1930.

Original proceeding in mandamus.

Writ denied.

SYLLABUS

SYLLABUS BY THE COURT.

TAXATION--Shares of Bank Stock--Discrimination. Shares of state bank stock assessed to shareholders take the intangible rate of taxation because, disregarding form and regarding substance only, the foundation for the tax burden which shareholders must bear consists essentially of intangibles which are classifiable under the amended constitution, and which have been classified and given a low rate by the legislature. Therefore, the difference in rate of taxation on intangibles reached for taxation through shareholders, and rate of taxation on real estate and tangible personal property under general law, does not constitute unlawful discrimination requiring real estate and tangible personal property to be assessed and taxed at the intangible rate.

C. E. Lindley, of Lawrence, and J. G. Egan, assistant attorney-general, for the plaintiff; William A. Smith, attorney-general, of counsel.

C. B. Randall, attorney for the State Tax Commission, for the defendant.

John L. Hunt, attorney for the Kansas Bankers' Association, as amicus curiae.

Burch J. Johnston, C. J., Marshall, Dawson, Hutchison and Jochems, JJ., concurring. Harvey, J. dissenting.

OPINION

BURCH, J.

The action is one of mandamus commenced in this court, which has original jurisdiction in such cases. The petition was filed on March 1, 1930. The cause was advanced, and was set for hearing on March 5, on application for a peremptory writ. On March 5 the cause was submitted on oral arguments and typewritten briefs. The court conferred immediately after the arguments were concluded, and decided the writ should be denied. The decision was announced at once, and the purpose of this opinion is to state the reasons for the court's judgment.

The petition alleged, in substance, that plaintiff is the owner of real estate in the city of Lawrence, in Douglas county; that the first half of the taxes assessed against the real estate for the year 1929, at the general-property rate, was duly paid in December, 1929, and the second half of the taxes was payable on or before June 20, 1930; that on February 20 plaintiff tendered to the county treasurer of Douglas county, as full payment for the second half, a sum of money sufficient to discharge the taxes if computed at what is known as the intangible rate, which is much lower than the general-property rate, and that the tender was refused. The prayer was that a peremptory writ issue requiring the county treasurer to accept the tender and to receipt in full for the whole amount of the second half of the taxes.

Previous to 1923 sections 1 and 2 of article 11 of the state constitution, relating to finance and taxation, read as follows:

"§ 1. The legislature shall provide a uniform and equal rate of assessment and taxation; but [provision relating to exemption from taxation].

"§ 2. The legislature shall provide for taxing the notes and bills discounted or purchased, moneys loaned, and other property, effects, or dues of every description (without deduction) of all banks now existing, or hereafter to be created, and of all bankers; so that all property employed in banking shall always bear a burden of taxation equal to that imposed upon the property of individuals."

The legislature of 1923 submitted to the qualified electors of the state an amendment of these sections, reading as follows:

"SECTION 1. . . . That sections 1 and 2, article 11, be amended and combined into one section, to read as follows: Section 1. The legislature shall provide for a uniform and equal rate of assessment and taxation, except that mineral products, money, mortgages, notes and other evidence of debt may be classified and taxed uniformly as to class as the legislature shall provide. [Provision relating to exemption from taxation.]" (Laws 1923, ch. 255.)

The amendment was adopted by a vote of 250,813 for to 196,852 against. Under authority of the amendment, the legislature enacted the mortgage-registration law, the intangible-tax law, and the secured-debts law, providing for low rate of taxation on classified property, which, for convenience, will be called the intangible rate. In the case of Voran v. Wright, 129 Kan. 601, 284 P. 807, the court decided, in substance, that shareholders in state banks were entitled to the benefit of the intangible rate, and plaintiff's contention is based on his interpretation of the effect of that decision.

The problem for solution in Voran v. Wright involved application of the intangible rate in taxation of shares of state bank stock. The relation of the intangible rate to the general tax law of the state was not involved, and the question presented in this case was not decided. Students in accredited law schools, all of which use the case method of instruction, are taught that a court decision is not authoritative except with respect to the matter decided, and that the language of a judicial opinion is to be construed as referring to the subject under decision. In this instance the court did not put on "syllogistic seven-league boots" and leap from a particular premise to a universal conclusion which would wreck the tax system of the state and plunge the state into financial chaos.

The precise contention of plaintiff is this: A share of bank stock is not property falling within any of the classes mentioned in the amendment to the constitution. It is not a mineral product, nor money, nor mortgage, nor note, nor other evidence of debt. Therefore, a share of bank stock is simply a species of common unclassified property. Under the decision in the Voran case a share of state bank stock is to be taxed at the intangible rate. This being true, other common unclassified property, such as plaintiff's land, must be taxed at the intangible rate. Unless so taxed, land is discriminated against, and the discrimination is unlawful under the uniform and equal-rate clause of the constitution.

By way of approach to solution of the problem, it may be observed that deductive reasoning may land us in endless difficulty. Refractory facts cannot be reconciled with the conclusions, and it becomes necessary to reexamine premises. It will be recalled that Adam Smith created a science of political economy on the premise of an economic man. The economic man is dead, and economists jest among themselves as to who killed him. When legal theory finds itself confronted with contradictory theory in the field of taxation, it may be necessary to retreat to the low and humble ground of fact, and try to make the law conform to fact. Otherwise we might have the result of the famous fight between the gingham dog and the calico cat. Quarreling theories might eat each other up, and there would be no money to run the government. In this state the difficulty arises in the adjustment of taxation, placed in constitutional strait-jacket when life was simple, to the complexities and heterogeneities of a highly developed, progressive, industrial society.

It will be observed that section 2 of article 11 of the constitution, before it was amended, prescribed in detail a method for taxing banks. A tax law was framed according to the constitution, and state banks were organized and employed property in the business of banking. Then came the national banking system, and congress made a concession to the states relating to taxation of national banks.

The power to tax is an attribute of the state's own political sovereignty, and it has full power to tax its own people and property in its own way. In the case of Michigan Central Railroad v. Powers, 201 U.S. 245, 50 L.Ed. 744, 26 S.Ct. 459, the supreme court of the United States, speaking through Mr. Justice Brewer, said:

"We have had frequent occasion to consider questions of state taxation in the light of the federal constitution, and the scope and limits of national interference are well settled. There is no general supervision on the part of the nation over state taxation, and in respect to the latter the state has, speaking generally, the freedom of a sovereign both as to objects and methods. It was well said by Judge Wanty, delivering the opinion of the circuit court in this case:

"'There can at this time be no question, after the frequent and uniform expressions of the federal supreme court, that it was not designed by the fourteenth amendment to the constitution to prevent a state from changing its system of taxation in all proper and reasonable ways, nor to compel the states to adopt an ironclad rule of equality, to prevent the classification of property for purposes of taxation, or the imposition of different rates upon different classes. It is enough that there is no discrimination in favor of one as against another of the same class, and the method for the assessment and collection of the tax is not inconsistent with natural justice.'" (p. 292.)

The federal statute relating to state taxation as affecting national banking is a statute removing to a limited extent the bar to exercise of the state's power to tax a federal agency. All the property and effects of national banks except real estate, were withheld from taxation by the state, just as public buildings of the federal government, situated within the territory comprising the state, are withheld from the state's jurisdiction to tax. That did not prevent the state from taxing its own banks according to its own constitution. The federal government had no interest in that subject. Its sole interest was, and is, to see that the limited jurisdiction conceded to the...