Stroh v. City of Detroit

• Court: Supreme Court of Michigan
• Writing for the Court: HOOKER
• Citation: 131 Mich. 109,90 N.W. 1029
• Decision Date: 17 June 1902
• Parties: STROH v. CITY OF DETROIT et al.

131 Mich. 109
90 N.W. 1029

STROH
v.
CITY OF DETROIT et al.

Supreme Court of Michigan.

June 17, 1902.

Certiorari to circuit court, Wayne county; Robert E. Frazer, William L. Carpenter, Joseph W. Donovan, Flavius L. Brooke, Morse Rohnert, and George S. Hosmer (dissenting), Judges.

Mandamus by Julius Stroh against the City of Detroit and another, to compel the vacation of a tax assessment. Judgment for relator, and respondents bring certiorari. Affirmed.

[90 N.W. 1029]

Timothy E. Tarsney and P. J. M. Hally, for appellants.

Henry M. Duffield and H. H. Hatch, for appellee.

HOOKER, C. J.

The Stroh Brewing Company is a corporation organized under the laws of the state of West Virginia. All but one of its stockholders reside in Detroit, where its principal place of business is located,

[90 N.W. 1030]

and where all of its property is situated and assessed for taxes.

The authorities having assessed the relator for the value of his shares of stock in said corporation for city taxes for the year 1902, the circuit court ordered this assessment vacated, and the city has removed the case to this court by certiorari. The constitution of this state requires that there be a uniform rule of taxation, and we have held that this forbids double taxation, and while double taxation may occur under any law, and that fact may, perhaps, not invalidate an act not intended nor calculated to impose it, and may not invalidate assessments made under it and according to its provisions, a law which in its terms necessarily requires it, under ordinary conditions, must be held invalid or so construed as to avoid it. Comstock v. Grand Rapids, 54 Mich. 641, 20 N. W. 623;Attorney General v. Supervisors, 71 Mich. 16,38 N. W. 639;Standard Life & Accident Ins. Co. v. Board of Assessors of Detroit, 95 Mich. 468, 55 N. W. 112;Detroit Citizens' St. Ry. Co. v. Common Council of Detroit, 125 Mich. 675, 85 N. W. 96,86 N. W. 809.

In this instance, all of the property of the corporation being in Detroit and substantially all of the stock being owned there, the effect of these assessments is to impose a double burden on the owners of the corporate shares, for it is undeniable that they bear the burden of the tax imposed upon the corporation, inasmuch as the shareholders constitute the corporation and indirectly own its property. The severity of these assessments is the more apparent, though not more real, because they include all of the property and substantially all of the shareholders of the corporation. If a small portion of the property were situate, and a small proportion of the stockholders resided, here, or if the property and shareholders were scattered over the state, the difficulty of making assessments which should reach all the shareholders and all of the property without making a double burden would be great. There is no method provided for doing this, and it is doubtful if a rule could be made by which assessors could in all cases accomplish it.

Did the law provide for the assessment of all shareholders upon their shares in domestic corporations, and of all corporate property to the corporation, we should hesitate to say that such law was not in violation of the constitutional provision requiring uniformity. We are aware that many courts have held that such laws do not require double taxation, upon the very technical reasoning that the tax is not levied upon the same property, and that it is not imposed upon the same person, both of which propositions are true in a sense, but are also untrue in another substantial sense, as stockholders are likely to learn if the action of the authorities in this case is sustained. So, several of the text-books assert that the weight of authority sustains the rule that the states may impose taxes upon both corporation and stockholder, though, without exception, they admit the severity and injustice of such measures, and say that the courts will never permit it where the law is susceptible of another construction. This practice is so palpably unjust that Michigan does not tax shareholders in domestic corporations where the property of the corporation is taxed. It does not even tax private persons upon property invested in business outside of the state, provided they do not invest in business conducted by foreign corporations; thereby maka most invidious discrimination against the latter, and in favor of the former, class, for they relentlessly tax a citizen who invests in a corporate business outside of the state, and the law goes so far, if technically construed, as to tax the resident stockholder in a foreign business corporation, although such corporation conducts all of its business in this state, and is here taxed upon all of its property; and this is what the authorities of Detroit seek to accomplish in this case. The policy of taxing property here which is not in this state, and which is taxed elsewhere, is an unjust and narrow one, and one well calculated to impede the progress of the state. While we were obliged to hold in Bacon v. Board, 126 Mich. 22, 85 N. W. 307, that the law might tax citizens whose property was invested in corporations in other states, the corporate property not being in Michigan, we were careful not to recognize the practice as either just or politic.

The following quotation from a distinguished law writer indicates the policy of the more progressive states: ‘It is undoubtedly within the constitutional power of the legislature of a state to enact a statute that persons residing in that state who are stockholders in a corporation created by another state shall be taxed on their shares of stock at their residence within the former state. This principle of law is based on the fact that shares of stock are personal property; that they are distinct from the corporate property, franchises, and capital stock; that they follow the domicile of their owner like other personal property; and that consequently he may be taxed therefor wherever he may reside. It accordingly is a question of policy and expediency with a state whether or not it will tax its citizens who are stockholders in foreign corporations. A few of the states levy such taxes, but New York pursues the more broad and liberal policy that shares of stock should not be taxed where the corporation is already taxed; that the state which furnishes facilities to the corporation for the earning of dividends should have the sole benefit of...