The State ex rel. Orr v. Buder
| Decision Date | 13 April 1925 |
| Docket Number | 25729 |
| Parties | THE STATE ex rel. ISAAC H. ORR and ST. LOUIS UNION TRUST COMPANY v. WILLIAM BUDER, Assessor and President of Board of Equalization of City of St. Louis, et al |
| Court | Missouri Supreme Court |
Record of Board of Equalization quashed.
Bryan Williams & Cave for relators.
(1) The Trust Company is authorized under the laws of Missouri to invest in and hold shares of stock in business and manufacturing companies and other corporations. R. S. 1919 sec. 11799. (2) The property of a manufacturing or business corporation is assessed and taxed against the corporation. R S. 1919, sec. 12775. (3) But the shareholders of manufacturing or business corporations are not subject to taxation on account of their shares. State ex rel Gardner v. Harris, 286 Mo. 262; State ex rel. Campbell v. Brinkop, 238 Mo. 298; State ex rel. Koeln v. Lesser, 237 Mo. 310; Valle v. Ziegler, 84 Mo. 214. (4) The Realty Company was a business corporation, and the shares of stock held by the Trust Company in the Realty Company were not subject to taxation. Authorities supra. (5) The Realty Company was an existing entity, different and distinct from the Trust Company, and the fact that the Trust Company owned the stock of the Realty Company did not subject the shareholders of the Trust Company to the payment of taxes on property owned by the Realty Company. Gramophone and Typewriter, Ltd., v. Stanley, 2 Kings Bench L. R. (1906) 856; Washburn Co. v. Bliss, 105 A. 179; State ex inf. v. Railroad, 237 Mo. 338; Cummings v. Parker, 250 Mo. 427; Wann v. Scullin, 210 Mo. 429; Exchange Bank v. Macon Co., 97 Ga. 1.
Oliver Senti and A. H. Bader for respondents.
(1) Government bonds in which the capital, surplus, profits, premiums or earnings of a trust company are invested, are included in the amount which is taxable against the shareholders of such trust company. State ex rel. v. Brinkop, 238 Mo. 298. (2) The extent of the power of a corporation is measured by the terms of the state statutes creating it or relating to it, and it can rightfully exercise only such powers as are expressly granted, or such incidental powers as are necessary to the carrying on of the business for which it is established. Trust companies are given no power or authority under the statutes to engage in the realty and securities business, either directly or indirectly. They are limited to the powers granted under Sec. 11799, R. S. 1919, and the enumeration of such powers excludes all others. The purchase of all the shares of stock of the St. Louis Realty & Securities Company by the Trust Company is ultra vires, unlawful and void. R. S. 1919, sec. 11799; State ex inf. v. Lincoln Trust Co., 144 Mo. 562; State ex inf. Harvey v. Missouri Athletic Club, 261 Mo. 576; Hunting Club v. Kessler, 252 Mo. 424; Millinery Co. v. Trust Co., 251 Mo. 553. (3) The grant of authority to trust companies to buy, invest in and sell all kinds of Government, state, municipal and other bonds and all kinds of negotiable and non-negotiable paper, stocks, or other investment securities, carries with it neither the express nor the implied authority to purchase all the stock of other corporations for the purpose of directly or indirectly controlling their management, but confers only the power to deal in such paper in the course of the business for which the trust company is incorporated, and not otherwise. Luehrman v. Lincoln Trust Co., 192 S.W. 1033; State ex inf. v. Railroad, 237 Mo. 338; Millinery Co. v. Trust Co., 251 Mo. 553. (4) The Trust Company has violated the provisions of its charter, the Constitution and the laws and public policy of the State. It was not authorized to hold all the stock or to engage in the operation of the Realty & Securities Company, either directly or indirectly, nor to conduct and operate the business of said company which is not shown to be necessary or incident to the business of the Trust Company. A corporation, and particularly a trust company, has no right to own all or the majority of the stock of another corporation unless that right is especially conferred by statute. State ex inf. v. Trust Co., 144 Mo. 562; State ex rel. v. Bank, 157 Mo.App. 557. (5) The Trust Company has no power or authority under the laws to contribute its assets or property to a business or manufacturing corporation in order to create a surplus, or for any other purpose, whether it owns all the stock of such corporation or the majority of such stock or only one share. R. S. 1919, sec. 11799; Luehrman v. Lincoln Trust Co., 192 S.W. 1026; Millinery Co. v. Miss. Valley Tr. Co., 251 Mo. 553. (6) The Trust Company, by unlawfully diverting its funds for the purpose of defeating the imposition of taxes, has perpetrated a fraud in law and such funds remain taxable to the same extent and in the same manner as if such diversion had never taken place; and the fraud become more culpable when such funds are diverted to a corporation in which the trust company owns all the stock. Holly Springs Sav. & Ins. Co. v. Marshall Co., 52 Miss. 281; Mitchell v. Commissioners, 9 Kan. 344, 91 U.S. 206; Shotwell v. Moore, 129 U.S. 590; In re People's Bank, 203 Ill. 300. (7) Sec. 12775, R. S. 1919, authorizes the deduction from the total of the capital, reserved funds, profits, premiums or earnings, and all other values . . . the value of real estate, if any, represented by such shares of stock. This must be strictly construed, and those claiming exemptions thereunder must establish their right beyond a reasonable doubt, and in the construction thereof the intention of the Legislature must be ascertained to give such effect. State ex rel. v. Tax Commission, 282 Mo. 219; State ex rel. v. Board of Equalization, 256 Mo. 463.
Jesse W. Barrett, Attorney-General, and J. Henry Caruthers, Assistant Attorney-General, for respondents.
Where a change or shift is made in the custody or character of property for the sole purpose of defrauding the Government of its just dues, and to enable a party to escape the payment of his just proportion of the taxes imposed by law, such party cannot shelter himself behind such change or shift so as to escape taxation. Crowder v. Riggs, 153 Ind. 158; Holly Springs S. & I. Co. v. Marshall County, 52 Miss. 287; Jones v. Seward County, 10 Neb. 154; Sisler v. Foster, 72 Ohio St. 437; Mitchell v. Commrs., 9 Kan. 344; Ransom v. City of Burlington, 111 Iowa 78; In re People's Bank of Vermont, 203 Ill. 303; Mitchell v. Commissioners, 91 U.S. 208; Shotwell v. Moore, 129 U.S. 590; Lumber Company v. Township of Elmer, 123 Mich. 61; Poppleton v. Yamhill County, 8 Ore. 337; Stifel v. Brown, 24 Mo.App. 102.
Solon T. Gilmore and E. F. Halstead for intervener.
Since the tax proceeding in question was a valuation of the shares of stock of the trust company, from which no deduction is permissible other than for real estate owned by the trust company and in those cases necessary to prevent double taxation, the assessment in question should be upheld. Sec. 12775, R. S. 1919; 6 Fed. Stat. Ann. (2 Ed.) 796; Van Allen v. Assessors, 3 Wall. 573; Bank Tax Case, 2 Wall. 200; Sections 6 and 7, Article X, Mo. Constitution; State ex rel. Miller v. Shryack, 179 Mo. 424; State ex rel. Campbell v. Brinkop, 238 Mo. 298; State ex rel. Gardner v. Harris, 286 Mo. 262; State ex rel. Koelen v. Lesser, 237 Mo. 310.
White, J. All concur, except Atwood, J., not sitting.
This is an original proceeding by certiorari, whereby the relators seek to quash the record and proceedings of the Board of Equalization of the City of St. Louis in assessing certain of their property for taxation.
The St. Louis Union Trust Company returned for taxation, as of June 1, 1923, its property listed as follows:
The item in this list of "Book Value Corporation Stock $ 9,912,658.92", is explained in an exhibit attached listing about twenty corporations in which the Trust Company held stock aggregating in value the sum mentioned. On that list is the following item:
St. Louis Realty & Security Co., 250 shares
Book Value
Deduction of the book value of the corporation stock held by the Trust Company, amounting to nearly ten million dollars, was on the ground that the corporations in which that stock was held were taxed on the value of their taxable assets, and the shareholders in such corporation were not taxed as such.
The District Deputy Assessor, Mr. John H. Bole, who received the list, allowed all the deductions except the item of $ 2,371,215.69, representing the stock in the St. Louis Realty & Security Company. He added it to the $ 895,068.19, returned as subject to taxation. The Trust Company took the matter before the Board of Equalization of the City of St. Louis, and that Board likewise disallowed the deduction claimed by the Trust Company.
The book value of the stock in the Realty Company was made up in this way:
95,794.88
Total Book Value
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