United States Smelting, Refining & Mining Co. v. Haynes

• Decision Date: 06 January 1947
• Docket Number: 6931
• Citation: 176 P.2d 622,111 Utah 172
• Parties: UNITED STATES SMELTING, REFINING & MINING CO. v. HAYNES, County Treasurer
• Court: Utah Supreme Court

176 P.2d 622

111 Utah 172

UNITED STATES SMELTING, REFINING & MINING CO. v. HAYNES, County Treasurer

No. 6931

Supreme Court of Utah

January 6, 1947

Appeal from District Court, Third District, Tooele County; C. E Henderson, Judge.

Action by the United States Smelting, Refining & Mining Company against Phares Haynes, as County Treasurer of Tooele County to recover a tax paid under protest. From a judgment for plaintiff, defendant appeals.

Reversed.

Grover A. Giles, Atty. Gen., Zar E. Hayes and Arthur H. Nielsen, Deputy Attys. Gen., and A. Pharis Johnson, Co. Atty., of Tooele, for appellant.

Cheney Jensen, Marr & Wilkins, of Salt Lake City, for respondent.

Larson, Chief Justice. McDonough, Wade and Wolfe, JJ., concur. Pratt, Justice (dissenting).

OPINION

Larson, Chief Justice.

This action involves the construction of Sec. 80-5-57, U. C. A. 1943, relative to determining the base or valuation of metalliferous mines for tax purposes. As far as pertinent to this case, the statute reads:

Section 80-5-56.

"All metalliferous mines and mining claims, both placer and rock in place, shall be assessed at $ 5 per acre and in addition thereto at a value equal to two times the net annual proceeds thereof for the calendar year next preceding * * *."

Section 80-5-57 defines the phrase "Net annual proceeds," and provides in part:

"The words, 'net annual proceeds,' of a metalliferous mine or mining claim are defined to be the gross proceeds realized during the preceding calendar year from the sale or conversion into money or its equivalent of all ores from such mine or mining claim extracted by the owner or lessee, contractor or other person working upon or operating the property, including all dumps and tailings, during or previous to the year for which the assessment is made, less the following, and no other, deductions: * * *."

The matter resolves upon the question as to how the gross proceeds realized are to be determined. The issue grows out of the following facts: Plaintiff and respondent, hereinafter called the mine, operates a smelting and refining business and also owns and operates in the state of Utah a certain metalliferous mine called the Hidden Treasure. For the calendar year 1943, the State Tax Commission, hereinafter called the commission, fixed the net proceeds of the smelter's mine at the sum of $ 18,962.88, which was doubled, and a tax base fixed at $ 37,926. On such valuation Tooele County levied a tax for the year 1944 in the sum of $ 667.50, which amount was paid under protest and this action instituted against defendant as County Treasurer, hereinafter called the county, to recover the amount so paid.

During the present World War, and to prevent or control inflation, the Federal Government set up Office of Price Administration, which fixed or prescribed ceiling prices on the sale of many articles including metals. Finding it necessary or advisable to increase the production of certain strategic metals without disturbing the price structure, the government set up the Metal Reserve Company to carry out a plan jointly arranged by the War Production Board and the Office of Price Administration designed to increase the output of such metals. This plan provided for the fixing of certain quotas of production for non-ferrous metal mines, and permitted the Metal Reserve Company to pay to the producer of metals a fixed subsidy or "premium payment" per pound over and above the O. P. A. ceiling price for metals produced by the mine in excess of its fixed quota. These payments were designed to encourage and make possible the mining, extraction and refining of submarginal ores which otherwise would not be "pay-dirt." They were paid to the producer by the Metal Reserve Company monthly upon certificates from the smelter showing the quantity of the various metals, over the assigned quota, delivered to the smelter from the mine.

Under the facts as stipulated in the trial court, the commission included in the gross proceeds of the mine the premium payments made by the Metal Reserve Company for over-quota production. Had these premium payments not been included in the computation of gross proceeds, there would have been no taxable net proceeds. The mine contends these payments were bounties or subsidies and not proceeds realized from ores extracted from the mine. The sole question for our determination is: Are premium payments to be included in computing gross proceeds realized from ores extracted from the mines within the meaning of Section 80-5-57, U. C. A. 1943? The argument hinges upon the meaning of the phrase

"The gross proceeds realized * * * from the sale or conversion into money or its equivalent of all ores from such mine * * * extracted by the * * * person working upon or operating the property."

The county argues that these words cover and include all moneys received from, or on account of, the extraction of metalliferous ores which have been sold or rendered and converted into such condition that its monetary value is readily ascertainable. The mine contends that the words include only money or its equivalent received from a purchaser as the price the purchaser pays for the metals sold to it by the mine. In examining the expression, we first note the word proceeds. Perhaps the best definition is that given by the Nebraska court in State ex rel. Ledwith v. Brian, 84 Neb. 30, 120 N.W. 916, 917, where it is defined as "the amount proceeding or accruing from such possession or transaction" -- the "yield, issue product." The Texas court in Ladd v. Upham, Tex. Civ. App., 58 S.W.2d 1037, 1039, quoted with approval the foregoing definition and added the words "income, receipt, or return." Valuation is figured on the proceeds realized. Money, property or profits realized usually means brought into possession. Lorillard v. Silver, 36 N.Y. 578. The word does not include paper profits or estimated profits. Taylor v. Commissioner of Internal Revenue, 7 cir., 89 F.2d 465. Realize is usually used in contrast to "hope" or "anticipation." Lorillard v. Silver, supra. But it need not be "cash in hand" to be realized gain or income, since for taxation purposes income is "received" or "realized" when it is made subject to the will and control of the taxpayer, and can be, except for his own action or inaction, reduced to actual possession. Loose v. United States, 8 Cir., 74 F.2d 147, 150. Taxes assessed and payable in one year, but not actually collected until the next year are nevertheless revenues "realized" as of December 31st of the year assessed within a statute providing that revenues realized for the first year should be applied to certain indebtedness. Houston County v. Peach County, 168 Ga. 813, 149 S.E. 219, 220. When a taxpayer obtains money by issuing an obligation which he later discharges for less than face value, taxable gain exists, since money need not be sold or exchanged to be "realized." Commissioner of Int. Rev. v. American Chicle Co., 2 cir., 65 F.2d 454. And where corporation bought assets of another corporation, and assumed payment of seller's bonds, differences between face of bonds purchased in 1922, 1924 and 1925 and sums less than face paid therefor were taxable as "realized gains" absent proof that the buyer suffered a loss on the whole transaction. Helvering v. American Chicle Co., 291 U.S. 426, 54 S.Ct. 460, 78 L.Ed. 891. When used in connection with the conversion of claims or demands into money "realize" is a very broad term. Bittiner v. Gomprecht, 28 Misc. 218, 58 N.Y.S. 1011, 1013.

We conclude that "the gross proceeds realized" as used in this section of the statute, means the total or whole amount in money, or other things of value, that has been received or which the owner may receive or take possession of at his pleasure, or to which he is entitled on demand, and which accrues to him from the sale or conversion into money or its equivalent of ores extracted from the mine or mining claim.

Are the "premium payments" money received from a sale or conversion into money or its equivalent of ores extracted from the mine or mining claim? That the "premium payments" are tied tight to ores extracted from a mining claim is not disputed, nor could it well be. These payments are made only on the metals produced from a mine or mining claim over the assigned quota. But the statute confines the tax base to proceeds realized from: (a) a sale of ores or metals; (b) a conversion of ores or metals into money or the equivalent of money. We consider them in the reverse order.

Premium payments apply only to ores shipped to the smelter or reduction works. They are made on the basis of the determined metal content of the precipitates and concentrates delivered to the smelting company. In other words, the premium payments are made only on and when the ores extracted from the mine are converted into concentrates or bullion where the quantity of the various metals is readily determinable and the value thereof easily computable. When the extracted ores have been converted or refined into metals in such form that they have a ready market at definite or readily determinable prices so that at any time the miner can dispose of them and receive the money therefor, they have been converted into the equivalent of money, and are to be included in the computation of gross proceeds for the purpose of fixing valuation or tax base. Salt Lake County v. Utah Copper Co., 10 Cir., 93 F.2d 127 (certiorari denied 303 U.S. 652, 58 S.Ct. 750, 82 L.Ed. 1112). See also Sec 80-5-59, U. C. A. 1943; Mercur Gold Mining & Mill. Co. v. Spry, 16 Utah 222, 52 P. 382. But in fixing the value or monetary equivalent of the refined metals bullion or concentrates for determination of the gross proceeds, are the premium...