Utah Mortgage Loan Corporation v. Gillis

• Decision Date: 31 July 1930
• Docket Number: 5578
• Citation: 49 Idaho 676,290 P. 714
• Parties: UTAH MORTGAGE LOAN CORPORATION, a Corporation, for Itself and All Other Corporations Similarly Situated, Respondent, v. W. D. GILLIS, as Attorney General of the State of Idaho, Appellant
• Court: Idaho Supreme Court

290 P. 714

49 Idaho 676

UTAH MORTGAGE LOAN CORPORATION, a Corporation, for Itself and All Other Corporations Similarly Situated, Respondent, v. W. D. GILLIS, as Attorney General of the State of Idaho, Appellant

No. 5578

Supreme Court of Idaho

July 31, 1930

TAXATION-CONSTITUTIONAL LAW-TAX ON STOCK OF FOREIGN CORPORATIONS-STATUTES-TITLES OF.

1. Statute imposing tax on "shares of stock" or "capital stock" held to have for its object direct taxation of individual shares of stockholders (Laws 1929 chap. 252).

2. Shares of stock are personal property of individual stockholders, as regards taxation.

3. Shares of stock without state, owned by nonresident stockholders in foreign corporation having statutory agent within state, held beyond taxing jurisdiction of state.

4. State tax on shares of nonresident stockholders in foreign corporation having statutory agent in state held to contravene federal Constitution (Laws 1929, chap. 252; Const., U.S. , Amend. 14).

5. Fact that foreign corporation licensed to do business within state continued so to do since adoption of statute taxing capital stock held not implied assent by stockholders to conditions imposed (Laws 1929, chap. 252).

6. Corporation is not stockholder's agent to bind stockholder regarding latter's own individual property as regards taxation.

7. Statute entitled act "providing system of taxing shares of stock," if actually taxing corporate property or business, held invalid as not expressing subject in title (Laws 1929, chap. 252; Const., art. 3, sec. 16).

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Dana E. Brinck, Judge.

Plaintiff brings this action to perpetually enjoin W. D. Gillis, as Attorney General, from enforcing the provisions of chapter 252, 1929 Idaho Session Laws. Judgment for plaintiff. Affirmed.

Judgment affirmed; costs to respondent.

W. D Gillis, Attorney General, and Fred J. Babcock, Assistant Attorney General, for Appellant.

A corporation has its domicile for the purpose of taxation at the place where its principal place of business is located and a foreign corporation by entering this state consents to limitation of its privileges to those enjoyed by like domestic corporation. (37 Cyc. 959, 964; Attorney General v. Bay State Min. Co., (Mass.) 96 Am. Dec. 717; Hanover Fire Ins. Co. v. Carr, 272 U.S. 494, 47 S.Ct. 179, 71 L.Ed. 372; National Sav. & Loan Assn. v. Gillis, 35 F.2d 386; Const., sec. 10, art. 3; C. S., secs. 4772, 4773).

The situs of shares of capital stock of a corporation for the purpose of taxation may properly be fixed by statute at the place where the corporation is domiciled. (26 R. C. L. 184; 37 Cyc. 961; Barnes v. Jones, 139 Miss. 675, 43 A. L. R. 673, 103 So. 773; Commonwealth of Pennsylvania v. Sunbury Converting Works, 286 Pa. 545, 48 A. L. R. 992, 134 A. 438.)

No constitutional objection lies in the way of a legislative body prescribing any mode of measurement to determine the amount it will charge for the privilege it bestows. (Maine v. Grand Trunk Ry. Co., 142 U.S. 217, 12 S.Ct. 121, 35 L.Ed. 994; Home Ins. Co. of N.Y. v. New York, 134 U.S. 594, 10 S.Ct. 593, 33 L.Ed. 1025; National Sav. & Loan Assn. v. Gillis, supra.)

Richards & Haga, for Respondent.

Appellant says that: "The situs of shares of capital stock of a corporation for the purpose of taxation may properly be fixed by statute at the place where the corporation is domiciled," and cites in support thereof 26 R. C. L. 184.

An examination of the authority cited will show that it had reference only to stock of foreign corporations held within the state levying the tax. Following the statement referred to, the cited text says:

"But States have not yet undertaken to tax foreigners upon shares they hold in foreign corporations, even where such corporations carry on all their corporate operations and have all their property within the jurisdiction, and only a paper organization in their home States."

We know of no authority sustaining appellant's position on this point. It is well established that shares of stock in foreign corporations are intangible personal property and have a situs at the domicile of the owner and are there subject to taxation, except perhaps where they have acquired a "business situs." The state creating the corporation may also reserve the right to tax the shares of the corporation created under its laws and the shares may have a situs for purpose of taxation in such state. (State v. Dunlap, 28 Idaho 784, Ann. Cas. 1918A, 546, 156 P. 1141; Tyler v. Dane County, 289 F. 843; Rhode Island Hospital Trust Co. v. Doughton, 270 U.S. 69, 43 A. L. R. 1374, 46 S.Ct. 256, 70 L.Ed. 475.)

While the decision in Tyler v. Dane County, supra, involved transfer taxes, the law as stated by that court and other courts, including the supreme court of the United States, as to the jurisdiction to tax, is the same, whether it relates to transfer taxes or property taxes. The decision in the above case is discussed at length and with approval by Professor Beale in 38 Harvard L. Rev. 291. At page 293 the distinguished author says, regarding this decision:

"The decision of the court on the point seems eminently sound, and the point itself is so fundamental and one of such inherent difficulty that it is a satisfaction to find it raised and so well discussed."

The supreme court of the United States in Rhode Island Hospital Trust Co. v. Doughton, supra, in considering a similar question says that "the decision in Tyler v. Dane County contains a full and satisfactory discussion of the subject in a Wisconsin case which has been followed by the Supreme Court of Wisconsin in Shepard's Estate, 184 Wis. 88, 197 N.W. 344. See article by Professor Beale, 38 Harvard L. Rev. 291."

LEE, J. Givens, C. J., and Budge, Varian and McNaughton, JJ., concur.

OPINION

LEE, J.

Plaintiff and respondent, Utah Mortgage Loan Corporation, duly organized and existing under the laws of the state of Utah with its headquarters at Logan therein, and duly licensed to do business within this state with its statutory agent at Boise, Ada county, brought this suit to have declared unconstitutional and void chapter 252 of the 1929 Idaho Session Laws, and to secure a perpetual injunction against W. D. Gillis, Attorney General, from instituting proceedings against respondent for the forfeiture of its right to do business in Idaho consequent upon its failure to comply with the requirements of said act. The act by its title proclaims the following intent:

". . . . ; Providing a system of taxing the shares of stock of any bank, building and loan association, finance company and other capital in competition with banks as defined in this act."

Section 3 of the act provided that any foreign corporation or association licensed to do business within the state should on or before the first Monday in June of each year file with the county assessor of the county in which its principal place of business is located within the state, or, if it had no such designated place of business, then with the assessor of the county of its resident agent, a statement substantially in conformity with C. S., sec. 3298; and in addition should show in such statement the total amount of its investments and loans within the state of Idaho and also the total amount of its loans and investments made outside the state. The act further directed that it should be the duty of the assessor "to assess such shares of capital stock according to the ratio that its investments and loans within the state of Idaho bears to its total loans and investments, making the same deductions therefrom as provided for in section 3297 of the Compiled Statutes of Idaho and acts amendatory thereof." It was then provided that "Such foreign corporation or association shall pay the taxes upon such shares of stock, and the procedure for the assessment on such shares of stock, the entry thereof on the personal property tax rolls, and the collection of such tax shall be substantially in conformance with the provisions of Article 12 of chapter 144 of the Compiled Statutes of Idaho and all acts amendatory thereof." Any failure to comply with these requirements, it was declared, would commission the attorney general to institute proceedings to forfeit delinquent's license to do business within the state.

Respondent plead that is designated Boise as its principal place of business in Idaho and appointed its statutory agent therein for the sole purpose of complying with chap. 187, C. S.; that it maintains within the state neither office nor agent for the purpose of any business whatsoever; that all of its stockholders are nonresidents, and that it has no loans or investments in Ada county. Charging that the act is violative of both the state and federal Constitutions, it specified the following instances wherein it alleges such violations operate:

That the act does not provide for the levying of a tax according to valuation so that every person or corporation shall pay a tax in proportion to his, her or its property as required by section 2 of article VII of the Constitution of Idaho;

That it does not provide for the levying of a tax uniform upon the same class of subjects within the territorial limits of the authority levying the tax, and does not provide for the levying of said tax or taxes under such regulations as will secure a just valuation of property for taxation purposes and provides no proper or adequate method for determining or equalizing the value of the property proposed to be taxed under said act as provided by sec. 5...