Wheelock Lovejoy & Co. v. Gill

• Court: Illinois Supreme Court
• Writing for the Court: ORR
• Citation: Wheelock Lovejoy & Co. v. Gill, 366 Ill. 378, 9 N.E.2d 58 (Ill. 1937)
• Decision Date: 16 June 1937
• Docket Number: Gen. No. 23867.
• Parties: WHEELOCK LOVEJOY & CO., Inc., v. GILL, County Collector.

366 Ill. 378

9 N.E.2d 58

WHEELOCK LOVEJOY & CO., Inc.,

v.GILL, County Collector.

Gen. No. 23867.

Supreme Court of Illinois.

Feb. 12, 1937.

As Modified on Denial of Rehearing June 16, 1937.

Suit by Wheelock, Lovejoy & Company against Joseph L. Gill, county collector. From a decree dismissing the suit, plaintiff appeals.

Reversed and remanded, with directions.

WILSON, J., dissenting.Appeal from Circuit Court, Cook County; Walter J. LaBuy, judge.

Adams, Nelson & Williamson, of Chicago (Robert McCormick Adams and Paul S. Davis, both of Chicago, of counsel), for appellant.

Thomas J. Courtney, State's Attorney, of Chicago (Hayden N. Bell, Jacob Shamberg, and Manuel E. Cowen, all of Chicago, of counsel), for appellee.

ORR, Justice.

Do the revenue laws of Illinois authorize the taxation of a portion of the net credits and other intangibles of a foreign corporation? This appeal from the circuit court of Cook county raises no other question.

The appellant, a Massachusetts corporation and licensed to do business in Illinois, has maintained a branch office in Chicago for many years. It has regularly paid taxes upon all tangible property located and used in this state, including machinery, equipment, and merchandise. In preparing the assessment books for 1934 the county assessor of Cook county placed two additional assessments of $10,000 each against appellant on its credits and ‘franchise.’ It was stipulated that if net credits payable solely in Massachusetts were assessable in Illinois, the assessment of $10,000, in the judgment of the assessor, was the fair cash value ‘of that portion of the net credits arising out of and produced by the Chicago office of complainant corporation.’ In arriving at the value of this so-called ‘franchise’ the assessor used a weighted average of earnings to which a capitalization factor was applied, and to this value applied a factor representing the ratio of appellant's Cook county business to its total business in the United States. This assessment was denominated by the assessor as an assessment against the ‘franchise’ of the corporation, and it was further stipulated that it consisted, in the assessor's judgment, ‘of that portion of the trade-marks, copyrights, patents, good will, capitalized earning power and franchise allocated to the Chicago office on the basis of the proportion of business produced by the use of said intangibles at the Chicago office of the complainant corporation.’

The evidence shows that out of appellant's 1934 sales of approximately $1,100,000, a total of about $180,000, both cash and credit, or approximately 16 per cent, was made through the Chicago office. A small bank account was maintained at the Chicago branch as a petty cash account, but all bills arising from sales or other activities of the Chicago office were payable at the home office in Cambridge, Mass. All invoices from sales arising through the Chicago office contained a direction to purchasers to ‘send all remittances to 128 Sidney street, Cambridge, Massachusetts.’ Appellant paid to the secretary of state the usual fee required for admission of a foreign corporation and the usual franchise tax required by the Business Corporation Act (Smith-Hurd Ill.Stats. c. 32, § 157.1 et seq.) from all foreign corporations admitted to do business in Illinois. For the year 1934 it was also assessed the sums of $929 for machinery and equipment and $21,910 for merchandise on hand. The suit in the lower court was a proceeding in equity to enjoin the county collector from collecting the additional tax on intangibles, and the suit was there dismissed for want of equity.

The authority of the General Assembly to levy general property taxes in this state is found in section 1 of article 9 of the Illinois Constitution, which provides: ‘The general assembly shall provide such revenue as may be needful by levying a tax, by valuation, so that every person and corporation shall pay a tax in proportion to the value of his, her or its property; * * * but the general assembly shall have power to tax * * * persons or corporations owning or using franchises and privileges, in such manner as it shall from time to time direct by general law, uniform as to the class upon which it operates.’

By section 1 of the Revenue Act of 1872, as amended (Smith-Hurd Ill.Stats. c. 120, § 1), the General Assembly has provided for the taxation of the following property:

‘First: All real and personal property in this state.

‘Second: All moneys, credits, bonds or stocks and other investments, the shares of stock of incorporated companies and associations, and all other personal property, including property in transitu to or from this state, used, held, owned or controlled by persons residing in this state.

‘Third: The shares of capital stock of banks and banking companies doing business in this state.

‘Fourth: The capital stock of companies and associations incorporated under the laws of this state,’ etc.

The first provision of section 1 relates to the taxation of real and personal property and may be regarded as broad acter, tangible or intangible, in this state. tangible or intangible, in this state. People v. National Box Co., 248 Ill. 141, 93 N.E. 778;People v. Chicago Union Lime Works Co., 361 Ill. 304, 198 N.E. 1. The express provision of the second subdivision is, that personal property shall be taxed, not if it is used or held in this state, but if it is ‘used, held, owned or controlled by persons residing in this state.’ By this provision the Legislature has followed the maxim mobilia sequunt personam-that the situs of personal property follows the domicile of the owner. This was the common-law rule, and its principles have been recognized by many decisions of this court. In re Appeal of Borden, 208 Ill. 369, 70 N.E. 310;Ellis v. People, 199 Ill. 548, 65 N.E. 428;Mills v. Thornton, 26 Ill. 300, 79 Am.Dec. 377;Illinois Central Railroad Co. v. Carr, 302 Ill. 172, 134 N.E. 138, 139;People v. Culver, 304 Ill. 566, 136 N.E. 682. Thus, it was said in Illinois Central Railroad Co. v. Carr, supra: ‘As a general rule, incorporeal personal property has no locality, but accompanies the person of the owner wherever he goes. But that is merely a rule of the common law adopted for convenience, only, and it may be changed by the Legislature in the exercise of its judgment. The actual situs of personal property having a visible and tangible existence will determine the town or district in which it may be taxed without reference to the domicile of the owner, but intangible property for the purpose of taxation, in the absence of a statute, is generally held to be situated at such domicile.’ This rule has won unqualified acceptance when applied to the taxation of intangibles. Blodgett v. Silberman, 277 U.S. 1, 9, 10, 48 S.Ct. 410, 413, 72 L.Ed. 749;Baldwin v. Missouri, 281 U.S. 586, 50 S.Ct. 436, 74 L.Ed. 1056, 72 A.L.R. 1303.

We are unable to accept the argument of appellee that the language in section 1 of the Revenue Act is broad enough to cover the intangible property owned by the corporation in Massachusetts, based upon that portion of its trademarks, copyrights, patents, good will, capitalized earning power and franchise used in Illinois, and thus...