I dissent. The plaintiff is a Montana corporation qualified to do business only within this state. It maintains its head office at Butte and has offices in other cities within the state. All of its stock is owned by the Commercial Credit Company, a Delaware corporation which has no office in and does no business within the State of Montana. The plaintiff, hereinafter referred to as the Montana Company, is a complete and separate corporate entity from the Delaware corporation. Its business consists of the purchase from dealers and distributors of conditional sales contracts, notes and trust receipts arising out of sales by the dealers and distributors of automobiles and other products on a deferred payment plan. In furtherance of its business, the Montana Company entered into a contract with the Delaware corporation, wherein the latter agreed to purchase from the Montana Company such of its receivables as were acceptable to the Delaware corporation at a rate of discount stated in the contract. Pursuant to the terms of the contract and certain writings and letter agreements appearing in the record, the Montana Company, as it receives the conditional sales contracts, notes and trust receipts from the dealers and distributors, transfers and delivers them to the Delaware corporation at its office in San Francisco. After their transfer the Montana Company makes *Page 222 collections on these receivables and then either remits the collections direct to the Delaware corporation, or credits them on any amount owed by the latter corporation to it.
The companies treated the transaction as an absolute sale, the Montana Company's books showing a sale and the Delaware corporation showing these receivables as assets on its balance sheets which are filed with the Securities and Exchange Commission, and with financial institutions for credit purposes. The income from these receivables is included by the Delaware corporation in its profits and loss statement filed with the Securities and Exchange Commission. After the transfer of these receivables to the Delaware corporation, they are kept by it at its San Francisco office, and the Montana Company cannot exercise, and has never exercised any control over them. The income form of the Delaware corporation also shows these receivables as the property of that company. The Delaware corporation, in borrowing money, puts up these receivables as security. Nothing on the books of either company, nor in their general method of doing business, suggests that either one considered the transaction as a loan or pledge, or anything but an absolute sale. Upon the full payment of any note transferred by the Montana Company to the Delaware corporation, it is the practice for the Montana Company to obtain the note when paid from the Delaware corporation for delivery to the maker in Montana. Under the contract, provision was made for a guaranty on the part of the Montana Company that the receivables would be paid, that is, the Montana Company agreed to make good on any that were not collectible up to two per cent, of the total amount transferred. It is agreed that the losses never exceeded the two per cent.
The gist of the controversy is well stated by the appellants in their brief: "Whether or not the receivables in question were taxable in Silver Bow county, Montana, as property of the Montana Company, depends upon the nature of the transaction between the two companies. If the assignment and delivery of receivables from the Montana Company to the Delaware company under the agreed facts constituted a genuine, bona fide sale so *Page 223 that title to the property passed directly from the Montana Company to the Delaware company, then the receivables were not taxable in Montana since they obviously were not within the taxing jurisdiction of Montana on the first Monday in March, 1937. If, however, despite the `show and things' to the contrary, the transaction between the two companies actually amounted to a pledge of the receivables by the Montana Company to the Delaware Company to secure advances of money theretofore paid or thereafter to be paid by the parent company to its subsidiary, then the receivables in question did belong to the Montana Company on the above tax date and were subject to taxation in Montana. * * * Was the transaction a sale or a pledge?"
The general rule is that whether or not the transfer is a pledge or a sale is one of intention to be determined by an examination of the contract of transfer and the circumstances under which the transfer is made. (Mercantile Trust Co. v.Kastor, 273 Ill. 332, 112 N.E. 988.) No suggestion is raised here that there was any fraud in the arrangement existing between these two companies, nor is it suggested that there was any attempt at evasion of our Montana taxing laws by the arrangement. It is agreed that the two companies had a perfect right to enter into a sale and purchase agreement if they chose to.
No note is returned to the Montana Company nor does it become reinvested with title thereto unless the note is dishonored by non-payment. In such a case the Montana Company under its contract is obligated to redeem such note to the extent of two per cent. of the total amount of the notes sold to the Delaware company. This arrangement constitutes the Montana Company a seller of the notes with limited liability to their purchasers, the limit of its liability being two per cent. of the whole amount the Delaware Company has purchased from the Montana Company. After the title to the notes passes to the Delaware Company it is the owner thereof and taxable thereon. The Montana Company has nothing more to do with the notes except such as may be returned to it under the two per cent. guaranty. The arrangement between the Montana Company and the Delaware company *Page 224 does not constitute a pledge as described by sections 8292 and 8293, Revised Codes, in any sense of the word. Clearly the Montana Company is a subsidiary of the Delaware company, but that fact does not make either liable for local taxes on respective assets.
The judgment of the trial court is correct and should be affirmed.
Rehearing denied March 24, 1944.
Note: Order of Supreme Court of Montana Allowing Appeal to Supreme Court of the United States filed June 20, 1944.