I dissent to the decision and opinion of the majority.
There was no compliance or attempted compliance with the provision of the taxing statute on the part of the R. C. Jones Cotton Company. The lower court found that the Cotton Company at no time from the year 1911 to 1924, inclusive, made a return of its corporate property as provided by law. There is an abundance of evidence to support the findings. The lower court found that an unascertainable amount of the corporation's capital was invested in raw material (personal property). There was no effort below to tax personal property eo nomine, for it was the view that such property value would be included in the assessment upon capital stock.
The effect of the majority opinion is that, *Page 222 where any part of the property of such a corporation finds its way upon the tax rolls, then the corporation cannot be back-taxed under procedure for taxing omitted property. Such a holding is violative of the principle announced in Re Assessment of Durant National Bank, 107 Okla. 65, 230 P. 712:
"The general rule applicable to corporations, which under the law are assessed upon their moneyed capital, surplus, etc., is, if said corporation fails to report any item or specie of property of any kind or character owned by it that it is called upon to report to the assessor, and the value thereof, the failure to report said items or specie of property thereof is an omission, and not an under-valuation of the property of the corporation, and the item or specie of property which the corporation failed or refused to report, may be assessed as omitted property either under section 9597, or 9798, C. O. S. 1921."
It is contrary to In re Okla. Natl. Life Ins. Co.,68 Okla. 219, 173 P. 376.
Herein the Jones Cotton Company was called upon to report eight different items and species of property by express provisions of statute (section 9962, C. O. S. 1921, and section (9606, C. O. S. 1921). It reported none of them. Yet this court holds there was no omission, but an undervaluation, if anything. Such a conclusion, in my judgment, renders nugatory the desire of the sovereign to tax such corporations upon the value of their moneyed capital, surplus and undivided profits less the assessed value of tangible property owned by such corporation located in this state and listed separately in its name.
The majority opinion says:
"If the real estate in fact belonged to, the corporation and the corporation paid the tax on it, then it cannot be omitted property, and not being omitted property it cannot be placed on the tax rolls in this procedure, nor can the assessed value thereof be assessed herein as omitted 'moneyed capital, surplus and undivided profits.' "
It should be borne in mind that this is not an effort to assess any tangible property — real or personal — but an effort to assess that directed to be assessed by the law, the corporate value, and to permit deductions allowable by law for tangible property otherwise assessed.
The majority opinion takes the view that there was no proof of value of moneyed capital, etc. I think there was proof. It was an admitted fact that there was no return for corporate assessment as provided by law — consequently an omission in toto of the eight items to be considered in such an assessment. Moreover, the record abounds with proof of dividends declared by the corporation, and of returns of value invested, made to the Corporation Commission as a basis for rates to be charged in ginning and of value fixed as a basis for federal income tax. So that we could be justified in concluding there was some value not assessed as provided by law.
The court below found, by reason of profits shown, that the original investment of $75,000 derived from sale of capital stock was not impaired. I think that reasonable proof of value. However, I would not object to a remanding of the cause for a specific finding of value, but with such a showing I think it destructive of rights of the state to dismiss the cause. Herein, under the evidence, is disclosed a corporation that seeks to avoid assessment for taxes upon its property. Proof shows the corporation has not only failed to return its corporate property for assessment, but even has concealed its deductible offsets by allowing the same to be held in the name of other persons, firms, and corporations. As I view it, the corporation has displayed its contempt of the sovereign's desire to force it to bear its just part of governmental expense for its protection and benefit. Such evasion should not be allowed to succeed.
What a mockery of substantial justice it would be for a corporation, whose property is worth to its stockholders for the purpose of income and sale, vast sums of money, to be held liable for taxation only upon an inconsequential portion of its wealth, and that only by reason of assessment of real estate which found its way upon the tax rolls in the names of other persons; and where in the whole phase of the case there has been no compliance with or attempted conformation to the provisions of law requiring a corporate return and a corporate assessment of moneyed capital, surplus and undivided profits for tax purposes. Adams Express Co. v. Ohio, 166 U.S. 185, 41 L. Ed. 965, 71 Sup. Ct. 604.
My view is expressed in Robertson v. U.S. Nursery Co. (Miss.) 83 So. 307, where it was held:
"There is no merit in the contention that merely because all of the capital stock of the appellee corporation has been invested in real and personal property and that its real and personal property has been assessed and subjected to taxation, the corporation *Page 223 cannot now be back-taxed upon any portion of its capital stock. The record shows that the corporation has neither been assessed upon capital stock eo nomine, nor paid taxes upon the value of its capital stock as such."
As to the general policy of the law regarding assessments for taxation, see: Anderson v. Ritterbusch, 22 Okla. 761,98 P. 1002; Harvester Bldg. Co. v. Hartley, 99 Kan. 73, 160 P. 971; Washburn Wire Co. v. Bliss, 42 R.I. 32, 105 A. 179; State v. Duluth, G. W. Co., 76 Minn. 96, 78 N.W. 1032, 57 L. R. A. 63; People v. Commissioners, 95 N.Y. 554; Commonwealth v. Ky. Heating Co., 176 Ky. 35, 195 S.W. 459; Adam v. Clarke (Miss.) 31 So. 216; Noyes v. Hale, 137 Mass. 266; Sturges v. Carter,114 U.S. 511, 29 L. Ed. 240.
The Oklahoma Natl. Life Ins. Co. Case, supra, expressed the view that "taxable personal property not included within that assessment (under the name of moneyed capital, surplus and undivided profits) will escape taxation." I cannot follow that statement in its entirety. It must be remembered that the scope of the taxing statute, section 9606, supra, may be almost reduced in application to include merely intangibles. It begins with the aggregate value of moneyed capital, surplus and undivided profits. It is true that tangible personal property in which the capital may be invested goes to make up the aggregate value taxed, yet there is provision for the taxing of the tangible personal property wherever located. Such provision is contained in section 9625, C. O. S. 1921:
"When a person is doing business in more than one county, the property and credits existing in any one of the counties are to be listed and taxed in that county; and credits not existing in nor pertaining especially to the business in any one county are to be listed and taxed in that county where his principal place of business may be," etc.
Section 3543, C. O. S. 1921, reads as follows:
"The word 'person,' except when used by Way of contrast, includes not only human beings but bodies politic or corporate."
So "person," as used in section 9625, supra, means "corporation" as well.
It is true such enactment was of the date of 1909, and carried forward as section 7330, R. L. 1910, yet it was construed in Re Assessment of Chickasha Cotton Oil Co.,80 Okla. 101, 194 P. 215, so as to be effective and considered in pari materia with section 9606, supra, where it was held:
"When a taxpayer is doing business in more than one county in the state, the property and credits existing in any one of the counties are to be listed in that county. Section 7330, R. L. 1910. In case of a local corporation, the value of its real estate and the value of its property and credits existing in counties other than in the county where the corporation is located must be deducted from the net value of its moneyed capital, surplus and undivided profits as a basis for assessment in the county where it is located. Section 7330, R. L. 1910; sec. 4, c. 107, S. L. 1915; section 7318, R. L. 1910; sec. 1, c. 203, S. L. 1919."
I would follow that rule. Another reason why I would follow it is that the ninth item required to be reported by the corporate return under section 9962, as contained in the amendment of 1915, is:
"Description, the location and assessed value of allreal estate and tangible personal property owned by such corporation, listed and assessed separately in its name."
That provision contemplates local assessment of tangible personal property as required by section 9625, supra.
The record justifies the finding that the paid-up capital was never below $75,000, and that it was never impaired. The intent of the statute is to assess the actual value of the property or estate of the corporation, allowing deductions for the assessed value of any real estate located in this state, owned by the corporation and listed separately in its name, as well as deductions for the assessed value of personal property, owned by such corporation listed and assessed separately in its name. See In re Oklahoma Natl. Life Ins. Co., supra, for mortgage exemptions. 2 Cooley on Taxation (4th Ed.) section 870.
It is not necessary nor contemplated that the surplus and profits be identified and taxed separately. The subject of taxation is the "aggregate" moneyed capital, surplus and undivided profits.
In Harvester Bldg. Co. v. Hartley, supra, where it was contended that the corporation had disposed of all of its capital stock and invested the proceeds in real estate upon which taxes had been paid, and that the deduction of the amount of stock so invested from the amount paid in would leave nothing to be listed and taxed, the Kansas court said:
"That conclusion seems obviously to have been based upon the interpretation of the statute which has been contended for by the plaintiff and which this court for the reason already stated is unable to accept." *Page 224
The Kansas Supreme Court held that, where the corporation was engaged in no other business than in renting real estate which it had procured by the expenditure of the whole amount paid in by stockholders, and where taxes had been paid upon the real estate, the capital of such a corporation should be taxed at its true value, less the amount assessed against specific property as provided by their statute.
Likewise I would hold that the county court erred in considering the money (value) derived from the sale of capital stock nonassessable, because it had been invested in tangible properties upon which taxes had been paid, and in only adjudging assessable the surplus and undivided profits as elements separate and apart from the aggregate "moneyed capital, surplus and undivided profits."
There is no injustice in this view, if the law is followed, for a just value will be placed upon the capital of the corporation and a proper deduction is allowable for the assessed value of real estate and personal property under specified conditions. If the real and personal property is overvalued when assessed as such, the fault is compensated by a consequent reduction in the corporate tax; if the real estate is undervalued, the gain in the lessened real estate tax is balanced by the loss in the increased corporate tax, so the result is the same.
The only authorized deduction from the assessable value of the corporate wealth, under section 9606, supra is "less the assessed valuation of any real estate located in this state, owned by such corporation and listed separately in its name." To that deduction is added that for personal property, locally assessed, as heretofore set out.
The Cotton Company relies upon Payne County v. Empire Petroleum Co., 104 Okla. 42, 230 P. 710. That was a case wherein it was sought to tax oil in storage as omitted property. That was not a case wherein intangibles were sought to be taxed which had been omitted, but it concerned the specific taxing of tangible personal property. The fact was that tax had been paid upon the said tangible personal property — true, by another — and this court properly held the same was not omitted property. But in the case at bar the state desires to tax the intangibles together with all other value of the corporation omitted and not otherwise taxed, and in order to refrain from double taxation, the state permits deductions for certain assessed value of property of the corporation.
Is the Cotton Company entitled to deduct from the assessed value of its corporate wealth the assessed value of gin properties located in various counties of this state, which gin properties were assessed in the name of individuals, other firms and other corporations, although this Cotton Company claims ownership, possession, and control, and for which it claims it has paid taxes assessed against such properties? The Cotton Company relied upon its fancy of the result desired by the state, rather than the process, whereas its adversary points out that to allow such deductions will defeat the purposes of the statute. This court has said that statutes authorizing deductions are to be strictly construed. In re Okla. Nat. Life Ins. Co., supra.
"That such deductions are not permitted in the absence of a statute is well settled, and it has been held that statutes authorizing the same should be strictly construed."
I would hold the plain import of the words of the taxing statute, section 9606, supra, is that deductible amounts from the corporate assessment for real estate must be limited to (1) assessed valuation of real estate, (2) located in this state, (3) owned by such corporation, and (4) listed separately in its name. Now the one element lacking to entitle this deduction for real estate, providing the Cotton Company's claim is substantiated by proof, is the 4th, i. e., that the real estate was not listed in its name. Deductions are not allowable, unless compliance is had with the statute authorizing deductions, in so far as it is possible for such a corporation to comply with the listing of its real property.
Now, if there was error in the assessment of the real estate belonging to this corporation, for which it now seeks deductions, it may be that matter could be shown and corrected so as to render allowable the deductions claimed, but, on the other hand, if the corporation is at fault in not causing an assessment of such real estate to be made in its name, it should not be heard to complain, and the deductions should be denied where compliance is not made with the requirements of the statute.
"The only corporations which are to be regarded as owners of real estate, the value of which is to be deducted from the valuation of their stock, are those to whom the land is directly assessable and who are primarily chargeable with the taxes thereon." 2 Cooley on Taxation (4th Ed.) 890. Baltimore v. Canton Co., 63 Md. 218.
The statutes provide for assessment in *Page 225 the owner's name, except in case of disability. Sections 9617, 9625, 9645, 9663, 9668, 9673, 9674, C. O. S. 1921.
This, and all other such corporations, are called upon to make return of its property, and if it defaults in making return and does not disclose as provided by statute that any portion of its wealth is not subject to taxation, when the state has established the corporation's actual cash value, based upon what the corporation is worth as to income and consequently at voluntary sale, it cannot complain if the state treats its property as all taxable, less deductions allowable, as the Supreme Court of the United States said:
"It is suggested that the company may have bonds, stocks, or other investments which produce a part of the value of its capital stock, and which have a special situs in other states,or are exempt from taxation. If it has, let it show the fact."166 U.S. 222, 41 L. Ed. 978.
Complaint is made concerning the burden of proof.
I would hold the burden was upon the state to show that in the years named the moneyed capital, surplus and undivided profits of the corporation were of a stated value and that an assessment of said property was omitted from the tax rolls. In re Daniels' Omitted Property, 108 Okla. 195, 233 P. 543.
I think the state amply sustained the burden of proof by showing affirmatively that such property existed and that an assessment had not been made as required by law.
The dividend record from the minute book is as follows:
May 18, 1911 15%
June 30, 1911 5% 20%
May 14, 1912 20%
May 13, 1913 12 1/2%
In 1914 None
April 10, 1915 20%
April 28, 1916 10%
April 11, 1917 20%
April 10, 1918 10%
May 13, 1919 5%
May 11, 1920 20%
June 25, 1922 None
May 8, 1923 50%
of earnings were
directed to be
added to surplus
account.
May 16, 1924 30%
I think the lower court was in error in not considering for assessment, the value of the capital stock, and in not holding that deductions from the corporate assessment under section 9606, supra, for real estate are limited to the assessed value of real estate located in this state, owned by such corporation and listed separately in its name.
Note. — See under (4) 26 Rawle C. L. p. 173; 4 Rawle C. L. Supp. p. 1647.