Wallace v. Hughes Electric Co.

Birdzell, J.

(dissenting). I dissent from the conclusion reached by the majority of the court in this case, and, owing to the importance of the main question involved, I deem it a duty to set forth the reasons for my dissent.

*433As I read the majority opinion, it is founded upon a misapprehension of the poAvers and duties of the tax commission that is so gross and so far reaching as to amount to the practical nullification of the obvious purposes which the legislature had in view in providing for the creation of the commission. In order to malee clear the reasons for my dissent, it is necessary to advert to the character of the proceedings in the instant ease. The petition shows that in April of the year 1917, the tax commission, in pursuance of the powers and duties expressly imposed upon it by law, attempted to obtain from the Hughes Electric Company of Bismarck information relative to the value of its property, its earnings and financial condition, which the legislature had made it the duty of the commission to obtain. The means selected for the communication of this information was that of asking the managing officer of the company to appear before the commission at a stated time, in the Capitol Building, there to testify to the facts within the range required by the statute. This court should, doubtless does, take judicial notice of the fact that the Hughes Electric Company operates in the capital city, and of the degree of inconvenience that would be involved in complying with the request made by the tax commission. The petition further shows noncompliance with this request, and that thereafter, on the 19th day of May, a summons and subpoena was served on the respondents Aasness and Dutton, and that on the 21st day of May, still during the assessment season, a summons and subpoena was served on the respondent Hughes. It is also alleged that all of the respondents have-neglected and refused to appear before the commission at the time and place stated in -the summons and subposna, or at all. “And that the Hughes Electric Company, its managers and officers, wilfully and wrongfully refuse and neglect to appear before such tax commission, or to in any manner submit to an investigation by such tax commission, concerning its capital fund, its current assets and liabilities, the value of its property and earnings, its operating expenses, or to submit any other facts which might be needful to enable the said tax commission to ascertain the value of the property of the said Hughes Electric Company

The petition contains further allegations to the effect that during the period and at the times when the petitioners sought, as herein above indicated, to obtain the desired information from the respond*434ents, it was in regular session as required bj law and engaged in the performance of the duties imposed upon it, among which is that of requiring individuals, partnerships, companies, associations, and corporations to furnish information concerning their capital stock, the earnings, and the operating expenses and other expenses, its taxes, and all facts concerning such company needful to enable the commission to ascertain the value of all kinds of property in the state; also that the information was needed to enable the commission to ascertain the value of the property of the Hughes Electric Company and that it was required in order that the commission might “fulfil its functions and duties as prescribed by law, and in order that it may properly cause to be assessed and malte recommendations of assessment” of such property. Such are the allegations of the petition. The answer denies the ability of the respondents Aasness and Dutton to respond to the subpoena duces tecum, and denies further “that it is necessary and proper, and the duty of the said tax commission, to inquire into the capital stock, debts, current assets, and liabilities, value of the property, earnings, operating expenses, and other expenses of said corporation to fulfil its functions and duties as prescribed by law, or for any other purposes, or at all;” and it is alleged that the property “has been asesssed for the year 1917 by the city assessor of the city of Bismarck; that the respondent company, and it officers and managers, showed to such assessor the blue prints and engineering records of said company, and furnished him with all of the data, facts and information demanded and required by him for the purpose of making.such assessment ;” also that the agents of the tax commission were given access to the property, machinery, an equipment of the Hughes Electric Company; and “that they have been enabled thereby to secure all of the information and data necessary and required to determine the value of such property, machinery, and equipment.” It is further alleged that the respondents have been and are ready and willing to furnish to the proper assessing officer of the city of Bismarck all the data and information reasonably necessary to make an assessment of the company. It is then alleged and contended that the sections of the statute under which the tax commission proceeds to summon witnesses are unconstitutional, and that the orders and commands of said tax commission are unreasonable, unjust, arbitrary, and void, and violative of *435§ 18 o£ the Constitution of this state and the 4th and 14th Amendments of the Constitution of the United States. The issues framed by the petition and the return were before the lower court and were resolved in favor of the petitioners. The petition, the return, and the order constitute the entire record upon this appeal.

The majority opinion decides upon this record that there is no real or apparent reason or no reasonable basis for the order entered by the lower court. This seems to be the sole basis for the reversal of the order. To me it is inconceivable that such a conclusion upon such a record can be in the least consistent with the ordinary exercise of the powers granted to the.tax commission by the legislature, and, in my judgment, it constructs all but an insuperable barrier to the performance by the tax commission of the duties clearly imposed upon it. The opinion seems to presuppose that the order is harsh and ports unnecessary inquisitorial power, or a power only to be resorted to in extreme cases. As a matter of fact, the order only requires the respondents to impart information which it is only fair to presume similar corporation managers have done without hesitation.^ It is manifestly no more inquisitorial in its nature than a request for the filling out of a blank form which, when completed, would contain- the information demanded. Aside from the mere matter of convenience,- there can be no distinction between requesting information to be supplied upon a blank furnished by the tax commission and requesting that it be supplied from the personal knowledge of those who may be possessed of the information (refreshed and supplemented by records regularly kept), and who are asked to communicate that information verbally instead of in writing. The petition clearly shows that ample opportunity was afforded to the respondents to furnish the information, and that they did not do so; and the respondents do not even argue that they should not be required to furnish the information in the manner requested because of the inconvenience entailed. It is, however, contended that the books of the respondents are in the state of Minnesota, consequently outside the jurisdiction of this state. This contention goes to the legal power only. Inasmuch as the majority opinion does not discuss that question, I leave it untouched. No argument is advanced that could not likewise be advanced by any individual, partnership, or corporation that might *436be requested to supply sucb information by filling out a blank. The appellants in effect contend that the tax commission has no business with such information, and the majority opinion in effect sustains this contention. It the tax commission has .not the right to have this information from the defendants, clearly they have not the right to obtain it from others. We should bear in mind that the action of tax officers as well as other officers is clothed with the ordinary presumption of good faith and honest official intention. See Barnes v. Wayne County, 194 Mich. 540, 161 N. W. 237. And it is not to be presumed that a tax officer vested with inquisitorial power “would desire to inquire into the private affairs of the citizen for any other purpose than those connected with his official duty.” Stanwood v. Green, 2 Abb. U. S. 184, Fed. Cas. No. 13,301.

The vital question is whether or not the legislature intended that the tax commission should obtain information of this particular character. The wisdom of leaving to the legislature a large discretion not only in the selection of the subjects of taxation and in the determination of the extent, but also in the mode, of enforcement, has, I believe, been seldom if ever questioned since the decision of the Supreme Court of the United States in M’Culloch v. Maryland, 4 Wheat. 316, 4 L. ed. 579; and the impropriety of judicial interference with, or supervision over, administrative agencies, acting under legislative direction, is everywhere recognized. Said Chief Justice Marshall, in M’Culloch v. Maryland (page 639) : “The power of taxing the people and their property is essential to the very existence of government, and may be legitimately exercised on the objects to which it is applicable, to the utmost extent to which the government may choose to carry it. . . . We are not driven to the perplexing inquiry, so unfit for the judicial department, what degree of taxation is the legitimate use, and what degree may amount to the abuse of the power.”

Under the Tax Commission Law the supervisory power of the tax commission is analogous to that of the commissioner of internal revenue of the Federal government, and is expressed in the statute in much the same language as the powers and duties of that officer are expressed in the Federal statutes. In the case of Stanwood v. Green, supra, it was said: “It is further provided that it shall be the duty of the supervisor, under the direction of the commissioner, to see that all laws and regula*437tions relating to the collection of internal taxes are faithfully executed and complied with; to aid in the prevention, detection, and punishment of any frauds in relation thereto; and to examine into the efficiency and conduct of all officers of internal revenue within his district; and for such purposes he shall have the power to examine all persons, boohs, papers, accounts, and premises, and to administer oaths, and to summon any person to produce books and papers and to appear and testify before him.” In speaking of this power, the Federal court said: “That there exists a necessity for taxation, and to a very large amount, is not denied. That the amount, the subjects of taxation, and the mode of assessing and collecting the same, are questions alone to be determined by Congress, the lawmaking power, and with which the courts have nothing to do, it being their duty to expound and enforce the laws, is also admitted. It was competent for Congress to provide for the appointment of such officers as might be deemed necessary for the collection of the revenue, and to prescribe their duty.” The court, then, after referring to the powers above named, under three distinct heads, — those of (1) seeing that the laws are faithfully executed and complied with; (2) preventing and punishing frauds; (3) examining into the efficiency and conduct of revenue officers, — continues: “And to enable him to perform any one or all of these duties, he is invested with these extraordinary powers, as they are termed, without which he would be unable to perform the duty assigned him.” The court held that the act was constitutional, and that under it the respondents were compellable to produce their books and papers without hawing disclosed to them the purpose for which the inspection was had. See also Re Strouse, 1 Sawy. 605, Fed. Cas. No. 13,548, and Re Meador; 1 Abb. U. S. 311, Fed. Cas. No. 9,315. The first paragraph of the syllabus in the latter case is as follows: “It is not necessary, in order to support an application by a supervisor of internal revenue, or an attachment to compel a person liable to taxation to appear and testify and produce his books, etc., that the supervisor should appear to have acted, in issuing the summons, under any special instructions from the Commissioner of Internal Eevenue. The supervisor must obey any special instructions which are shown to have been given, but, in the absence of proof of instructions, it will be presumed that his acts have been in pursuance of his official duty.”

*438In the case of State ex rel. Hessey v. Daniels, 143 Wis. 649, 128 N. W. 565, the supreme court of Wisconsin upheld the power given to the tax commission to reassess the property of a particular assessment district, and, in explaining the theory upon which a state administrative agency is justified, says: “The state has a vital interest in insisting that its laws pertaining to taxation be honestly and fairly administered to the end of that the burden of taxation may be equitably distributed. . . . So, the state, in endeavoring to enforce the requirements of the law in regard to the assessment and equalization of property, is not acting as a mere interloper exercising a paternalistic function for the purpose of exploiting its right so to do, but is attempting in good .faith to perform a duty in which its citizens, generally, have something more than a passing interest.” See also Great Northern R. Co. v. Snohomish County, 54 Wash. 23, 102 Pac. 881. Surely it is competent for the legislature to give inquisitorial powers to a board of this character as extensive as those given to assessors. It has been held that assessors may compel banks to disclose cash registers, draft registers, personal accounts, and individual ledgers showing the accounts of ita patrons in the interest of securing a just valuation for taxation of all property. Washington Nat. Bank v. Daily, 166 Ind. 631, 11 N. E. 53.

•The majority opinion seems to intimate that if some character of proceeding were pending before the tax commission, it might possibly foe entitled to obtain information in the manner proposed. Just what would constitute a “matter pending,” however, is not defined, and if information of this general character cannot be obtained by an administrative body intrusted with general supervision, and’ even with power to order a reassessment, as will be demonstrated later, except in rel/spouse to some kind of a complaint or when there is some “matter pend-it is quite apparent that an administrative body of the presumed importance of the tax commission will be wholly at a loss to proceed with its regular functions of supervision and administration. If the information which the law requires the commissioners to obtain cannot be had except under the limitations indicated in the majority opinion, intelligent supervision and efficient administration become impossible. This argument seems to me to be quite effectively disposed of by the supreme court of Indiana in the case of Co-operative Bldg. & L. Asso. *439v. State, 156 Ind. 463, 60 N. E. 146, where, in answer to the argument that the inquisitorial power of the county assessor should be limited to the assessment season and to instances of special proceedings to add omitted property to the tax duplicate, the court said (p. 469)':' “Assessors may search for omitted property independent of any proceeding to add omitted property to the duplicate; they should first find it.” It seems that if the statute contemplated that the powers of the tax commission were only to be exercised in furtherance of special proceedings before it, the legislature would have said so. The body is required to be in continuous session, and it seems to me that a fair reading of the act will disclose that it is made its duty to exercise the powers conferred upon its own initiative. Otherwise, there would be no way to attain the results which are the express aims of the legislature. See Re Davies, 168 N. Y. 89, 56 L.R.A. 855, 61 N. E. 118.

It is stated in the majority opinion that the assessment for the year 1911 was completed, reviewed, and equalized before the order was obtained, and the answer contains similar allegations. (It appears, however, that the amended petition was served in July before the equalization was complete.) A careful reading of the answer discloses that, though the defendants rely upon an assessment made by the local authorities as tending to defeat the jurisdiction of the tax commission,' it is not stated that information of the character of that requested was ever supplied to the assessor or to any reviewing officer, and the answer shows that the agents of the tax commission were given access to the physical property of the defendant to enable them to determine its value. There is not the slightest suggestion in the record anywhere that any attempt has been made by any authority, other than the tax commission, to ascertain the facts upon which an assessment of the nonphysical property of the defendant electric company, if any, could be based; and the answer falls far short of any showing of willingness to make any disclosures of intangible property or of facts from which such intangible values, if any, might be determined. Yet it is said that there is no reasonable basis for an inquiry designed to uncover the facts upon which intangible values, if any, might be determined.

It is said in the majority opinion that the assessment for 1917 was complete, and that there was not even a suggestion in the petition or in the record that the assessor or any board of review had failed to per*440form his or its duty, or that property has escaped taxation, or that there has been any noncompliance with, or discovery of, any violation of the laws relating to assessment. Surely it is not expected that an administrative body exercising its powers in a capacity representing the state will proceed in the dark by presuming that other tax officers have been derelict in their duties. As I understand the Tax Commission Law,, it is contemplated that the commission shall be first supplied with facts so that it may then determine whether other officers are proceeding m accordance with the law. It would he strange, indeed, if the legislature contemplated that the tax commission must first charge, without knowing, that other officers have failed to perform their duty. The majority opinion seems to me to border on absurdity in requiring a blind charge to be made as a condition of being permitted to obtain the information to substantiate the charge. The legislature has said what information the tax commission shall obtain, and it has not seen fit to impose such conditions. The majority seem to lose sight of the fact that the tax commission is a mere administrative agency, and not a judicial tribunal. The defendants are charged with nothing, and are not on trial, — perhaps not even suspected of being underassessed. They are merely asked and required to assist in the ordinary administration of the tax laws by supplying information which the legislature has deemed appropriate to that end. It is not for this court to characterize such proceedings as extraordinary. A proper respect for the legislative and executive branches of the government should rather lead to the conclusion that it is only the conduct of the defendants that is extraordinary. The record in this ease shows quite conclusively that the necessity for" a resort to a summons and subpoena duces tecum was occasioned by the refusal of the defendants to furnish the information upon request.

The condition of the law in this state, with reference to the assessment of property, does not justify the statement-that the assessment of the defendant’s property was complete for the year 1917. Subdivision 10 of § 2088, as amended by the legislature in 1917, chapter 232, authorizes the tax commission to make a reassessment in any year of all or any real or personal property, or either, in any assessment district, when, in the judgment of the commission, such assessment is desirable or necessary to the end that any or all property in such district shall be-*441assessed equally and in proper proportion to the taxes wherein such district is situated. The section provides in detail the procedure for reassessment, and under it there can be no question but what the tax commission would have had authority, even at the date when the order was obtained from the district court, to have caused a reassessment to be made of the property of the Hughes Electric Company which would have been effective for that year. The necessity for ordering a reassessment could not have been known to the tax commission except as it might appear from the facts which it was attempting to obtain. Furthermore, as was said by the supreme court of Indiana in the case of Co-operative Bldg. & L. Asso. v. State, supra: “It is not more inquisitorial in its nature to pry into the private affairs of a taxpayer by the examination of him and others after the original assessment lists have been made, than it is before or while they are being made.” So, from the standpoint of the inquisitorial nature of this proceeding, it must, of necessity, be such if the facts which the legislature says should have a bearing upon the assessment are to be disclosed.

I am in hearty accord with the statement in the majority opinion that the lawmaking power is limited by constitutional restrictions, and that the legislature may not itself exercise nor confer upon an administrative body a general power of making inquiry into the private affairs of the citizen. It is elementary, however, that the 4th.Amendment to the Federal Constitution only inhibits unwarranted searches and seizures by Federal officials, and that it has no application whatsoever to the action of the officers of the state. But it goes without saying that no tax system that depends for the efficiency of its administration upon disclosure by the citizens and taxpayers of their property can be efficiently administered without the exercise of a reasonable inquisitorial power.

It is also observed in the majority opinion that the statute under consideration makes no provision for granting immunity to those testifying before the tax commission, nor clothing their disclosures with secrecy. Of course, the failure to so provide enables the witness to fall back upon his constitutional privilege (Counselman v. Hitchcock, 142 U. S. 547, 35 L. ed. 1110, 3 Inters. Com. Rep. 816, 12 Sup. Ct. Rep. 195), and the inquisitorial power cannot be so extensively exercised where such provisions are lacking. This being true, in a matter of this *442character no witness could be required to give evidence incriminating him, nor be compelled to make disclosures that would amount to an unreasonable search into his private affairs (Interstate Commerce Commission v. Brimson, 154 U. S. 447, 38 L. ed. 1047, 4 Inters. Com. Rep. 545, 14 Sup. Ct. Rep. 1125; Hale v. Henkel, 201 U. S. 43, 50 L. ed. 652, 26 Sup. Ct. Rep. 370), and in so far as the order in the instant case might be thought to require a disclosure in excess of the needs of the tax commission in the exercise of its supervisory power, it should be.modified so as to guard against any unreasonable compulsion. This is the most that should be done in this case, but, instead of doing this, the majority opinion excuses the defendants altogether from disclosing facts which, it is perfectly obvious, are essential to the performance of the official duties charged upon the petitioners.

It is proper'to observe here that the information that the defendants are asked to disclose is protected to the same extent, no more and no less, when given to the tax commission, as when given to an assessor.

If the majority opinion be construed as holding that the petition is defective as not showing that there had been some formal complaint made to the commission, which was at the time under investigation, it goes to the extreme limits of technicality. The recital of the fact of a complaint, formal or informal, would add so little to the showing of reasonable grounds for the order, that I cannot believe the majority would hang the decision on so slender a thread.

In my opinion the order was entirely proper, is expressly authorized by § 10 of chapter 303 of the Session Laws of 1911, and should be affirmed.'