Fajardo Sugar Co. v. Richardson

Mr. Justice Wolf

delivered the opinion of the court;

This is a suit to recover taxes paid under protest as authorized by Act No. 35 of March 9, 1911. The complainant is a corporation organized under the laws of the State of New York. The defendant, according to the complaint and a supplementary complaint, among other things, assessed property for taxation against the complainant in the sum *292of $1,015,530.55. The complainant objected to the ensuing tax, bnt nevertheless it paid under protest to said Treasurer the sum of $12,186.37 for the whole year, based on the'foregoing assessment.

The complaint and supplementary 'complaint further set up that the $1,015,530.55 assessed against the complainant consisted entirely of credits, namely, (a) advances, loans and current account with the Fajardo Sugar Growers’ Association in the sum of $743,383.79; (b) a current'account'with the 'Fajardo Development Company, a railroad company, in the sum of $200,146.76, and (c) promissory notes and other evidences of debt in the sum of $72,000. The complainant maintained that the whole sum aforesaid was exempt by virtue of section 290 of the Political Code of Porto Eico and relied principally on the decision of this court in the case of the Union Central Life Insurance Co. v. Gromer, 19 P. R. R., 856.

From the stipulation of the parties it appears that the Treasurer, for the purposes of taxation fixed by sections 290, 317 and 320 of the Political Code, assessed the property of the complainant in the sum of $3,357,194. These sections as amended are as follows:

“Section 290. — That all property "not expressly exempted from taxation shall be assessed and taxed. For the purposes of the assessment and collection of taxes, real property shall be deemed to be synonymous with immovables as defined in sections 333, 334 and 335 of the Civil Code: Provided, however, That machinery, vessels, instruments or implements not fixed to the building or soil shall not be deemed to be real property. Personal property shall include such machinery, vessels, instruments or implements not fixed to the building or soil, live stock, money, whether in the possession of the owner thereof or held by or on deposit with some other person or institution, bonds, stocks, certificates in unincorporated syndicates or partnerships, patent-rights, trade-marks, franchises, concessions and all other matters and.things capable of private ownership and not included within the meaning of the term ‘real property,’ but shall not include book-credits, promissory notes nor other personal credits.
*293“Section 317. — Tbe personal property of institutions, corporations and companies incorporated under the laws of Porto Rico other than banking institutions having a share capital shall be assessed to such institutions, corporations and companies by the Treasurer of Porto Rico in the manner provided by this section. The actual present value of the capital of such corporations shaE be ascertained by the Treasurer of Porto Rico from the sworn declarations of the presidents, directors or other chief officers of such corporations as required by section 319, and from such other reliable information as "the Treasurer may have or secure, and the present actual value shall in no case be less than the value of the capital stock and bonds plus the surplus and undivided earnings of said institutions, corporations and companies, nor less than the market value of the real and personal property of said institutions, corporations and companies, including in personal property rights, franchises and concessions. ’■ From the validation thus obtained shall be deducted the total valuation of real property of said corporations, as ascertained in accordance with the provisions of section 316, and the remainder shall be deemed to represent the personal property of said corporations for purposes of taxation.
“Section 320. — The assessment of every, corporation, joint stock and limited liability company not incorporated in Porto Rico but engaged in the transaction of business therein, other than banks and banking institutions having a share capital, shall be made in the manner provided by this Title for the assessment of the property of institutions, corporations, and companies incorporated under the laws of Porto Rico: Provided, however, That in the determination of the actual present value of the capital of such corporations only such part of the capital of such corporations shall be considered and assessed as is employed in the transaction of business in Porto Rico, but the amount of such capital shall in no case be less than the value of the real and personal property of such corporation or company situated in Porto Rico, including in such personal property all franchises or concessions granted said corporation or company under the laws of Porto Rico. All obligations imposed upon institutions, corporations and companies incorporated under the laws of Porto Rico, or upon their officers, to fill in and return schedules, under sworn statements or otherwise, shall apply equally to corporations, joint stock and limited liability companies not incorporated in Porto Rico, and their officers. All the shares of stock in banks and banking institutions, whether of issue or not, existing by authority of the United States or of any State of the United *294States, or of Porto Rico, or otherwise, and located asnd doing business within Porto Rico, shall be assessed by the Treasurer of Porto Rico to the owners thereof in 'the municipal districts where such banks are located, and not elsewhere. In the assessment of all Insular and municipal taxes that have been or may hereafter be duly imposed by law in such municipality, whether such owners are residents of said municipality or not, all such shares shall be assessed at their fair market value on the fifteenth day of January, first deducting therefrom the proportionate part of the value of real estate belonging to the bank and the persons or corporations who appear from the records of the bank to be owners of shares at the close of business on the day next preceding the fifteenth day of January of each year shall be taken and deemed to be the owners thereof for the purposes of this section. Every such bank shall pay to the Treasurer of Porto Rico, at the time in each year when other taxes assessed in the municipality become due, the amount of the tax so assessed in such year upon the shares in such bank. If such tax is not paid, the bank shall be liable for the same, and the said tax, with the penalties provided for in section 330' of this Title, may be recovered by the Treasurer of Porto Rico in the same manner as the payment of other delinquent taxes is enforced. The shares of such bank shall be subject to the tax paid thereon by the bank, or by the officers thereof, and the bank and the officers threof shall have a lien on all the shares in such bank and on all the rights and property of shareholders in the corporate property, for the payment of said taxes. The cashier of every such bank shall make and deliver to the Treasurer of Porto Rico, on or before the fifteenth day of January of each year, a statement, verified by the oath of such cashier, showing the name of each shareholder, with his residence and the number of shares belonging to him at the close of business on the day next preceding the fifteenth day of January as the same then appeared on the books of said bank. All obligations imposed upon institutions, corporations and companies other than banks incorporated under the laws of Porto Rico, or upon their officers, to fill in and’return schedules, render sworn statements, or otherwise, shall apply equally to banks as described in this section and their officers.”.

In making kis original assessment the Treasurer maintains or concedes, as the case may be, that he took into account solely the physical property of the Fajardo Sugar Company, made up of lands, machinery, buildings, improvements, mortgages, leases, bridges, money, and other things, includ*295ing the alleged credits which are the object of this suit. The complainant, not being satisfied with the assessment originally made by the Treasurer, appealed to the Board of Be-view and Equalization, and the grounds of the appeal were that the valuation made on machinery had been increased by the Treasurer in the sum of $427,627 without taking into account its real value, and that the Treasurer had likewise taxed advances, loans and other credits in the sum of $1,500,785, and also had assessed shares of stock not situated in Porto Bico in the sum of $586,500.

The Board of Beview and Equalization fixed the assessment of the Fajardo Sugar Company, in round numbers, in the sum of $3,000,000. Exactly how the said Board arrived at the said sum of $3,000,000 is not at all clear from the record and is so conceded by the Treasurer. The appellant maintains and his principal argument based upon the claim is that the Board of Beview and Equalization assessed the property according to the capital stock, making deductions for the property outside of Porto Bico. He maintains that to reach this conclusion the capital stock of the company was taken at the value of $2,569,818, the bonds at $400,000, undivided profits at $587,101, and surplus and insurance fund at $50,000, making a total of $3,606,919, from which the Board deducted the sum of $606,919, as capital employed elsewhere, leaving the total sum to be taxed as $3,000,000.

The company on its appeal asked for a reduction of $427,627 on machinery, ‘ and on $1,500,785 of credits. The Board reduced the amount from the estimate made by the Treasurer in the sum of $357,194. The company now is asking that the tax on $1,015,530.55 for each six months be returned. The $1,015,530.55 is a claim for less than the difference between the $1,500,785 originally claimed for credits and the reduction of $357,194 made by the Treasurer.

Prom one of the exhibits certified by the Treasurer, namely, “Exhibit X to accompany F,” it appears that the Board of Beview and Equalization attempted to make the *296taxation on'the basis of the’value' of the capital stock, etc.; and not upon the actual value of the physical property.

Nevertheless, in another certificate by the Treasurer if merely appears that the Board reduced the valuation made by the Treasurer from $3,357,194 to the lump sum of $3,000,000.

We shall first dispose of a preliminary question of practice raised by the appellant and then consider the powers of the Board and what it must be deemed to have done.

The appellant in his brief maintains that there was a variance between the complaint and the proof. It says the complaint refers to the assessment made by the Treasurer of Porto Rico when in point of fact the assessment was finally made by the Board of Review and Equalization. We think that the action of the Board is necessarily the action of the Treasurer, first, by reason of the Poraker Act, whereunder the Treasurer is the' person appointed to collect money in Porto Rico; second, by reason of the adoption by the Treasurer of the reports of the Board of Review and Equalization, and his proceeding to collect by virtue of such assess^ ment; third, by reason of the law governing the action of the Board wherein the Treasurer is ordered to correct the assessment books to conform to the action of the Board which shall deliver all papers and books to the Treasurer, the latter being under a duty to furnish a book to record the decisions of the Board. Sections 309, 310, 311 and 313 of the Political Code. The Treasurer is besides ex officio a member of this Board. There is also an analogy between the action of this reviewing board and the action of a reviewing court. The final action of the reviewing court becomes the judgment of the court below; the final action of the Board of Review and Equalization is also the action of the Treasurer. Furthermore, we think that this question was waived by the Treasurer by reason of the trial court’s theory in which this particular question of variance was never raised, by the acceptance of the pleadings and the stipulation and *297by the actions generally of the parties in the court below. It is evident that the parties and the judge below were trying or thought that they were trying the question' of whether these particular alleged credits were unduly taxed.

The original assessment by the Treasurer was on the physical property of the complainant. It is true, as the appellant maintains, that in the original return of - the complainant it said that its capital stock was $3,000,000, but in that return the value of the capital stock was in nowise estimated, nor was any request made by the Treasurer or any other officer that the value of such capital stock should be estimated. The Board of Review and Equalization, without apparent data, fixed the value of this stock in the sum of $2,569,818. How they arrived at such a sum is a mystery to all the parties in this case. The appellant alleges that the sum was arrived at without taking into consideration how the capital of the company was employed in Porto Rico. We are strongly of the opinion that the Board of Review and Equalization arrived at its idea of the value of the capital stock by an actual consideration of what the physical property of the company in Porto Rico was really worth, based partly on the idea of the capitalization of the company at $3,000,000. It had no other data before it than the value of such physical property in Porto Rico, because the assessment made by the Treasurer, from which the appeal was taken and on which the board had based its conclusion, contained only the value of the physical property, and on the basis of the valuation made by the Treasurer the parties made their argument before the Board. Furthermore, we agree with the respondent that even if this is an assessment based on the value of the capital stock of the property in Porto Rico, as the value of such stock must necessarily be made up of the value of the physical property or franchises of the corporation, and as no due allowance was made by the Board of property which was claimed to be exempt, if such property is really exempt, then the company is. entitled to have its taxation reduced in *298the amount of' the credits which the company alleges were improperly included in the original assessment of the Treasurer and which apparently were not considered by the Board of Review and Equalization. We think that there is enough in the record to indicate that the action of the Board was. merely a reduction of the sum originally fixed by the Treasurer. The considerations of this paragraph are supported!, by section 320 of the Political Code, cited above, when it; says that only that part of the capital of a foreign corporation shall be assessed as is employed in business in Porto. Rico. ■

The appellant, in spite of the case of the Union Central Life Insurance Company v. Gromer, supra, insists that the-credits are not exempted by the law. He maintains that The-Attorney G-eneral of Porto Rico, Mr. Brown, and this court, in following his opinion were mistaken. The argument is-that section 290 merely says that credits should be exempted from their classification under the head of personal property,, but that credits are nevertheless taxable because section 290-provides that all property shall be taxed. The appellant points out that by the law of 1902 credits were also taxed and that the only revision that the law of 1904 made was. to exclude them from their classification under personal property.

It is a very general and convenient division of property into real and personal. Sometimes credits or choses in action were not considered to be included under personal property,, and execution or judicial'process against personal property did not run against credits. The mere fact that the Legislature indicates an intention to tax all property does not make every possible form or mutation of property taxable,, and some things or claims of value are frequently not com sidered as property until the Legislature declares them to be so. Tally, County Treasurer, v. Brown, 125 M. V., 248; State of Washington ex rel. J. G. Wolf v. Parmenter, 19 L. R. A. (N. S.), 707, citing People v. Hibernia Sav. & L. *299Soc., 51 Cal., 243, where it was held that credits were not necessarily property under constitutional provision requiring all property to be taxed. See also Gleason v. Thaw, decision of the Supreme Court of the United States, February 23, 1915. Generally, however, — and it has been so held by the courts, — personal property would include credits, and when section 290 specifically excludes such credits we must take it for granted that the Legislature intended what it said. The-Legislature, seeing that all physical property is taxed, may have desired to avoid a taxation of claims on that property tc avoid duplicate taxation which so frequently falls on the borrower himself instead of on the person holding the credit. The case of the Union Life Insurance Company v. Gromer has never been overruled and does not depend solely on the opinion of Attorney General Brown, but on a reasoned consideration of the statute. Following this same line of argument, the appellant insists that exemptions should be strictly construed, but the cases in which this principle is announced are more generally clear immunities, e. g., particular individuals, corporations, boards, or charitable organizations, or property exempted to individuals. Vicksburg, etc., R. R. Co. v. Dennis, 116 U. S., 665; Providence Bank v. Billings, 4 Pet., 514; 37 Cyc., 908 et seq.

Strictly speaking, the exclusion here is an exception or omission to tax, as such difference is pointed out in the case of Eidman v. Martínez, 184 U. S., 583.

“It is an old familiar rule of the English courts, applicable to-all forms of taxation, and particularly special taxes, that the sovereign is 'bound to express its intention to tax in clear and unambiguous language, and that a liberal construction be given to words of exception confining the operation of duty, Warrington v. Furbor, 8 East, 242, 247; Williams v. Sangar, 10 East, 66, 69; Denn v. Diamond, 4 B. & C. 243, 245; Tomkins v. Ashby, 6 B. & C. 451; Doe v. Snaith, 8 Bing. 146, 152; Wroughton v. Turtle, 11 M. & W. 561, 567; Gurr v. Scudds, 11 Exchq. 190, though the rule regarding exemptions from general laws imposing taxes may be different. Cooley on Taxation, 146; In Matter of Enston, 113 N. Y. 174, 177.”

*300See also Hall Company v. Commonwealth, 215 Mass., 326; Hale v. County Commissioners, 137 Mass., 111; Broom’s Legal Maxims, p. 4.

But whether the exclusion of credits in section 290 be considered as an exemption or an exception to taxation, the intention of the Legislature as revealed by that section is not to be mistaken. The intention to exclude is further displayed by the changes made in 1904 in other parts of the Political Code. In sections 317 and 319 of that code, requiring corporations to make returns of their personal property, the word “credits” was included in 1902 and omitted in 1904, the date at which section 290 was amended. And section 290 itself says that for the purposes of taxation real property should include certain things and personal property certain others (excluding credits), thus showing an exhaustive division of property to be taxed. '

The appellant, however,. makes another and further contention in this case. He maintains that these alleged exemptions were not credits at all but some other form of prop-, erty. The theory is that these advances or loans to sugar companies, railroads, and cultivators of sugar are all money used in the business of the Fajardo Sugar Company, which is admittedly engaged in the business of the cultivation of sugar. The exact nature of these alleged credits of the Fa-jardo Sugar Company is not shown by the pleadings or the proof. They are admittedly loans or advances but they are' unsecured and the nature of the contracts between the Fa-jardo Sugar Company and the various debtors is not specifically revealed. If these alleged credits were merely advances made by the corporation, in other words, property or money which had passed out of the custody of the Fajardo Sugar Company, then it might be very well questioned whether such loans or advances are property in the hands of the corporation. What the corporation has, then, is a right to something in the future, whether it be the delivery *301of sugar or a right to compensation in default of such delivery.

The intention, then, on the part of the Legislature to tax these advances or loans has not been indicated in any way by the statute. We have seen from the case of Eidman v. Martínez and the other authorities supra that the intention to tax must be clearly indicated by the Legislature. If it would seem unscientific to say that these advances by which individuals owe a duty to deliver goods or money to the corporation are not taxed, then it is evident that the measure of that duty or the damages is a claim properly classified by the company in its return as a credit. Any other construction than that these loans or advances are credits would enable the company thereafter to contend that they were dealing, not with taxable property, but with claims that might arise in the future, and that the proper time to tax these things would be when they became property in the hands of the corporation by reason of the delivery of the things mentioned in the supposed contracts. If it should be deemed-to be wise, the Legislature will be given hereafter an easy basis for taxation of these credits. Indeed, section 290 has been in force since 1904 and the fact that the Legislature has not sought to change it to make the taxation of credits specific militates against the theory of the appellant.

We have had some doubt as to whether the complainant ought to recover the whole sum claimed, inasmuch as some other physical property was reduced by the assessment taxes as fixed by the Board of Beview and Equalization. However, as the claim for reduction was much larger than the reduction finally made by the Board and as the Board evidently did not regard the claim on the alleged credits and, furthermore, as the issue between the parties was shown by the record to be the return of these credits vel non, we think the entire judgment should be

Affirmed.

Justices Aldrey and "Hutchison concurred. *302Mr. Chief Justice Hernández took no part in the decision of this case. Mr. Justice del Toro dissented.