| Ky. Ct. App. | Dec 13, 1907
Opinion of the Court by
Reversing.
This was a proceeding in the Jefferson county court by the auditor’s agent against appellee, a building and loan association organized under the laws of this State, to have assessed for taxation for county and State purposes what was claimed by the auditor’s agent to constitute parts of the surplus fund and undivided profits of the association which had been omitted in its tax assessment for the years 1901 to 1905. Upon the agreed facts which will be adverted to presently, the county court refused to list the assets mentioned, which action, upon appeal to the circuit court, was affirmed.
Omitting from the agreed statement of facts what appears to us to be mere bookkeeping features, the following, for the year 1904, will serve to illustrate
Assets.
Mortgage Loans.......................$777,500 00
Pass Book Loans....................... 15,658 00
Real Estate........................... 2,591 30
Total Assets..................-.......$795,749 30
Liabilities.
Cash overdrawn............$ 6,522 70
Dues ..........:.......•. 653,000 04
Paid up stock............. 47,500 00
Bonds outstanding......... 64,900 00
Interest on bonds.........! 1,298 00
Sundry expenses.......... 40 00 — $773,268 74
Lxcess of assets over liabilities.......$ 22,480 56
Reserve Fuhd..............$10,918 94
Balance .................. 11,561 62 — $ 22,480 56
Total Assets..........................$795,749 30
Paid in by stockholders:
Dues .....................$653,000 04
Paid up stock............. 47,500 00 — $700,500 04
Surplus and undivided profits.........$ 95,249 26
Amount listed by taxation 1905:
Personalty ................$ 11,068 94
Real Estate............... 3,070 00 — $ 14,138 94
Balance ......................... — $ 81,110 32
Now it is contended by appellant that the difference between the book assets and stock liabilities of the association constituted its undivided profits and
It becomes necessary at this-point to examine the statutes ■ under -which this assessment was made. They are: - •
Section 4093, Ky. Stats., 1903: “That the shares of building’ associations or building and loan associations shall be taxed as other individual personal property, and. shall be listed with the. assessor for that purpose by the owners of said shares, the amount so listed by every owner or shareholder to correspond with the amount paid in. and not withdrawn by the said shareholders on the.fifteenth day of September of every year: Provided,, that the borrowing members shall not be required to list their shares, if the amounts borrowed by certain members equal or exceed the amount paid in on their respective shares. The shares of infants shall be listed by the parents or guardians of such infants.”
Section 4094, Ky. Stats., 1903: ‘ ‘ The president or secretary of every such building association or building and loan association shall list with the assessor the amount of such surplus funds and undivided profits as the association may have on hand and undistributed on the fifteenth day of September of every year. ’ ’
It will be at once perceived by. those who are familiar with the taxing statutes of this State that there is not only a specific, but a different, mode provided for assessing building association shares and other property. But the difference exists. only in the method of assessment. There was. neither purpose nor power in the Legislature to discriminate in favor
Building and loan associations are a peculiar kind of corporation. They are usually aggregations of people who deal exclusively among themselves in accumulating a kind of savings fund for investment in homes. They are not commercial bodies, in the large or popular sense of the term. They are, rather, limited, co-operative, home building co-partnerships. The chapter of the statutes providing for their organization treats them differently from other corporations. So the taxing statutes treat them with respect to their real character. It is recognized that property invested in such associations should be ‘ taxed once for each unit of government under which it exists. In devising a just system of reaching this property, and to tax it only once, the Legislature has looked below the mere apparent thing, and ignored as far as -was practical, the corporate entity. It
But the object of the association is to loan its funds to its members, out of which loans they build houses upon their lots. As some may borrow more than they have paid in on their “shares,” thus anticipating their own payments on their share subscriptions, they secure their obligation to continue paying on their shares till they are matured, by mortgage on their land. These obligations, whether they are called mortgage notes or mortgage bonds, are primarily to secure the obligor’s agreement to continue paying in on his share subscription until it has come to be equal to its par value, at which time his obligation is fulfilled.- In this co-operative plan by which the weekly or monthly installments, small in each instance, but considerable in the aggregate, are loaned to one another by the membership, in their co-operative capacity, it is at last each one’s furnishing the means to build his own home. For that reason the notes and bonds of the corporation are not made assessable under the statute. The property which they represent must from its very nature surely be subject to taxation. The Legislature saw that to tax such notes, and to tax the corporate shares, too, would be double taxation in its worst form, for that would tax both the member’s property, and his indebtedness representing its value. The statute has been upheld in not taxing such notes as being not in contravention of the provision of the Constitution that all property shall be taxed. Commonwealth v. Fayette Building Ass’n, 71 S. W. 5, 24 Ky. Law Rep. 1223.
It was pointed out in argument that some property
It is true some loans are made upon “pass books,” meaning that the association has allowed its “borrowing” member to temporarily withdraw a part of
It further appears in this case that appellee issued bonds and sold them, of which $64,900 are now outstanding. Appellant contends that in the item of $777,500 of loans is the money realized from the bond issue, and hence that, to the extent that borrowed money is loaned out on mortgages, the latter should be taxed as against the association. A sufficient answer to this contention seems to be that the statute does not authorize such an assessment against the association unless it be among either its “surplus” or “undivided profits.” There can be legally neither surplus nor undivided profits so long as there is an indebtedness against the association above its assets. But it is contended that there was for the year 1904, as shown in the statement above, a difference of $22,480.56 between assets and liabilities, of which $10,918.94 was set apart as a reserve fund by the association (and which was duly listed by it), leaving $11,561.62 of earnings not listed. Appellee contends that this balance should not be regarded as taxable until after the period of distribution, viz., January 1st or July 1st, and the county court and circuit court each so held. But we' think whatever was on hand on September 15th (now September 1st) of undivided earnings is taxable against the association. ' But as the undivided earnings are subject to the payment of current indebtedness against it as of that date, and as the statute clearly indicates that only the surplus earnings were intended to be taxed, we think current indebtedness should be deducted.
Without setting out here the detailed calculation, we will add that, following the same principle, for the year 1900, there was omitted $2,433.07; for 1901, $1,731.25; for the year 1902, $4,357.54; and for the year 1903, $5,819.46.
The judgment is reversed, and cause remanded for proceedings consistent herewith.