Eq. Fin. Co. v. Bd. of Sup'rs of Lee Co.

111 So. 871 | Miss. | 1927

* Corpus Juris-Cyc References: Taxation, 37Cyc, p. 908, n. 33.

[EDITORS' NOTE: THE MARKER FOR FOOTNOTE * IS OMITTED FROM THE OFFICIAL COPY OF THIS DOCUMENT, THEREFORE THE MARKER IS NOT DISPLAYED IN THE ONLINE VERSION.] This is an appeal by the Equitable Finance Company, a corporation chartered under the laws of Delaware, having its property and place of business at Tupelo, Miss., from an assessment of forty thousand dollars by the board of supervisors on its capital invested in the state. The cause was tried in the court below on an agreed statement of facts, which reads as follows:

"The following is an agreed statement of facts, agreed to between Guy W. Mitchell, attorney for the board of supervisors, Lee county, Miss., for and on behalf of said board, and J.M. Thomas, attorney for Equitable Finance Company, for and on behalf of said company, with reference to the assessment of taxes against the Equitable Finance Company for the year 1926, said assessment appearing on the Personal Assessment Roll of said county for 1926, on page 306, line 19.

"(1) It is agreed that Equitable Finance Company is a foreign corporation chartered and organized under the laws of the state of Delaware, but having its principal place of business and office in the city of Tupelo, Lee county, Miss., and being engaged in said city of Tupelo in the business of discounting notes or other securities for money, and being so engaged in said business in said city of Tupelo and said county, on the 1st day of February, 1926.

"(2) That the board of supervisors of Lee county, Miss., has duly and regularly, in accordance with the statute in such cases made and provided, made an assessment against the Equitable Finance Company for taxes for the year 1926, under section 6900 of Hemingway's Code; such assessment being in the sum of forty thousand dollars for the amount of money employed in the purchase or discount of bonds, notes, bills, checks, or other securities for money; which assessment is in addition to an assessment filed by Equitable Finance Company covering the value of physical tangible property as follows: `In repossessed automobiles, furniture and fixtures, four thousand five hundred dollars' — being a total assessment for said physical tangible property of the sum of four thousand five hundred dollars, which property was in the possession of Equitable Finance Company on February 1, 1926.

"(3) That the board of supervisors of Lee county, now sitting as an equalization board at this, the regular August term of said board of supervisors, has determined and adjudicated and found that the Equitable Finance Company has the sum of forty thousand dollars employed in said business in accordance with said statute, and that Equitable Finance Company should be and has been additionally assessed with the said sum of forty thousand dollars, which it has adjudged to be the true value of the amount employed in the purchase or discount of bonds, notes, bills, checks, or other securities for money in the state of Mississippi; and it is agreed that, as a matter of fact, the Equitable Finance Company on the 1st day of February, 1926, did have said sum employed in said business.

"(4) It is further agreed that all of the money so employed by the Equitable Finance Company, in the purchase or discount of bonds, notes, bills, checks, or other securities for money, is invested in what is known as motor lien notes (with the exception of the physical tangible assets already assessed against the Equitable Finance Company, as above set out), which motor lien notes were purchased by Equitable Finance Company from various automobile dealers prior to the 1st day of February, 1926, and held, owned, and possessed by said Equitable Finance Company on February 1, 1926, and which motor lien notes were made under the following circumstances and conditions:

"(a) That the various dealers in automobiles would sell automobiles to the purchaser thereof on a credit, under what is known as a conditional sales agreement; the cash price of the automobile being fixed, to which would be added by the dealer a certain sum of money to make the credit price, such additional charge, so added amounting to approximately a sum that would equal one per cent. per month. That the dealer would, after adding this credit charge to the cash price, collect approximately thirty per cent. of the total in cash, and the balance would be settled by the execution of a note for said amount payable in twelve monthly equal installments.

"That next hereto attached is a copy of one of such conditional sales agreements, giving a typical illustration of the method adopted of calculation and the terms of such sale, and which copy may be used in connection with this agreement as a part thereof as if specifically set forth therein.

"(b) That the various dealers would, after the making of said contract of sale, sell said contract and the note providing for the monthly installments to the Equitable Finance Company, who would pay the dealer or dealers therefor a price equal to the face value of the sum of said monthly installment notes after deducting therefrom an amount equal to the additional charge for credit; and which amount so deducted is an amount in each instance in excess of six per cent discount.

"That said notes bear six per cent. per annum after the maturity thereof until paid; that whenever any interest is charged to or collected from the maker of the notes other than above set forth, the rate of interest thereon is calculated at six per cent. per annum from the maturity of the installments. Guy W. Mitchell, Attorney for Board of Supervisors, J.M. Thomas, Attorney for Equitable Finance Co."

It will be seen from the agreed statement of facts that the forty thousand dollars had been invested in notes bearing six per cent. interest after maturity, taken for the purchase price of automobiles; that on the 1st day of February, 1926, all the capital of the corporation, except the four thousand five hundred dollars physical tangible property mentioned in the agreed statement of facts, was invested in these notes.

Chapter 183, Laws of 1918 (section 6879a [w], Hemingway's Supplement), reads as follows:

"(w) All state, county and municipal, levee or school bonds or other government obligations issued after the 1st day of April, 1906, and all notes and evidences of indebtedness bearing a rate of interest not greater than six per cent. per annum, and all money loaned at a rate of interest not exceeding six per cent. per annum shall be exempt from taxes of any character whatever."

The court below held the company subject to the assessment, because under the agreed statement of facts the automobile company taking the different notes had a cash price and a credit sales price, either of which was available to the purchaser, and the credit sales price was an advance over the cash price equal to one per cent. per month on the deferred payments, and because of this fact that more than six per cent. was charged under an arrangement between the finance company and the dealer, and that as a consequence the finance company obtained more than six per cent. per annum on its money. We held in Commercial Credit Co. v. Shelton, 139 Miss. 132, 104 So. 75, that a similar contract was not usurious, because such credit price was in excess of the interest rate allowed by law; that the transaction was not one merely of interest, but was a credit price properly involving not only interest for the use of money, but credit risk. In that case it was contended that the credit price amounted to more than twenty per cent. over the cash price, and, consequently, that both principal and interest were forfeited under the laws of this state, but we held to the contrary. We think the present case is controlled by the same principle, and, consequently, that there was not an interest charge in excess of six per cent. The notes expressly provided for six per cent. after maturity, and were six per cent. notes. We do not think that the test is whether the owner of the notes (where the notes bear six per cent. or less) gets them at such a discount as will enable him to reap more than six per cent. in profit on his money. The policy of the law in exempting notes, bonds, and other evidences of indebtedness not bearing more than six per cent. was to induce people to lend money at a low rate of interest. A person may take a note bearing six per cent. interest and be able to sell it on a basis that will yield a greater return to him; and another note bearing six per cent. interest might be sold on such a basis as to make it yield less than six per cent. net; while another note bearing eight per cent. interest might be sold so as to reduce the income to below six per cent., yet it would bear the rate of eight per cent. and the maker of the note would have to pay eight per cent. The test in such case, we think, is the true rate of interest the paper bears, for which the maker is responsible, and which he must pay. It does not depend upon whether the note is sold at a discount or a premium to determine the rate of interest it bears, under the law.

This brings us to the question whether the Equitable Finance Company, being a corporation, is assessed in the same way as an individual, or whether it is to be assessed upon its capital, regardless of how that capital is invested. In other words, must a corporation of this kind pay upon the amount of capital it has invested in the business, regardless of whether that capital is invested in exempt property or not? By section 112 of the state Constitution taxation is required to be equal and uniform throughout the taxing district, and property must be taxed according to its value, although, in certain cases, the legislature may provide special methods of ascertaining its value. Section 181 of the state Constitution provides that the property of corporations shall be taxed in the same way and to the same extent as the property of individuals. In Panola County v. Carrier, etc.,89 Miss. 277, 42 So. 347, the court considering the question of assessment for taxation of property of joint-stock companies and corporations other than banks, under section 4267, Code of 1906 (section 3758, Code of 1892), held that the section was incomplete and must be considered in connection with the constitutional sections above referred to; that, so considering it, the real and tangible personal property must be determined and deducted from the market value of the capital stock if the market value of such stock exceeded the total value of such property, thus establishing the principle that the property of the individual and the property of the corporation, other than such corporations as are specially provided for in section 181, should be taxed in the same way and to the same extent. InPeople's Warehouse Co. v. Yazoo City, 97 Miss. 500, 52 So. 481, this principle was reaffirmed. In Robertson, RevenueAgent, v. Mississippi Valley Co., 120 Miss. 159, 81 So. 799, the revenue agent undertook to back assess the Mississippi Valley Company, a corporation chartered under the laws of the state and domiciled at Water Valley, upon that part of its capital stock which was invested in the stock of other railroad corporations whose property had already been taxed, on the ground that the amount so invested was subject to taxation by the city of Water Valley. It was contended by the revenue agent in that case that, under the statute above referred to, you should deduct the real estate which had been assessed for taxation and assess the capital stock of the corporation at its domicile with the entire amount of such capital not invested in real estate, regardless of whether the property owned by the railroad in whose stock it was invested had paid taxes upon its tangible and intangible property. The court was there equally divided upon the question whether such capital stock should be so taxed, but it had decided in another case (Robertson, Rev. Agt, v. Mississippi Val. Co. [Miss.], reported in 77 So. 253) that such capital stock was not taxable by the state or county for state or county taxes, and the court held that the former decision was a precedent, although decided by an equally divided court, and it was there held that such capital stock was not subject to taxation because it was invested in nontaxable property; that is, property upon which individuals were not subject to taxation.

We think that these cases are controlling here and are distinguished from the case of Harrison Naval Stores Co. v.Adams, 104 Miss. 381, 61 So. 417. In that case a nonresident corporation was engaged in manufacturing naval stores, and held certain turpentine leases for timber, which had been taxed to the owner of the timber, growing upon the land which was not subject to taxation by the state, being certain of the school lands of the state. In that case the capital of the company was not invested in nontaxable property. At page 394 of the Mississippi Report (104 Miss. 394, 61 So. 418), the court said:

"It is certainly well known that it is the purpose of the state in its scheme for providing revenue to require all property,saving such as may be especially exempted, to be assessed for taxation and to bear its proper burden in raising the necessary funds for the expense of government." (Italics supplied.)

The court certainly had in mind, in writing this opinion, the saving from the operation of the opinion such property as might be specially exempted by law. We think it was the policy of the legislature in exempting money loaned at six per cent., or less, to encourage lending money at a cheap rate, and that the rate was to be determined by the original transaction, and not by the fluctuating values that such paper might have in passing through the channels of trade. The same paper in passing through the channels of trade might vary in its marketable value at the various times it was bought and sold, and there would be no certainty in determining whether it was taxable or not, if its return to the owner who might possess it during any particular year was the test. We therefore think the court erred, and the judgment will be reversed and judgment entered here for the appellant.

Reversed, and judgment here for the appellant.