148 Ky. 331 | Ky. Ct. App. | 1912
Opinion of the Court by
Reversing.
This was a proceeding instituted by a revenue agent for the purpose of having’ assessed for the years 1905-6-7-8-9 as omitted property 6,292 acres of land owned by the appellant company, a foreign corporation, and situated in Lyon County; and, for the purpose of having assessed for the same years as omitted property money on deposit to the credit of the appellant company in banks located in Lyon County.
Upon hearing the case, the circuit court ordered to be assessed for the years mentioned as omitted property the land, as well as the deposits in banks,. From the judgment of the circuit court, this appeal is prosecuted.
Taking up first the question of the assessment of the land, it appears from the record that the appellant company in 1901 purchased a large 'body of land situated in Lyon,' and adjoining counties. The deed to the appellant company for this land does not describe the number of acres in the tract, but refers to other deeds
Conceding these facts, it resists the effort of tibe Commonwealth to have assessed as omitted property the 6,292 acres of land, upon the ground that its agent in Lyon County did not know the number of acres of land it owned in Lyon County, and that the value at which it assessed the land — believing that it contained 7,000 acres — was a fair value, although there may have been in the tract assessed 13,292 acres in place of 7,-000 acres. The argument being that if the amount at which it assessed the land was the fair assessable value of all the land it owned in Lyon County, it is not a matter of material importance whether it described accurately or not the number of acres in the tract assessed.
On the other hand, it is the contention of the Commonwealth that the company knew that it owned the number of acres it now admits it did own, and that it purposely omitted from assessment the excess over 7,-000 acres now sought to be assessed.
The resident agent of the appellant, who gave in the land for assessment, testifies that he did not know how many acres of land was contained in the body, and that he assessed it at 7,000 acres, believing that this was a fair estimate of the number of acres, and that there was no intention upon his part, or on the part of the company, to purposely omit .from' assessment any land owned by it. Of course, the resident agent in assessing the land acted on behalf of his principal, the company, and, although he may not have known- how many acres the tract contained, it is hardly probable that the company did not know approximately at least the number of acres it owned in Lyon County. The discrepancy in the number of acres assessed -and the number of acres actually owned is too large to be entirely accounted for upon the theory of inadvertanee or mistake. So far, however, as this proceeding is concerned, it is not important . why this large acreage of land was omitted from assessment. If it was liable to assessment, the fact that it was omitted by mistake or inadvertanee would not excuse the company from now paying taxes upon it,- and if it was intentionally omitted, the sitúa
Section 4056, of the Kentucky Statutes, provides in part that—
“Persons listing their estates with the assessor shall state separately the tracts of land, the number of acres in each tract, the price per acre, and the improvements thereon, the name of the nearest resident thereto, and where situated, giving election precincts in which it is situated.” * * *
In the schedule the taxpayer must sign and verify, in giving in a list of his taxable property items 12, 13, 14, and 15 require that he shall state in separate items the number of acres of land owned by him, the value per acre, the nearest resident thereto, the election precinct in which it is situated, and the valuation of each tract with improvements.
It is obvious that the purpose of requiring the taxpayer to give the number of acres of land is to enable the assessor and the board of supervisors, whose duty it is to revise and correct assessments, to know how many acres of land the taxpayer owns, so' that they may have the aid of this information in fixing the value at which it should be assessed. Under the statute, as well as under the prevailing custom farming land is valued, not by the tract or body, but by the acre, and, although the number of acres is assessed at a lump sum, it is of course easy when the acreage is given to ascertain the price per acre at which it is assessed. The taxpayer is presumed to know the number of acres that he owns, and this information the assessor and the assessing authorities generally obtain from his sworn statement. It is true they could, in nearly every instance, by an examination of the records learn the number of acres of land owned by each taxpayer, but the almost universal rule is to accept the statement of the taxpayer as to the number of acres of land owned by him. The assessing officers seldom know the number of acres that a taxpayer owns, but as a rule they do know the value of land
In Commonwealth v. Robinson-Norton & Co., 146 Ky., 218, we ruled that revenue agents could not re-assess or re-value property that had been listed at an undervaluation, but that they could only have property assessed that had been omitted from assessment. So that, if the question here was merely an undervaluation of the property, and not an omission, the proceeding by the revenue agent to have it assessed could not be sustained. The question of undervaluation, however, is not presented in this record. The theory upon which counsel for appellant proceeds is that the valuation of $5.30 an acre, or $37,100, at Avhich the company listed 7,000
We acknowledge the force of the argument of counsel for the appellant that when the taxpayer has placed a fair valuation on his property, it is not a matter of great importance whether he has described it accurately or not as the State has not lost anything by the misdescription, and we will now take up this argument to see how the case for the appellant stands. It assessed for each of the years named 7,000 acres of land in Lyon County at a total valuation of $37,100 or $5.30 an acre, and now insists that although it owns 13,292 acres, $37,-100 was a fair valuation for the whole tract during these years. Cr, to state it differently, the effect of the contention is that its entire body of land should only have been assessed during these years at $2.65 an acre. If this conclusion should be accepted as sound, and the statement of its agent that he did not know that the body of land contained over 7,000 acres be accepted as true, the appellant would be placed in the attitude of having assessed this 7,000 acres at twice its assessible .value during each of these years. To agree that $37,-100 the valuation fixed by it on 7,000 acres was a fair valuation for 13,292 acres, we would have to believe that it assessed the land'it thought it owned in these years at practically double its value.
But, passing this curious situation, if the evidence clearly and convincingly showed that appellant assessed at its fair value all the land owned by it, the discrepancy between the number of acres given in and the number of acres owned would not warrant the re-assessment of the omitted acreage as omitted property, because in this state of case no property would in fact have been omitted or indeed undervalued. But the burden was on appellant to show by clear and convincing evidence that the valuation at which it returned the 7,000 acres was'a fair valuation for the 13,292 acres that it owned; and this, the evidence does not do.
The witnesses for the appellant testified that the fair cash value of the land, estimated at the price it would bring at a fair voluntary sale at the assessing period was not over $2 an acre; while the witnesses for the Commonwealth said that it was worth from $6 to $8 an acre. But as some of the witnesses for the Commonwealth were not asked what was the fair cash value of
Taking up now the assessment of the deposits in bank, we find a close and difficult question. The evidence upon this branch of the case is substantially this— the appellant company has its home office and principal place of business in St. Louis, Missouri. The land owned by it in Lyon and other counties in this State was thought to be valuable for the minerals it contained, and it was chiefly for the purpose of developing the supposed mineral resources that the land was bought. Previous to 1905, it was discovered that the mineral re
Upon this state of facts, was this money a proper subject for taxation? To state the question in another way, if a foreign corporation, engaged in business in this State, sends money to its resident agent in this State for the sole purpose of defraying the current expenses of its business in the State — the income from which is not sufficient to meet expenses — and it is used for this purpose alone, has it a situs in this State for taxation?
The attorney for the Commcnwealth in support of the proposition that these deposits, were proper subjects for assessment and taxation, relies upon the case of Commonwealth v. R. G. Dun & Co., 126 Ky., 109. It appears from the opinion in that case that* the home office and principal place of business of Dun & Co., was in New York, but it had an established agency and office in this State, and had transacted business in this State for many years. That at the assessing periods in 1900-1-2-3-4, it If&d on deposit in banks in this State money that was sought to be assessed, as in this case, as omitted property. It is stated in the opinion that—
*340 “There was due to the Louisville office from subscribers (or persons transacting business with appellee) on each of the above assessing dates about $5,000. The income from the Louisville office for each of the years named was about $40,000, which was deposited in the banks, on which the manager drew checks for all current expenses, and at the end of each month, if there was any substantial balance on deposit, he would remit to the New York office. It is conceded that the money deposited in the banks, and the amounts due at the assessing dates referred to, were omitted from assessment and taxation; but appellee claims that the situs of these deposits and the debts due appellee on the above-named assessing days, for the purpose of taxation, must be deemed and considered to exist in New York, the home of Dun’s heirs, devisees, and trustees managing the estate.”
After stating that the money in bank and the debts due by Dun & Co. were personal estate subject to taxation under the statute, the opinion proceeds:
“This court, however, in construing this statute, has determined that it does not apply to the' property of non-residents when in this State temporarily; that in such a case the situs for the purpose of taxation is at the domicile of the owner. * * * But this court has never held that when a non-resident of this State establishes a business in this State, from which money is derived, and other property is accumulated, such property should be relieved from taxation. In our opinion the accumulations from the business of appellee are not temporarily in this State, in the meaning of the decisions referred to. In this case we have a non-resident with an established business, agents residing here who manage it, and an income of over $40,000 annually.”
In the Dun case, the décision that the deposit in bank was subject to taxation was put upon the ground that the deposit accrued from business, carried on by Dun & Co. in this State through an established agency in this State. In this case the evidence shows that the money on deposit was not earned or accumulated in this State, but was sent here from another State for the purpose of being checked out to pay debts due by the non-resident. It was not the profit or accumulations of any business done in this State. If this money on deposit was the proceeds of the farming or business operations
The case of Bluefield Banana Co. v. Board of Assessors, 49 La. Ann., 43, is also relied on by the Commonwealth, but in that case, as in the Dun & Co. case, the money on deposit that was taxed was accumulated from business transacted by the non-resident in New Orleans. As stated in the opinion:
“The corporation had an agent here where it received and sold fruit and received the price for the same. A part of the proceeds were withheld in the hands of the agent for the purposes incidental to the prosecution of its business, and a part deposited to the credit of the company subject to the check of its local agent, also for the prosecution of its business here and for such other purposes as the company might direct it to be applied to. The company prosecuted business in New Orleans precisely as did resident business men and firms. It received all the advantages to be derived from the State and city governments which residents- received. "We s^e no reason why it should not be taxed as claimed in this proceeding, unless there be insuperable objections in the way.”
In case of In Re Houdayer, 150 N. Y., 37, the question before the court was whether an inheritance tax could be imposed by New York on the succession to a deposit in a New York bank to the credit of a non-resident who had died. In holding that it was subject to the tax, the court in the course of the opinion said:
“The decedent brought his money into this State, deposited it in a bank here, and left it here until it should suit his convenience to come back and get it. While the_ commingling of funds may complicate administration, it does not change the facts as thus stated. If he had deposited in specie, to be returned in specie, •there can be no doubt that the money would be property in this State subject to taxation. But, instead, he did as business men generally do — deposited his money in the usual way, knowing that not the same but the equivalent would be returned to him on demand. While the relation of debtor and creditor technically existed, practically he had his money in the bank and could come and get it when he wanted it. It was an investment in this State, subject to' attachment by creditors. If not voluntarily repaid, he could compel payment through the courts of this State. The depository was a resident*342 corporation, and the receiving and retaining of the money were corporate acts in this State. * * * Conceding that it was intangible, still it was property in this State for all practical purposes, and in every reasonable sense within the meaning of the transfer tax act.”
In the Dun case, in the Bluefield Banana Co. case, in the Houdayer case, in Blackstone v. Miller, 188 U. S., 189, 47 L. Ed., 439; New Orleans v. Stempel, 175 U. S., 309, 44 L. Ed., 174; Buck v. Beach, 206 U. S., 392, 51 L. Ed., 1106; Metropolitan Ins. Co. v. City of New Orleans, 205 U. S., 395, 51 L. Ed., 853; State Assessors v. Comptoir Natl. D., &c., 191 U. S., 388, 48 L. Ed., 232; Liverpool & London Inc. Co. v. Board of Assessors, 221 U. S., 346, 55 L. Ed., 762; Commonwealth v. Peebles, 134 Ky., 121; Commonwealth v. West India Oil Ref. Co., 138 Ky., 828, and in many other cases decided by this and other courts, it has been firmly settled that money or intangible property of a non-resident is subject to taxation in the State in which it has an actual situs for business purposes, as when it is in the custody of an agent or fiduciary within the State who manages and controls it by lending it out, investing it, collecting the interest, and the like or when it is the accumulation or income from the business done in the State or when it has been placed permanently on deposit. But the principle applied in this class of cases does not reach the question we have before us. If the money sought to be taxed had been sent to this State to remain here on deposit, or was on deposit for permanent purposes, or if it was the accumulation or income derived from the business done in this State, or if it was sent here for the purpose of being invested, there would be no difficulty in holding that it was subject to taxation. But the uncontradicted evidence shows that no one of these conditions existed with respect to this money. It was the custom and practice of the resident agent of appellant to forward to it at St. Louis as soon as. received all money collected by him from business in this State, and the custom arid practice of the St. Louis office to send to the resident agent from time to time such amounts of money as were needed to defray current expenses, which was more than the amount derived from income in this State. Under this custom and practice, the money collected in this State only remained on deposit in this State until in ordinary course of banking it
It should he stated as a very pertinent and material fact that there is no charge that this practice and custom was resorted to or followed with the purpose of evading the tax laws of the State. It was simply the method the appellant had adopted to carry on its business, a method made necessary in part by the failure of the income to meet expenses. The Commonwealth places its right to tax this money in bank solely upon the ground that as the appellant was engaged in business in this State, having a resident agent here, the money on deposit to its credit in the banks in this State was subject to taxation to the same extent as if it was the money of an actual .resident of this. State who had it on deposit for the purpose of paying his current expenses. Of course, if this rule should be applied, the money should be taxed, as deposits in bank are the subject of taxation. They are mentioned as one of the items of taxable property in the schedule the taxpayer is to sign and are assessible like other property, and if these deposits had been placed in the bank to the credit of a resident owner, they would undoubtedly be subject to taxation except to the extent that they were diminished by outstanding checks. But under the undisputed facts, our conclusion is that the situs of this money for purposes of taxation was not in this State, but at the residence of the owner in St. Louis. We do not think the right to tax the money of a non-resident that is in this State for the mere temporary purpose of paying debts due in this State or defraying expenses incurred in this State could be sustained upon the ground that it had a situs in this State. The exception to the general rule that money and intangible property has only a situs for taxation at the lesidence of the owner is put distinctly upon the ground that the owner by his conduct in relation to it or his manner of doing business with it has given it what may be termed a permanent situs in some other State or locality. It is the permanent feature of the thing that
But, in ruling that this money was not subject to taxation, we do not depart in any particular from the principle laid down in the Dun & Co. case.
If it was shown by fact or circumstance that the income here exceeded the expenses of the business, or that the practice of sending out of this State the money derived from business done in this State, and the returning to defray expenses of money to take the place of that sent out, was a device or scheme to evade the tax laws of the State, we would have no hesitation in holding the money subject to taxation. If a non-resident doing business, in this State could evade taxation upon money in bank by merely adopting a course of business by which all the money collected here should at once be remitted to him, and in turn he would forward to this State the money to conduct the business, such scheme, if successful, would furnish an easy and simple method of escaping taxation on deposits. But it is scarcely necessary to add that such a scheme would not accomplish the purpose intended.
It is further suggested that the levy made by the fiscal court of Lyon County for each of the years 1905-1909 was void, because in making the levy the court did not observe the requirements of section 180 of the Constitution, providing in part that—
“* '* * Every ordinance and resolution passed by any county, city, town or municipal board or local legislative body levying a tax shall specify distinctly the purpose for which said tax is levied, and no tax levied and collected for one purpose shall ever be devoted to another purpose.”
The levy made by the fiscal court recited that it was made “to defray the current expenses, such as salaries, maintenance of paupers, building of bridges, working of roads,” and we think it was a sufficient compliance with the Constitution. Pulaski County v. Watson, Sheriff, 106 Ky., 500. But, aside from this, the question of the validity of the levy is not involved in this case. If no levy at all had been made for the years named, or if the levy made was fatally defective, it would not interfere with the assessment of property. The validity of the levy can only be assailed when it is sought to collect taxes under it. This proceeding is merely for the purpose of having the property assessed.