Hale v. County Treasurer of Mineral Co.

265 P. 6, 82 Mont. 98, 1928 Mont. LEXIS 62

• Court: Montana Supreme Court
• Decided: March 17, 1928
• Docket: No. 6,268.
• Status: Published

Opinion

MR. CHIEF JUSTICE CALLAWAY

delivered the opinion of the court.

The legislative assembly at its last session passed an Act purporting to impose a license tax “on livestock coming into Montana from other states, and grazing therein, providing for collection of same and distribution of such tax,” and fixing a penalty for violation of the Act.

Section 1 provides that a license tax of forty cents per head on horses, mules and cattle and ten cents per head on sheep is “imposed on all such livestock coming into this state to graze for any length of time whatsoever, provided, however, that no livestock on which the regular annual tax is levied by any county of the state shall pay said license tax.”

Section 2 makes it the duty of an owner, or his agent, bringing livestock into this state for grazing purposes immediately to notify in writing the treasurer of the county in which the livestock is being grazed, giving the number of the livestock and the location of the land on which they are being grazed.

Section 3 makes it the duty of the assessor to ascertain if there is any livestock from without this state temporarily grazing within his county and if so to report the number of livestock, their location, and the name of the owner or person in charge thereof to the treasurer, “who shall immediately upon receipt of such notice from the assessor or owner of such livestock,” proceed to collect the sum of money due and payable from the person keeping and herding the livestock, or his agent; and in the event that it is necessary for the treasurer to collect the taxes due by distress and sale he may proceed without any further warrant for that purpose in the same manner as is provided by law for taxes assessed upon personal property.

Section 4 provides a penalty for a violation of the Act by the owner or his agent.

Section 5 prescribes that all moneys collected under the Act “shall be divided equally between the general fund of the school district, or districts, in which the livestock is being grazed and the general fund of the county.” (Chap. 101, Sess. Laws 1927, p. 342.)

The plaintiff, a resident of the county of Yakima, state of Washington, was the owner of 2,400 head of ewes which were assessed for taxation in Yakima county for the year 1927 in accordance with the laws of Washington, which provide for an assessment on the basis of the valuation of all personal property as of March 1 of each year. Plaintiff had a permit to graze sheep in the Lolo National Forest, which embraces portions of Montana and Idaho. On June 1 the ewes were loaded on cars of the Northern Pacific Railway en route to Chicago, but by an arrangement with the railway company they were unloaded in Mineral county and placed within the National Forest to graze until September 1. In their migrations it was expected that they would graze in Idaho as wéll as Montana. A part of the Lolo National Forest is within Mineral county and the treasurer of that county threatened to collect the license tax of ten cents per head on all the sheep in accordance with the Act by restraining and selling them, and also proposed to arrest the plaintiff for violating the law. The plaintiff, claiming that the Act is invalid and unconstitutional, brought this suit against the treasurer to enjoin him from interference. A demurrer to the complaint, interposed by the county attorney of Mineral county, was sustained, and plaintiff refusing to amend, judgment was entered for the defendant, from which the plaintiff has appealed.

The plaintiff claims (1) that the Act is void under the Constitution of Montana for the reason that the tax is not based upon a uniform legal assessment; (2) that it is invalid under the Constitution of the United States because (a) it denies to plaintiff the equal protection of the laws, and (b) it imposes a burden upon interstate commerce; (3) it is charged that, the Act is invalid because it is an attempt to regulate the use of the public lands of the United States.

After an exhaustive search of the authorities, while no case directly in point has been found, we are constrained to hold the Act is invalid because it denies to plaintiff the equal protection of the laws; and none of the other objections need be considered. It may not be amiss to say before we proceed with the discussion that the legislature in enacting Chapter 101, supra, attempted to do what it failed to do in enacting Senate Bill No. 30, approved March 14, 1901 (Sess. Laws 1901, p. 57), which was declared unconstitutional in Hayes v. Smith, 58 Mont. 306, 192 Pac. 615. Both Acts are directed against livestock brought into this state for grazing purposes.

In considering the question presented we have borne in mind that canon of statutory construction which requires the indulgence of every presumption in favor of the constitutionality of an Act of the legislative assembly. Every reasonable doubt must be resolved in favor of the legislative action. The court must determine not whether it is possible to condemn but whether it is possible to uphold the Act which is attacked, every presumption being in favor of its validity. The statute will not be declared invalid unless, in the judgment of the court, its unconstitutionality is shown beyond a reasonable doubt. (State ex rel. Wallace v. Callow, 78 Mont. 308, 254 Pac. 187; Mills v. Stewart, 76 Mont. 429, 47 A. L. R. 424, 247 Pac. 332; State ex rel. Boone v. Tullock, 72 Mont. 482, 234 Pac. 277; Martien v. Porter, 68 Mont. 450, 219 Pac. 817.) Consequently, if two constructions are possible, one of which will result in declaring the statute constitutional and the other unconstitutional, the court will follow the former. (State ex rel. Northern Pacific Ry. Co. v. Duncan, 68 Mont. 420, 219 Pac. 638; State ex rel. Bankers’ Trust Co. v. Walker, 70 Mont. 484, 226 Pac. 894.) But where the Act, in the judgment of the court, manifestly violates a constitutional provision it is the duty of the court so to declare.

Section 1 of Article XII of Montana’s Constitution provides: "The necessary revenue for the support and maintenance of the state shall be provided by the legislative assembly, which shall levy a uniform rate of assessment and taxation, and shall prescribe such regulations as shall secure a just valuation for taxation of all property, except that specially provided for in this article. The legislative assembly may also impose a license tax, both upon persons and upon corporations doing business in the state.”

Section 11 of the same Article provides: "Taxes shall be levied and collected by general laws and for public purposes only. They shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax.”

In State v. Camp Sing, 18 Mont. 128, 56 Am. St. Rep. 551, 32 L. R. A. 635, 44 Pac. 516, this court, speaking through Mr. Justice DeWitt, discusses the two systems of raising revenue which are contemplated by section 1, supra. These he characterized for convenience as the "taxation system” and the "license system.” i

Taxes are generally classified as either taxes on property or excise taxes, although sometimes the word "excise” is not used, but instead "license,” "privilege,” "occupation” or the like. (Cooley on Taxation, 4th ed., sec. 1670.)

Of course, all taxes are levied against the person, not against his property. (State v. Camp Sing, supra; Hilger v. Moore, 56 Mont. 146, 182 Pac. 477; Sanderson v. Bateman, 78 Mont. 235, 253 Pac. 1100.)

In the Gamp Sing Case the court pointed out that if the legislature sees fit all revenues may be raised by taxation, and the "license system” may be or may not be resorted to. The license system "is elastic and pliable and can be suited to circumstances/’ Touching the "taxation system” the court said that the rate of assessment and taxation must be uniform under such regulations as will secure a just valuation for taxation of all property (except that declared to be exempt), but that the license system is not controlled by the equality and uniformity requirements of the Constitution. In other words, the court held that section 11, supra, applies to the taxation system but not to the license system. (State ex rel. Sam Toi v. French, 17 Mont. 54, 30 L. R. A. 415, 41 Pac. 1078.) This holding is in harmony with the authorities generally. (Cooley on Taxation, 4th ed., sec. 1685.)

But it does not follow that in imposing a license tax the legislature may disregard the principles of uniformity and equality altogether; it may not resort to unreasonable or arbitrary discriminations. It is true that it is not required to tax all occupations equally or uniformly. (Quong Wing v. Kirkendall, 39 Mont. 64, 101 Pac. 250, affirmed 223 U. S. 59, 56 L. Ed. 350, 32 Sup. Ct. Rep. 192 [see, also, Rose’s U. S. Notes].) In imposing a license tax, the state may tax all or it may select for taxation certain classes and leave the others untaxed. “But it is generally held that occupation taxes must be uniform upon the same class of subjects, although proper sub-classification is allowable. The rules as to classification are the same without regard to whether the imposition is a tax or a mere exercise of the police power. In order to render a classification illegal, the business discriminated against must be shown to be precisely the same as that included in the class which is shown to be favored.” (Cooley on Taxation, 4th ed., sec. 1685.)

A proper classification implies that there exist real differences as between the subjects constituting the different classes, and excludes the idea of arbitrary selection. (Northwestern Life Ins. Co. v. Wisconsin, 247 U. S. 132, 62 L. Ed. 1025, 38 Sup. Ct. Rep. 444.)

It is within the legislative power to define the different classes and to fix the license tax required of each. All the taxpayer can demand is that he shall not be taxed at a different rate from others in the same occupation as classified by legis lative enactment. This seems to be the universal rule. (State v. Stephenson, 109 N. C. 730, 26 Am. St. Rep. 595, 14 S. E. 385.)

“It is settled that a license tax is uniform when it is equal upon all persons belonging to the described class upon which it is imposed.” (Lacy v. Packing Co., 134 N. C. 567, 47 S. E. 53; Bickett v. Tax Commission, 177 N. C. 433, 99 S. E. 415.)

In Cooley on Taxation, fourth edition, section 259, it is said that “while perfect equality is imposible, yet these are cases where there is such glaring inequality, either intentional or otherwise, as to clearly violate the uniformity and equality rule. Let it reach all of a class, either of persons or things, it matters not whether those included in it be one or many, or whether they reside in any particular locality or are scattered all over the state. But when, for any reason, it becomes discriminative between individuals of the class taxed, and selects some for an exceptional burden, the tax is deprived of the necessary element of legal equality, and becomes inadmissible.”

It is an essential requirement that the tax be equal upon all persons belonging to the class upon which it is imposed. (Bickett v. Tax Commission, supra.) This principle is recognized in Quong Wing v. Kirkendall, supra, in which this court, speaking through Mr. Justice Smith, said: “No suggestion is made that this law is not uniform as to all laundry proprietors, either on its face or in its application, except in so far as it exempts certain women, and in all other respects it appears to us to be uniform and reasonable.” This statement was followed by the following quotation from Magoun v. Illinois T. & S. Co., 170 U. S. 283, 42 L. Ed. 1037, 18 Sup. Ct. Rep. 594: “If the constituents of each class are affected alike, the rule of equality prescribed by the cases is satisfied. In other words, the law ‘operates equally and uniformly upon all persons in similar circumstances.’ ”

That the Act under consideration is discriminative is plain. This fact alone does not condemn it. (State v. Loomis, 75 Mont. 88, 242 Pac. 344.) The question is, Is the discrimination arbitrary and unreasonable? It seems to us that but one answer can be made. The Act applies only to livestock which are brought into Montana “to graze for any length of time whatsoever.” In other words, it is directed against what may be termed foreign livestock. It does not apply to livestock brought into the state for any other purpose than to graze. For instance, it does not apply to sheep brought into Montana to be fed in pens. If this be called a distinction the legislature might, with equal reason, impose the tax upon sheep which graze upon the public range and omit the tax upon those which are fed Montana-grown alfalfa hay. The Act does not, upon its face, apply solely to nonresidents. Apparently it applies as well to residents who bring livestock into the state after the first Monday of March to graze in their own fields. “Although the Act does not in express terms confine its operations to livestock brought into the state for grazing purposes after the first Monday of March, by necessary implication it does so, and such a construction is commanded, otherwise the entire Act would be meaningless,” as the court remarked in Hayes v. Smith, supra.

The Constitution provides that the legislative assembly may impose a license tax upon persons and corporations doing business in this state. It will be admitted that plaintiff in grazing his sheep within this state is doing business in this state; he is carrying on the sheep business. He would be carrying on that business if he were feeding the sheep in pens. In so far as the taxing power is involved it is not perceived that there is any basis for differentiation here.

The decision in Hayes v. Smith again is directly applicable. In almost the precise language employed in that case we say we are unable to perceive any distinction which can be drawn between a flock of 2,400 ewes of a particular breed, size, description and value brought into this state after the first Monday of March for the purpose of grazing for any period, and a flock of the same size, breed, description and value brought into the state at the same time for the purpose of being fed in pens for the same length of time, and yet this statute assumes to render the first flock subject to the license tax, whereas the other is not. The attempted classification appears to be entirely arbitrary, and the unreasonable and unjust discrimination is apparent.

Enough has been said to demonstrate that the law cannot be upheld, and while more might be said, we shall go no further.

The judgment is reversed, with direction to the district court of Mineral county to overrule the demurrer.

Reversed.

Associate Justices Myers, Stark, Matthews and Galen concur.