Kingsley v. City of Merrill

99 N.W. 1044, 122 Wis. 185, 1904 Wisc. LEXIS 163

• Court: Wisconsin Supreme Court
• Decided: June 10, 1904
• Status: Published

Opinions

Cassoday, C. J.

Counsel for the plaintiff contend with much ability that the notes and mortgages in question are not property, capable of being taxed as such in this state. Certainly the statutes have treated such debts as property arid subject to taxation ever since the state has existed. This is obvious from the wording of different sections of the statutes. Thus the statute declares that “taxes shall be levied upon all -property in this state, except such- as is exempted therefrom.” Sec. 1034, R. S. 1878, and Stats. 1898. The same, in substance, was contained in sec. 1, ch. 15, R. S. 1849. Then, after defining the term “real property,” “real estate,” and “land,” the statute provides that:

“The term 'personal property’ as used in this title, shall be construed to mean and include ... all debts due from solvent debtors, whether on account, note, contract, bond, mortgage or other security, or whether such debts are due or to become due.” Sec. 1036, R. S. 1878, and Stats. 1898.

Those provisions were taken almost literally from sec. 19, ch. 130, Laws of 1868, and are substantially the same as sec. 3, ch. 15, R. S. 1849. Among the rules for construing the statutes, as prescribed therein, during the last forty-six years, we find that “the words 'personal property’ include money, goods, chattels, things in action, and evidences of debt.” And again that “the word 'property’ includes property, real and personal.” Subd. 14, 15, sec. 1, ch. 5. R. S. 1858, and subd. 3, 4, sec. 4972, R. S. 1878, and Stats. 1898. The statute only exempts the taxpayer from “so ranch of the debts dne or to become due to any person as shall equal the amount of bona -fide and unconditional debts by him owing.” Subd. 10, sec. 1038, R. S. 1878, and Stats. 1898, and subd. 10, sec. 2, ch. 130, Laws of 1868. Other sections of the statutes clearly require such notes and mortgages to be assessed as personal property. Secs. 1055, 1056, R. S. 1878, and Stats. 1898.

If such statutes are constitutional, then there can be ho doubt but what the tax in question is valid.

The constitution declares that “the rule of taxation shall be uniform, and taxes shall be levied upon such property as the legislature shall prescribe.” Sec. 1, art. VIII, Const. If it is true that notes and mortgages are not property subject to taxation under this clause of the constitution, then it is very singular that the fact was not discovered by the able lawyers who have revised the statutes from time to time — -first in 1849, and then in 1858 — and especially those who revised the statutes of 1878, because that revision took place several years after the lengthy controversy and numerous conflicting decisions and opinions as to the validity of certain provisions of the statutes under the clause of the.constitution above quoted. The subject related to revenue and was of vital importance to'the state and its citizens; and in revising the statutes on the subject the revisers, from time to time, must have scrupulously sought to keep within the bounds of legislative power. The same may be said of the legislature, from time to time, amending the statutes in respect to taxation.

Such long and uniform sanction by law revisers and lawmakers of the right to tax notes and mortgages would, of course, be entitled to great weight in construing an ambiguous or doubtful provision of the constitution, yet it is entitled to no weight'if the statutes in question are in conflict with the plain meaning of the constitutional provision quoted. State ex rel. Hudd v. Timme, 54 Wis. 318, 339—341, 11 N. W. 785; State ex rel. Weiss v. District Board, 76 Wis. 177, 195-199, 44 N. W. 967; State ex rel. Lamb v. Cunningham, 83 Wis. 90, 141-143, 53 N. W. 35, and cases there cited; Travelers’ Ins. Co. v. Fricke, 94 Wis. 258, 266, 68 N. W. 958. The question of such validity is here squarely presented, and must be squarely met and disposed of on the merits.

Undoubtedly, as stated by the Tax Commission and urged by counsel, that which gives a credit

“value, and which the present assessment laws recognize and treat as property, consists, not in the written instruments or other evidences of the creditor’s right or security, but in the right itself — the creditor’s right to receive and enforce payment of his demand. This right of the creditor is admittedly a thing of value, assuming always that the debtor is solvent. In many of its forms, with its evidences, it may be freely transferred from' one person to another, and often performs the office of a medium of exchange more efficiently than money.” Report of Wis. Tax Com. 1903, p. 116.

But that does not indicate that notes and mortgages are not property. On the contrary, it pretty clearly indicates that they are property. One definition of property in the Century Dictionary is:

“The right to the use or enjoyment or the beneficial right of disposal of anything that can be the subject of ownership; ownership; estate; especially ownership of tangible things. In the broad sense, a right of action is property.”

“A vested right of action is property in the same sense that tangible things are property.” Bouvier’s Law Diet.

That is a quotation from the opinion of the Supreme Court of the United States in Pritchard v. Norton, 106 U. S. 124, 132, 1 Sup. Ct. 102. Mr. Black says, “Personal property is further divided into property in possession and property or choses in action.” In the latest Encyclopaedia of Law it is stated that:

In general, the word 'property,’ standing alone, will include choses in action. Thus the word without the qualifying term 'personal has been held to include solvent credits. So it has been held to include hauls notes, promissory notes,, hills of exchange, bonds, insurance policies, judgments, and stocks.” 23 Am. & Eng. Ency. of Law (2d ed.) 264, 265.

In support of the text numerous adjudications are cited. In one of them, Cooley, C. J., makes this statement: "A right of action is as much property as is a corporeal possession.” Power v. Harlow, 57 Mich. 107, 111, 23 N. W. 606. This court has held, in effect, that notes and mortgages in favor of a nonresident and against a resident of this state are “property within this state,” and subject to he reached by creditors’ bill. Bragg v. Gaynor, 85 Wis. 468, 481-488, 55 N. W. 919. So this court has held that notes secured by mortgages on land in another state, and in the hands of an agent in such state, hut belonging to a resident of this state, are “property in this, state,” within the meaning of the constitution and the statutes of this state, and hence are taxable here. Sec. 1, art. VIII, Const.; secs. 1034, 1036, 1038, 1040, 1056, Stats. 1898; State ex rel. Dwinnell v. Gaylord, 73 Wis. 316, 323—325, 41 N. W. 521. It is there said that:

“Such notes and mortgages, however, are mere evidences of indebtedness. The destruction of such evidences does not necessarily extinguish the debts. They are merely choses or things in action. ... In the case of such intangible species of property, the thing that is valuable is the right of the creditor to receive property or money, and to enforce such right by action in court.”

That case has since been sanctioned in this and other states. Perrigo v. Milwaukee, 92 Wis. 241, 65 N. W. 1025; Howell v. Gordon, 127 Mich. 517, 86 N. W. 1042. So it was held in Vermont that debts due from solvent debtors, residing in that state, to a nonresident creditor, upon promissory notes, were personal property within the meaning of the statutes of that state, and that the legislature of that state had power to enact a law subjecting snob property in the hands of an agent there to taxation. Catlin v. Hull, 21 Vt. 152. So it has been held in Alabama that solvent credits, evidenced by negotiable promissory notes, were taxable at the place of the owner’s residence in that state, although secured by mortgage on lands in another state, where they were payable and held by an agent. Boyd v. Selma, 96 Ala. 144, 11 South. 393. There seems to be no escape from the conclusion that the notes and mortgages in question were property, within the meaning of the statutes cited and the constitutional provision quoted.

2. The more important question is whether “the rule of taxation” prescribed by those statutes is “uniform,” within the meaning of such constitutional provision. One of the grounds for claiming that such rule is not uniform is that the statutes mentioned only required taxes to be levied on '“all debts due from solvent debtors,” after deducting there from “the amount of bona fide and unconditional debts” owing by such taxpayer. In other words, the statutes omit from taxation debts due from insolvent debtors. It is claimed that, if “debts due from solvent debtors” are property, then debts due from insolvent debtors are also property, and that the statute requiring taxes to be levied upon the former without being levied upon the latter is in violation of the rule of uniformity required by the constitution.

If the statute is void upon the ground thus suggested, then -we have never had a valid statute on the subject, in this state. We have already shown that the statute under which the tax in question was levied has existed in substantially the same form ever since the revision of 1849. Before that, and several years prior to the adoption of our constitution, the territorial legislature enacted that “the term personal property . . . shall be construed to include . . . debts due from solvent debtors, over and above the amount of debts owed by the owner thereof, whether due on account, contract, notes, Rond, or mortgage.” Laws of Wis. Ter. 1841, No. 4, pp. 20, 21. That provision was taken almost literally from the Revised Statutes of New York, where the same has remained in force in substantially the same form ever since. Sec. 3, tit. 1, ch. 13, pt. 1, p. 388, R. S. of N. Y. 1829; subd. 4, § 2, art. I, 3 Birdseye’s R. S., Codes & Gen. Laws of N. Y. (2d ed.) p. 3091.

The question recurs, What is meant by the words “solvent debtors,” as thus used in the statutes ? Of course, “solvent debtors” include all who are not insolvent. Undoubtedly the meaning of the words depends very largely upon the subject to which they are applied and the circumstances under which they are used. 'In bankruptcy and insolvency laws and proceedings they have a different meaning than in common discourse. Thus it is said in a recent work that:

“As used in insolvency and bankruptcy laws, especially when applied to traders or persons engaged in commercial pursuit, the term Insolvency’ generally means the condition of a person who is unable to pay his debts as they become due in the ordinary course of business. According to this definition, a person may be insolvent 'though he has assets exceeding in value the amount of all his liabilities.” 16 Am. & Eng. Ency. of Law (2d ed.) 636, 637.

But the same authority states in the same connection that:

“In its popular and general sense, the term Insolvency’ denotes the insufficiency of the entire property and assets of •an individual to pay his debts.”

Undoubtedly the general understanding is that an insolvent debtor is one who has not property sufficient to pay all his debts, or out of which his debts may be collected. Century Diet. The statute in question was made for the guidance of assessors and people generally. It is to have a practical construction. It was never intended that the assessor should engage in a judicial investigation to ascertain the exact balance between the assets and liabilities of such debtors. Where a person, although indebted to others, has business or income and pays his debts, or has property out of which collection can be made, then he may fairly be regarded as a solvent debtor.

Under the constitutional provision quoted, was it competent. for the legislature to require taxes to be levied upon “debts due from solvent debtors,” without requiring taxes also to be levied upon debts due from i?isolvent debtors ? In-other words, was the rule of uniformity broken by such discrimination between good and bad debts? This court held many years ago that:

“The legislature has power to prescribe not only the property to be taxed, but the rule by which it must be taxed, and the only limitation of that power is that the rule shall be uniform. The power to prescribe what property shall be taxed necessarily implies the power to prescribe what property shall be exempt.” Wis. Cent. R. Co. v. Taylor Co. 52 Wis. 37, 89, et seq., 8 N. W. 833.

It was there said, in effect, that such rule of taxation had never been regarded as requiring “uniformity as to the subjects of taxation,” and numerous, provisions of the statutes-were there referred to as illustrating the truth of the statement. While recognizing that “arbitrary classification of inclusion and exclusion,” based upon “no rational grounds for distinction in the character, use, productiveness, or circumstances of the property or subjects taxed,” could not be indulged, yet this court, in a later case, reaffirmed the authority of the legislature to make legitimate classification of property for the purposes of taxation. State ex rel. Sanderson v. Mann, 76 Wis. 469, 476, 477, 45 N. W. 526, 46 N. W. 51. It was there said that, since the Taylor County Case,

“Numerous decisions have been made by courts of high authority sanctioning the reasonable classifications of property for the purposes of -taxation, and holding that the same were-not in violation of the rule of uniformity.” Citing a number of cases in support of the proposition. See Black v. State. 113 Wis. 216, 217, 89 N. W. 522.

The Hew constitution of Pennsylvania of 1873 provides that “all taxes shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax.” Sec. 1, art. IX, Const. of Pa. See 52 Wis. 87, 8 N. W. 833. Under that provision it was held in that state that:

“The power to impose taxes for the support of the government, with the power of classification, still belonging to the legislature under the new constitution, the selection of the subjects thereof, their classification, and the methods of 'collection to be provided, are matters purely legislative. The power to classify being given, all that is then required by the constitution is that the taxes shall-be uniform upon the members of a class, and it is the uniformity of taxation according to the classification made which is a question to be determined by the courts. Absolute equality is unattainable, and a mere diversity in the methods of assessment and collection violates no rule of constitutional right, if, when they are applied, there is substantial uniformity in the results.” Comm. v. Delaware D. C. Co. 123 Pa. St. 594, 615, 16 Atl. 584; Comm. v. L. V. R. Co. 129 Pa. St. 455, 18 Atl. 406, 410.

The constitution of Missouri of 1875 requires that taxes “shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax.” Sec. 3, art. X, Const. of Mo. In a ease arising in that state under that provision of the constitution, it was held by the supreme court of the United States that:

“Diversity Of taxation, both with respect to the amount imposed and the various species of property selected, either for bearing its burdens or for being exempt from them, is not Inconsistent with a perfect uniformity and equality in taxation, and of a just adaptation of property to its burdens. A system of taxation which imposes the same tax upon every species of property, irrespective of its nature or condition or class, will be destructive of the principle of uniformity and equality in taxation, and of a just adaptation of property to its burdens.” Pacific Exp. Co. v. Seibert, 142 U. S. 339, 12 Sup. Ct. 250.

If, for the purposes of taxation, any classification of debts is permissible, under the constitutional provision in question,, then certainly the difference between “debts due from solvent debtors” and debts due from insolvent debtors is sufficient to-furnish a basis for such classification. We must hold that the statute in question is'not void by reason of such classification.

3. It is further contended that if “debts due from solvent debtor’s” are property within the sense mentioned, yet to tax the same necessarily results in double taxation, and hence is repugnant to the rule of uniformity required by our constitution. Our attention is called to the report of the Wisconsin State Tax Commission on the subject. Pages 116 — 118. Undoubtedly it is true, as there said, that “for every credit there exists an indebtedness of equal amount”’ that “the sum of all credits in the world is exactly equal to the sum of all indebtedness ;” that if, by some method of exchange or transfers, all debts were paid, then the corresponding credits would thereby become wholly extinguished; that “the result would be a great shifting of property or changing of financial resources among individuals,” but that there would be no less actual property in the world; “that to treat credits as property,” as well as all lands and tangible things, “is in substance and effect a duplication of values;” that “such duplication results in double taxation, in economic consideration, and from the standpoint of substantial justice and equity.” There may be great force in such statement when addressed to the legislature engaged in the framing of taxation laws, but they are only entitled to consideration here as bearing upon the constitutionality of the statutes mentioned. The report assumes the constitutionality of such statutes, and does “not contend that such duplication results in double taxation, in technical and legal contemplation, according to the general current of judicial decisions.” We are not called upon to consider the wisdom of the statutes, but the power of the leg-Mature to entact the statutes. The case seemingly most relied upon by counsel is People v. Hibernia Bank, 51 Cal. 243, where it was held that “credits are not property in the sense in which the word ‘property’ is used in sec. 13, art. XI, o£ the constitution, and cannot be assessed for taxes or taxed as property, even if secured by mortgage.” The section of the constitution of that state therein referred to declares that “taxation shall be equal and uniform throughout the state.All property in this state shall be taxed in proportion to its value, to be ascertained as directed by law.” 51 Cal. 244. It will be observed that this provision contains restrictions upon legislative power not found in our constitution. The equality of taxation and the proportionate value of property are requirements not mentioned in our constitution. The decision in that case was in obedience to such requirements. It seems to be placed upon the grounds that credits were incapable of proportionate valuation as there required, and that to tax property purchased on credit, and also ‘to tax the credit, was unequal taxation, and hence forbidden by the constitution. The provision of the constitution of that state is quite similar to some of those referred to from other states in the Taylor County Case, where it was said that:

“The provisions quoted from the several state constitutions have each contained one or more elements of restriction upon legislative power not present in our constitution.” Wis. Cent. R. Co. v. Taylor Co. 52 Wis. 88, 8 N. W. 833. See pages 60-63 and 78-88, 52 Wis.

The decision in that case is certainly not an authority in a ease under our constitution, containing no such restrictions. In Pennsylvania, where, as we have shown, the constitutional restriction is very much like our own, it is held that:

“The legislature has the power to impose double taxation, provided it is done in such manner as to secure the uniformity which the constitution requires.” Comm. v. Fall Brook C. Co. 156 Pa. St. 488, 26 Atl. 1071; Comm. v. Lehigh C. & N. Co. 162 Pa. St. 603, 29 Atl. 664.

Of course, there is a presumption against the existence of an intention to impose such double taxation,"until.overcome by the express language of the statute. Id. See, also, Stroh v. Detroit, 131 Mich. 109, 90 N. W. 1029. In this state it has been held that:

“In order to render taxation double, one person or known subject of taxation must be required to contribute twice directly to the same burden, while other subjects of taxation are required to contribute but once.” Second Ward S. Bank v. Milwaukee, 94 Wis. 587, 69 N. W. 359.

In that case the shares of stock in the bank were taxed as the property of the shareholder, while the real estate forming a part of the capital stock was taxed as the property of the bank. And in a recent case it was held by this court:

“That the fact that the capital of an unincorporated association engaged in banking consists of real property, and was taxed as such to the association, does not affect the question of its being taxable in its intangible form to the members of such association.” State ex rel. Batz v. Lewis, 118 Wis. 432, 95 N. W. 388.

The correctness of these decisions has not been questioned, and we perceive no good reason why they are not based upon solid ground. The case at bar does not present a case of double taxation, as defined by this court in the cases cited. We must hold that the statutes in question are not repugnant to the constitutional requirement that “the rule of taxation shall be uniform, and taxes shall be levied upon such property as the legislature shall prescribe.” Sec. 1, art. VIII, Const.

4. Counsel also contend that the taxation of “debts due from solvent debtors” is prohibited by that clause of the federal constitution which declares that “no státe shall . . . deny to any person within its jurisdiction the equal protection of the laws.” Sec. 1, XIVth Amendm. Const, of U. S. The question was determined by the supreme court of the 'United States against' such eontention of counsel many years ago, in a case wherein it was held that:

“This court can afford the citizen of a state no relief from the enforcement of her laws prescribing the mode and subjects of taxation, if they neither trench upon federal authority nor violate any right recognized or secured by the constitution of the United States. The constitution does not prohibit a state from taxing her resident citizens for debts held by them against a nonresident, evidenced by his bonds, payment whereof is secured by his deeds of trust or mortgages upon real estate situate in another state.” Kirtland v. Hotchkiss, 100 U. S. 491, affirming the same case in 42 Conn. 426.

See, also, Kentucky Railroad Tax Cases, 115 U. S. 321, 6 Sup. Ct. 57; Gibbons v. District of Columbia, 116 U. S. 404, 6 Sup. Ct. 427; Davenport Bank v. Davenport Board, 123 U. S. 83, 8 Sup. Ct. 73; Gulf, C. & S. F. R. Co. v. Ellis, 165 U. S. 150, 17 Sup. Ct. 255; Adams Exp. Co. v. Ohio, 165 U. S. 194, 17 Sup. Ct. 305; Western U. Tel. Co. v. Indiana, 165 U. S. 304, 17 Sup. Ct. 345; Am. Sugar R. Co. v. Louisiana, 179 U. S. 89, 21 Sup. Ct. 43; Kidd v. Alabama, 188 U. S. 730, 23 Sup. Ct. 401; Board of Assessors v. Comptoir National, 191 U. S. 388, 24 Sup. Ct. 109. Several of these cages sanction the classification of property in the states for the purposes of taxation.

We must hold that the statutes in question are valid en-actments, and that the notes and mortgages belonging to the plaintiff were subject to taxation.

By the Gourt. — The order of the circuit court is affirmed.