Yellowstone Bank v. State Board of Equalization

351 P.2d 904, 137 Mont. 198

• Court: Montana Supreme Court
• Decided: May 4, 1960
• Docket: 10024
• Status: Published

Opinions

HONORABLE W. W. LESSLEY, District Judge, sitting in place of MR. CHIEF JUSTICE HARRISON,

delivered the Opinion of the Court.

This is an appeal from a judgment entered in the District Court of the Thirteenth Judicial District in favor of the plaintiff, Yellowstone Bank of Columbus and against the defendants, Stillwater County, et al.

In this cause, the plaintiff and respondent Bank (hereinafter simply referred to as respondent), after assessment of its surplus by the Stillwater County assessor at 30 percent, paid its tax under protest; subsequently, it filed its complaint and later its amended complaint. The defendants and appellants (hereinafter referred to as appellants), Stillwater County, Montana, Alice Marvin, then County Treasurer of Stillwater County, the Stillwater County Board of Equalization, and Harry T. Brown, Ernie Hudson and Ted Keating, as members of the Board of County Commissioners of Stillwater Comity, Montana, and ex-officio members of and constituting the Stillwater County, Montana, Board of Equalization together with the State Board of Equalization filed their demurrer, which was overruled by the trial court.

The State Board of Equalization then filed an answer, taking the same legal position as the respondent Bank. The appellants chose to stand on their demurrer, and judgment was entered by the lower court for respondent Bank and against appellant Still-water County. The case comes here' on appeal from the trial court’s ruling on the demurrer and its subsequent judgment.

This ease is concerned with the fixing of the value of bank shares for purposes of taxation.

In accordance with Chapter 172, Session Laws of 1957, the Board had directed the county assessor of Stillwater County to fix the basis for imposition of taxes of the “moneyed capital” of the plaintiff Bank as follows: $100,000 in “Class 5”, and $127,277 in “Class 4”. The use of the words “Class 5” and “Class 4” is nothing more than a simple method of referring to the application of 7 percent and 30 percent of true and full value in determining the “basis for imposition of taxes” with respect to “moneyed capital and shares of banks” under section 84-308, as amended by Chapter 172 of the Session Laws of 1957.

The County authorities refused to follow the provisions of the new law and also refused to follow the directions of the Board that the new law, Chapter 172, must be followed.

We shall not concern ourselves with whether the county officials may disregard the instructions of the Board of Equalization or whether the county has sufficient standing to challenge the constitutionality of a legislative act. We shall assume, without deciding these matters, and go directly to the merits of the statutes involved.

The law we are here concerned with is section 84-308, which was the governing law from 1929 until amended in 1957. Before amendment in 1957, it read as follows:

“As a basis for the imposition of taxes upon the different classes of property herein specified, a percentage of the true and full value of each class shall be taken as follows:

“Moneys and credits, seven per centum (7 %) of true and full value.

“Moneyed capital and shares of banks, both national and state, thirty per centum (30%) of true and full value.”

Chapter 46 of Title 84, Revised Codes of Montana 1947, now sections 84-4601 to 84-4605, R.C.M. 1947, is the basic statutory authority in this area. This law is designed to comply with and meet the demands of the Federal law. The Federal statute is section 5219 of the Revised Statutes of the United States (section 548 of Title 12 of United States Code). It may be paraphrased as allowing a state to tax the shares of national banks, or follow three other alternatives, not relevant here; but use of one is and must be in place of all others. The State of Montana taxes the shares of national banks and imposes the same tax on state banks. The bank shares are the property of the owner of the shares.

The specific law on which this ease is centered is the amendment to section 84-308. This amendment is Chapter 172 of the Session Laws of 1957. As Senate Bill 15, it was introduced, passed and signed by the governor into law on March 8, 1957. We set it out in full:

“84-308 (2000.6) Basis for imposition of taxes on moneys and credits, moneyed capital and hank shares. As a basis for the imposition of taxes upon the different classes of property herein specified, a percentage of the true and full value of each class shall be taken as follows:

“ ‘Money and credits, seven per centum (7%) of true and full value.

“ ‘Moneyed capital and shares of banks, both national and state, thirty per centum (30%) of true and full value on that portion of the true and full value not represented by surplus, as shown on the books of the bank; seven per centum (7%) on that portion of the true and full value represented by surplus as shown on the books of the bank; provided that on that portion of any of such surplus which is over and above the amount represented by the stated capital of a bank, the excess shall be .subject to thirty per centum (30%) of true and full value. The state board of equalization shall prepare, distribute and cause to be used such forms as it may require to obtain from the banks doing business in this state reports of such facts and figures as may be necessary to ascertain tbe taxable value of bank shares as a basis for the imposition of taxes.’ ”

With the original law and the amendment before us, we may epitomize its meaning and effect. Section 84-302 specifies classes as the basis for the imposition of taxes. The classification of “moneyed capital” and shares of banks is fixed by section 84-308; this effect has not been changed by the amendment, and a review of the statutes will show that the “basis” as set out in section 84-308, as amended, corresponds with Classes 4 and 5 that appear in section 84-302. However, we have on our statute books special classification laws relating only to moneys and credits, money capital and bank shares; it is Chapter 64, Session Laws of 1929, now sections 84-303 to 84-308; section 84-308, as amended, of course being the law construed and passed upon in this decision. A reading of Chapter 64 must make it clear that it does not relate itself specifically to our original classification law and the several different classes of property specified. Thus, it must be clear that the State Board of Equalization’s use of the terms “Class 4” and “Class 5” is a term of reference on application of 7 percent and 30 percent of true and full value in determining the basis for tax imposition as to moneyed capital and shares of banks under the law with which we are here concerned.

It is true, section 84-4605 makes this reference: “such moneyed capital to be ascertained as provided by section 84-301”. This is ineffective because of the operative effect of sections 84-304 and 84-305, since their enactment in 1929.

The above constitutes the legislative and factual background of the amendatory law we now consider.

Two specifications of error are raised in this appeal:

1. That Chapter 172 was not effective until approved by the governor; that he did not approve it until March 8, 1957; that this was after the first Monday in March (March 4, 1957) the time the tax lien attached; that after lien time, no one may diminish that obligation; that this amendment seeks to do that and is thus in direct conflict with section 39 of Article Y of the Constitution of the State of Montana.

2. That Chapter 172 is unconstitutional, in that it allows portions of bank property — a part of the surplus to be taxed at a lower rate than other property in the same class, to-wit: property in the “moneyed capital” class. This is claimed to be a discrimination as to taxation within a class, a discrimination clearly prohibited by sections 1, 11, and 17 of Article XII of the Constitution of the State of Montana.

.The additional specification of error, that Chapter 172, Session Laws of 1957 is unconstitutional, in that it is a graduated ad valorem tax in reverse, is not advanced with much force and effect, and is in fact abandoned in appellants’ argument.

We consider the first contention of the appellants.

. The first Monday in March is significant to determine and fix the situs and ownership of property for tax purposes. Sections 84-406 and 84-409, R.C.M. 1947; Ford Motor Co. v. Linnane, 102 Mont. 325, 57 P.2d 803; Hayes v. Smith, 58 Mont. 306, 192 P. 615: To place other Significance upon that date is to isolate it from- the total taxing process and procedure and to ignore other vital and subsequent steps in the process.

■ The ‘ ‘ assessing ’ ’ of the property is done after situs is acquired. Sections 84-406 and 84-409, R.C.M. 1947. The shares of a bank are assessed under Chapter 46, Title 84, R.C.M. 1947; the assessing is not done until the statements are furnished by the banks (both state and national), five days after demand, or assessment by assessor in case of failure of the banks to furnish the statements. .

The “basis for imposition of taxes” becomes important when levies are made. It is evident that changes by the Legislature affecting this “basis” if effective before time of levying taxes are' in time to affect the taxes for that current year.

-Assessors, when they make their annual assessments, determine and assign the percentage basis of true and full value as provided in section 84-302. See section 84-402, R.C.M. 1947. Section 84-302 is a part of the general classification law. Of course, bank shares are not included in the general classification law, of which section 84-308, as amended, is a part. Thus, it can be seen the assessor’s one responsibility, in determining and assigning the percentage basis of true and full value of bank shares, is to determine and assign, under section 84-308, as it is at the time of the annual assessment of bank shares; this is a time subsequent to the first Monday in March, by many days. Though details have been altered in the process, the statement from Butte Electric Ry. Co. v. McIntyre, 71 Mont. 21, 24, 227 P. 61, 62, is most apropos. “It will thus be seen that the classification statute has nothing whatever to do with the assessment of property or the determination of assessed value.”

Succinctly stated, when the time had arrived to determine the taxable value of the bank shares in the year 1957, Chapter 172 was in full force and effect; it was in effect when the time arrived in the year 1957 for computing and for levying the taxes for that year. This was, and is, a classification law; it is applied after the first Monday in March as the subsequent steps of assessing, computing, and levying are carried on to the inevitable end. The force of this point of view is not destroyed by admitting the obvious, i. e., that the tax lien attached to the taxed property as of the first Monday in Mai’ch (March 4, 1957).

Section 39 of Article Y of our Constitution provides that “no obligation or liability of any person, association or corporation, held or owned by the state, or any municipal corporation therein, shall ever be exchanged, transferred, remitted, released or postponed, or in any way diminished by the legislative assembly; nor shall such liability or obligation be extinguished, except by the payment thereof into the proper treasury. ’ ’ Emphasis supplied.

Does Chapter 172 amount to or result in remitting, releasing, or diminishing an “obligation or liability” held or owned by the state or city? Our court has said a lien is not an obligation, in that it has held the cancellation of a lien is not the cancellation of an obligation due the State. Christofferson v. Chouteau County, 105 Mont. 577, 74 P.2d 427. Here the taxes were not yet due and payable on March 8, 1957, which is the effective date of the statute; they had not even been levied; the cancellation of the lien would not in any way cancel the obligation due. We must reject this contention of the appellants.

We shall consider and answer the constitutional questions raised. We do this, well aware of the guiding rule, as set out in Dickey v. Board of Com’rs, 121 Mont. 223, 191 P.2d 315, 317, that “the universal rule is that the constitutionality of a statute will not be determined in any case unless such a determination is absolutely necessary to a decision upon the merits of the action.” Here the necessity exists.

We answer, categorically, the question: Is the statute constitutional ?

The constitutional stricture by which we measure our statute is the well-known section 11 of Article XII of the Montana Constitution, which provides that “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. ’ ’

The appellants present the constitutional question with a double entry. First, this is not a classification statute, but an exemption statute and, as thus, is clearly unconstitutional under the rule enunciated in Victor Chemical Works v. Silver Bow County, 130 Mont. 308, 301 P.2d 730. Second, appellants state that if this is a classification statute, it is contrary to section 11 of Article XII of the Montana Constitution. We shall consider both viewpoints together.

It is a fallacious argument to insist there was no change in section 84-301, in respect to classification. A consideration of the facts and events makes evident this fallacy. Class Six was a “dead letter” lifeless and inert, even though still on the statutes, because of the decision of the Supreme Court of the United States in Commercial National Bank of Miles City v. Custer County, 76 Mont. 45, 245 P. 259; 275 U.S. 502, 48 S.Ct. 155, 72 , and subsequent Montana decisions that conform to it. See First National Bank of Plains v. Sanders County, 85 Mont. 450, 279 P. 247; State ex rel. Conrad Banking Corporation of Great Falls v. Mady, 83 Mont. 418, 272 P. 691.

The Legislature by section 1, Chapter 88, Laws of 1957, amended section 84-301 as follows: ‘ ‘ Class Six. Property formerly included in this class is now classified by Section 84-308 of the Revised Codes of Montana■, 1947.” Emphasis supplied.

A practical reading, of the amendment under consideration, makes it evident that all bank shares and “moneyed capital” are affected by it; all bank shares and “moneyed capital” of banks are subject to the same classification. The Legislature may devise its own formula to determine the basis for the imposition of taxes on the property in question, namely, bank shares and “moneyed capital”. This court has said, “The whole matter is left to the discretion of the legislative power, and there is nothing to forbid the classification of property for the purposes of taxation and the valuation of different classes by different methods. The rule of equality, in respect to the subject, only requires the same means and methods to be applied impartially to all the constituents of each class, so that the law shall operate equally and uniformly upon all persons in similar circumstances.” Hilger v. Moore, 56 Mont. 146, 172, 182 P. 477, 483.

We will not here concern ourselves as to the wisdom of the legislative act. The formula the Legislature originates as set out is for the Legislature not for this court. We are concerned only with the taint of inequality. See Bank of Miles City v. Custer County, 93 Mont. 291, 19 P. 2d 885; we find none here.

It has been suggested also, that this is an exemption statute, such an exemption statute as was struck down in the Victor Chemical Works case, supra. We do not so find. It is a classification statute. Its formula is not fraught with constitutional inequality. This statute is constitutional.

The demurrer was properly overruled. The judgment • is affirmed.

MR. JUSTICES ANGSTMAN and CASTLES concur.