Source: https://supreme.justia.com/cases/federal/us/114/511/
Timestamp: 2019-04-25 18:04:41+00:00

Document:
entry on the tax list that he might have an opportunity to show that his statement or return was correct. A taxpayer was summoned before the auditor to give information of property not returned for taxation, and appeared, and while in attendance was informed by the auditor of his purpose to increase the amount of property returned by him for taxation. Held that this was a substantial compliance with the provision requiring the auditor to notify the taxpayer before making entry of the increase.
The Act of the Legislature of Ohio of May 11, 1878, authorizing auditors to extend inquiries into returns of property for taxation over a period of four years next before that in which the inquiry is made is no violation of that provision in the constitution of that state which declares that "The General Assembly shall have no power to pass retroactive laws."
Mr. Justice Story's definition of a retrospective law in Society for Propagating the Gospel v. Wheeler, 2 Gall. 139, has been adopted by the Supreme Court of the State of Ohio, and is quoted and adopted by this Court.
"No person shall be required to list for taxation any certificate of the capital stock of any company the capital stock of which is taxed in the name of the company"
does not apply to shares in a foreign corporation which pays taxes in Ohio only on the portion of its property which is situated there.
This action, brought in a state court of Ohio by a county treasurer to recover taxes upon shares of stock of the Western Union Telegraph Company of New York, held by the defendant below and not returned by him for taxation, was removed to the circuit court of the United States after answer filed. Judgment below in favor of the plaintiff. The defendant below sued out this writ of error. The facts which make the case are stated in the opinion of the Court.
the Western Union Telegraph Company and certain credits and investments owned by Sturges, who, during those years, was a citizen of Ohio, residing in the City of Mansfield in said county. The amount of the taxes sued for was $10,776.83, with the penalty thereon of ten percent, amounting to $1,077.68, making a total of $11,854.50. The controversy in this case relates only to the taxes on the stock of the telegraph company.
Before the trial, the term of office of Lee, the original plaintiff, expired, and Merchant Carter, his successor in office, was substituted as plaintiff in his stead. The parties waived a trial by jury, and submitted the case to the court upon the issues of fact as well as of law.
of his intention to assess him on all personal property owned by him during said period and not included in his tax returns.
The auditor then proceeded to assess the defendant on $100,000 of stock in the Western Union Telegraph Company for each of the years 1874, 1875, 1876, and 1877, and entered the same on a supplemental tax duplicate, and certified the same to the county treasurer for collection.
The defendant owned the telegraph stock so assessed during the four years aforesaid, and the same had not been included in his returns for taxation, nor had he been theretofore charged with or paid any tax on the same.
The Western Union Telegraph Company was organized under the laws of New York; it had a paid-up capital of $41,000,000; most of its property was situated outside of Ohio; it owns 4,950 miles of telegraph wires, with the chemicals and office furniture used in connection therewith, in Ohio, all which for ten years past it had regularly returned for taxation, and paid thereon from $10,000 to $15,000 per annum of tax to the State of Ohio.
"The auditors said supplemental assessment was authorized, and is regular and valid, and under the statutes of Ohio, as construed by the courts of the state, the defendant is liable in this action for the amounts assessed on his Western Union Telegraph stock, and judgment will therefore be rendered against him for the tax so assessed thereon, with the damages prescribed by statute, and interest and costs."
The court thereupon rendered judgment against Sturges for $10,727.65, "the sum so as aforesaid found to be due," and thereupon Sturges sued out the present writ of error to reverse that judgment.
The first contention of the plaintiff in error is that the court erred in holding that the notice give to him by the Auditor of Richland County was sufficient, under the statutes of Ohio, to authorize the assessment of additional taxes, and in admitting evidence of what was said by the auditor to the plaintiff in error when the latter was under examination.
"whom he might suppose to have a knowledge of the articles or value of the personal property, moneys or credits, investments in bonds, stocks, joint stock companies, or otherwise, and examine such person or persons on oath in relation to such statement or return, and it shall be the duty of the auditor in all such cases to notify every such person, before making the entry on the tax list and duplicate, that he may have an opportunity of showing that his statement or return of the assessor was correct. And the county auditor shall in all such cases file in his office a statement of the facts or evidence on which he made such correction."
These provisions of the statute have been in force ever since April 5, 1859.
The findings of fact show that the plaintiff in error was subpoenaed to appear before the auditor to give information of all property within his knowledge which had not been returned for taxation, and that while in attendance before the auditor, he was informed by the latter of his purpose to increase the amount of the property returned by him for taxation. This was a substantial compliance with the statute, which required the auditor to notify the taxpayer, before making the entry of such increase on the tax list and duplicate, of his purpose to do so so that he might have an opportunity of showing that his statement or the return of the assessor was correct. The subpoena served on the plaintiff in error, and the conduct of the auditor under it, gave him he opportunity to which the statute entitled him.
But the plaintiff in error contends that besides service of the subpoena requiring him to attend upon the auditor and give testimony in relation to property not returned for taxation, he was entitled to written notice before the auditor could make an entry on the tax list of any additional property omitted in his returns. The statute does not require any notice in writing, except the compulsory process of subpoena, to be served upon the person called to attend and testify. But if any further notice was required, it was waived by the plaintiff in error.
The finding of the circuit court shows that he appeared and submitted to an examination touching the correctness of his returns; that the auditor told him during such examination that as auditor he was required by his duty to make a supplemental assessment against him of the property which he had not included in his returns for the four years mentioned in the findings of the court, and requested him to make such explanations of his returns as he thought proper, and that he did make such as he chose. It does not appear that he complained that he had not received notice of the purpose of the auditor to increase the assessment of his property, or that the notice was not in writing, or that it was too short, or that he asked further time for consideration, or to take the advice of counsel, or to produce further evidence. From all that appears by the record, there was no surprise; he had opportunity to establish the correctness of the tax returns and to show the auditor that he was not liable to an additional assessment. He cannot therefore complain of want of notice.
the state, all moneys, credits, investments in bonds, stocks, etc., of persons residing therein, should be subject to taxation and entered on the list of taxable property for that purpose, and section six of the same act required the owner to make out and deliver to the assessor a statement under oath of all the personal property, moneys, investments in bonds or stocks, required to be listed for taxation. This was the law in force during the years for which the taxes sued for were assessed and levied, and it is still in force.
"And the inquiry and corrections provided for in this and the next section may go as far back as the same can be traced, not exceeding the four years next prior to the year in which the inquiries and corrections are made; but as to former years, no penalty should be added, and only simple taxes should be claimed."
Laws of Ohio, 1878, title 13, p. 456; Rev.Stat.Ohio 1880, § 2781. As this act took effect upon its passage, it authorized the auditor, in any future corrections and adjustments of taxes due, to extend his inquiries back for a period of four years. It did not require him to wait four years after its passage before he could give it full effect.
It is this amendment of April 11, 1878, which the plaintiff in error insists is retroactive because it authorizes the auditor to go back for a period of four years to correct false returns, whereas before its passage he could not for that purpose go behind his annual settlement with the treasurer.
The complaint is not that the auditor was required to add fifty percent to the value of the omitted property, for the old law authorized him to do that provided he did it before his annual settlement with the county treasurer, and the new law authorized him to make the addition of fifty percent for the current year only, so that in this respect the new law did not change the old; but that it was not competent for the legislature to go behind the annual adjustments made of the taxes by the auditor with the taxpayer; that if the state had wrongfully assumed too much, the citizen was barred, and if the citizen had listed too little, the state was barred, and that legislation which undertook to open these adjustments was retroactive.
In substance, this contention is that a taxpayer who has been evading the payment of the taxes due from him by making false returns, can shield himself behind the annual settlement made by the auditor with the treasurer, in which his returns were assumed to be true, and that the legislature can pass no act by which the falsity of the returns can for a limited period (in this case four years) be exposed, and the payment of the taxes enforced -- in other words, that the taxpayer has a vested right in the fruits of his false returns. Such a proposition cannot be sustained. Forter v. Essex Bank, 16 Mass. 245.
"Upon principle, every statute which takes away or impairs vested rights acquired under existing laws or creates a new obligation, imposes a new duty, or attaches a new disability in respect to transactions or considerations already past must be deemed retrospective."
The act of 1878 took away no vested right of the taxpayer, it imposed upon him no new duty or obligation, and subjected him to no new disability in reference to past transactions. The definition of Judge Story was adopted by the Supreme Court of Ohio in Rairden v. Holden, 15 Ohio St. 207, when construing the clause in the Constitution of Ohio now under consideration. Applying that definition, it is clear the provision in the Act of May 11, 1878, complained of is not open to the objection that it is forbidden by the constitution of the state. See also Goshorn v. Purcell, 11 Ohio St. 641; Greene Township v. Campbell, 16 Ohio St. 11; State v. Richland Township, 20 Ohio St. 362; Dow v. Norris, 4 N.H. 16; Clark v. Clark, 10 N.H. 380; Greenlaw v. Greenlaw, 12 N.H. 200. The authorities cited are conclusive against the contention that the legislation under review is retroactive.
The plaintiff in error next insists that the circuit court erred in deciding that certificates or shares of capital stock in the Western Union Telegraph Company held by him were taxable in the State of Ohio. Section 2 of Article 12 of the Constitution of Ohio declares: "Laws shall be passed taxing by a uniform rule all moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise."
property, moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise, or the value thereof, shall be entered on the list of taxable property for that purpose."
"That the term investment in stocks, whenever used in this act, shall be held to mean and include all moneys invested . . . in any association or corporation, joint stock company or otherwise, the stock or capital of which is or may be divided into shares which are transferable by each owner without the consent of the other partners or stockholders, for taxation of which no special provision is made by this act, held by persons residing in this state, either for themselves or as guardians, trustees, or agents."
"9th. Each individual in this state may hold exempt from taxation personal property of any description of which such individual is the actual owner, not exceeding fifty dollars in value. . . . No person shall be required to include in his statement as a part of the personal property, moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise which he is required to list any share or portion of the capital stock or property of any company or corporation which is required to list or return its capital and property for taxation in this state."
"No person shall be required to list for taxation any certificate of the capital stock of any company the capital stock of which is taxed in the name of the company."
the plaintiff in error insists that the shares of stock held by him in the company were exempted from taxation by the clauses of the Act of April 5, 1859, which we have quoted.
This contention cannot be sustained. The law taxes the shares of the plaintiff in error unless they are "expressly exempted." The burden is on him to show an express exemption.
There is no exemption unless the payment by the Western Union Telegraph Company of the tax imposed on its property situated in the state, and which the findings of facts made by the circuit court show was but a small part of its whole property, relieves from taxation its shares held by a resident of the state.
It may be conceded that generally the capital or the capital stock of a corporation is its property. Bank Tax Case, 2 Wall. 200; National Bank v. Commonwealth, 9 Wall. 353. But the shares held by the stockholders are distinct from the capital stock of the corporation, and the taxation of both is not necessarily double taxation. Farrington v. Tennessee, 95 U. S. 679; Dewing v. Perdicaries, 96 U. S. 193; Bradley v. Bauder, 36 Ohio St. 28. The claim, therefore, of the plaintiff in error is to the exemption of a certain class of his property from taxation. But it has been repeatedly held by this Court that an exemption from taxation must be expressed in clear and unmistakable terms, and cannot be shown by doubtful or ambiguous language. Providence Bank v. Billings, 4 Pet. 514; Gilfillan v. Union Canal Co. 109 U. S. 401.
The case therefore depends upon the construction of the statute. The Supreme Court of Ohio has decided that shares owned by a resident of Ohio in a foreign corporation, none of whose capital was taxed in Ohio but all of it in the state where the corporation had its home, was taxable in Ohio. Bradley v. Bauder, 36 Ohio St. 28. The controversy on this part of the case is therefore reduced to the question whether the legislature has clearly and unmistakably expressed the purpose in the act under consideration to exempt from taxation shares in a foreign corporation owned by residents of Ohio when but a small part of the property of the company was subject to taxation in Ohio.
The exemption from taxation of investments in stocks provided by the statute applies only to shares of those corporations which are required to return their capital and property for taxation in the state. Jones v. Davis, 35 Ohio St. 474. This clearly means those corporations which are required to return all or substantially all their capital and property. There is no rule of interpretation by which the statute can be held to apply to corporations who list only a small part of their property for taxation in Ohio. If the legislature had intended to allow an exemption in such a case, it could and would have expressed that purpose by words not admitting of doubt. As the shares of the plaintiff in error in the Western Union Telegraph Company were not only not expressly but not even by fair implication exempted from taxation, we are of opinion that the tax complained of was authorized by law.
Lastly, complaint is made that the circuit court erred in rendering judgment for the penalty and interest upon the additional taxes assessed against the plaintiff in error.
The judgment of the circuit court was for $10,727.65, which is less than the taxes demanded in the petition without either interest or penalty. The findings of fact do not show the rate of taxation for anyone of the four years for which the taxes were recovered, and it is impossible for us to say that anything was included in the judgment but the simple taxes. It is true that the court said in its conclusion of law that judgment would be rendered for the tax, with the damages prescribed by statute and interest and costs.
But we have not been referred to any statute which gives damages in this class of cases, and there is nothing in the findings to show that anything was actually included in the judgment, either for damages or interest. The amount of the judgment was based upon the assessment of the property of the plaintiff in error made by the auditor, a sworn public officer. Therefore the burden is on the plaintiff in error to show by the record that the court rendered judgment for an amount not authorized by law. This he has failed to do.
in other respects, was right unless the contrary is shown. Ventress v. Smith, 10 Pet. 161; Townsend v. Jemison, 7 How. 714; The Ship Potomac, 2 Black 581.

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