Case Name: CAPITAL TRUST & SAVINGS BANK, a Corporation, et al., Appellants, v. GEORGE E. WALLACE, as Tax Commissioner of the State of North Dakota et al., Respondents
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 1920-03-13
Citations: 45 N.D. 182
Docket Number: 
Parties: CAPITAL TRUST & SAVINGS BANK, a Corporation, et al., Appellants, v. GEORGE E. WALLACE, as Tax Commissioner of the State of North Dakota et al., Respondents.
Judges: Christianson, Oh. J., and Robinson, J., concur.
Reporter: North Dakota Reports
Volume: 45
Pages: 182–208

Head Matter:
CAPITAL TRUST & SAVINGS BANK, a Corporation, et al., Appellants, v. GEORGE E. WALLACE, as Tax Commissioner of the State of North Dakota et al., Respondents.
(177 N. W. 440.)
Taxation — moneys and credits tax — does not apply to foreign corporations not doing business in the state.
Chapter 230 of the Session Laws of 1917, which provided for the taxation of moneys and credits at an annual flat rate of three mills on each dollar of the cash value, having been repealed by chapter 62 of the Session Laws of the Special Session of 1919, the latter providing that the act should not be construed to invalidate or discharge any tax theretofore levied or assessed, it is held that the plaintiffs, in respect to the business described in the complaint, are not liable for the tax sought to be imposed.
Opinion filed March 13, 1920.
Appeal from District Court, Burleigh County, J. M. Hanley, Special Judge.
[Reversed.
Butler, Mitchell & Doherty (Miller, Zuger & Tillotson, of counsel), for appellants.
The court has jurisdiction to entertain this cause and decide the matters in controversy. State v. Packard, 32 N. D. 301, 105 N. W. 666; State v. Taylor, 33 N. D. 76, 156 N. W. 561; State v. Hall, 35. N. D. 34, 155 N. W. 281; State v. Packard, 35 N. D. 298, 160 N. W. 150; State v. Packard, 168 N. W. 673.
The notes held by the relators, although secured by mortgages on North Dakota real or personal property, are not subject to taxation in North Dakota. State Tax on Foreign-held Bonds, 15 Wall, 300; Walker v. Jack, 88 Fed. 576; New Orleans v. Stempel, 175 H. S. 309.
“A debt due a nonresident of this territory from a resident of this territory, although secured by a mortgage upon real estate situated in this territory, is not subject to taxation in this territory.” Territory v. Delinquent Tax Lists, 24 Pae. 182; State v. Scottish Am. Stg. Co. 76 Minn. 155; Holland v. Board of Comrs. 39 Pac. 575; Adams v. Colonial & H. S. Mortg. Co. 34 So. 482; Jack v. Walker, 96 Fed. 578, affirmed in 100 Fed. 1006; Hathaway v. Edwards, 85 N. E. 28; Com. v. Peebles, 119 S. W. 774; National Fire Ins. Co. v. Board of Assessors, 46 So. 117; General Electric Co. v. Board of Assessors, 46 So. 122; Board of County Comrs. v. Cutler, 3 Colo. 351; Goldgart v. People, 106 HI. 29; Firesman v. Byrns, 69 Ind. 254; Com. v. Consolidated Casualty Co. 185 N. W. 508.
“Where the nonresident lender has no place of business or location or agent in the state, and accomplishes the loan beyond the limits of this state, the fact that negotiations for the loan were made by persons in this state, and it was secured by mortgage on property in this state, does not subject it to taxation here.” State v. Smith, 8 So. 294; Goldgart v. People, 106 111. 25; Senour v. Ruth, 39 N. E. 946.
“The debt, therefore, if owned and controlled by one not a resident of the state, is not ‘property in the state subject to taxation’ as provided by the Revenue Act of 1891, but can be assessed only at the domicil or place of residence of the creditor without regard to the domicil of the debtor.” Holland v. Silver Bow County, 39 Pac. 575.
Wm. Langer, Attorney General, and F. E. Packard, Assistant Attorney General, for respondents.

Opinion:
Birdzell, J.:
This is an appeal from a judgment in favor of the defendants which was entered pursuant to an order sustaining a demurrer to a complaint. The action is one to enjoin the defendants from proceeding under certain tax laws to tax credits evidenced by promissory notes and mortgages owned by the plaintiffs on April 1, 1919. The plaintiffs allege that they are foreign corporations having their offices and places of business in the cities of St. Paul and Minneapolis, Minnesota; that the business of each of them consists in loaning money on promissory notes secured by mortgages on farm lands and, as to one plaintiff, by chattel mortgages on live stock; that on April 1, 1919, they held a large amount of such notes and mortgages; that none of the plaintiffs has established any place of business within the state of North Dakota nor has any office in this state; that loans have been made by them substantially in the following manner: Persons or corporations living within this state and engaged in the banking,- loan, or real estate business, take applications for loans, submit them to the plaintiffs for consideration, and, if satisfactory to the plaintiffs, the loan is completed. The loan broker in North Dakota, to whom the application was made, attends to the execution of the necessary papers which are sent by him to the plaintiffs for their examination and approval. Upon approval, the money is forwarded by the plaintiffs to the loan broker, or, in some instances, deposited in Minnesota banks to the credit of the broker. The brokers receive their commissions from the borrower and act as his representative. The plaintiffs keep their notes and mortgages at their offices outside the state and that they keep no fund within the state for investment. Another method of acquiring securities is their purchase from banks or persons engaged in the mortgage loan business. Tbe methods according to which the various plaintiffs handle loans on North Dakota property differ to some extent. Some make loans exclusively in the manner hereinbefore described at length; others may mingle both that method and the purchase method; and still others acquire loans exclusively by purchase.
It will be noted that the facts stated above are substantially the same as the facts presented in State ex rel. Langer v. Packard, 40 N. D. 182, 168 N. W. 673.
The history of the legislation bearing upon the tax sought to be enforced against the plaintiffs is stated in full in the opinion of this court, filed concurrently herewith, in the case of Farwell, O. K. & Co. v. Wallace, ante, 173, 177 N. W. 103, and need not be repeated here. Suffice it to say that it evidences two complete changes of legislative policy, the first relating to situs and the second to the desirability of the tax provided for. The situs law, which was before this court in State ex rel. Langer v. Packard, supra, is completely changed so as apparently to make the determining factor either the domicil of the debtor, or the situs of the tangible property upon which the security is given, and this is again changed by the act of the special session of the legislature in 1919 which eliminates this criterion. As to the tax itself, the special session of the legislature repealed the law which provided for the tax on moneys and credits, saying, however, "any tax heretofore levied or assessed under or by virtue of any of the tax laws of this state." Laws of the Special Session of 1919, chap. 62, § 2. It does not affirmatively appear that any tax has heretofore been levied or assessed under any of the tax laws of this state as to the credits owned by the plaintiffs and which were obtained in the manner heretofore indicated. On the contrary, it rather appears that such taxes had not been assessed or levied up to the time of the institution of this suit, if not up to the time of the passage of the repealing law. In view of the grave doubt as to whether the legislature actually intended by the repealing act to save taxes that were in litigation prior to assessment, which litigation was known to be pending when the repealing act was passed, and of the further fact of the distinct change in policy evidenced by the repeal, our decision in his case will be of little or no value as a precedent and we have determined merely to state the conclusion at which we have arrived, with a brief statement of the reason therefor.
Our conclusion is that the plaintiffs are not liable for the taxes involved in this litigation. The statute (Sess. Laws 1919, chap. 229) which defines the jurisdiction of the state to tax the property involved herein, makes the revenue laws applicable to "all property and business . . . though the owners . . . may have or claim domicil elsewhere." And it is provided that if the holder of credit obligations secured by property within the state has no residence in the state "the taxes shall be deductible upon such obligations in the hands of the debtor or his agent." The money and credit tax sought to be levied under chapter 230 of the Session Laws of 1917, does not purport to be a tax upon any business conducted in this state nor does it evidence any attempt to tax capital employed in any business as such. On the contrary, it attempts to seize upon the single fact of the domicil of the debtor or the presence of the mortgaged property within the state as the sole test of jurisdiction to tax. f It does not segregate the interests of the mortgagor and mortgagee in the property. The mortgagor must still pay a tax on the mortgaged property valued without regard to the mortgage. So, under the statutes referred to, the owner of a credit, secured by property within the state, is rendered liable to the tax even though he never had any business relations whatsoever with the debtor whose residence and property are here. The fiction of mobilia sequuniur personam is responsible for a broad assertion of the lack of jurisdiction to tax a credit in the state of a debtor's domicil. See State Tax on Foreign-held Bonds, 15 Wall. 300, 21 L. ed. 179. But while this fiction has been compelled to yield to facts pointing to the necessity of equal taxation of those engaged in business within a sovereign state, the principle has never been so completely reversed so as to authorize the state to seize upon the sole fact of the residence of the debtor and the presence of his mortgaged property within it as determining the taxing jurisdiction of the state. We are satisfied that this cannot be done where it would render negotiable instruments in the hands of nonresident owners subject to tax in this state.
As in the case of Farwell, O. K. & Co. v. Wallace, ante, 173, 177 N. W. 103, decided simultaneously with the case at bar, relief is asked from the capital stock tax sought to be levied under chapter 222, Session Laws of 1919. In our opinion, under the facts alleged, the plaintiffs are entitled to the relief sought. See State ex rel. Langer v. Pack ard, 40 N. D. 182, 168 N. W. 673; and Farwell, O. K & Co. v. Wallace, supra.
Being of this opinion, it follows that the judgment appealed from must be reversed. It is so ordered.
For reasons stated in a per curiam opinion filed concurrently herewith in an original application to this court, it is also ordered that the two interveners are entitled to the benefits of the judgment to be entered in the district court.
Christianson, Oh. J., and Robinson, J., concur.
Bronson, J., concurs in result.