Case Name: CITY OF DETROIT v. KRESGE
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1918-03-28
Citations: 200 Mich. 668
Docket Number: Docket No. 143
Parties: CITY OF DETROIT v. KRESGE.
Judges: Brooke and Kuhn, JJ., concurred with Moore, J.
Reporter: Michigan Reports
Volume: 200
Pages: 668–694

Head Matter:
CITY OF DETROIT v. KRESGE.
1. ■ Taxation — Constitutional Law — -Double Taxation. ,
The constitutional requirement of equal taxation, the ground for refusing double or duplicate taxation, has no application in cases where the alleged double taxation was not Imposed by the same sovereignty.
2. Same — Corporate Stock — Double Taxation.
The taxation of shares of stock of a Michigan corporation, some of the property of the corporation being within and some without the State, and taxed where situated, is not double taxation.
3. Same — Corporate Stock — Exemptions.
The property of a Michigan corporation owning property within and without the State is taxable to itself, and therefore the shares of such corporation are exempt from taxation under section 4002, subd. 7, 1 Comp. Laws 1915.
Per Ostrander, C. J., and Steere, Brooke, and Stone, JJ.
Error to Wayne; Hally, J.
Submitted October 17, 1917.
(Docket No. 143.)
Decided March 28, 1918.
Rehearing denied June 20, 1918.
Assumpsit by the city of Detroit against Sebastian S. Kresge for the amount of an assessment for taxes. Judgment for defendant on a directed verdict. Plaintiff brings error. •
Affirmed.
Walter Barlow (Harry J. Dingeman, of counsel), for appellant.
Donnelly, Lyster & Munro and John H. Brennan, for appellee.

Opinion:
Moore, J.
In this case it was stipulated as follows:
"Mr. Kresge is a resident of Detroit. The board of assessors in April, 1917, in making up the personal tax rolls, assessed him in the amount of $20,000. Subsequently the board of review increased his assessment to $3,000,000, after notice to him of their intention so to do. Mr. Kresge petitioned the board of review to reduce his proposed assessment of $3,000,000 to $5,429.18. In his sworn statement Mr. Kresge, in answer to question Number 12, therein lists 66,548 shares of the common capital stock of the S. S. Kresge Company, of the par value of $100 per share. This company is a Michigan corporation formed under Act No. 232 of the Public Acts of 1903, as amended, commonly known as the Denby act. The company has an authorized and outstanding capital stock of $2,000,000 preferred stock and $10,000,000 common stock, shares worth $100 each, par value. In the tax statement, Mr. Kresge expressly claimed that the shares of stock in this company were exempt from taxation in this State. The board of review denied his petition and confirmed the assessment at the sum of $3,000,000. Mr. Kresge had an interview with the board of review, in which his. shares of stock in the above company were discussed, and the board of review was advised by Mr. Barlow, chief - assistant corporation counsel, that the shares of stock belonging to the petitioner were taxable, not for their cash value, but for a proportionate amount depending upon the proportion between the taxable property of the corporation outside of the State to its taxable property inside the State. Mr. Kresge, being asked what proportion of the property of the company was outside the State, stated that to the best of his opinion it amounted to about 80 per cent, and 20 per cent, is located within this State. The amount of the assessment made by the board of review was based upon the amount of the property of the company so stated to be outside the State. It is conceded that Mr. Kresge's entire personal assessment for the year 1917 is based upon his. ownership of these shares of stock.
"Mr. Kresge appealed from the decision of the board of review to the board of State tax commissioners, who sustained the assessment.
"The company is engaged in conducting mercantile establishments and stores, for the sale of goods not only in Michigan, where it has quite a number of stores, but also has stores, in 21 other States and in the District of Columbia; that the company owns no real estate, but has personal property at its stores in Michigan and in the other States, consisting principally of its stock of goods for sale at its. several stores, and of the furniture and fixtures, used in connection with the stores; that its property is of the same character in other jurisdictions as in Michigan, and that the company pays taxes upon such property wherever it maintains a store, not only in Michigan, 'but in other States. The articles that constitute the stock of goods on sale at the several stores of the S. S. Kresge Company outside of Michigan are not, as a general rule, shipped from or supplied from a depot or warehouse in this State, but are shipped direct from the manufacturer or parties from whom they are purchased, to the particular store where they are to be kept for sale.
"The S. S. Kresge Company is licensed to do business in the 21 other States and District of Columbia mentioned above, and does business there in its own name as a Michigan corporation.
"It was proven on the trial that there was a general city tax of $41,426.64 levied against the defendant by the board of assessors, of the city of Detroit on the basis of a personal property valuation of $3,000,000 assessed against him for the year 1917, and that there was a penalty of one per cent., $414.26, to be added thereto by reason of the non-payment of said original tax during the month of July, 1917, within which month Detroit city taxes are payable without addition thereto under the provision of the city charter. The total amount of the tax due to the plaintiff from the defendant, if anything, was therefore $41,840.90 at the date of the trial."
The court directed a verdict in favor of the defendant. The case is here by writ of error.
Counsel are agreed that the only question involved is whether the court should have directed a verdict in favor of the plaintiff in the sum of $41,840.90, instead of directing a verdict in favor of the defendant.
The claim of counsel for the appellant is clearly and concisely stated as follows:
"It is double taxation for the same State, as Michigan, to tax the property and stock of the same corporation, whether domestic or foreign; but it is not double taxation for one State to tax property, and another State' to tax the stock of the same corporation.
"Illustration: The stock of a foreign corporation, owned by a citizen of Michigan, is. taxable by this State, though such corporation pays taxes to another State on all its property. Bacon v. Board of State Tax Com'rs, 126 Mich. 22.
. "The stock of a foreign corporation, owned by a citizen of Michigan is not taxable by this State, if all of its property is taxed in Michigan. Stroh v. City of Detroit, 131 Mich. 109.
_ "The stock of a foreign corporation, owned by a citizen of Michigan, is taxable in Michigan, though such corporation pays taxes in Michigan on part of its_property and taxes to other States on the rest; but it is so taxable less a pro rata reduction for the value of its property taxed in Michigan. Thrall v. Guiney, 141 Mich. 392.
# "Shares of stock of foreign and domestic corporations have been, and are taxable alike, notwithstanding the apparent difference in the wording of the statutory provisions. Stroh v. City of Detroit, supra. page 115.
"General Principle: It is legal for this State to tax stock of corporations whether foreign or domestic, to its citizen stockholders, insofar as it does not tax their property to such corporations, viz.: If all of the corporate property is inside Michigan. Michigan may not tax the stock at all; if all of the corporate property is outside Michigan, Michigan may tax the-full value of the stock; and if part of the property is inside Michigan and part outside, Michigan may tax part of the value of the stock, but only part, for allowance must be made for the' corporate property taxed in Michigan.
"In all three of these leading Michigan cases the court applied the rule of equitable taxation by giving the shareholders in the corporations therein mentioned the benefit of the exemptions, specified in subdivision 7 of section 4002 of our statute (1 Comp. Laws 1915). The corporations in those cases were all foreign corporations, and giving subdivision 9 of said section a literal or strict construction all of the shares of foreign corporations owned by residents, here would be subject to taxation here whether such corporations paid taxes on their property here or not.
"Subdivision seven of this section of the statute exempts shares of stock in a corporation from taxation only so far as the property of the corporation located here is exempt from taxation and insofar as taxes are paid on such property in this State. The payments of taxes on its property here is the reason why its shares of stock are not taxable to its shareholders residing here."
In Bacon v. Board of State Tax Com'rs, supra, Justice Long, speaking for the court said:
"There are the questions of policy and abstract justice involved, both protesting against double taxation, but the legislatures of the States are judges of both policy and propriety so long as the constitutions have not forbidden it, and the weight of authority supports the claim that, in the absence of clear and. express prohibition, they have not."
The stock assessed in that case was stock in a foreign corporation and the assessment was sustained for the reason that subdivision 9 provides for the assessment of "all shares in foreign corporations, except in national banks, owned by citizens of this State."
There is a clear intimation that a different result would have been reached had the stock been that of a domestic corporation. Clearly that case is not controlling of the instant case. ,
In Stroh v. City of Detroit, supra, Justice Hooker in speaking for the court said:
"The Constitution of this State requires that there be a uniform rule of taxation and we have held that this forbids double taxation; and while double taxation may occur under any law, and that fact may, perhaps, not invalidate an act not intended nor calculated to impose it, and may not invalidate assessments made under it and according to its provisions, a law which in its terms necessarily requires it, under ordinary conditions, must be held invalid, or so construed as to avoid* it. Comstock v. City of Grand Rapids, 54 Mich. 641 (20 N. W. 623); Attorney General v. Board of Sup'rs of Sanilac Co., 71 Mich. 16 (38 N. W. 639); Standard Life & Accident Ins. Co. v. Board of Assessors of Detroit, 95 Mich. 468 (55 N. W. 112); Detroit Citizens' St. Ry. Co. v. Common Council of Detroit, 125 Mich. 675 (85 N. W. 96, 86 N. W. 809).
"The taxation of shares to the shareholder, and property to the corporation, is clearly double taxation, within the spirit of the constitutional provision, and while we appreciate the fact that the shareholders and the corporation are different entities in the law, and that shares of stock are recognized as property, and distinct from the corporate property, it is plain that the shareholders are the corporation, and that they are the owners of its property. The Constitution does not permit the' taxation of both property and shares, and we must, if possible, give such a construction to the law as to make it reconcilable with the Constitution."-
In that case it was held that stock in a foreign corporation owned by a resident of the State could not be assessed where the property of the corporation was in this State and was taxed. Clearly this decision does not help the appellant.
In the case of Thrall v. Guiney, supra, the stock as sessed was stock of a foreign corporation, and it was claimed should have been exempt because of the provisions of subd. 5, reading:
"5. All goods, chattels, and effects belonging to inhabitants of this State, situate without this State, except that property actually and permanently invested in business in another State shall not be included"
and this court held that the language did not sustain the claim, and allowed the assessment to stand. What the result would have been in case the stock assessed was in a domestic corporation does not appear.
In Union Trust Co. v. Detroit Common Council, 170 Mich., at p. 699, Justice Stone, speaking for the court, said:
"This brings us to the second question raised by respondents, whether or not the relator can use the stocks owned by it in other Michigan corporations, which pay taxes in Michigan on their property, as an offset.
"It is the claim of relator that, insofar as stocks in corporations are concerned there can be no question that such stocks are exempt from taxation, and their value should be deducted from the taxable capital of relator. 1 Comp. Laws, § 3831 (1 Comp.. Laws 1915, § 4002), subd. 7:
"'For the purposes of taxation, personal property shall include (7) all shares in corporations organized under the laws of this State, when the property of such corporations is not exempt, or is not taxable to itself; or when the personal property is not taxed.'
"In the construction of this section due consideration should be given to section 3834 (1 Comp. Laws 1915, § 4005), which provides that all corporate property, except where some other provision is made by law, shall be assessed to the corporation, in the name of the corporation. Stroh v. City of Detroit, 131 Mich. 109 (90 N. W. 1029); Bacon v. Board of State Tax Com'rs, 126 Mich. 22 (85 N. W. 307, 60 L. R. A. 321, 86 Am. St. Rep. 524); Thrall v. Guiney, 141 Mich. 392 (104 N. W. 646, 113 Am. St. Rep. 528). We think that relator is right in this claim."
No Michigan case is called to our attention that is on all fours with the case before us, and it may be well to refer to the provisions of the statutes that are at all applicable.
The Kresge Company is organized under chapter 258, .4 How. Stat. [2d Ed.] (2 Comp. Laws 1915, chap. 175).
Section 31 (4 How. Stat. [2d Ed.] § 9562; 2 Comp. Laws 1915, § 9046) reads:
"All corporations formed or existing under this act shall be liable to be assessed for all real and personal estate held by them in this State, at its true value, and shall pay thereon a tax for township, village, city, county and State purposes, the same as other real and personal estate, and such tax shall be assessed, collected and paid in the same manner as other taxes on real and personal estate are required to be assessed, collected and paid: Provided, Nothing herein contained shall authorize the taxing of the capital stock of such corporation as such capital stock."
It must be apparent that the capital stock should not be assessed as capital stock. Clearly there is no authorization in this section of the statute for doing what the appellant seeks to have done.
Similar statutes were before the supreme court in Kentucky, in the case of Commonwealth v. Walsh's Trustee, 133 Ky. 103, and Commonwealth v. Trust Co., 147 Ky. 77. In the last named case it was contended as it is contended here, that as some of the property of the corporation was located outside of Kentucky, and paid taxes in another State and not in Kentucky, the stock might be assessed in Kentucky.
In disposing of the case the court said in part:
"The construction demanded by the commonwealth would lead us to the decision that if a Kentucky manufacturing or trading non-franchise corporation were, at any time in the pursuit of its lawful business, to become the holder of any considerable property outside of the State of Kentucky,.the holders of its shares of stock would at once have to list same for taxation; whereas, if the corporation should, confine its property holding entirely to Kentucky, its shareholders would not need to list their shares nor submit to a tax upon them. The legislature can hardly have meant to create so unjust a condition. The construction claimed would mean that a Kentucky plant, in order that its shares might not be a separate subject of taxation, must restrict its operations, or rather its property holdings, entirely to the State, and thus be denied the opportunities which thrift and enterprise might give to it by establishing itself in other states as well.
"In the language of section 4085, considered alone, is to be found a strong argument upholding our view of its intent; as well as negativing the commonwealth's theory that all its property must be tax-paid in Kentucky before the stockholders' exemption arises. The statute provides that 'the property of all corporations shall be assessed in the name of the corporation in the same manner as that of a natural person and so long as said corporation pays the taxes on all its property of every kind, the individual stockholders shall not be required to list their shares in said corporation.' Now upon what property, reading the statute in its entirety, must the corporation pay its taxes, before the stockholder's exemption arises? The answer is found in the statute itself and means, of course, that the corporation shall pay taxes upon the property 'assessed in the name of the corporation.' Manifestly the corporation could not pay taxes in Kentucky upon property assessed in some other State. The section of the statute, therefore, answers itself, and makes its meaning clear, i. when the corporation has paid the taxes on all its property in Kentucky, assessed in its name, the holder of shares of stock in it need not list them for taxation."
We quote part of section 4002, 1 Comp. Laws 1915:
"For the purposes of taxation personal property shall include:
'Í7. All shares in corporations organized under the laws of this State, when the property of such corporations is not exempt, or is not taxable to itself; or when the personal property is not taxed."
Whether the assessment of the stock shall stand depends upon the construction put upon this subdivision. The argument of the appellant is that, as the personal property of the Kresge Company is not taxed in this State, the stock owned by the resident of the State should be taxed.
The language of subdivision 7 is not ambiguous.'' The shares of stock may be placed on the assessment roll when the personal property of the corporation is not taxed. Not taxed where? The appellant says in this State. The statute does not so read, and we are not justified in reading into it something the legislature did not put in. The practical effect of leaving this stock on the assessment roll is to subject the property of the corporation to double taxation.
In the language of Justice Hooker in Stroh v. City of Detroit, supra:
"The Constitution does not permit the taxation of both property and shares, and we must, if possible, give such a construction to the law as to make it reconcilable with the Constitution."
The judgment is affirmed, with costs.
Brooke and Kuhn, JJ., concurred with Moore, J.
Ostrander, C. J.
It is settled by numerous decisions based upon reasoning which cannot be answered that the constitutional requirement of equal taxation, the ground for refusing double or duplicate taxation, has no • application in cases where the alleged double or duplicate taxation is not imposed by the same sovereignty. The Stroh Case and the Thrall Case are applications of the rule forbidding — at least refusing to uphold — duplicate taxing of property in the same jurisdiction. In the case at bar, duplicate taxation is not attempted. What is attempted is the taxation of the shares of stock of a Michigan corporation, the owner of which is a resident of this State, some of the property of the corporation being within and some without the State. So much of the property of the corporation as lies Within the State is taxed and presumably all of it lying without the State is taxed in the place where it is situated. It cannot be doubted that the shares of stock are property, nor can it be properly claimed that duplicate taxation is attempted.
The general power to tax the shares of stock to the resident owner being clear, the question to be determined is whether the taxing power is limited — whether they are exempt from taxation. The question must be answered as we shall read the statute. The language of the statute to be considered is in section 4002, subd. 7, 1 Comp. Laws 1915, and is:
"All shares in corporations organized under the laws of this State, when the property of such corporations is not exempt, or is not taxable to itself; or when the personal property is not taxed."
Unless exemption from taxation of these shares is found in this provision, they are not exempt. What is meant by the term "is not taxable to itself"? Does it mean not by the law of its organisation, or other law, taxable to itself, or does it mean not in fact taxable to itself, as when some or all of it is situated outside the State. The legislature has not said "is not taxed to itself," but "is not taxable to itself." The property of the S. S. Kresge Company is taxable to itself. I cannot persuade myself that the legislature meant that the shares of stock of a Michigan corporation are taxable as the property of the company in the State varies and is actually taxed in the State. The statute deals generally with subjects of taxation. One subject is shares of the stock of Michigan corporations, which are not, however, to be taxed when the property of the corporation is taxable to itself. The context, I think, supports this view of the meaning of the par ticular provision of the law. According to this view, the shares are not taxable.
Steere, Brooke, and Stone, JJ., concurred with Ostrander, C. J.