Court Opinion

ID: 6738398
Source: CourtListenerOpinion
Date Created: 2022-07-20 23:20:15.985421+00
Date Added: 2024-06-11T16:01:52.855632
License: Public Domain

Grace, J.
(concurring in part, dissenting in part). We concur in the opinion of the majority in so far as it holds that moneys and credits of the citizens of the state of North Dakota are taxable according to the provisions of chapter 229 of the 1917 Session Laws.
We dissent from the majority opinion wherein it holds that the relators and those similarly situated who are nonresidents and who are the owners and holders of mortgages, obligations, accounts, and contracts, etc., which are obligations owing by the citizens or residents of this state to the residents and citizens or corporations of other states, are not taxable by the proper tax officials of this state, in the same manner and to the same effect as moneys, obligations, and credits, etc., of the citizens and residents of this state are subject to the tax provided by chapter 229 of the 1917 Session Laws.
As it appears to the writer, the result arrived at by the majority with reference to intangible property of nonresidents is clearly contrary to the major portion of the reasoning of the majority of the court. The greater part of the reasoning of the majority, as expressed in their opinion, would be logical if the result as to nonresidents were just the reverse of that at which the majority opinion arrives.
The first main question to be considered, stated in simple manner, is: “Are the plaintiffs transacting business within the state of North Dakota ?” The revenue statute under consideration is part of chapter 229 of the 1917 Session Laws. The same reads as follows: “Except as otherwise provided in this chapter, personal property shall be listed and assessed in the county, town or district where the owner or agent resides; the capital stock and franchises of corporations and persons shall be listed in the county, town or district where the principal office or place of business of such corporation or person is located in this state; and if there be no principal office or place of business in *207this state where such corporation or person transacts business, then personal property pertaining to the business of a merchant or manufacturer or corporation shall be listed in the town or district where his business is carried on. The taxation and revenue laws of this state shall apply with equal force to any person or pei’sons representing in this state business interest that may claim domicil elsewehere, the intent and purpose being that no nonresident, either by himself or through any agent shall transact business within the state without paying to the state a corresponding tax with that exacted of its own citizens; and all bills receivable, obligations or credits arising from business done in this state are hereby declared assessable within this state, and at the business domicil of said nonresident, his agent, or representative; provided, however, no insurance company paying the state a percentage of its gross premiums received in the state shall be subject to the provisions of this act.”
It is not difficult to ascertain the intent of the legislature in passing the above law. In fact the legislature has declared its intent which is contained in the body of the law. The legislature evidently did this in order to save the court the trouble of trying to ascertain what the intent of the legislature was, in the passage of such law, and for the further purpose of guiding the court in ascertaining the intention of the legislature. Many laws are passed by legislatures in which no reference is made as to what the intent of the law really is, it being left to the court of final resort to finally determine the intent of the law from the language used therein; but the legislature has clearly expressed the intent of the law under consideration.
The law under consideration, as passed by the legislature, has not its parts grammatically and logically arranged, but this is a fault common to many legislative enactments; but notwithstanding the poor grammatical arrangement of the law under consideration, when the whole law is read, the intent thereof is exceedingly clear, and would be so even though the legislature had not declared the intent.
The majority opinion clearly declares the intent of the law, and then arrived at a result which appears to us directly contrary to the intent of the law. The majority opinion uses the following language with reference to the intent of the amendment:
"The intent and purpose of the amendment, as declared by the legis*208tature, was to require nonresidents transacting business within the state to pay a tax corresponding to that exacted from citizens of the state.”
We quote further from the majority opinion to support such intent of the legislature in enacting said law:
“At the outset, it is well to note that the avowed purpose.of this statute under, consideration is to fix the situs of personal property for the purpose of taxation.
“The original section provides that personal property should be listed where the owner or agent resides, and that the capital stock and franchise of corporations and persons should be listed where the principal office or place of business of the corporation is located; and if there is no principal office or place of business in the state that then personal property pertaining to the business of a merchant or manufacturer or corporation should be listed where the business is carried on. The amendment merely extended these provisions and made the statute applicable to nonresidents transacting business in the state. The intent and purpose of the amendment as declared by the legislature was to require nonresidents transacting business within the state to pay a tax corresponding to- that exacted from citizens of the state. And in that connection and to that end it provided that ‘all bills receivable, obligations or credits arising from business done in this state are (hereby declared)assessable within the state and at the business domicil of the said nonresident, his agent or representative/ Obviously, the legislature had no intention, by the enactment of this statute, to impose a privilege or occupation tax. The legislature was dealing with a tax upon property only. The true purpose of the statute is merely to fix the situs of personal property and to designate the particular place within the state where such property is to be taxed. ...
“It is strenuously asserted by counsel for the relators that the power to impose a tax upon obligations evidenced by promissory notes and other written instruments exists only in cases where the owners reside or the instruments themselves are within the borders of the taxing power. Although there is certain language used in some of the authorities justifying the contention made, it is difficult to see any logical reason on which the contention can rest. It is true that ‘by a tradition which comes down from more archaic conditions’ the debt is deemed *209inseparable from the paper which declares and constitutes it. Blackstone v. Miller, 188 U. S. 189, 47 L. ed. 439, 23 Sup. Ct. Rep. 277. This, however, is only a legal theory and one which the legislature may modify or abrogate when it deems necessary or desirable. And, as has been stated, a legal fiction or theory cannot deprive a state of jurisdiction to tax where a sufficient jurisdictional basis does, in fact, exist. While promissory notes are deemed property in the sense that they are subject to purchase and sale, the instruments themselves are, as between the creditor and debtor at least, in fact merely evidence of the debt. A promissory note and the mortgage securing it may be destroyed, but the obligation evidenced by the instruments still remains until discharged. If all promissory notes and mortgages now existent formerly executed by citizens of this state were destroyed, the obligations on the part of the makers and the rights of the owners ami holders to enforce such obligations would not be altered in the least. The evidence of the obligation would bo nonexistent, but the obligations themselves would remain and could be enforced as before. In other words, the debt or obligation itself is the primary thing, and remains even though the evidence of its existence is destroyed. The credit is one thing, the evidence of it is another thing. What gives the debt validity? Nothing but the fact that the law of the place where the debtor is will make him pay. It does not matter that the law would not need to be invoked in the particular case. ... So, again, what enables any other than the very creditor and proper person to collect the debt? The law of the same place. Ibid. The thing of-value, the enforceable obligation, is here regardless of where the evidence of the obligation may be found. We are therefore of the opinion that this state has the power which it has sought to exercise by the statute under consideration, to wit, to impose taxes upon credits and obligations owned by a nonresident who is conducting a business in this state, and which credits and "obligations are owing to him by residents of this state, and have arisen from the business which is being conducted by such nonresident in this state. Manifestly such obligations and credits are subjects of value to the owner. In many instances they constitute property of the very highest value. Under the statute, obligations and credits to be taxed must have arisen in this state from business transacted here under the protection of our laws and payable by persons domiciled within this state. *210The rights of the creditor must be enforced here. The laws of this state protect the obligation and enable the creditor to enforce it against the debtor, thereby making it valuable. And as tangible property is taxable where it has the permanent situs, because the sovereign state-where it is located can exercise control over it, and thus afford it the protection for which the tax is exacted, it seems that in cases not like those which fall within the provisions of the statute before us the state of North Dakota, which is the domicil of the debtor and has control over him, also has control over the obligations sought to be taxed. Nor do we deem the physical presence of the instrument of indebtedness Avithin this state a jurisdictional prerequisite. We do not believe that a nonresident who is engaged in business in this state and acquires and owns valuable obligations, credits and securities which have arisen from such business, can escape taxation merely by removing the evidence of such debts from this state.”
The Avriter has quoted most extensively from the opinion of the majority, and, after reading and considering the language thus expressed in the majority opinion, cannot escape the conviction that the majority opinion conceives it was the intention to require nonresidents transacting business in this state to pay a tax corresponding to that exacted from citizens of the state; that such tax may be upon intangible property; that such intangible property may consist of notes and mortgages on land within this state and oAvned and held by persons without the state, and that the situs of such intangible property for the purpose of taxation is, in fact, the place where the debtor resides though the evidence of the debt is held without the state; that the situs of such intangible property for the purpose of taxation is in the state that has control over' both the debtor and its obligation and the laws of such state, which protect the obligations and enable the creditor to enforce it against the debtor.
All these concessions are l’eally, in-fact, made by the majority opinion, and such concessions must necessarily be made because they are true, and Ave see that when such concessions are made the result arrived at by the majority opinion, .as to nonresidents, cannot logically be reached.
There is no question arising in this case concerning Avhether or not .the relators do business in this state. They, in their petitions and *211affidavits, admit they are doing business in this state, and they, in effect, admit they are doing a regular business in this state; and this being true, the notes, obligations, or mortgages arising in this state owing from debtors in this state to them, even under the reasoning of the majority, are taxable in North Dakota.
The majority opinion seems to rest upon the theory that the relators in question were not doing business within this state. We see no other way the majority can avoid the logical result of their own reasoning except to base the reason for the result they reached upon the theory or .claim that the relators are not doing business in the state of North Dakota or are not conducting a regular business. This theory or this claim is entirely overcome and dissipated by the express admission of the relators. E. J. Wheeler, in his affidavit, states as follows: “Affiant further says that he is engaged in the real estate and loaning business, and in the purchase and sale of mortgages, bonds, credits, and other securities held and owned by him until collection thereof; that at times in the furtherance of his lawful occupation and business he advances and loans to citizens of the state of North Dakota moneys and checks therefor, notes, bonds, obligations, and other evidence of debt secured by mortgages upon real and personal property, and at times purchases the same, and for that purpose at times employs an agent in the state of North Dakota to take applications for loans, cause to be executed notes and mortgages, and forwards the same to petitioner, who forwards to the agent the moneys for said loans, which is by said agent delivered to the borrower within the state of North Dakota, which said promissory notes, mortgages, and credits, however, are not held in the state of North Dakota, but in the actual possession of the petitioner in the state of Minnesota.”
It is not necessary to quote the affidavit of Wheeler further, as it clearly shows that he is engaged in transacting a regular business in the state of North Dakota, where this conclusion necessarily follows from his admission. He also shows, further, that the bonds, notes, negotiable instruments, and mortgages are in different and various counties of the state of North Dakota; that the property securing such evidence of debt is located in various taxing districts of the state of North Dakota and subject to the particular jurisdiction where levies are and have been made for the purpose of providing revenue for said *212particular taxing district, and to meet the current expenses of said taxing district. We see, therefore, that the affiant, -who is one of the petitioners and relators, concedes that the property which secures these obligations is located in various taxing districts which have jurisdiction over such property. If it should be found that the obligations which said property secures are assessable as intangible property, it will necessarily have to be conceded that the taxing districts where the property is located which secures such obligations will have jurisdiction to assess such intangible property.
The other petitioners and relators in this proceeding are, the Capital Trust & Savings Bank, Merchants Trust & Savings Bank, Northwestern Trust Company, Minneapolis Trust Company, Minnesota Loan & Trust Company, Wells-Dickey Company, Hennepin Mortgage Company, Gould-Stabeck Company, and Drake-Ballard Company. These are all Minnesota corporations, and each have a business office or place either in St. Paul or Minneapolis, Minnesota.
In the brief of intervening relator is substantially the following statement of facts: “The business of each of them (referring to the above corporations) consists among other things in loaning money on promissory notes secured by mortgages on farm lands in Minnesota, North Dakota, and other states in the Northwest. They each hold a large amount of such notes secured by mortgages on farm lands in various counties of the stale of North Dakota. The method of making such loans is illustrated by a practice of the intervener, Capital Trust & Savings Bank, and is as follows: Persons or corporations living in the state of North Dakota and engaged in the banking, loan, or real estate business and having applications for loans made to them by owners of farm lauds in the state, submit such application to the intervener. The applications are in writing and are sent by mail to the intervener’s office in St. Paul for its consideration. In some cases the intervener accepts the applications and in other cases they are rejected. If it desires to make the loan applied for, the notes and mortgages arc executed by the borrower, who is usually a resident of North Dakota. The loan broker in North Dakota through whom the application is made attends to the execution and recording of the papers, and when they are complete they are sent by mail to the intervener at his office in St. Paul for its examination and approval. The papers are examined in St. Paul; the abstracts of *213titles are passed on at St. Paul and tlie loan is accepted or rejected in St. Paul. If the papers are approved the money loaned is transmitted by the intervener at St. Paul to the loan broker through whom the application is received, the funds being transmitted by draft or cashier’s check drawn on funds in the state of Minnesota. The intervener has no agent acting for it in such matters in North Dakota, and the loan brokers have no authority to represent the intervener and receive their commission and compensation from the borrower and act as the borrower’s agent. After the loan is made, the notes, mortgages, and other papers are kept by the intervener at his office in St. Paul so long as he owns the same. The notes are, in all cases, made payable at the office of the intervener in the city of St. Paul. Occasionally, if the intervener purchases mortgages from banks or persons engaged in the mortgage loan business in North Dakota, and in such cases the papers relating to the mortgage loan are sent to the intervener at his office in St. Paul for examination and approval, and if accepted, the purchase price is transmitted from St. Paul to North Dakota in the same manner as where the loan is made by the intervener in the first instance. The intervener does not maintain any agent or place of business in the state, and the mortgage notes do not arise out of any business transacted in the state of North Dakota, unless making loans in the manner set forth constitutes doing business in that state. The methods followed by all the interveners are substantially the same. The interveners, other than the Capital Trust & Savings Bank, have heretofore complied with the Foreign Corporation Act of the state of North Dakota; but notwithstanding they have received licenses to do business in that state, they have not, in fact, transacted any business in the state unless the making of mortgage loans stated constitutes doing business in the state.”
This statement of facts, without need of further analysis, clearly shows and demonstrates that each of the interveners is engaged in business in the state of North Dakota. In the statement of facts, it is admitted that "they each hold a, large amount of such notes secured by mortgages on farm lands in various counties of the state of North Na-1'ota.” This statement, in effect, is equivalent to stating that they each do a large business in the state of North Dakota by loaning money to the residents of North Dakota and talcing mortgages on their farms. They have, with one exception, complied with the Foreign Corporation *214Act of this state and received their licenses to do business, — all of which indicates the transaction of a regular business in the state of North Dakota. The statement of facts also shows that a large part of the business is done in North Dakota. The statement of facts referred to this matter and to the making of a loan, and states as follows: “If it desires to make the loan applied for, the notes and mortgages are executed by the borrower, who is usually a resident of North Dakota,, and it is stated that the method of making such loan is illustrated by the practice of the Capital Trust & Savings Bank.”
The quotation last made is with reference to the Capital Trust & Savings Bank, so that it would appear that a large part of the business of the corporation is that of making farm loans in the state of North Dakota. In fact, it must, we think, be conceded that all of the corporations above referred to, from their own statement of facts, do a large farm loaning business in the state of North Dakota. Assuming that it appears that such corporations do a large business in the state of North Dakota, the result arrived at by the majority opinion has no logical support, and the result arrived at does not follow from the major part of the reasoning of the majority opinion. The result arrived at by the majority, as it appears to us, is in direct conflict with their reasoning as we have set it forth in this opinion, and cannot rest upon the proposition that the. intervening relators are not doing business in the state- of North Dakota, because their statement of facts, we believe, shows that they are doing business in the state of North Dakota. It being, as we believe, shown that the relators are doing business in the state of North Dakota, as the words, “doing business,” are usually understood, and applying to such words the ordinary and common signification, and it being further conceded that the obligation is, in fact, the thing of value, and the notes and mortgages but the evidence of the value, and that the power exists in this state to enforce such obligations to which power the creditor may resort whenever he is entitled to a remedy, it must be' apparent and it ought to be held that such obligation is taxable as intangible property by virtue of the statute under consideration. Such, wo believe, was the intent of the legislature, and such intent, when ascertained and especially when expressly declared, should govern this court. The plain intent of the legislature should be carried into effect.
*215There can be no question but what the state has jurisdiction to impose a tax under consideration upon the intangible property, in this proceeding. The intangible property is located within this state. That is, the obligation, the thing of value, is within this state. The debtor resides within this state. The power to enforce the obligations under consideration is within this state. The intangible property, the obligation, is within this state. Though the evidence of such obligation may be without the state, the obligation, the thing of value, the credit being within this state, the state has jurisdiction to apply taxing laws to such obligation and credits in the same manner as it applies the taxing laws to similar obligations and credits of its own citizens. There can be no question about the state having jurisdiction over the intangible property under consideration and all similar intangible property.
The legislature has clearly declared the intent of the act in these words: "The intent and purpose being that no nonresident, either by himself or through any agent shall transact business within the state without paying to the state a corresponding tax with that exacted of its own citizens[Laws 1917, chap. 229.]
It is clear from the above language that it is not necessary to have an agent in this state, for the law applies whether the business is done by the principal or through an agent; and the intent as expressed above clearly shows that if the business is done within this state so that an obligation exists in the state, then the power to tax such obligation exists in the state, to the same extent that a similar obligation is taxed as against a citizen of this state.
It may be well to examine upon what intangible property or credits are the citizens of the state of North Dakota subject to tax. When that is ascertained, then the nonresident must pay a corresponding tax upon similar intangible property. -It must be conceded that the citizens of the state of North Dakota must pay the tax under consideration, upon every credit and upon all intangible property such as notes, mortgages, accounts, contracts, etc., which he owns. Any citizen who has any of such intangible property is subject to the tax under consideration, whether he is an individual, a corporation, or whether he does such business himself or through an agent. If this is true, then the nonresident who has similar property in this state, according to the expressed intent of such law, should pay a corresponding tax.
*216The question then is: Are notes and mortgages executed by citizens of this state to nonresidents, upon intangible property within this state, subject to the tax under consideration? It being conceded that such notes and mortgages are but the evidences of the obligation, and that the obligation is the thing of value; that the obligation exists within this state, the debtor resides within this state; the obligation to pay existing within this state; the power to enforce such obligation being within this state; it must follow that the intangible property under consideration and similarly situated must be within this state, and is therefore taxable within this state in the manner corresponding to that of similar intangible property taxed against the residents and citizens of this state. In other words, whatever intangible property a nonresident has within this state is taxable in the same measure as and correspondingly with similar property of a resident or citizen of the state.
This is the true measure of authority and power of the state to tax this kind of property. If the citizens of the state pay this tax upon a mortgage, note, or obligation which they own, then a similar tax must be paid upon a similar note, mortgage, or obligation which is owned by a nonresident.
It does not seem to us that there is any great difficulty in understanding this law, especially where the clear intent of the legislature is expressed, as we have before set forth. The measure of the liability of a nonresident who owns' intangible property within this state to pay tax thereon is measured by the liability of a citizen or resident within this state in paying a tax upon similar intangible property.
As the majority opinion has not entered into a discussion of constitutional questions, we will not do so.