Court Opinion

ID: 4005200
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:06:17.482918+00
Date Added: 2024-06-11T07:44:36.070366
License: Public Domain

As noted in the majority opinion the ruling of this Court inCharleston Federal Savings  Loan Association v. James, TaxCommissioner, 120 W. Va. 781, 200 S.E. 845, declared that state and federal building and loan associations were corporations within the meaning of Code, 11-3-13 (dealing with the assessment of corporate property), and that their intangible and other personalty are subject to taxation. Within a few month thereafter, a statute (Acts of the Legislature, 1939, Chapter 118, Article 3, Section 1) was enacted by the Legislature which furnished a norm for the purpose of taxing building and loan associations and federal savings and loan associations. Significance must be attached to such legislation for, if taxation of intangible and other personalty was to be based upon the same standard applicable to other corporations, there was no requirement for legislative action since, under the pronouncement of this Court indicated above, that result had already been effected.
There is nothing equivocal about the guide provided by the Legislature for the assessment to be made against building and loan and federal savings and loan associations. The majority opinion states:
    "* * * if we were assessing these shares to the owner, as distinguished from the association, the price at which they could be sold would be their actual value; but when we assess the association, we assess all of its property, as under our constitution we must."
Such language is in direct contravention of the statute itself. It is difficult to understand the logic, legal justification, or equity in fixing two different assessments, when the same property is employed as the measure thereof, merely because of the identity of taxpayer. The statute may not employ a proper standard for assessment of the loan associations involved, but certainly the legislative directive for assessment of investment shares and *Page 442 
investment accounts cannot mean one thing when applied to shareholders and another when applied to loan institutions. The basis for the assessment standard is definitely erroneous for the investment shares and accounts are not assets of the association but are actually liabilities, representing the amount due investors. In other words, the property assessed actually belongs to the investors, yet the assessment is one against the association. The bulk of the investment undoubtedly is represented by promissory notes secured by realty deeds of trust, and a proper criterion for assessment of an association's intangible property would include an evaluation of such notes. Every lending agency must necessarily attach some risk of loss in every loan transaction which may be occasioned by innumerable circumstances tending to cause a fluctuation of values of the security behind the notes. It is for such probable loss that reserves are created. In Rosenthal and Jacoby, Cyclopedia of Federal Savings and Loan Associations, p. 208, it is stated:
    "Inspiring the original reserve requirements fixed for Federal savings and loan associations was a clear conception of the trustee character of these associations. It was recognized that they have, if possible, an even greater responsibility than other such trustees because funds invested with them are frequently not the surplus cash of well-to-do people but the sole protection of wage earners against disaster."
The majority of the Court considers such reserves as assets of the company. I should have no objection thereto if the premise of the assessment consisted of other assets of the company, but, as noted above, that is not the situation; and for the majority to say, as it does, that "that part of the statute which refers to market value is inapplicable to the case at bar", is simply deleting, by juridical statement, a factor which the Legislature has employed. Since the statute involves only assessment of *Page 443 
specified associations, when, may it be inquired, shall that part of the statute apply if not to the case at bar?
Nor am I able to agree with the statement in the majority opinion that the statutory directive that the assessor "in ascertaining the true and actual value of such capital as represented by such investment shares and investment accounts as aforesaid, the assessor shall take into consideration all earned reserves and undivided profits of any such association" manifests an intention to secure the assessment of the association's property, for, if such had been the intendment of the Legislature, it would have employed as a basis for assessing the associations the corporate property rather than the true and actual value of the investment shares and investment accounts. Referring to the language of the statute above quoted, the majority opinion states that "it is difficult to perceive what possible meaning, other than that relating to value, can be attributed to the language used."
Under Code, 11-3-14, shares of stock in a banking institution, national banking association or industrial loan company are assessed to the several holders of such stock. A comparison of that statute with the one under consideration here reveals such similarity of language that it is clear that what the Legislature sought to do was to measure the tax of a building and loan or federal savings and loan association by the true and actual value of the investment shares and investment accounts. In the case of banks and industrial loan companies the tax is paid by the stockholders, while in building and loan and federal savings and loan associations the tax is to be paid by the association. It is true that investment shares may be purchased at an association's office at par; but may it be said that because thereof, that represents the market value? The record discloses that in the case of Hancock County Federal Savings and Loan Association the most recent and the largest sale of shares of stock sold at ninety cents on the dollar. That shares of stock may be purchased at an association's office at par would *Page 444 
not be the motivating factor for a prudent investor to acquire with his funds the shares of a savings and loan association. Would not he know that the assets of the institution consisted in the main of negotiable notes secured by realty — a situation which is true in the instant case — and would he not be interested in ascertaining what reserves were maintained? In other words, to a prudent investor each loan of the association would represent a unit of risk and whether or not he could anticipate the return of his money invested on a one hundred per cent basis would depend upon the reserves maintained by the association. The reserves, established and maintained, sustain the par value of the shares and accounts of a building and loan association and a federal savings and loan association. Hence, it is clear that the Legislative intent in its enactment of Code, 11-3-14(a), was to provide for an assessment against such associations based upon the real and actual value of investment shares and investment accounts represented by the market value thereof, but that the determination of such value must necessarily include a consideration of the earned reserves and undivided profits of any such association. Since the value of such association could never be actually determined until its business was totally and finally culminated — when it could be determined with exactitude whether each loan represented a profit or a loss — the reserves carried on an association's books could be naught but a book item to absorb losses, if and when such occurred. If the property of an association is to be assessed as the majority of the Court indicates, then the same rule of assessing intangibles generally in Hancock County should be applicable in the assessment of notes held by an association which, according to Kenneth Hill, County Assessor, is on the basis of fifty per cent of the face value of such notes.
I am unable to concur in the fortification of the Court's position which it in the majority opinion derives from the constitutional provisions relating to taxation. The *Page 445 
Court might well have considered whether the statute under consideration was violative of the basic law because it relieved property of the association from the burden of taxation, but even under the Court's decision theassets of the association are not assessed. There is no disagreement on my part that funds properly assessable should bear their share of the tax burden; but it seems that in this case to reach its result the Court does not only overlook the practical setup of building and loan associations and savings and loan associations, but denies the import of language used by the Legislature.
Therefore, I respectfully dissent.