Court Opinion

ID: 8194406
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:17:33.462435+00
Date Added: 2024-06-11T16:40:43.027553
License: Public Domain

The following opinion was filed March 12, 1924:
Crownhart, J.
(dissenting). I respectfully dissent because I am impelled to the belief that the decision of the court has been reached by wrong reasoning. It does the' state of Wisconsin and its taxpayers a great and lasting injustice; discriminates against domestic corpoi'ations; favors foreign corporations; discriminates in favor of foreign investors in foreign. corporations doing business in this state; and works against the welfare of foreign investors in domestic corporations. It encourages evasion of our laws and the fraudulent holdings of stock without our jurisdiction, to escape just, fair, and reasonable taxes; it enables foreign investors to seek and receive the protection of our laws without rendering a fair equivalent.
In the first place, I do not think the court has given to our statutes the presumptions of constitutionality to which they are entitled under uniform decisions of the highest court of the state and nation. Mr. Chief Justice Dixon, who. sat in at the making of our constitution, said that it is only when a statute can be seen to be unconstitutional at first blush that this court should so declare. And the same thought has been repeatedly stated in another way by all the courts; that is, a statute will only be held unconstitu*99tional when it is so plainly so that reasonable men may not differ thereon; or, when it is unconstitutional beyond reasonable doubt. We profess but fail to follow the rule, it seems to me. For ten years the provision in question has been the law of this state, accepted as such by able lawyers, and many thousands of dollars have been collected thereunder without protest. Would this have happened, if the law were so plainly unconstitutional as to have been seen at first blush? I think not.
We may premise this case by the admitted facts that the statutes here in question fix a fair, reasonable, and just basis of taxation; that they seek to avoid discrimination; that they seek to prevent duplication of taxes on the same property for the same purpose; and that there is a crying need for the method provided by such statutes. These facts were admitted on the argument and not open to denial. Wherein does the court find any specific provision of our constitution that is offended by the statute? None can be pointed out except the due-process clause. Do these statutes offend against such provision?
It is trite to say that “the property of a corporation is its property and not that of its stockholders,” but it is an expression of a mere fiction of law, not accurate for any purpose, and this fiction should give way to the statutes on the subject. The legal title is. in the corporation, but the corporation is trustee for the shareholders and the shareholders have an equitable interest in the property. They may by vote dissolve the corporation and repossess their property at any time.
Likewise it is true that there is a difference between a corporation’s capital and its capital stock. Its capital is the value of its property; its capital stock represents the investment of the stockholders, but in legal parlance the difference is shadowy and immaterial. It is not correct to say, however, that the former belongs to the corporation and the latter to the shareholders. The legal title to both belongs *100to the corporation; the certificates of stock belong to the shareholders and they represent the equitable interest of the shareholders in the capital and capital stock of the corporation. The capital stock (not certificates of stock), under our statutes, is personal property, and the certificates are not property but merely evidence of property interest in the corporation.
That before it may levy a transfer tax on the foreign shareholder of a foreign corporation the state must have jurisdiction of the person or of the property to be transferred, I agree. That the state has that jurisdiction, I maintain is capable of demonstration: 1. No foreign corporation can enter the state except on such conditions as the state may impose, except where the constitution provides otherwise. 2. Stockholders, in organizing a corporation, make the corporation their agent to do the business authorized by the articles of incorporation, and shareholders by subsequent purchase are bound by the same conditions as the original incorporators. 3. A corporation submitting to the laws of this-state speaks for its shareholders, and they are bound by its action. 4. The foreign shareholder has exactly the same kind of property and the same kind of interest in a foreign corporation doing business in this state as a foreign stockholder has in a domestic corporation doing business in this state. It is admitted that the foreign stockholder of a domestic corporation may be assessed a transfer tax. 5. The state may impose on the foreign corporation, as a condition of doing business in this state, exactly the same conditions it imposes on its domestic corporation, except as the federal constitution may provide otherwise. It has done so. 6. The conditions binding on foreign, shareholders of a domestic corporation may be made just as binding on the foreign shareholder of a foreign corporation doing business under the laws of this state as upon the shareholders of the domestic corporation. That follows as axiomatic from the power of the,state to impose conditions on *101such foreign corporation seeking to do business in this state. .The state has so provided by statute. 7. The transfer tax paid by the plaintiff was imposed upon the corporation as a condition of its doing business in this state, and when it accepted that condition, as it did by express agreement, its stockholders were bound by its agency to act for them in its corporate affairs. The foreign corporation has the same right to speak for its stockholders as the domestic corporation has to speak for its stockholders. The two corporations stand on a par in this respect; likewise the foreign holders of shares of stock in the one corporation are equally bound to comply with the laws of the state applying to their respective corporations.
I maintain with confidence based on a careful search of the authorities that the foregoing propositions are sustained by such authorities, and that there is no precedent to the contrary except the single case of Tyler v. Dane Co. 289 Fed. 843, in the United States district court for the Western district of Wisconsin. This case has been appealed by the state. Every case cited by the court to the contrary is distinguishable on the law and the facts. None was involved under statutes like those of Wisconsin. To my mind the court has made the palpable mistake of reasoning in a circle from a wrong assumption. It contends that our statutes are unconstitutional as applied to plaintiffs because of lack of jurisdiction, and there is lack of jurisdiction because the statute is unconstitutional. Neither premise is true. Jurisdiction is obtained of the property because the corporation, as the agent of plaintiff, brings the property into the state and expressly consents to its jurisdiction as to that property. The law is constitutional because it deals with taxation, the subject matter of which is actually, physically, within the state.
It seems fatuous to cling blindly to the statement that the tax is on transfer of property and not on property. No one denies this; but the property in the state measures the *102amount of the tax, and the collection of the tax is by means of the prohibition of transfer of property until the tax is paid. Our statutes are fair and reasonable and not discriminatory. Foreign corporations and domestic corporations are treated exactly alike. Foreign stockholders with property interests of exactly the same nature and extent within the state are treated exactly like foreign stockholders in domestic corporations.
It is claimed by the plaintiffs and the opinion of the court that plaintiffs were not required to submit to our laws to secure a transfer of the stock — they might snap their fingers under our noses and go into the state of New York, the home state of the corporation, and there compel the transfer. If so, why are they here, 1,500 miles from home, when all they had to do was to step across the state line and begin their action? I think they were well advised by competent counsel. Had they gone into' court by mandamus in New York for such purpose, the corporation could have answered in equity and set up the conditions under which it entered Wisconsin, and then have referred to sub. (6), sec. 72.11, Stats., which reads:
“(6) Reports; duty to pay tax. The tax commission shall require such reports and information, and shall make such orders, rules, and regulations as it may deem necessary to enable the commission to secure the necessary information from corporations, domestic and foreign, and to ascertain the amount of and collect such tax; and no holding company or other corporation subject to the provisions of this section shall deliver or transfer any such stocks, bonds, mortgages, or other securities of a nonresident decedent based upon or representing in whole or in part, directly or indirectly, the value of Wisconsin property, or stocks, bonds, mortgages, or other securities of a Wisconsin corporation or a corporation owning property in this state, without retaining a sufficient portion or amount thereof to pay any tax which may thereafter be assessed on account of such *103transfer, except upon order of the proper court or a certificate of the tax commission.”
I am constrained to believe that the New York courts would have quashed the writ. And I am quite certain that plaintiffs must have been so advised by New York attorn neys; otherwise they would not be here. It would appear that plaintiffs chose the wiser course when they appealed to Wisconsin courts. It is quite true that plaintiffs were not required to come into court in Wisconsin. The corporation, however, had, as a condition of doing business in this state, agreed to withhold transfer of the stock until a sufficient sum had been paid to it to cover the tax.
It seems to me that under no consideration of this case are the plaintiffs entitled to recover. Take the assumption of the court that our state had nothing to do with the transfer of plaintiffs’ property; that they had the right to step across the line into New York and there compel the transfer and thus wholly ignore the Wisconsin law — let me inquire, then, why they did not do so ? Why did they come from New Jersey to Wisconsin and voluntarily go into the Dane county court and there petition the court to assess the tax, and expressly waive notice and consent to the jurisdiction and judgment of the court? And having done so, what right in morals or equity have they to complain? It is not the amount of the tax about which they complain, but of lack of jurisdiction. They invoked the jurisdiction of the court— they submitted to it; they are estopped from appealing to the original equitable jurisdiction of this court to. recover money paid into the county court under a void assessment, as they claim.
The proposition of law here set forth seems to be supported by overwhelming authority when rightly considered. A discussion of the cases has become useless, unfortunately as it may be, in view of the fact that the federal *104courts will undoubtedly follow the construction of this court placed on our own constitution and statutes.
I think the tax should have been sustained and the judgment of the county court affirmed.
A motion for a rehearing was denied, without costs, on June 3, 1924.