Court Opinion

ID: 7914534
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:09:23.099229+00
Date Added: 2024-06-11T16:32:44.448656
License: Public Domain

Hoch, J.
(concurring in the result only): While concurring in the result reached by the decision, I cannot follow the reasoning which the opinion advances to support it.
The purpose of the statute under scrutiny is to effectuate the taxation of shares of stock in foreign corporations at the “intangible tax rate.” It is said that the taxation of such shares at the regular ad valorem rate applicable to property generally leads to widespread concealment and evasion, since such shares cannot profitably be owned if so taxed. And that thereby, the state and local governmental units lose a great deal of revenue. The statute seeks to reach the result by classifying such shares as “evidences of debt,” and thus bring them within the permitted classifications provided by the amendment to the constitution adopted in 1924. That amendment *15provides that the legislature may classify “mineral products, money, mortgages, notes and other evidence of debt” and tax them uniformly as to class.
The opinion does not say that shares of stock in a corporation are, in fact and in law, “evidences of debt”- — this court has heretofore stated categorically that “they are not” — but upholds the statute on the theory that the court cannot say that the framers and adopters of the amendment of 1924 did not intend to include such shares within the phrase “evidences of debt.” Circumstances and utterances attendant upon the submission and adoption of the amendment are invoked in support of the argument. While subscribing fully to the general principles of liberal interpretation set forth in the opinion, I cannot bring myself to subscribe to the application which is made of them. It is well settled that where there is uncertainty or ambiguity in the language of enactments recourse may be had to extrinsic evidence, such as legislative committee reports, arguments advanced by legislators in connection with the enactment, etc., in order to determine the meaning of the language under consideration, and that where there are two meanings that may be given to words or phrases the meaning which will validate the enactment should be followed rather than the one which will invalidate it. But it is also a well-established rule of interpretation that where words and phrases have no uncertain meaning and there is no ambiguity to be cleared away it must be held that the legislature meant what it said, and not what the courts have reason to believe it really intended to say. The simple fact is that a share of stock is not an evidence of debt. It is an evidence of ownership. Neither while the corporation is a going concern nor in case of liquidation is a stockholder classed as a creditor. He shares in benefits only after all demands of creditors have been satisfied. By what process then do we conclude that when the legislature used the phrase “evidence of debt” it meant to include something which in fact is not an “evidence of debt”? And by what divination do we read the minds of the voters who adopted the amendment and determine they, too, meant to include within the phrase that which the phrase itself does not include? It is undoubtedly true, as the majority opinion argues, that words and phrases are often loosely used, and that the popular and ordinary meaning must be given weight in interpreting statutes and constitutions. But that rule need be invoked only where two meanings are involved. Suppose we had before us for interpretation a statute imposing cer*16tain obligations upon “stockholders,” in line with their well-established relationship to the corporation. Could the word “stockholders” be properly stretched to include “bondholders” merely because many people use the words “stocks and bonds” with quite hazy ideas as to the legal and practical distinctions between the two? Certainly no sound rule of interpretation, however liberal, would justify that result.
If, then, the statute before us is to be upheld, what is the ground for doing áo? For answer, attention is directed to the case of Stevenson v. Metsker, 130 Kan. 251, 286 Pac. 673. In that case this court had before it the question of whether the legislature could provide for taxation of bank stock at the “intangible rate” instead of at the regular ad valorem rate. In substance the question was the same as the one here presented. The statute was upheld. The reason advanced in the opinion was that the court would look back of the mere surface of the words and seek to reach the real “essence” of the matter; and that such a process revealed that the real purpose of the amendment was to permit the classification of “intangibles;” that bank stocks are “intangibles.” and that therefore the statute was valid. The opinion flatly stated that “it is not material that a share of bank stock, regarded simply as a share of bank stock, is not ‘mineral, money, mortgage, note or other evidence of debt.’ ” Justice Harvey, in a very able dissenting opinion, attacked the theory that the amendment of 1924 was properly to be regarded as an “intangible tax amendment,” and called attention to the fact 'that the amendment itself not only did not contain the word “intangible” but that at least two of the classes of property specified in the amendment— namely, mineral products and money — are not “intangibles.” They are “tangibles.” I may say frankly that the argument made in the dissenting opinion strongly appeals to me. But the court, in a fully-considered opinion, held otherwise, and the power to give bank stock the intangible rate is now settled. On what theory can we say that the decision as to bank stock does not apply with equal force to corporation shares? Whatever differentiation might be made in other cases that may arise, I discern no grounds for saying that shares of stock in an ordinary corporation are not as “intangible” as shares of stock in a bank. In fact, it may well be argued that in some cases at least they are more “intangible,” if such a comparative may be used. For instance, in the case of stock in an investment corporation, where the underlying investments are entirely securities of one *17sort or another, we would have a case of “intangibles” resting upon “intangibles.”
It is contended that the court failed to follow Stevenson v. Metsker when it came to deal with building and loan shares in the case of Ryan v. State Tax Commission, 132 Kan. 1, 294 Pac. 938. Whatever may be said for that contention, it must be noted that while the court did say in that case that tax classification of certain classes of building and loan shares “was not permissible under the 1924 amendment,” the comment applied only to such shares “other than permanent shares.” It would appear, at least by implication, that the court thought “permanent shares” might be so classified. It must also be noted that the case dealt with the effect of certain statutes on the taxation of “rural credit shares” and “withdrawal shares” of building and loan associations. It simply held that the effect of these statutes was to leave the former class exempt from taxation and the latter class not exempt. Accordingly, I do not see that the Ryan case has much bearing on the question here.
Consider, also, the case of shares of stock in domestic' — -that is to say, Kansas — corporations. Our statutes have long “classified” them in a way that amounts, in effect, in many cases, to exempting them entirely from taxation. The individual holder of such shares need not return them for taxation provided the corporation itself lists its outstanding stock, and the corporation is then permitted to offset against its capital stock the property investments subject to taxation. (G. S. 1935, 79-310.) This is permitted, although it is well settled that shares of stock in a corporation are personal property separate and distinct from the property of the corporation. They belong to different owners — the shares to the individual holders and the property to the artificial person, the corporation. (7 R. C. L. 196.) The statute is justified on the ground of preventing double taxation, and no question is here raised as to its propriety. But on the bare question of the power of the legislature, under the constitution, to exempt shares of corporation stock, I see no convincing differentiation between shares in a domestic and a foreign corporation.
But it may be said that the issue does not involve the right to exempt but the right to classify and apply a lower rate. Two lines of decisions are to be noted, both dating back to early cases. The first one established the principle that under the constitution’s requirement of “a uniform and equal rate of assessment and taxation” the legislature is without power to classify property for taxation *18purposes. These restrictive decisions led eventually to the adoption of the amendment of 1924, which seeks to escape the rigidity which the constitution, as thus construed, had imposed, and to achieve greater flexibility in the tax structure. The second- line of cases established the doctrine that while the constitution specified certain classes of property for permanent exemption, the legislature might add new classes- of exempted property. There have always been those who have believed that the first line of cases imposed needless rigidity — that the constitution might well have been interpreted to permit broad classification of property for taxation purposes, provided, of course, such classification was based upon the public interest and the same rate applied to all property in the class. However that may be, the other view became the settled law, and the amendment of 1924 was an effort to ease the situation created by it.
Acting under the principle established by the second line of cases, various additional .classes of property have been given tax exemption. With no disrespect for the able justices who helped establish these two early lines of decisions, I must confess that the reasoning at times advanced to harmonize them seems to me to command greater respect for its age than for its logic. It is a rather elusive logic which holds that no matter what consideration of public interest may exist for doing so the legislature is without power to “classify” property into broad general classes and apply a lower rate to one than to the other, but if it will only carry the “classifications” a little further and classify into a status of tax exemption the enactment may be upheld. I am not unmindful of the fact that the constitution seems to imply that the exemption of personal property “to each family” may be increased beyond the two hundred dollars named in the constitution. But the statutes which have added to the exemptions have not been of that sort. They have simply added new classes of exempted property. These two lines .of cases, however difficult the task of teaming them, constitute the broad background of the issue presented in the case before us.
If the interpretation of the 19.24 amendment made in Stevenson v. Metsker, supra, is to be disregarded it would be better, in my opinion, for the court frankly and plainly to say so. But unless the reasoning which supported that opinion is to be repudiated, the considerations of logic, consistency and stability in the law seem to me to require validation of the statute before us. The evident purpose of the’ statute is to apply the “intangible tax” rate to the *19shares of stock of foreign corporations. The legislative method employed calls for no judicial questioning, provided the method itself is not banned by the constitution. The legislature employed the method it believed best for accomplishing the desired result.