Court Opinion

ID: 6484123
Source: CourtListenerOpinion
Date Created: 2022-06-26 23:07:42.205449+00
Date Added: 2024-06-11T15:54:15.793534
License: Public Domain

*45DISSENTING OPINION OF
GALBRAITH, J.
I understand that one proposition in particular was settled, by the decision of this Court in Inter-Island Steam Navigation Co. v. Shaw, 10 Haw. 624, namely, that real and personal property combined and used in an enterprise for profit can be properly valued as a whole or unit, for taxation purposes, under Section 820, C. L., and that when so valued the value of the combined property or unit may be much greater than the-sum of the values of the several items forming the unit. In other words that the value of whole (the combined property) may be greater than the sum of the values of all of its parts-
From this proposition it follows as a necessary deduction that by whatever sum the value of the unit or whole enterprise exceeds the sum of the values of its several parts to that extent intangible property i« valued for taxation under this statute- and to that extent Section 820 provides for and creates a new and distinct class of property for taxation purposes, namely, intangible property, a class of property not included in real estate as defined in section 818, or personal property as defined in section 819. It can make no material difference so far as this proposition is concerned whether the increased value results from intangible elements in tangible property or from intangible property altogether.
As was said by the Supreme Court in the Express Companies ease. “The burden of the contention of the Express companies is that they have within the limits of the State certain tangible-property, such as horses, wagons, etc.; that that tangible property is their only property with the State; that it must be valued as other like property, and upon such valuation alone can taxes be assessed and levied against them.
But this contention practically ignores the existence of intangible property, or at least denies its liability for taxation. In the complex civilization of to-day a large portion of the wealth of a community consists in intangible property, and there is nothing in the nature of things or in the limitations of the Federal Constitution which restrains a state from taxing at its real value such intangible property. Take the simplest *46illustration: B; a solvent man, purchases from A certain property, and gives to A his promise to pay, say $100,000 therefor. Such promise may or may not be evidenced by a note or ■other written instrument. The property conveyed to B, may or .may not be of the value of $100,000. If there be nothing in the way of fraud or misrepresentation to invadidate that trans■action, there exists a legal promise on the part of B to pay to A $100,000. That promise is a part of A’s property. It is something of value, something on which he will receive cash, and which he can sell in the markets of the community for cash. It is as certainly property, and property of value, as if it were a building or a steamboat, and is as justly subject to taxation. It matters not in what this intangible property consists — whether privileges, corporate franchises, contracts or obligations. It is enough that it is property, which, though intangible, exists, -which has value, produces income, and passes current in the markets of the world. To ignore this intangible -property, or to hold that it is not subject to taxation at its accepted value, is to eliminate from the reach of the taxing ■power a large portion of the -wealth of the country. Now, whenever separate articles of tangible property are joined together, not simply by a unity of ownership, but in a unity of use, there is not infrequently developed a property, intangible ’though it may be, which in value exceeds the aggregate of the value of the separate pieces of tangible property. Upon what theory of substantial right can it be adjudged that the value ■of this intangible property must be excluded from the tax list, ■and the only property placed thereon be the. separate pieces of -tangible property? ****** To say that there can be no such intangible property, that it is something of no value, is -to insult the common intelligence of every man.” Adams Express Company v. Ohio, 166 U. S. 185, 218, 219 and 220.
This theory of valuation ought to be well established in this jurisdiction since in the Inter-Island case intangible property -was valued at $211,109.52, the difference between the return of 'the taxpayer of the aggregate values of the several items of -property and the valuation of the whole approved by the Court, *47making tbe value of the intangible property almost as great as that of the tangible valued separately.
The decision in this case is a conclusive answer to the contention of the taxpayer that no property can be valued or considered in estimating the value of the combined property as defined in the Section 820 except real and personal property as defined in the preceding sections. It will be remembered that Section 820 providing for valuing combined property and Section' 871, providing for returning the same, were engrafted on the tax law by the revision of 1896. (See Session laws, 1896, Act 51, Secs. 17 and 68) and that prior to that time no similar provisions were found in the tax laws of the islands while the definitions of real and personal property as given in sections 818 and 819. were carried forward from the tax laws of 1892 and 1882, with little change in the language except that the last definition of personal property is extended to include “contracts.”
The phrase “for the purposes of this Act” in each of the sections defining property is found in the earlier tax laws, those that existed prior to 1896, and was brought forward with the definitions from those laws, such use of this phrase cannot properly be held to indicate an intention on the part of the legislature to restrict the use of the words real and personal property in section 820 within the definitions given prior to its ■enactment. Section 820 is the later expression of the legislative will on the question and ought to control. At any rate, this court has held as above indicated, that no such limitation was intended to be made.
Under my view of the question it is immaterial whether or not the investment in the stock and bonds of California Corporations amounting at par value to $363,102.00 is personal property within the definition given in Section 819, although it seems to me that there can be no serious doubt as a matter •of law that the word “chattels” used in the definition is broad enough to include stock and bond within the definition of personal property. Bouvier; 2 Kent. 340; Terhume v. Height, *4835 N. J. L. 219. The situs of these foreign stocks and. bonds for taxation purposes follows that of the owner and is in this Territory and should be taxed here. Bacon v. Tax Commissioners, 126 Mich. 22; McKeen v. Northampton, 49 Pa. St. 525; Ferrington v. Tennessee, 96 U. S. 679; Bristol v. Washington Co., 177 U. S. 133.
Contracts are specifically enumerated in the definition of personal property in Section 819 and are proper subject of taxation at their true cash value the same as other kinds of personal property.
The captial stock of the taxpayer is $1,000,000, its gross income for the year ending December 31, 1901, was $461,-044.38, expenses for the same period were $31,629.50, and net income or profits for that period $429,414.88.
It appears from the evidence that there were six plantation agency contracts held by the taxpayer and not returned for taxation. These it is admitted come within the definition of personal property and should be taxed the same as other personal property but it is found by the majority of the court that the evidence fails to show the value of these contracts and “that justice will be more nearly accomplished by regarding the contracts, for the purposes of this ease, as of no value.”
It may be admitted that the evidence does not offer as satisfactory data as might be desired for measuring the value of these contracts. But who is to blame for this? The facts were in the possession of the taxpayer. It was its duty to give them to the assessor or to the Tax Appeal Court. It did not do so. I submit that it is not in the interest of the “accomplishment” of “justice” to give to this taxpayer a premium for withholding information. In other words to hold that certain of its property, which we know is subject to taxation, exempt from taxation for the reason that tbe taxpayer failed to furnish exact evidence for fixing the value of the property, especially since there is evidence from which a valuation may be placed on this property.
*49It is shown by the evidence that the commissions realized by the taxpayer from these contracts for the year preceding, (1901) amounted to $91,110.00. This fact standing alone refutes the claim that the contracts have no ascertainable value. Property from which an annual income of $91,110.00 is realized has a taxable value that ought not to escape the payment of its pro rata part of the expenses of the government because its owner denies that it has taxable value and fails to furnish full information for measuring it.
It is a well-settled rule of law that income, or-the source of income, or capacity to produce income, is almost universally made the basis upon which taxes are estimated. Cooley Taxation, 16. Adams Express Company v. Ohio, 165 U. S. 194; Adams Express Company v. Kentucky, 166 U. S. 171. Why should these agency contracts not be valued for taxation purposes by the amount of income or profit that the agents receive from them ? It does not lessen their value that only a person of large means or a wealthy corporation could act as agent. Since the agent does not wish to part with the agency or to sell it, particularly so long as it is so profitable.
Applying the above rule to the scant fact relative to these contracts the court possibly would be justified in fixing a valuation on them for taxation purposes equal to the sum which, at interest, at the rate of 10 % per annum would produce an amount equal to that realized from them annually by the taxpayer, or $91,-110.00, however, this -would undoubtedly be a valuable guide in arriving 'at their true taxable value. To say that these contracts have no ascertainable value is to close one’s eyes to the fact of the annual profit derived from them and that this is almost equal to ten per cent, on the par value of the taxpayer’s entire c'apital stock. There is nothing in the record to warrant the inference that these contracts are of peculiar value to this taxpayer and that they would not be of equal value to any other person of ordinary business capacity. The fact that they are given as a favor by the plantation does not detract from their taxable value. The Tax Appeal Court fixed the value *50of tbe taxpayer’s taxable property at $629,717. Tbis amount placed at interest at 10% per annum would only amount to $72,971.70 per year or almost $30,000.00 less than tbe amount Realized annually from these contracts.
Considering tbe fact tbat tbe taxpayer did not produce tbe •evidence tbat would bave made it possible to fix tbe real value •of these contracts and tbat tbe valuation placed on its property .by tbe Tax Appeal Court does not appear to exceed tbe possible taxable value of these contracts alone I am convinced tbat tbe ends of justice would be subserved by tbe affirmance of tbe judgment of the. Tax Appeal Court. Tbis I think ought to be •done.