Court Opinion

ID: 4005199
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:06:17.476349+00
Date Added: 2024-06-11T07:44:36.067669
License: Public Domain

According to my understanding of the law, and of the facts as presented by this record, neither the conclusion reached by this Court, nor that of the court below, nor the statute itself establishing the method of assessing the property of building and loan associations, conforms in all respects with the requirement of the Constitution of West Virginia applicable to the assessment of property. Section 1, Article 10, of the Constitution provides: "Subject to the exceptions in this section contained, taxation shall be equal and uniform throughout the State, and all property, both real and personal, shall be taxed in proportion to its value to be ascertained as directed by law * * * ". We are concerned here with the language "all property, both real and personal, shall be taxed". This rule of the Constitution is perfectly clear, perfectly simple and easily workable. It simply requires that all property of whatsoever character and by whomsoever owned shall be taxed. So far as the Hancock County Federal Savings and Loan Association is concerned, this would have been an extremely simple proceeding. It would have involved merely a listing of this *Page 436 
association's property, real and personal, tangible and intangible, and fixing the true and actual value of each item. The process would have been somewhat lengthy by reason of the large number of these properties, but there would have been involved no complications and no uncertainty whatever.
But the Legislature by Chapter 118 of the Acts of 1939 did the anomalous thing of providing that in the case of every "building and loan association and federal savings and loan association" the assessment should be based, not on its property, but on its capital — not on its assets but on itsliabilities. The provisions of this Act are perfectly plain: "The capital of every building and loan association and federal savings and loan association, as represented or evidenced by the investment shares and investment accounts in such association, shall be assessed at its true and actual value, according to the rules prescribed by this chapter, to such building and loan association or federal savings and loan association in the county, district and town where such association is located". The manifest intent and direct effect of this Act is to require the assessment, not of "all property, both real and personal" of the association as required by the Constitution, but only of the "capital", and not even of all the capital, but only of the capital "as represented or evidenced by the investment shares and investment accounts in such association". It is true that the Act further provides that "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 intoconsideration all earned reserves and undivided profits of any such association"; but this requirement is not that such reserves and undivided profits, shall be assessed, but simply that they shall be taken into consideration, for what effect may be considered proper. And the provision affects only "earned" reserves, not reserves which may have been paid in, and does not require the assessor to take into consideration other items of the capital structure, such *Page 437 
as outstanding bonds, if any, preferred stock, if any, reserves for other purposes, or any of a large number of possible items frequently present and wholly proper in a statement of the capitalization of such a corporation. Two conclusions therefore are perfectly plain: (1) That the property itself of the association is not proposed to be directly assessed or taxed; and (2) that only a limited part of the liabilities are to be considered in fixing the assessment.
A little history explains this anomaly. Prior to December 8, 1938, this Court held that "Building and loan associations are not to be assessed with a capital stock. The members are to be assessed with their shares." Ohio Valley Building  LoanAssociation v. County Court, 42 W. Va. 818, 26 S.E. 203. On that date, however, this Court modified its position to this: "Both state and federal building and loan associations are incorporated companies within the meaning of Code 11-3-12 and are corporations within the meaning of Code 11-3-13. Therefore, their intangible and other personal property is subject to taxation." Charleston Federal Savings  Loan Association v.James, 120 W. Va. 781, 200 S.E. 845. At the first session of the Legislature thereafter, to-wit, on March 11, 1939, Chapter 118, above quoted from, was enacted. This apparently was designed expressly to neutralize this Court's holding inCharleston Federal Savings  Loan Association v. James, supra, and to restore the law as it was under Ohio Valley Building Loan Association v. County Court, supra, with the single exception that the stock under the new Act was to be assessed, not against the holders, but against the corporation itself. The Legislature, of course, had the power to pass an Act modifying or wholly abolishing the rule established by this Court if no Constitutional provision were involved, but the Legislature could not modify the requirement of the Constitution that "all property, both real and personal, shall be taxed". Therefore, if the Act of 1939 is to be construed as authorizing an assessment against the *Page 438 
appellee association which was less than the true and actual value of all its property, it is to that extent unconstitutional. No unsurmountable difficulty arises from the anomaly of basing the assessment on liabilities rather than on assets, or property, of the association, provided, of course, that the total of all liabilities is included. In every system of accounting, assets and liabilites are always equal. In fact, the liability side of the ledger, or balance sheet, always conforms to the opposite, or assets, side, and must under all circumstances be an exact reflection of the amount of assets. Hence, what might be an absurdity in basing the assessment on liabilities disappears, the liabilities being exactly equivalent in amount to the assets, provided, of course, that all liabilities are included. But the statute, the decision of the court below, and the holding now of this Court, expressly utilize in the' assessment only a part of the liabilities. This is the exact equivalent of taxing only a part of the property of the association, a thing which the Constitution forbids. If, on the other hand, the court had construed this statute to require the assessment to be based on all the liabilities (being the exact equivalent in amount of all the property) of the association, no Constitutional difficulty would be encountered. There would then be, however, other express and self-evident errors in the case by reason of the fact that both the trial and appellate courts have directly withdrawn a part of the liabilities from the data on which the assessment is based. The assessment itself then, rather than the statute, would be unconstitutional.
Another element in the case which is only a detail in the calculation of the assessment, seems, also, to require a modification of the assessment. The books of account and the balance sheet of the association show the ownership of real estate of the value of $417,524.17. The record discloses that this real estate is distributed throughout the counties of Hancock and Brooke. It is elemental that each parcel of this real estate must be assessed within the *Page 439 
taxing unit where it is located; it cannot be taxed in the City of Chester unless located within that City. Hence, regardless of any statute, the real estate outside the City of Chester must be taxed separately and in the geographical territory where it is located. Accordingly, it is imperative that real estate be deducted from the total of the association's property which is here being assessed in Chester, the situs of the association's office and place of business. The statute, however, (and it is followed by both the court below and this Court) provides that "a proportionate share of suchassessed value shall be deducted in ascertaining the market value of such investment shares and investment accounts." It seems to me that, as a mere matter of simple accountancy, the whole value of the real estate must be deducted from the total assets (or its liabilities, as in this case), and not the assessed value. The presence among the assets of the association of real estate to the amount of $417,524.17 automatically and of necessity increased its reserves and surplus by this exact amount. Since this real estate cannot be assessed in Chester it must be taken out absolutely, and when taken out, the reserves and surplus of the association are reduced automatically by exactly the amount of the book value of the real estate. A simple test would be to take from the assets the full value of the real estate and then to take from the surplus the assessed value of the property, which in this case is $278,150.00. The result will be that the assets and liabilities do not balance. No statute, no assessment, and no order of court can change this rule of mathematics or this principle of accountancy. When assets to the amount of $417,524.17 are taken out of the assets side of the account, the surplus or other reserves on the liability side are inevitably thereby reduced by precisely the same amount.
Another consideration makes this course even more imperative. Of the surplus and reserves proposed to be assessed, $417,524.17 represents real estate. If we deduct *Page 440 
from that sum only $278,150.00 then there remains in the surplus the sum of $139,374.17, which continues to represent, and exists only by reason of, real estate owned. It is no more possible to assess in Chester $139,374.17 of the company's real estate scattered over two counties, than to assess in Chester the full value of the real estate. Neither the full value of the real estate nor any part thereof can be assessed in the City of Chester unless the real estate is actually located therein. Therefore, for this reason alone, the full amount of the book value of the real estate must be deducted from the surplus and reserves in calculating the amount of assessment to be made in the City of Chester.
The necessity for this holding will appear at once if we take another illustration. Suppose that the association, instead of carrying its real estate at the value of $417,524.17, had actually carried it at $1.00 as is done by many financial concerns, without fraud or any reason for criticism. Then when this real estate has been assessed at $278,150.00, what amount should be deducted from the surplus and reserves? It is perfectly clear in the supposed case that the real estate has added to the surplus only the sum of $1.00. Yet, under the rule established by the statute and approved by this Court when the real estate is assessed elsewhere at $278,150.00, there should be a reduction of the surplus and reserves, not by $1.00, but by $278,150.00. The correct and only possible rule is that when real estate is removed from the company's assets, regardless of the price at which it should be assessed, it reduces the remaining assets and, therefore, the remaining surplus and reserves, by exactly the amount at which it was carried on the books. The assessment of the property, exclusive of the real estate should be, therefore, reduced by this exact amount. This principle alone requires a modification of the decree of the lower court and justifies, in my opinion, this dissent to the holding here. *Page 441