Golden Valley County v. Estate of Greengard ( 1938 )

This is an appeal from an order sustaining a demurrer to the complaint of Golden Valley county which seeks to recover from the estate of Nathaniel Greengard, deceased, for taxes levied against a stock of merchandise and fixtures of a clothing store operated by the deceased during the years 1918 to 1934, inclusive.

The complaint contains separate causes of action representing the various years for which the plaintiff seeks to recover taxes. Since these causes of action are the same except as to dates and amounts, a consideration of the first cause of action will be sufficient as a basis upon which to determine the sufficiency of the complaint. After alleging the operation of the store by the deceased, the appointment of one of the defendants as administrator-trustee the other as resident-agent and the continued operation of the store by them, the complaint goes on to state that during the year 1918 the defendants or their predecessors in interest reported to the assessor that the value of the stock and fixtures in the store was the sum of $1,654, that the actual valuation of the property that should have been reported was $12,696.58, and, "that the report to the assessor was false and fraudulent and was known by the predecessors in interest of the defendants to have been false and fraudulent at the time the same was made, and that the plaintiff and its officers have just ascertained the facts with reference to such false and fraudulent statements." It is then alleged that the county commissioners authorized the bringing of the action; that immediately upon ascertaining the facts the county auditor of Golden Valley county proceeded to enter upon the assessment roll of property which had escaped taxation, the sum of $371.58 taxes for the year 1918, and $910.37 interest and penalty making a total of $1,281.95; that the county auditor has corrected the books in accordance with the facts and has added such omitted property and assessed it at its true and full value and has figured taxes thereon at 50 per cent of the true value as provided by law during the year 1918. The complaint also alleges that due notice has been given as required by law and that the board of county commissioners has reviewed, equalized and confirmed the taxes so assessed and that the same have been entered upon the tax list of Golden Valley county.

The appellant contends that Nathaniel Greengard by rendering a statement to the assessor that his stock of merchandise and fixtures were of the value of $1,654 when the actual value was $12,696.58, rendered a false statement to the assessor and that as a result thereof the major portion of the stock of goods was not taxed, and that the auditor of Golden Valley county was entitled to treat that portion of the stock represented by the unreported value as property that had escaped taxation and that it was the duty of the county auditor to proceed under the provisions of chapter 198, N.D. Sess. Laws 1925 (Supp. Comp. Laws § 2304a1) as amended by chapter 280, N.D. Sess. Laws 1931, to correct the assessment, tax and assess such property at its full and true value. The appellant also contends that the county auditor has proceeded in accordance with the statute above cited that the property has now been assessed according to law and that the appellant county is entitled to recover against the estate of the deceased the taxes and penalties due.

The respondents contend that the property in question has all been assessed and that even though the value thereof be far below the actual value that such assessment as so made covered the entire stock of goods and that no part thereof can be treated as property which has escaped taxation, and that the auditor is without power to reassess property against which a complete assessment has been levied, and the taxes thereon paid. They distinguish between specific omitted property which is susceptible of identification and value not listed and argue that the stock of goods and merchandise was an indivisible item for taxation purposes and that value not listed does not constitute property that has escaped taxation.

The procedure for the assessment of personal property is wholly statutory. The auditor's authority must be determined from the statutes. Section 1 of chapter 198, N.D. Sess. Laws 1925 (Supp. Comp. Laws, § 2304a1) as amended by chapter 280, N.D. Sess. Laws 1931, so far as it is pertinent to this case provides that: "Whenever the county auditor shall discover that taxable real or personal property has been omitted in whole or in part in the assessment of any year or years or that any building or other structure has been listed and assessed against a lot or tract of land other than the true site or actual location of such building, or that any person has given the assessor a falsestatement of his personal property or that the assessor has not returned the full amount of all property required to be listed in his district, or has omitted property subject to taxation, he shall proceed to correct the assessment books in accordance with the facts in the case and shall correct such error or omission in assessment and shall add such omitted property and assess it at its true and full value." (Italics supplied.) The statute then sets forth the procedure to be followed in assessing the escaped or omitted property and provides the manner in which it shall be entered upon the tax lists.

Respondents' argument loses much of its force when we note that the statute does not limit the authority of the county auditor to the assessment of omitted items of property, but authorizes him to correct an error or omission in assessment when the taxpayer has given the assessor a false statement of his personal property. The amount of property subject to taxation may be measured in items or in value depending upon statutory provisions. When the statute requires the owner to list the value of certain property instead of items, a false value renders the statement false.

It becomes the duty of the county auditor when he discovers that any person has given the assessor a false statement of his personal property to proceed to correct the assessment books in accordance with the facts. In order to determine what constitutes a false statement of a stock of merchandise we must examine the statutes dealing with the assessment of such property. Section 1 of chapter 206, N.D. Sess. Laws 1925 (Supp. Comp. Laws, § 2094) makes it the duty of the taxpayer to list all of his taxable personal property with the assessor. Section 2128, N.D. Comp. Laws 1913, imposes upon the assessor the duty to require the taxpayer to make a correct statement of his property and upon the taxpayer the reciprocal duty to make such statement. Under § 2108, Comp. Laws 1913, an added duty is placed upon the taxpayer who is a merchant, "when he is by this article required to make out and deliver to the assessor a statement of his personal property, he shall state the value of such property pertaining to his business as a merchant." Sections 2108 and 2128 were originally enacted as sections of chapter 126, N.D. Sess. Laws 1897. It is, therefore, the duty of a merchant to give the assessor a statement of his personal property and to state the value of that part of such property that pertains to his business as a merchant. If the value which he gives is false it renders the statement false as to that property for which his statement as to value is required. If the merchant falsely and fraudulently states only a small part of the value of his stock of goods as is alleged in the complaint in this action, he "has given to the assessor a false statement of his personal property" within the meaning of chapter 198, N.D. Sess. Laws 1925. When the county auditor discovers that such a false statement has been made, it is his duty to proceed to correct the assessment in accordance with the provisions of that chapter.

The complaint states facts sufficient to show that the county auditor had authority to and did proceed to assess the property involved in accordance with the provisions of chapter 198, supra. The complaint seeks to recover penalty in excess of that authorized by the above statute which provides, "In the case of personal property, such taxes shall be entered upon the most recent delinquent personal property tax list. . . . Taxes upon escaped property for prior years, whether upon real or personal property, shall be subject to the same penalties and collection thereof shall be forced at the same time and by the same method as other taxes upon the lists upon which they are entered." The prayer for excessive penalty, however, does not destroy the cause of action, but merely goes to the amount of recovery.

The respondents cite Marshall Wells Co. v. Foster County,59 N.D. 599, 231 N.W. 542. That case involves the assessment of real property upon which the value is placed by the assessor, no statement of value being required from the owner. A store building located on lots seven and eight had been erroneously assessed upon lot number five. The board of county commissioners instructed the county auditor to cancel the excessive taxes on lot five, which was a vacant lot. The county auditor undertook to assess the value of the building against lots seven and eight as omitted property under the provisions of chapter 198, Sess. Laws 1925. The court held that the building could not be taxed as omitted property, saying, "It is also clear that the buildings on lots seven and eight were assessed against lot five so that none of the property was actually omitted in the assessment for any of the years involved," and further held that chapter 198, supra, does not give the county auditor the power to revalue property which has been listed and assessed by the assessor. The holding in that case is not inconsistent with the right of the county auditor to proceed to assess a stock of merchandise and fixtures under the provisions of chapter 198, supra, which has largely escaped bearing its proper share of taxes because of false statements as to value rendered by the owner to the assessor.

The respondents also contend that personal property taxes do not constitute a personal obligation of the tax debtor, and are, therefore, not collectible by judgment and execution. They cite Hertzler v. Freeman, 12 N.D. 187, 96 N.W. 294, wherein it was held that a tax upon real estate does not create a personal obligation of the owner, but is merely a charge against the land. Respondents then argue by analogy that personal property taxes may not be enforced by general judgment and execution, but only by distraint as provided by chapter 279, N.D. Sess. Laws 1931. The remedy of distraint, however, is not exclusive. Our statutes also contemplate the procurement of a judgment against the tax debtor for delinquent personal taxes as is indicated in the following sections of the 1913 Comp. Laws.

Section 2172. "Whenever it is deemed expedient by the board of county commissioners of any county to collect delinquent personal taxes by action, they shall have the power to institute such an action in the name of the county for and on behalf of the county.

Section 2179. "Upon payment to the county treasurer of any personal property tax for which judgment has been obtained, the treasurer shall deliver a certificate of the fact of such payment to the clerk of the court, who shall satisfy the judgment upon the margin of the record thereof, by stating the date of payment, and number of the receipt given therefor, and file such certificate."

In State v. O'Connell, 170 Minn. 76, 211 N.W. 945, the court considered contentions similar to those made by the respondents herein. In the syllabus of that case the court said:

"The owner of personal property, omitted from the tax rolls, becomes liable for the tax thereon at the time the property ought to have been placed upon the rolls, and this liability continues until the tax is discharged by payment."

"Where personal property has been omitted from the tax rolls, taxes thereon which accrued against the owner in his lifetime may be enforced against his estate after his death."

Section 2093, Supplement to Compiled Laws, provides that: "Personal property shall be listed and assessed annually with reference to its value on April first." Personal property is of such a nature that it may be readily transferred, transported, consumed or altered. It is usually neither fixed as to location nor permanent as to condition. The statutes impose upon the taxpayer the duty to list and return his personal property as of April first in order that the taxpayer's obligation may be fixed as of that date, although actual assessment may not occur until sometime later. The obligation thus incurred when completed by assessment is more than an inchoate lien against the property that may be perfected and enforced by destraint. It is an obligation which may be enforced against the taxpayer or his estate by legal action. The complaint states a cause of action and the demurrer should be overruled.

BURR, J., joins in this dissent.