Ford Motor Co. v. Linnane

It is apparent that the trial court took the view that only property in the state and subject to its jurisdiction at noon on the first Monday of March is taxable for that fiscal year, and did so upon the authority of the case of Hayes v. Smith,58 Mont. 306, 192 P. 615. That case involved the constitutionality of an Act providing for the assessment and taxation of livestock brought into this state for the purpose of grazing. The holding of the court was that the Act was unconstitutional because it violated the rule of uniformity declared by our state Constitution. Accordingly, it is apparent beyond possibility of dispute that the language of the court declaring that "in order for personal property, other than the net proceeds of mines, to acquire a situs for the purpose of taxation it must be within the state and subject to its jurisdiction at 12 o'clock noon on the first Monday of March," was obiter dictum and is no authority. (Mettler v. Ames Realty Co., 61 Mont. 152,201 P. 702.)

The trial court's decision amounts to an exemption for the year 1935. It is obvious that if its judgment is affirmed, the property in question will not be taxed for the calendar or fiscal year 1935. It may fairly be said that the property is thus temporarily exempted from taxation. The word "exempt" is variously defined; it may mean released from, or not subject to, an obligation, liability, etc. (New Century Dictionary.)

"``Exemption' from taxation granted by a legislature is not a franchise nor an estate or interest inherent in or running with the exempted property, but is a mere privilege personal to the grantee, unless a contrary intention appears. (Schock v.Sweet, 45 Okla. 51, 145 P. 388, 392.)" (3 Words and Phrases, 3d series, 427.) An exemption need not be permanent. (3 Bouvier's Law Dictionary, Rawle's 3d Rev., 3234; citing Welch v. Cook,97 U.S. 541, 24 L. Ed. 1112; 26 R.C.L. 313, 314.) "Exemption from taxation has two meanings, one broad and the other narrow. In the broad sense, whenever a tax is laid on property which does not apply to all property within the jurisdiction of the taxing authorities, the property not taxed may be said to be exempted." (26 R.C.L. 296. See, also, Cruse v. Fischl, 55 Mont. 258,263, 267, 269, 175 P. 878; Buffalo Rapids Irr. Dist. v.Colleran, 85 Mont. 466, 467, 471, 279 P. 369.)

It may be urged that the assessor must, as a practical matter, have some fixed date as of which he must cease to assess property in any given year, or that it would be unreasonable to compel a man to pay taxes for a year upon property which he brings into the state on the last day of the year. If there is any merit to such an argument — which we doubt very seriously — our statutes provide a very simple answer. The duty of the assessor (except in the case provided by section 2035, Rev. Codes 1921) is to do his assessing between the first Monday in March and the second Monday of July. (Sec. 2002, Id., as amended by Chap. 30, Laws of 1935.) The first Monday of March is merely an arbitrary date selected by the legislature as the date to which the assessor must refer in fixing the value of all property, for the sake of uniformity, in selecting the name of the person to whom the county shall look for payment of the taxes and the point of time when tax liens shall attach. (Hammond Lumber Co. v. Smart, 129 La. 945, 57 So. 277, 38 L.R.A. (n.s.) 856, and note.) Assuming for the sake of argument that some date ought to be fixed in each year after which property being brought into the state shall not be subject to assessment, the logical date is the second Monday in July, the date when the assessor is directed to conclude his work. We do not mean to commit ourselves to the proposition that property brought into the state after the second Monday in July is not subject to taxation for that year, but in the instant case we are dealing with property brought into the state after the first Monday in March and before the second Monday in July. "It was never intended that the county within which the particular personal property may chance to be casually or in a transitory sense on the first Monday of March shall be the county entitled to assess and collect the taxes upon it." (Flowerree Cattle Co. v. Lewis and Clark County, 33 Mont. 32, 81 P. 398, 8 Ann. Cas. 674.) The statute involved (sec. 2002, Revised Codes 1921, as amended by Chapter 158, Laws of 1933, and Chapter 30, Laws of 1935) is common to that in most states in that it fixes a certain day of the year as the date upon which the valuation of property shall be determined for tax purposes. Likewise the statutes of other states similar to the statute in Montana have been construed to exclude from assessment property which either comes into existence or which is brought into the state after the date set in the statute. It is argued by appellants that such statutes are unconstitutional in that they exempt certain property from taxation in violation of the constitutional provision requiring that all property except that in the class specified as exempt in the Constitution shall be taxed. Such statutes, however, are not based upon constitutional right, but are merely a practical regulation of the taxing powers given by the Constitution. As a matter of fact, were it not for such statutes requiring the ownership of personal property to be determined on a particular day of the year, different valuations would be found for one person than for another on the same type of property.

The fact is that the contention of appellants that property of the same class should be assessed on different dates, depending upon when it comes into the state, would constitute a direct violation of section 11, Article XII of the Constitution of Montana, requiring uniformity of taxation upon the same class of subjects. A statute was enacted in the state of Mississippi along the lines recommended by appellants in their brief for the decision of this court, and such statute was held to violate the requirement of uniformity in the Constitution. In that statute it was provided that stocks of goods brought into the state or offered for sale after February 1, which was the assessment date for other classes of property, should be assessed on a pro rata basis for the rest of the year. The court held such statute to be in violation of the uniformity provision of the Constitution in that it required certain stocks of goods to be assessed at their value on a different date of the year than other stocks of goods. (See Reed Bros. v. Board of Supervisors, 126 Miss. 162,88 So. 504.) An exact case in point has been decided in the state of Idaho. In that case it was held that automobiles coming into the state subsequent to the taxation date could not be assessed in that year. (Preston A. Blair Co. v. Jensen, 49 Idaho, 118,286 P. 366.)

The question has been decided by this court. In the case ofHayes v. Smith, 58 Mont. 306, 192 P. 615, the statute in the same form as it existed after the 1935 amendment was considered and interpreted. In that case the question was whether or not a special statute providing for the assessment, at a different date, of livestock brought into the state for grazing purposes, was constitutional, and it was attacked upon the ground that it was in violation of the uniformity provision of the Constitution. It is stated by counsel for appellants that the interpretation in that case placed upon section 2002 constitutes obiter dictum because not necessary for the determination of the case. To argue that the rule set forth in the Hayes Case is obiter dictum is to argue the entire decision away, as an interpretation of section 2002 is a necessary prerequisite to a determination as to whether or not what was then section 2531 was constitutional.

We can hardly believe that the proposition of the right of the county assessor to assess the automobiles brought in after the first Monday of March is seriously urged. Certainly some date had to be set by the legislature to prevent a lack of uniformity by reason of the same valuations being fixed for the same class of property but for different individuals at different times during the year. If the contention of the appellants should be adopted, it would be necessary for the assessors to haunt the harvest fields and to assess and tax property coming into existence in the nature of crops or of new-born calves or new-born sheep during the balance of the year. It is because of the requirement of section 2002 that the property be in existence and within the state of Montana by the first Monday of March in order to be assessable. Plaintiffs sought an injunction restraining defendants county treasurer and county assessor of Cascade county from collecting a personal property tax upon a trainload of Ford automobiles. Defendants filed separate answers admitting all of the allegations of the complaint, and affirmatively alleging additional facts tending to amplify in certain particulars the allegations. Plaintiffs filed no reply. The trial court granted plaintiffs' motion for judgment on the pleadings and rendered judgment awarding plaintiffs a permanent injunction restraining the defendants from enforcing the assessment and "collecting the tax, and adjudging the assessment and levy to be null and void." The appeal is from the judgment.

The plaintiff Ford Motor Company shipped from Chicago a trainload of automobiles to be delivered to the plaintiff Kincaid Motor Company at Great Falls, Montana, upon the payment of a draft attached to the bill of lading covering the shipment. The constituent parts of these machines had previously been shipped by the motor company to its Chicago assembling plant, where they were assembled into complete automobile units. The train left Minneapolis, Minnesota, ever the line of the Great Northern Railway Company on the evening of Monday, March 4, 1935, entered the state of Montana during the forenoon of March 7, 1935, and arrived at Great Falls on Saturday morning, March 9, 1935. Prior to the delivery of the automobiles to plaintiff Kincaid Motor Company, a Montana corporation with its principal office and place of business at Great Falls, the county assessor proceeded to assess them for purposes of taxation. After making the assessment, he reported it to the county treasurer, who computed the tax on the automobiles and threatened to collect it by a sale of the cars. This action followed. The defendants assign error upon the granting of plaintiffs' motion for judgment on the pleadings and the rendering of judgment in favor of plaintiffs. The primary question involved is whether this personal property, brought into the state three days after the first Monday in March, is taxable for the year 1935.

In the case of Hayes v. Smith, 58 Mont. 306, 192 P. 615,[1] 616, this court said: "Whatever may be said of its vast character and sweeping extent, the power of taxation, of necessity, must be limited to subjects within the jurisdiction of the state, or, as otherwise characterized, to subjects which have acquired a situs within the state for the purpose of taxation. In most jurisdictions the annual assessment of property subject to taxation is made as of some definite date, and the situs of the property determined as of that date. In pursuance of that general policy, our legislature, by the repeated references in the revenue measure, evinced very clearly an intention that in order for personal property, other than the net proceeds of mines, to acquire a situs for the purpose of taxation it must be within the state and subject to its jurisdiction at 12 o'clock noon on the first Monday of March. The references will be found in sections 2510, 2511, 2512, 2552, 2556, 2578, 2579, and 2601, Revised Codes, and possibly elsewhere but the foregoing are sufficient for present purposes."

Counsel for defendants assert that what the court said above[2] with reference to the necessity of personal property having a situs within the state at noon on the first Monday of March in order for it to be subject to taxation for such year wasobiter dictum and unnecessary to the solution of the question before the court and that the statements there made were within the rule announced by this court in the case of Mettler v.Ames Realty Co., 61 Mont. 152, 201 P. 702, stating the effect of unnecessary expressions appearing in opinions.

The facts in the case of Hayes v. Smith, supra, were that the plaintiff, a resident of Oregon and the owner of certain sheep, transported them to the state of Montana in the month of June, grazed them here for three months, and then shipped them out of the state. On July 8 of the same year the assessor proceeded to assess the property, and on the basis of that assessment the county treasurer extended the tax. In that case it was sought to sustain the assessment and imposition of the tax under an Act providing in effect that all livestock brought into the state for the purpose of being grazed for any length of time whatever should be taxed for the year in which they were brought into the state. This court held that the Act was unconstitutional, in that it violated the uniformity clause of our state Constitution (Art. XII, sec. 11), for the reason that other livestock brought into the state or already within the state was taxable only if it was within the state on the first Monday of March, or for purposes of taxation had a situs within the state on that day. A careful perusal of the opinion reveals that its very foundation was the fact that other livestock were assessed only as of the date of the first Monday in March. The argument, therefore, that the quotation from Hayes v. Smith, is obiter dictum cannot under any reasonable construction be sustained.

Counsel for defendants argue that under certain statutory provisions, which we shall presently notice, this property was subject to taxation. Before passing, however, to the consideration of the Code sections upon which counsel rely, we shall notice briefly some of the sections mentioned in the case of Hayes v. Smith as the foundation for the statement therein contained.

Section 2002, Revised Codes 1921, makes it the duty of the assessor, between the first Monday of March and the second Monday of July of each year, to ascertain the names of all taxable inhabitants; to secure a list of all property in his county subject to taxation, except such as is assessed by the State Board of Equalization; and to "assess such property to the persons by whom it was owned or claimed, or in whose possession or control it was at 12 o'clock M., of the first Monday of March next preceding." Section 2003 directs him to require from each person a statement, under oath, setting forth specifically all the real and personal property owned by such person, or in his possession, or under his control at 12 o'clock M. on the first Monday of March. Section 2004 directs the county commissioners to furnish the assessor with blank forms setting out the statement provided for in the preceding section — a provision requiring that on these forms the assessor shall obtain a list of all the property owned, claimed, possessed, or controlled by a taxpayer at 12 o'clock M. on the first Monday of March preceding. Section 2057 commands the state land agent to transmit to the assessor of each county a list of all lands for which certificate of purchase, or deeds, or patents have issued during the year preceding the first Monday of March of each year. Section 2131 provides that the owners of railroads shall make a statement of their property as of the first Monday of March of each year. Section 2138 contains a similar provision with reference to telegraph, telephone, power line and other like companies.

Counsel for the defendants assert that the assessment is valid[3] under the provisions of section 2035, when properly applied; it provides: "When any personal property liable to taxation is brought into a county at any time after the second Monday of July, and such property has not been assessed for that year, it must be listed and assessed the same as if it had been in the county at the time of the regular assessment, and the tax must be collected by the assessor, as provided in this title, at any time." This section does not modify the clear legislative intention as expressed in the sections cited supra. It was first enacted into the Code in 1895. Sections 2002, 2004, and 2057 are all found in the Codes of 1895 (sections 3700, 3702, 3733). Although most of these sections had been previously enacted, all were a part and parcel of the Codes of 1895; they must therefore be construed as one enactment. The purpose of section 2035 was to provide for the assessment of property which had not theretofore been assessed, but which should have been assessed as of the first Monday of March of the current year. Its purpose was the same as that of section 2034, which provides for the assessment of property which had escaped taxation for previous years. If the contention of defendants is sustained, then it will become the duty of county assessors to assess all personal property which comes into the state during the year without respect to the time of its entry into the state, the increase of domestic animals occurring, and the products of the farm and forest during the various seasons of the year. Under such a construction, harvested wheat and stacked hay would become the subject of taxation immediately upon their severance from the soil.

It is argued that the effect of the judgment of the trial court is to exempt the trainload of automobiles from taxation for the year 1935, contrary to the command of the Constitution that all property shall be subject to taxation, except such as is [4] specifically exempted. (Const., Art. XII, sec. 16.) This court has long been committed to the theory that all taxes are levied upon persons and not upon property; that it is the person who is taxed, and that, while strictly speaking the property which the person owns is used to determine the amount of the tax he shall pay, it is the person who after all pays the tax. The person is liable. In addition to property being a means of determining what the person shall pay, it is also security for the payment. (State v. Camp Sing, 18 Mont. 128, 44 P. 516, 56 Am. St. Rep. 551, 32 L.R.A. 635; Hilger v. Moore, 56 Mont. 146,182 P. 477; Hale v. County Treasurer, 82 Mont. 98,265 P. 6.) Under this doctrine as applied to our taxing statutes, a person or corporation is required to pay a property tax annually. The amount of that tax is determined upon the valuation of the property owned by the taxpayer as of the date of the first Monday of March at noon. Under this view no exemption here results.

It appears from the answer that the automobiles in question had not been taxed in any other state for the year 1935, and it is argued that they were escaping taxation for that year. Assuming, however, the fact as alleged to be true, it is not controlling, since it is held that one may be assessed for the same property in two different states in the same year, as is illustrated by the case of Coe v. Errol, 116 U.S. 517,6 Sup. Ct. 475, 477, 29 L. Ed. 715. Therein the court said: "If the owner of personal property within a state resides in another state, which taxes him for that property as part of his general estate attached to his person, this action of the latter state does not in the least affect the right of the state in which the property is situated to tax it also. * * * The fact, therefore, that the owners of the logs in question were taxed for their value in Maine as a part of their general stock in trade, if such fact were proved, could have no influence in the decision of the case, and may be laid out of view." Admittedly, the power to tax by one state may depend somewhat upon the power of another to do so. (Southern P. Co. v. Kentucky, 222 U.S. 63, 32 Sup. Ct. 13, 56 L. Ed. 96; Farmers' Loan Trust Co. v. Stateof Minnesota, 280 U.S. 204, 50 Sup. Ct. 98, 74 L. Ed. 371, 65 A.L.R. 1000.) A state may not tax personal property which has a permanent situs in another state, even though the owner of the property resides within the borders of the first-mentioned state. (Farmers' Loan Trust Co. v. State of Minnesota, supra.)

Although on the first Monday of March, 1935, the trainload of[5, 6] automobiles was being transported from the city of Chicago to the state of Montana, it had not yet reached the borders of this state. Property being transported in interstate commerce is beyond the reach of state taxation, even though its owner resides within the state seeking to make a levy. The question, then, of the power of the state to tax is determined, not by the residence of the owner, but by the nature and effect of the particular state action with respect to a subject then under the sway of a paramount authority. (Bacon v. Illinois,227 U.S. 504, 33 Sup. Ct. 299, 57 L. Ed. 615.)

The trial court did not err in granting the motion for judgment on the pleadings and entering judgment in accordance with the previous ruling.

Judgment affirmed.

ASSOCIATE JUSTICES MATTHEWS, STEWART and MORRIS concur.