State v. Scottish-American Mortgage Co. of Edinburgh

COLLINS, J. 2

Case certified under G. S. 1894, § 1589, wherein the court below determined that an assessment and levy of taxes upon certain personalty were null and void. On the facts, the court held that the objecting party, a foreign corporation, against which the proceeding had been instituted, had no moneys, credits, or effects, and no claims or demands in the hands of its local agents on May 1, 1897; and therefore had no credits of the character covered by section 1524, subd. 22, subject to taxation in the St. Cloud taxing-district, wherein the assessment was made, and, as a result, that the county authorities had no power to make the levy.

The personal property in question consisted of notes and real-estate mortgages, the latter being recorded in Stearns and adjoining counties prior to May 1, and then, with the notes they secured, forwarded to the corporation at its home office in a for *160 eign land. The agents at St. Cloud, in Stearns county, received applications for loans, inspected and passed upon the securities, and then reported to the local agency at Alexandria, in Douglas county. The latter alone was in communication with the home office, there being no direct communication on any subject between the latter and the St. Cloud agency. Attorneys residing at St. Cloud examined abstracts of title. No money was kept on hand by any of the agents. When needed for loans, drafts were drawn by the agents upon funds belonging to the corporation in a bank at Montreal, province of Quebec. Interest was collected at the St. Cloud agency as it fell due, and upon maturity all notes and mortgages were sent there for collection. All moneys collected were promptly remitted by drafts to the home office. In case foreclosures became necessary, the papers were placed in the hands of St. Cloud attorneys; and, if foreclosures resulted in sales to the objector, such attorneys at once forwarded all sheriff’s certificates and other papers incident to the proceedings to the home office.

And so it stands conceded by counsel who represent the taxing power that, unless the unpaid notes and mortgages, those in process of collection, and those in which foreclosure proceedings had been had (all negotiated through the St. Cloud agency), constitute credits, effects, claims, or demands, subject to taxation at the place where the St. Cloud agents resided, there was no property subject to assessment, and that the court below was right in its conclusion.

We are not wholly without authority in this state upon the questions at issue. In City of St. Paul v. Merritt, 7 Minn. 198 (258), it was held that the statute then in force (P. S. 1858, c. 9, § 1) was sufficiently broad in its terms to include credits due nonresidents, if such credits had a situs in the then territory of Minnesota; but there was no provision of law under which an assessment thereof could be made. This omission, said the court, conclusively indicates that it was not intended that this kind of property, when belonging to nonresidents, should be assessed. Later, in Re Jefferson, 35 Minn. 215 , 28 N. W. 256 , the present law (G. S. 1894, §§ 1508, 1515) was under consideration, it being held that not only was the section now numbered 1508 broad enough in its terms to include credits due nonresidents which had been given a situs in our state, *161 but, in addition, that adequate provision had been made for the assessment thereof, under a subsequent section, now known as 1515, which provides, among other things, that every resident of full age and sound mind shall list ■ separately from his own, and in the name of his principal,

“All moneys and other personal property invested, loaned or otherwise controlled by him as the agent or attorney, or on account of any other person or persons, company or corporation whatsoever.”

Under the section which follows immediately such listing must be in the taxing district in which the agent resides. The conclusion was that the legislature intended to have all credits to whomsoever owing listed and taxed here, whenever they could be regarded as personal property situated within this state. The proposition stated in the opinion, that to justify the imposition of a tax by any state it must have jurisdiction over the person taxed, or over the property taxed, is self-evident, and so (the owner being a nonresident) the inquiry was whether the credits then under consideration had been given a situs in this state by reason of the acts of the creditor who had placed the same in the hands of an agent, resident here, for collection or renewal, with a view to retaining the money and keeping it invested in Minnesota as a permanent business. The property was in this state, not for a temporary purpose, but permanently; and the agent exercised the same control and management over it as if it had been his own, except that the money was loaned in the name of a nonresident principal. No other conclusion than that the owner had given the credits an actual business situs in this state could have been reached under the facts there presented.

From these two cases it appears very clearly that, to warrant the taxation of credits owned by a nonresident, the property must have been given an actual situs within the state, and that we have no statute which, as argued by counsel for the appellant, has segregated the situs of the debt or credit from the residence of its owner, and for the purposes of taxation has placed such situs within this state. From the findings, it appears that the local agents of this foreign corporation never had possession of, or control over, *162 any of its funds, except for the purpose of turning the same over to the borrowers, or for transmitting to the home office. They had no authority whatsoever to reinvest. The money of the corporation was never on deposit in this state, its notes and mortgages were not retained here, but, when the latter were recorded, were promptly forwarded to the corporation. If returned at all by the latter, it was for a specified and temporary .purpose, either for delivery to the makers upon payment, or for delivery to attorneys at law that they might be foreclosed. In case of foreclosure, all papers in connection with such proceedings were promptly forwarded to the home office; and, under the rulings in this court, it would seem that in no event could a mortgage debt be taxed as a credit after foreclosure. See Pioneer S. & L. Co. v. Farnham, 50 Minn. 315 , 52 N. W. 897 ; American B. & L. Assn. v. Waleen, 52 Minn. 23 , 53 N. W. 867 ; Evans v. Rhode Island H. T. Co., 67 Minn. 160 , 69 N. W. 715, 1069 .

And on the facts as to the money due to the corporation, secured by mortgages not foreclosed, it is obvious that the agents at St. Cloud had not invested or loaned the same, nor was any part thereof controlled by such agents. They did not invest it, nor did they loan, nor did they exercise any control over, it. If any part of it, or if the securities, ever came into the hands of these agents, it was for a temporary purpose only; and their possession lacked all of the essentials of that permanency necessary to give to the personalty a business situs, which would take it out of the ordinary rule that the situs of intangible property like a credit is at the domicile of the owner.

The subject has frequently been discussed by the courts of last resort, and that their views are in accord with those expressed in Re Jefferson, supra, as well as what is herein stated, is evident. Goldgart v. People, 106 Ill. 25 ; People v. Davis, 112 Ill. 272 ; Williams v. Board, 78 N. Y. 561 ; Myers v. Seaberger, 15 Oh. St. 232, 235, 12 N. E. 796 ; Boyd v. Selma, 96 Ala. 144 , 11 South. 393 ; Catlin v. Hull, 21 Vt. 152 ; Finch v. County, 19 Neb. 50 , 26 N. W. 589 . See also Herron v. Keeran, 59 Ind. 172 , in which it was held that notes and accounts belonging to a nonresident, held by an attorney at law simply for collection and remittance of the money, cannot be *163 said to have a situs at the residence of the attorney, for the purpose of taxation.

Again, if counsel for the State are right in their contention, we should have a statute which would áuthorize and compel the listing of the credits of all nonresidents for taxation who had local or resident agents within our state,. without regard to the actual situs of such credits, while other nonresident creditors, having no agents, would escape taxation upon like credits. Would not such a statute violate section 1, art. 9, of the constitution, which demands uniformity in taxation? Certainly the inherent inequality of such a tax law would be palpable; for the tax-ability of credits owned by nonresidents would be made to depend upon whether or not they had resident agents, instead of upon the actual situs of such credits. One nonresident, with an agent, would be compelled to pay taxes upon the notes and mortgages he might hold against debtors in this state, while another nonresident, without an agent, would escape taxation on exactly the same class of property.

On the facts as certified, we are of the opinion that the decision of the court below was correct, and that judgment should be entered in said court as therein determined. It is so ordered.

BUCK, J., did not sit.