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Brophy v. Powell

Supreme Court of Arizona

February 2, 1942

FRANK CULLEN BROPHY, as Trustee; FRANK C. BROPHY; J. E. BROPHY, JOHN B. CROWELL; M. J. CUNNINGHAM; THE BANK OF DOUGLAS, as Administrator of the Estate of Adeline S. Greene, Deceased; GRACE M. MEGUIRE, as Administratrix of the Estate of S. F. Meguire, Deceased; PHOENIX TITLE & TRUST COMPANY, a Corporation, as Trustee; THE BANK OF DOUGLAS, as Executor of the Estate of C. Viola Slaughter, Deceased; C. S. THOMPSON; H. W. WILLIAMS; J. S. WERTZ and THE BANK OF DOUGLAS, a Corporation, Appellants,
v.
JAMES L. POWELL, as County Assessor of COCHISE COUNTY, ARIZONA, Appellee

Page 648

APPEAL from a judgment of the Superior Court of the County of Cochise. John Wilson Ross, Judge. Judgment affirmed.

Messrs. Gilmore & Herring, for Appellants.

Mr. John Pintek, County Attorney, and Mr. John F. Ross, Deputy County Attorney, for Appellee.

OPINION

Page 649

[58 Ariz. 547] LOCKWOOD, C.J.

Frank Cullen Brophy, as trustee, and various other parties, called plaintiffs,

Page 650

brought suit against James L. Powell, as county assessor of Cochise County, seeking to enjoin him from assessing the shares of stock in the Bank of Douglas, an Arizona corporation, which belonged to the various plaintiffs in the action. A temporary restraining order was issued without notice, and the matter coming before the court on a motion to strike and dismiss, after consideration the motion to dismiss was granted and the temporary restraining order dissolved, whereupon this appeal was taken by plaintiffs.

The question involved is the constitutionality of sections 73-204, 73-205, 73-206, and 73-207, Arizona Code 1939, being our revenue statutes providing for the assessment of banking and other corporations or associations engaged in the business of using money to make money. These sections read as follows:

"73-204. Assessment of property and shares of stock in corporations -- Banking, building and loan associations or corporations, and finance corporations. -- The property of corporations shall be assessed and taxed and no assessment shall be made of the shares of stock of corporations, nor shall any holder thereof be taxed for such shares. The foregoing provision shall not apply to a banking corporation, building and loan associations or corporations, and a corporation or association engaged in the business of using money wherewith to make money for the owners of its shares, the shares of stock of which shall be assessed and taxed as other property, in the name of the shareholders of the several shares thereof, to be entered and taxed in the name of, and be payable by, such corporation or association."

[58 Ariz. 548] "73-205. Statement to assessor by banking corporation and shareholders -- Tax payable by corporation. -- Upon the demand of the assessor, the officers in charge of any such banking corporation or such corporation or association engaged in the business of using money wherewith to make money, shall make out and deliver to said assessor a sworn statement showing the number of shares, the name and residence of each shareholder, and the number of shares owned by him; the surplus, reserve fund, and undivided profits; and the par and market value of the shares. The full cash value of such shares shall be ascertained according to the best information which the assessor may be able to obtain, whether from any return made to any officer of the state or the United States, from actual sales of the stock, or from other trustworthy sources. Every such shareholder shall, where such corporation or association is located, render at their full cash value to the assessor all shares owned by him therein, and if the shareholder fail to do so, the assessor shall list and assess such unrendered shares as other unrendered property. The taxes due thereon shall be paid by such corporation or association, and shall be a lien against and assessed to such shares of stock, and no such corporation or association shall pay any dividends to any shareholder who is in default in the payment of taxes due on his shares, nor shall it permit the transfer on its books of any shares the owner of which is in default in the payment of his taxes on the same."

"73-206. Situs of stock -- Where tax payable. -- Every such corporation or association, for the purpose of said assessment, shall be considered as located in every county, city or town wherein it has an office for the purpose of carrying on its business, and the shares shall be subject to taxation in any county, city or town wherein it has such office. The officer of such corporation or association shall state in his statement if his association or corporation is subject to taxation in more than one (1) county, city or town, and the proportion of its assets situated in each thereof. The shares of such corporation or association shall be taxed in each county, city or town for [58 Ariz. 549] only such portion of their value as the assets situated in that county, city or town bear to the assets of the entire corporation or association. When a bank maintains branches or conducts business in more than one (1) county, city or town, the assessed value of the capital stock shall be apportioned among the several counties, cities and towns in which the main office or such branches are maintained or business conducted, and the amount apportioned to each county, city or town shall not be less than the actual cash value of the real and personal property of such bank situated in such county, city or town."

"73-207. Failure of officer to make statement -- Mandamus -- Penalty. -- If the officer in charge of any such corporation or association shall fail, on the demand of the assessor, to make and file the sworn statement as hereinbefore provided, the assessor shall at once, in the name of the state, at his relation, institute mandamus proceedings to compel the filing of such statement,

Page 651

and in addition to the taxes due, the said officer in charge shall forfeit an amount equal to double the amount of said taxes as assessed, to be recovered by the county in which the statement should have been filed, in a civil action in its name, to be paid into the school fund of said county."

It is urged by plaintiffs that these sections are unconstitutional for several reasons. The order to dismiss was obviously based upon a conclusion of the trial court that none of the objections to the constitutionality of the statutes above set forth were valid, for if any one of them was, the court would have denied the motion. We, therefore, consider each objection raised by plaintiffs. In doing so we must adhere to the well-established principle that only those who belong to the class for whose sake the constitutional protection is given may be heard to urge the unconstitutionality of a law, and that it must be shown the unconstitutional feature injures them. Hatch v. Reardon, 204 U.S. 152, 27 S.Ct. 188, 51 L.Ed. 415, 9 Ann. Cas. 736; Premier-Pabst Co. v. [58 Ariz. 550] Grosscup, 298 U.S. 226, 80 L.Ed. 1155; Henneford v. Silas Mason Co., 300 U.S. 577, 57 S.Ct. 524, 81 L.Ed. 814.

These objections were based on seven grounds. The first is that the statutes in question exempt the real and personal property of banks from taxation, in violation of section 2, article 9, of the Constitution of Arizona. This section, so far as material, reads as follows:

"... All property in the state not exempt under the laws of the United States or under this constitution, or exempt by law under the provisions of this section shall be subject to taxation to be ascertained as provided by law...."

And it is admitted that the real and personal property of banks is not exempt from taxation under the constitutional provision.

It is contended, however, by defendant that the form of taxation set forth in the statutes is not an exemption contrary to the constitutional provision, but merely a substitution of one method of ascertaining the ad valorem tax on the property of banks for another. It is not disputed that property may be classified by the legislature for the purpose of taxation if the ground of the classification is reasonable and its results do not violate constitutional provisions. The nature and functions of banking and money-loaning organizations are so different from those of the ordinary individual, partnership or business corporation, that we think they may well be put in a separate class for taxation, provided the effect of such classification does not violate the Constitution. In determining the purpose and effect of the classification thus made by the legislature, we think it necessary to consider at some length the history of the statutes in question that we may ascertain [58 Ariz. 551] whether they are, in reality, an attempt to exempt real and personal property of banks from taxation, or merely to assess and tax it in a manner different from that used for other similar property. This involves a determination of the meaning of the phrase "double taxation" under our law. The technical legal interpretation adopted by most of the courts when considering constitutional prohibitions against double taxation means taxing twice for the same purpose in the same period the same property in the same taxing area. Cooley on Taxation, 4th Ed., par. 223. And it is generally held by the courts that the taxing of two different interests in the same property is not obnoxious to constitutional or statutory provisions against double taxation, even though they may represent a duplication of the same fundamental values. Thus it is very generally held that both the physical property of a corporation and the shares of stock of the corporation in the hands of the stockholders may be taxed without violating a provision against double taxation. Our legislature, however, very early adopted the popular and common sense view of the meaning of "double taxation," which is to the effect that it applies to any case where the same intrinsic values are taxed twice, even though the legal and ultimate equitable titles thereto might be in separate and independent hands. Section 2633, Revised Code of 1887, contains a specific declaration to that effect, so far as corporations are concerned:

"Shares of stock in a corporation possess no intrinsic value over and above the actual value of the property of the corporation for which they stand and represent and the assessment and taxation of such shares and also of the corporate property would be double taxation. Therefore all property belonging to corporations shall be assessed and taxed, but no assessment [58 Ariz. ...


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