Markham v. . Carver

*620 Clarkson, J. The Legislature of North Carolina (Public Laws 1919, ch. 84) passed what is known as the Revaluation Act, “An act to provide for the listing and valuing of all property, personal and mixed, at its real money value.” Part of section 19 is as follows: “All personal property, unless herein otherwise provided, shall be listed and assessed as of the first day of January of each year. ' Between the first day of January and the fifteenth day of May every person who is liable for the listing of any personal property shall furnish to the county supervisor, or his assistant, a full and correct description of all personal property of which he was the owner on the first day of January of the current year, which the taxpayer is required by law to list, fixing what he deems to be a true and actual value of each item of personal property, for the guidance of the county supervisor, or his assistant, who shall finally settle and determine the actual value of each item of such property by the rule prescribed in section four of this act.” The findings of fact and record show that the defendants, Liggett & Myers Tobacco Company, and the American Tobacco Company, in accordance with the above section, furnished the county supervisor and his assistants of Durham County statements of valuation of their respective leaf tobacco. The statute required these defendant corporations to make oath that the statement contains a true, full and correct list of all personal property owned on 1 January, 1920; that no property had been converted for evasion; that the property had been fully and fairly described and its true condition represented; that it had not sought to mislead the officials as to the entire quantity, quality-or value of the property; that, to the best of its knowledge and judgment, the corporation had valued its said property at its true and actual value — that is, the price that could be obtained at private or voluntary sale for cash. This return was made to officials appointed, not by local authorities, but, under the Revaluation Act, by the State Tax Commission, who were the Corporation Commission, a court of - record — State officials, elected by the people. After the returns of personal property are sworn to, as above indicated, and filed with the county supervisor or his assistants, the supervisor then placed these sworn statements before the county board of appraisers and review. This was a nonpartisan and nonpolitical board. Laws 1919, ch. 84, part of sec. 8, is as follows: “The two members of the county board of appraisers and review, other than the county supervisor, who is to be chairman of such board, shall be nominated, one from each political party, by the board of county commissioners of each county, at their regular meeting in the month of April, one thou *621 sand nine hundred and nineteen, snob nomination to become effective when approved by the State Tax Commission.” Section 27 is as follows: “The officers created under this act shall be nonpolitical and nonpartisan in character, and any undue political activity by any officer provided for under this act shall be sufficient cause.for removal by the State Tax Commission or by the Governor of the State.” The duty of this board, as set forth in section 22, supra, is as follows: “When the county supervisor and his assistants have completed their taking of the lists of personal property in all townships in the county, the lists so taken shall be placed before the county board of appraisers and review, and it shall be the duty of the said board to review carefully the list as returned by each taxpayer, to ascertain if in each case a complete return has been made, and if the property returned has in each case been valued at its value in money, as required by this act; and it shall be the duty of the said board to revise such valuations wherever necessary to make the valuations conform in all respects to the rule required by this act, and, if any property has not been returned, to cause the same to be properly entered on such lists at the true value in money of such property.” Under section 23, full and ample power is given the supervisor and his assistants to make every investigation necessary, production of books, examination of witnesses, etc., if they have reason to believe that property listed is not true and complete. Section 25 provided that the listing of all property, real and personal, should be completed in each county not later than the first day of May of each year, and complete abstracts of such lists should be mailed to the State Tax Commission by the county supervisor not . later than 15 May, 1920, and of each year thereafter. It appears from the entire record, and from the facts found by the court below, that the supervisor and assistants were under oath; the county board of appraisers and review, a nonpartisan, nonpolitical board, were under oath, and the defendants were under oath; that in making their returns defendant corporations returned its leaf tobacco in accordance with the requirements of the statute, and made oath as to its real money value. Section 26 is headed, “Equalization or Eevaluation.” It provides that the State Tax Commission shall have authority as a State Board of Equalization, given in chapter 234, Public Laws 1917, “and it shall have authority to make such investigation, through its district supervisors, county supervisors, or special examiners, as may be necessary to determine if the list returned for each county is a complete list, and if the valuations returned have been made as required by this act. If prop *622 erty is found that has not been returned, it shall order such property placed on the list, and if it is found that the property in any county had been valued either higher or lower than required by this act, it may order a revaluation in such county, or require by general order that a percentage increase or decrease be made for the year in which such order is made, but shall in that- case order a complete revaluation of all such property at some time during the next ensuing year, to the end that any possible injustice that may have been done by the percentage increase or decrease may not be continued. If it is found necessary to order a revaluation in any county, the State Tax Commission shall designate both the county supervisor and the county board of appraisers and review, by whom the reassessment shall be made, and the expense of such revaluation shall be borne by the county, and is hereby declared to be a necessary expense of such county.” It will be noted that in the Revaluation Act, in the case of real estate, provision was made for a hearing before the county board of appraisers and review in cases where a taxpayer should be dissatisfied with the valuation placed upon his real estate by the county supervisor, with the right to appeal to the State Tax Commission, whose decision should be final. Any member of the county board of appraisers and review had also the right to appeal from the value fixed upon the real estate of a taxpayer in his county. It seems, and may be, that there is no provision in chapter 84 of the Public Laws of 1919, or chapter 234 of the Public Laws of 1917, which, by section 1 of the Revaluation Act, was continued in full force and effect for the listing and valuing of property, for appeals from values fixed by the county supervisor, or his assistant, upon personal property. In the ease at bar the county board of appraisers and review of Durham County approved the return of the American Tobacco Company, that the true and actual value that it made under oath was $9,141,005, and likewise approved the return of Liggett & Myers Tobacco Company of $15,202,151; that this was the valuation of the two corporations’ leaf tobacco fixed by the proper-authorities of Durham County, and which was included in the abstracts of property for Durham County, and which was sent to the State Tax Commission by the supervisor of Durham County, as provided by law. The State Tax Commission increased the value of the leaf tobacco of the defendant and the American Tobacco Company in the sum of $4,298,390, and that of the defendant Liggett & Myers Tobacco Company $9,657,111 — a total of $13,955,501 for the two companies. .The two companies had' returned $24,343,156, which the supervisor and the county board of appraisers and review of Durham County had passed on and determined as its true and actual real money value. The report of State Tax Commission on revaluation to the Gover *623 nor, and adopted by the General Assembly, has this increased valuation of $13,955,501 on the leaf tobacco of the defendants — more than one-third increase from the valuation put on it by the local authorities of Durham County, where the property was situate. The problem, and the only one in this case, is whether the State Tax Commission, sitting in Raleigh, can, without notice to defendant corporations and without a hearing, increase the valuation of its property, which amounts to an increase tax. This is the crux of this case. The power to tax is the power to destroy. The principle here involved is fundamental and goes to the very root of our institutions. It is contended by plaintiff that defendants had notice. The learned judge who tried this case found all the facts but this all-important one — notice. As to this, he says: “No other affirmative evidence of notice to defendant companies of such increases in valuation, or that same was being considered, appears, save as disclosed by the testimony.” This was tantamount to finding that no sufficient notice was given, as the record discloses none. Does the testimony in the record disclose any notice to defendant corporations? The only witness examined on this aspect in the case was J. S. Griffin, the clerk of the State Tax Commission, who testified substantially that the county supervisor’s report, as to the value of all the personal property in Durham County, to the State Tax Commission showed $53,000,000, and it had been increased to $66,000,000 — the difference, about $13,000,000, being added to the valuation put on the defendants’ leaf tobacco by direction of the chairman of the State Tax Commission. No permanent record was kept by the State Tax Commission showing the facts in connection with this matter. There was no meeting of the State Tax Commission as a body in their official capacity. The witness further testified: “That the increase in the value of personal property of Durham County for the year 1920, as shown by the difference in such value in' the report of the county supervisor, S. P. Mason, made to the Tax Commission, and the report of the State Tax Commission to the Governor, were made before 10 August, the date of said report to the Governor, and that at the time he did not think any appeal by the defendant tobacco companies was pending from any other value that had been fixed; that it was determined on Sunday afternoon before the convening of the extra session of the Legislature of 1920 to throw this value into the report; it may have been Saturday, and we were trying to get our report finished by the time the Legislature met. I think they met on Tuesday, and the question came up Sunday afternoon, I think. It may possibly have been Saturday. Mr. Maxwell and myself had direct charge of the compilation of this report — as to whether or not we would throw this total into the report. There was *624 no appeal pending at that time, and we discussed it right much, and finally Mr. Maxwell sent for Mr. Lee, or Mr. Lee came in the office, and we decided to put it in the total for Durham County. I am pretty sure that was Sunday afternoon. We closed up the report Sunday night. That increase was put in Sunday before the Legislature met on Tuesday. No appeal was pending by these tobacco companies for the valuation at the time it was reported to the Governor. After this was done, the letter of 25 August was written to Mr. Mason and that was the first letter that went down to anybody about the increased valuation of the property of the defendant tobacco companies, but I do not know whether the letter was mailed — and I did not mail it myself. It was mailed in due course of business, I take it, but I do not know the date.” From the record evidence, we can find no sufficient testimony that the defendant companies had notice of the increase before it was made. In fact, no evidence, nor was there any appeal to the State Tax Commission on either side pending to fix the Tobacco Company with notice. If the State Tax Commission increased the valuation without notice or a hearing, it follows, as a matter of course, that the Legislature’s approval based on the report was perfunctory, proforma and without notice, and there could be no presumption under the facts here that the defendants had notice, _ when the record shows clearly they had no notice. The record shows that on a Sabbath evening — no meeting of the State Tax Commission, consisting of the Corporation Commission, W. T. Lee, chairman, A. J. Maxwell and Geo. P. Pell, but the clerk of the State Tax Commission, Mr. J. S. Griffin, a man careful in his testimony, a witness for plaintiff states that he and Mr. Maxwell, who had direct charge of the compilation of the report to his Excellency, Governor T. W. Bickett, "as to whether or not we would throw this total into the report.” No appeal pending. They discussed it right much and finally Mr. Maxwell sent for Mr. Lee who came and “we decided to put it in the total for Durham County” — the report was closed Sunday night. No other tax-payers’ property for Durham County, except the defendant corporations’ were increased. It may not be amiss to call attention to the fact that by subsequent legislation, the State Tax Commission ceased to exist, and certain powers like unto the State Tax Commission were given the Board of Equalization, composed of the Chairman of the Corporation Commission, Commissioner of Revenue and the Attorney-General. Mr. W. T. Lee, who was chairman of the Corporation Commission, was on the Board of Equalization, and the board, after hearing evidence, unanimously found and declared that the value settled and determined by the County Supervisor and reviewed by the County Board of Appraisers and Review, to wit, $9,141,005, of the American Tobacco Co., and $15,- *625 202,151 ($15,575,271) of Liggett & Myers Tobacco Co., were tbe full actual value of tbe said tobacco as of 1 January, 1920, and thereupon ordered tbat tbe said valuation be restored, tbus nullifying tbe action taken on tbe Sabbatb evening. Although Mr. Lee was temporarily in the Sabbatb conference, be thought it just afterwards to reduce tbe assessment. We do not go into tbe matter of tbe Board of Equalization taking off tbe increase, as we tbink it unnecessary for tbe consideration of tbis case. We cite tbis matter as tbis board, sitting as officials under oath, beard evidence and nullified tbe Sabbatb evening action. Cooley on Taxation, Vol. 3 (4 ed.) chap. 18, part of sec. 1123, p. 2272, says: “Where a statutory board of review bolds stated meetings, with power to increase assessments, everybody is notified of tbe fact, and is warned to attend if be deems, it important; • and it is often held tbat under such circumstances special notice of tbe raising of a particular assessment, or of tbe adding of omitted property, need not be given. But as an increase in an assessment is not frequent, and will seldom be anticipated by tbe taxpayer, who will not be likely to attend upon tbe review except to seek a reduction, it seems safer and more just to bold, as has generally been done, tbat tbe taxpayer should have personal notice of any purpose to increase tbe assessment made against him. The general rule is that after an assessment has been made by an assessor, it cannot be increased by the assessor or by a reviewing board without notice to the taxpayer or opportunity to be heard,” (italics ours), citing numerous cases from IT. S. Court, Alabama, California, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Michigan, Mississippi, Missouri, Nebraska, Nevada, New Jersey, South Carolina, South Dakota, Wisconsin, Texas and Washington. Cooley, supra, sec. 1123, p. 2275, further says: “Tbis rule is almost universal either because so declared by statute or because of tbe due process clause or for other reasons. Absence of notice or opportunity to be beard violates tbe due process of law provision.” To support tbe latter proposition, be cites the case of Lumber Co. v. Smith, 146 N. C., p. 199, written by tbe late learned former Associate Justice H. G. Connor, of this Court, and afterwards District U. S. Judge. We tbink tbat ease, in tbe terminology of tbe lawyer, on “all-fours” with tbe case at bar. Tbe facts in tbat case were: Tbe Board of Commissioners of Caldwell County bad placed upon tbe tax lists, as a solvent credit, certain notes owned by tbe plaintiff, which tbe commissioners valued at their face value and so assessed them for taxation. No notice was given tbe plaintiff of listing, valuing or assessing tbe notes. Tbe tax list was placed in tbe bands of tbe sheriff for collection and be advertised plaintiff's real estate for sale in order to collect tbe tax. Tbe plaintiff sued out an injunction and tbis Court affirmed tbe judgment of tbe *626 judge of the Superior Court continuing the injunction to the hearing. The Court’s unanimous opinion said: “The power to tax, it has been said, and the truth of the saying too frequently exemplified, is the power to destroy. While the power is essential to the life of the State, its enforcement by constitutional methods and within constitutional limitations is essential to the safety of the property of the citizens. 'Proceedings for the assessment of a tax being quasi judicial, it follows that, in order to give validity to the assessment, notice thereof should be given to the owner of the property to be assessed.’ 27 A. & E. Enc., 704. . . . 'It is, therefore, a matter of utmost importance to the person assessed that he should have some opportunity to be heard and to present his version of the facts before any demand is conclusively established against him; and it is only common justice that the law should make a reasonable provision to secure him, as far as may be practicable, against the oppression of unequal taxation by making the. privilege of being heard a legal right.’ Cooley on Taxation, 625. . . . 'Provision for notice is, therefore, part of the “due process of law,” which it has been customary to provide for these summary proceedings; and it is not to be lightly assumed that constitutional provisions, carefully framed for the protection of property rights, were intended or could be construed to sanction legislation under which officers might secretly assess the citizen for any amount in their discretion without giving him the opportunity to contest the justice of the assessment.’ Cooley, 628.” In Bankers Life Ins. Co. v. County Board of Equalization, 89 Neb., 469, N. W., 1034, it was said: “It seems clear from the authorities that such change or addition made without notice and without an opportunity for a hearing somewhere along the line of procedure is void, for it amounts to 'taking the property of the citizen without due process of law.’ Stuart v. Palmer, 74 N. Y., 183; Central of Georgia R. Co. v. Wright, 207 U. S., 127; Horton v. State, 60 Neb., 701; Dixon County v. Halstead, 23 Neb., 697.” The Supreme Court of the U. S., speaking of the phrase “due process of law” holds before a person can be deprived of his property, notice must be given. In Traux v. Corrigan, 257 U. S., 312, the Court holds, in general, what is due process of law in the respective state is regulated and determined by the law of each state, and this amendment in no way undertakes to control the power of a state to determine by what process legal rights may be asserted or legal obligations enforced, provided the method of procedure adopted for these purposes gives reasonable notice and affords a fair opportunity to be heard before the issues are decided. The courts will interfere with state action on the ground that it is *627 repugnant to this clause only where fundamental rights have been denied. Const. of U. S., anno. (1923) p. 633, 634, citing numerous authorities. In McGregor v. Hogan, U. S. Superme Court advanced opinions (decided 12 November, 1923) p. 27, it is held: “It is not essential to due process of law that the taxpayer be given notice and hearing before the value of his property is originally assessed, it being sufficient if he is granted the right to be heard on the assessment before the valuation is finally determined. Pittsburgh C. C. & St. L. R. Co. v. Backus, 154 U. S., 421, 426; 38 L. Ed., 1031, 1036; 14 Sup. Ct. Rep., 1114. And see McMillen v. Anderson, 95 U. S., 37, 42; 24 L. Ed., 335, 336; and Turpin v. Lemon, 187 U. S., 51, 58; 47 L. Ed., 70, 74; 23 Sup. Ct. Rep., 20. The requirement of due process is that after such notice as may be appropriate, the taxpayer have opportunity to be heard as to the amount of the tax by giving him the right to appear for that purpose at some stage of the proceedings before the tax becomes irrevocably fixed. Turner v. Wade, supra, p. 67. And see Londoner v. Denver, 210 U. S., 373, 385; 52 L. Ed., 1103, 1112; 28 Sup. Ct. Rep., 708.” In R. R. v. Comrs., ante, 266, the following is said: “Plaintiff takes the position that the increased valuation of its property was made by the list-taker without any proper notice and that the same was approved by the board of commissioners, sitting as a board of equalization on the second Monday in July, (C. S., 7938) without giving plaintiff an opportunity to be heard. The facts are, however, as found by the court below, that the plaintiff’s agent did have notice of the action of the list-taker in making the change in question and the matter was reported by him to the legal department of plaintiff company for attention.” In that case the list-taker made a personal investigation of the property and increased the valuation to the sum as it had been listed the year before and notified plaintiff company what had been done. The Board of Equalization, under the statute, met on the second Monday in July, of the same year, to consider these tax matters, but plaintiff failed to take advantage of the notice and appear before the Equalization Board to make its objection before the proper tribunal, although having been notified, sometime before, on the 29th of May of that year. The Equalization Board approved the report of the list-taker. Notice was required to be published, etc., under the statute, of this July meeting so that all dissatisfied tax-payers could be heard as to the valuation of their property, and have the same corrected or equalized if found to be unjust or unequal. In that case, it will be seen that it was conceded that notice had to be given, and notice was given, and the statute provided the time and manner in which objections could be heard and a hearing provided for. In fact, the statute (C. S., 7938, supra) says: “They shall have *628 power, after notifying the owner or agent, to raise tbe valuation of such property as they shall deem unreasonably low.” Method is provided in the statute how the hearing shall be conducted. If local boards may not act without notice, then a fortiori a board sitting in Raleigh, far distant from where the property is located, sho.uld not act without notice. The tax, if legal, in this case would go to Durham County and the city of Durham. The Board of Commissioners of the county of Durham in their answer say: “That these defendants admit that they have taken no action upon said report filed by the plaintiff and have taken no steps to collect the tax referred to in paragraph 10 of the complaint for the reason that these defendants, after investigation, were of the opinion that the value placed by the defendants, Liggett & Myers Tobacco Company and the American Tobacco Co., upon their property represented the true value of said property as of 1 January, 1920.” The city of Durham in its answer says: “This defendant admits that its tax collector has taken no steps to collect the tax referred to in paragraph 10 of the complaint, for the reason that said property has never been placed upop the tax books of the city of Durham.” In Mfg. Co. v. Comrs. (of Cabarrus County), 183 N. C., p. 553, the assessment was on industrial plants — real estate. The value as finally fixed was done after the Cannon Mills had notice and a hearing on appeal before the State Tax Commission, and its findings of assessment was incorporated in the State Tax Commission’s report to the Governor, which was approved by the Legislature. When this was done, the State Tax Commission had no authority to change it. Laws 1919, chap. 84, sec. 15, gave right of appeal by either side in real estate assessments to the State Tax Commission, and its findings were final. In the present case, the increase was made of personal property without any notice or a hearing; and, perhaps, without any statutory authority, .the finding of the local authorities being the forum. This we do not pass on, as we think the assessment could not be increased without notice or a hearing. In giving the facts as taken from the record, we do not mean to criticise the action of any official. If mistakes have been made and the law not properly administered, their conduct should not be weighed in “gold scales.” The revaluation measure was new and untried. The work was a tremendous undertaking, and the report of 10 August, 1920, of the Corporation Commission, which was the State Tax Commission, to his Excellency, Governor T. ~W. Bickett, before the extra session of the Legislature of 1920, was a revolution in the taxing system of the State. It is but human that errors and injustices in so large an undertaking must of necessity have arisen. The whole tax structure could not be completed in so short a time. In the present case the assessment of the *629 leaf tobacco by tbe State Tax Commission was not made in accordance with law. Whatever may be the desire to collect tax, we have no right to take a copper from the rich or poor except through and by the law of our land. Any other course would in time affect our whole social structure. The facts and the justice in this case are not hard to comprehend. Under the new Eevaluation Act the defendants, under oath returned their leaf tobacco as of 1 January, 1920. This was approved and agreed to by the local authorities of Durham County — nonpartisan and nonpolitical officials, all under oath. On a Sabbath evening, 8 August, 1920, just before the Eevaluation report was made to the Governor, this assessment, made under oath by defendant corporations agreed to and accepted by the local authorities, ivithout notice or hearing to the defendant corporations and without a regular meeting of the State Tax Commission, was increased in an informal manner over one-third more than it was returned at under oath. In the language of the witness “to throw this value into the report.” If $13,000,000, increase in assessment can be thrown into the “melting pot” of taxes without notice or a hearing and we should sustain this, we would be blinded like Samson and perhaps some day pull the pillars of the house down to fall on the poor as well as the rich. We can find no authority to take property without notice or a hearing — this is due process of law. The chairman of the State Tax Commission, who afterwards by virtue of his office .became a member of the Board of Equalization, informally had agreed the Sabbath evening to the increase and after mature consideration with the other members of the Board of Equalization, they unanimously took the increase off. The Board of Commissioners of Durham County in their sworn answer admit that the original returns were correct and the returns were the true value. The city of Durham takes no affirmative position. in its answer asking for the increase. These are the two bodies most vitally interested. The defendant corporations have paid the tax on the assessment fixed by the proper local authorities. The only active contest is by plaintiff, who was employed and “whose duty it should be to spend such time as may be necessary in making a diligent search for property not listed for taxes, and to put such property on the tax books.” For this he is to get not in excess of 10 per cent of the recovery. He has performed the duty imposed and brought this case. The fathers who founded this republic built it on the Eock of Ages — Justice to the rich and poor alike. Fiat justitia, ruat caelum. From the facts and circumstances of this case, any other view taken would make the law a “rope of sand.” For the reasons given, there was error in the judgment of the court below. Error.