State ex rel. Linde v. Packard

Burke, J. Plaintiff brings this action to restrain the State Tax Commission from enforcing the provisions of chapter 255, Sess. Laws 1915. This legislation had its origin in the popular belief that moneys and credits had in the past escaped taxation, but that the owners of said property were morally, if not legally, justified in taking some measure to avoid the payment of a 7 per cent or 8 per cent tax, which necessity doled out to the inhabitants of some of our cities, when the banks and other reputable depositaries would pay but 4 per cent and 5 per cent for the use of said money. It was, therefore, suggested by some of the people who interest themselves in legal reforms that, if a special and lighter rate were imposed upon money and credits, this class of property and the assessor would be able to get better acquainted. The only obstacle that presented itself was the Constitution, which, it seems, favored the theory of taxing all classes of property at the same rate, and contained several provisions inconsistent with this new theory of taxation. The reformers, however, proceeded to meet these obstacles in the very commendable manner of a constitutional amendment, and in the fall of 1914 the voters adopted a concurrent resolution (chapter 103 of the Session Laws of 1913), changing § 176 of the Constitution of North Dakota. After the amendment, our Constitution read as follows: “Taxes shall be uniform upon the same class of property, in308 eluding franchises within the territorial limits of the authority levying the tax, and shall be levied and collected for public purposes only, but the property of the United States and of the state, county and municipal corporations shall be exempt from taxation; and the legislative assembly shall by a general law exempt from taxation property used exclusively for school, religious, cemetery, charitable or other public purposes, and personal property to any amount not exceeding in value $200 for each individual liable to taxation; pxrovided, that all taxes and exemptions in force when this amendment is adopted, shall rexnain in force, in the same manxxer and to the saxne extent until otherwise provided by statute.” This section takes the place of old § 176, which provided that laws shall be passed taxing by uniforxn rxxle all property according to its tx*ue value in money. After the adoption of this axnendnxent, the legislature enacted chapter 255, Sess. Laws 1915, which reads as follows: “Section 1. Definition. Tax Nate.— ‘Money’ and ‘credits’ as the saixxe are defined in § 2074 of the Compiled Laws of 1913, are hereby exempted from taxation other thaxx that imposed by this act and shall hereafter be subject to an anxxual tax of 2 mills on each dollar of the fair cash value thereof. But nothixxg in this act shall apply to money or credits belonging to incorporated banks situated in this state. “Section 2. ITow Listed. — All ‘money’ and all ‘credits’ taxable under this act shall be listed in the manner provided in § 2095 of the Coxnpiled Laws of 1913, but such listing shall be upon a separate blank from that upon which other personal property is listed. '“Section 3. Tax Coxnxnission to Prepax’e Instrxxctions. Forxn of Be-turn. , Blanks. — The North Dakota Tax Commission shall annually prepare instructions for bringing in the lists reqxxired by the preceding section. They shall prepare axxd distribute through the county auditors to the assessors, a form for the return which the taxpayers are reqxxired to xnake by this act, and this form shall state the rate of taxation and be printed on a separate sheet, and shall be entirely distinct froxn the forms prepared for the returns of other classes of property. Such forms shall require only aggregate suxns of credits and of moneys. “Section 4. Litigated Taxes. — Any assessnxexxt of money and credits heretofore made, the legality of which has been placed in litigation axxd the collection of the tax thereon has been, enjoined and is now — 309 — pending in tbe court may be compromised and settled by payment at tbe rate of 25 mills on the assessed valuation of such moneys and credits. “Section 5. Emergency. — Whereas, this act should be effective upon the assessment of taxes for the year 1915, an emergency exists and this laAv shall go into effect upon its passage and approval.” Acting under this new law the Tax Commission of North Dakota took steps looking to an assessment of the moneys and credits of our taxpayers in general and of our relator, Mr. Amerland, incidentally, whereupon this action was instituted. It is claimed by relator that § 255, Sess. Laws 1915, violates clauses of the Constitution to which no amendments have been made. We will quote briefly from his brief: “The petitioner alleges that the said legislative act violates several of the provisions of the Constitution of the state of North Dakota, all of Avhich said alleged violations are set out in full in said petition. In said petition some ten alleged grounds of invalidity or unconstitutionality are set forth. While we respectfully insist upon the merits of each and every one of such propositions, there are, in our opinion, a limited number of questions Avhich are so conclusive as to the invalidity and unconstitutionality of this law that we shall not discuss all of said ground of invalidity. . . . We, therefore, present for consideration to this court what we contend to be three unquestionable and direct violations of the fundamental law' of this state. Eirst, the act in question provides a fixed and arbitrary rate of taxation upon one class and subject of property without reference to the amount of revenue necessary to derive from the citizens of the state for public purposes. Second, the act in question does not state distinctly the object of the same; third, the act in question is void and ineffective in that it does not provide for any application, apportionment, or distribution of the revenues raised thereby.” The Tax Commission and other defendants, instead of meeting this constitutional attack, dispute the right of plaintiff to maintain the action and the jurisdiction of this court to entertain the proceedings. This divides the controversy into two essential parts: Eirst, Can the action be maintained? second, Is the act unconstitutional? (1) The Tax Commission argues that: (a) the remedy of prohibition is not available under the facts disclosed by plaintiff’s petition; (b) that the remedy by Avay of injunction is not available under the facts set — 310 — forth in plaintiff’s complaint; and (c) that the court has not jurisdiction to restrain a co-ordinate branch of the state government. Under (a) they urge that the Tax Commission has jurisdiction' of the matters of the taxation of petitioner’s moneys and credits, and that the same is taxable either under this new law or under the old law, and that, therefore, petitioner has no grievance. We do not believe this argument sound. Section 8470, Comp. Laws 1913, provides: “The writ of prohibition is the counterpart of the writ of mandamus. It arrests the proceedings of any tribunal, corporation, board or person, when such proceedings are without or in excess of the jurisdiction of such tribunal, corporation, board or person.” While the Tax Commission may have jurisdiction of the subject of taxation, they are, nevertheless, governed by the Constitution and the laws of the state, and can only exercise their powers under legal authority. If the new law, as contended by the relator, is unconstitutional, they have no authority to act thereunder, and it is not a sufficient answer to say it might have acted legally by a return to the procedure of the old law. The mere fact that under the new law moneys and credits are to be taxed but 2 mills, whereas under the old law the tax would have been very much higher, does not confer any constitutional or legislative powers upon the Tax Commission, nor should it defeat relator’s right to resist an illegal, though small, assessment. If the Tax Commission, therefore, is acting outside of its jurisdiction, the writ of prohibition is the proper remedy. See 32 Cyc. 606; State ex rel. Dorgan v. Fisk, 15 N. D. 219, 107 N. W. 191; State ex rel. Ladd v. District Ct. 17 N. D. 285, 15 L.R.A. (N.S.) 331, 115 N. W. 675; Bismarck Water Supply Co. v. Barns, 30 N. D. 555, L.R.A.1916A, 965, 153 N. W. 454; See also notes in 22 L.R.A. 699; 69 Am. Dec. 198; 49 Am. Rep. 287; 23 Am. Rep. 622; 53 Am. Rep. 110; 16 L.R.A.(N.S.) 807; 8 L.R.A.(N.S.) 125; 7 Am. St. Rep. 484; 98 Am. St. Rep. 865; and 105 Am. St. Rep. 122. Defendants maintain that the complaint itself shows that the relator 'has another reinedy, to wit, to pay the taxes and sue to recover the same. Cases cited by them, however, like Merchants’ State Bank v. McHenry County, 31 N. D. 108, 153 N. W. 386, show the law under which the tax is levied, constitutional. It is claimed that the court has no jurisdiction to interfere with a coordinate branch of the state' government. However, it is not against — 311 — any lawful act of the Tax Commission that restraint is sought, but against actions, as alleged, exceeding their powers; therefore, under the allegations of the complaint the Tax Commission are mere trespassers against the rights of the relator. This subject has been so thoroughly covered in the recent case of Bismarck Water Supply Co. v. Barns, that we will not further pursue the same. Our conclusion generally is that prohibition is the proper remedy, if under the facts of the case relator has any remedy in a court of equity. We are aware that the mere fact that relator is called upon to pay an illegal tax affords no grounds for equitable interference. In addition to his grievance, relator must show to this court other facts sufficient to bring the ease within the jurisdiction of a court of equity. The grounds appearing here which we think sufficient to answer this requirement are as follows: The matter is clearly piiblici juris. Every taxpayer of the state of North Dakota may have moneys and credits subject to the demands of this law. The state, every county, township, city, or village is directly interested, thus affecting the sovereignty of the state. Such being the case, this action may prevent a great multiplicity of suits. The action is timely brought by the relator upon his own behalf and upon that of all other persons similarly situated, thus preventing any defense to grow through laches. In cases where the sovereignty of the state is directly involved, this court is vested with large discretion in determining whether, under the particular facts of such case, a showing has been made which appeals to its original powers. The holdings of our court along this line began with: State ex rel. Walker v. McLean County, 11 N. D. 356, 92 N. W. 385; State ex rel. McDonald v. Holmes, 16 N. D. 457, 114 N. W. 367; State ex rel. Steel v. Fabrick, 17 N. D. 532, 117 N. W. 860; State ex rel. Shaw v. Harmon, 23 N. D. 513, 137 N. W. 427; and the later cases from our own court, already cited. See also State ex rel. Owen v. Donald, 160 Wis. 21, 151 N. W. 331. Our conclusion then is that the matter is of sufficient public importance ; directly affects the sovereignty of the state; is calculated to prevent a multiplicity of suits, and the relator is timely in his action. Therefore, this court should exercise its powers and take original jurisdiction of the subject-matter. Further, that prohibition is the proper remedy to invoke these powers. : — 312 — (2) We now reach the question of the constitutionality of house bill No. 255. The history of this legislation is enlightening, and as it has a vital bearing upon the results of this suit we will take a moment to review it. Chapter 285 of the Minnesota Session Laws of 1911 provided for the taxation of moneys and credits. The Tax Commission of Minnesota attempted to collect a nominal fee from the Winona Motor Company. Resistance being made, the matter reached the supreme court of Minnesota, who handed down a decision, February 9, 1912, upholding said law against the constitutional attack made thereupon. Some person who was, undoubtedly, familiar with the Minnesota legislation and litigation, drafted house bill 331, and presented it to the North Dakota 1915 legislature. A comparison of this bill with the Minnesota law shows that ours was modeled thereafter, and the author, no doubt, hoped that if it became a law three years after the Minnesota court had declared it constitutional, it would stand the tests of the North Dakota courts. As originally drafted, it contained 14 sections; § 5 providing for the listing of the property under oath and inspection; § 6 providing that the list furnished the assessor should be received as true; § 7 providing for action in case of failure of the person assessed to list his moneys and credits; § 8 providing for an estimate and for errors; § 9 providing for the amount assessable and providing for a change of domicil; § 10 providing that the property shall be listed in a separate book; § 11 providing for a review and equalization; § 12 authorizing the auditor to compute the tax and providing for the listing and collection; § 13 providing for the apportionment of the moneys among the various funds; § 14 providing for repeal of all acts in conflict therewith. If the author of the bill was familiar with the Minnesota legislation, there was somebody with influence in the legislature who was equally familiar with § 175 of our state Constitution and the case of State v. Klectzen, 8 N. D. 286, 78 N. W. 984, 11 Am. Grim. Rep. 324. Following the history of said bill, we find at page 785 of senate journal 1915, the following: “Your committee on taxes and tax laws to whom was referred house bill No. 331, a bill for an act relating to the taxation of personal property known as moneys and credits, have had the same under consideration, and recommend that the same be amended as follows: — 313 — “In line five, § 1 of the printed bill, strike out tbe word ‘three’ and insert in lieu thereof the word ‘two.’ “Strike out all of said bill after § 2, and add the following: “Section 3. Tax Commission to Prepare Instructions. Form or Return Blanks. — The North Dakota Tax Commission shall annually prepare instructions for bringing in the lists required by the preceding section. They shall prepare and distribute through the county auditors to the assessors, a form for the returns which the taxpayers are required to make by this act, and this form shall state the rate of taxation and be printed on a separate sheet, and shall be entirely distinct from the forms prepared for the returns of other classes of property. Such forms shall require only aggregate sums of credits and of moneys. “Section 4. Litigated Taxes. — Any assessment of money and credits heretofore made, the legality of which has been placed in litigation, and the collection of the tax thereon has been enjoined and is now pending in the court, may be compromised and settled by payment at the rate of taxation as provided in § 1 of this act. “Section 5. Emergency. — Whereas this act should be effective upon the assessment of taxes for the year 1915, an emergency exists and this law shall go into effect upon its passage and approval. And when so amended recommended the same do pass.” This report was adopted, and upon the very last day of the session the bill was passed in both houses. This is a simple chapter from the history of the bill as disclosed by the public records of which this court can take judicial notice. Section 175 of the state Constitution reads as follows: “No tax shall be levied except in pursuance of law, and every law imposing a tax shall state distinctly the object of the same to which only it shall be applied.” In State v. Klectzen, 8 N. D. 286, 78 N. W. 984, 18 Am. Crim. Rep. 324, and at page 291 of the state report, it is said: “All taxes, whether state, county, city or school, are paid into the county treasury; . . . but the disposition to be made of the proceeds of taxes when collected depends wholly upon the terms of the law under which each is levied and collected. In this respect the statute in question is wholly silent. The provisions of § 175 of the state Constitution are clear and unambiguous, and the same are mandatory upon the legislature and hence we are compelled to hold that the statute is repugnant to the Constitution.” — 314 — Every word quoted applied with equal force to chapter 255 as mutilated by its enemies. There is no doubt that the author of the amendment was familiar with said decision, and deliberately rendered the bill unconstitutional. Whether he succeeded in settling the lawsuit, which throws its dark shadow over § 4 of the bill, as passed, we do not know. The facts recited make it plain that the law clearly violated § 175 of the Constitution, and the writ of prohibition must issue. We might add, in passing, that the attempt to attach an emergency clause to chapter 255, Sess. Laws 1915, was in contravention of the initiative and referendum amendment to the state Constitution, and that said law, even if constitutional, would not have applied to the taxes which were attempted to be collected.