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Medina Common Pleas.

February 8, 1848, located in Westfield township, in Medina county. It is engaged in the business of fire insurance, and was organized for that purpose; and since that time this company has been engaged in such business quite extensively, not only in the state of Ohio, but a number of other states as well. The general office of the company is in Westfield township, Medina county.

The amended petition sets forth that the real estate of the company and all the monies, credits and movable property added thereto werə fully listed for taxation as required by sec. 2744, Rev. Stat., and the return thereof made to the auditor of the county for the years 1886, 1887, 1889, 1890 and 1891; that in the year 1886 the property was valued for taxation at $880,864.00, for the year 1887 at $930,861.00, for the year 1888 at $932,186.67, for the year 1889 at $1,010,171.08, for the year 1890 at $1,066,444.92. and for the year 1891 at $1,118,198.30; that the valuation so fixed for said years was the fair and full valuation of said property, and that the taxes for each of said years were duly assessed thereon for state, county, township and school purposes, which the plaintiff has fully paid for each and all of said years. Complaint is made that notwithstanding the premises the auditor of the county of Medina, on or about April 9, 1892, certified to the defendant, as treasurer of said county, that he had entered upon the tax list in his office against the plaintiff, personal property, monies, credits and investments for taxation in the years aforesaid, in amounts additional to what had been returned by said company, with the penalty and taxes thereon, as follows: For the year 1886 ...

$938,972 00 1887.

.1,005,111 00 1888 ...

..1,136,866 00 1889.....

...1,151.779 00 1890.....

..1,235,468 00 1891......

...524,318 00 That the taxes on the same were added as follows: For the year 1886.......

$9,957 51 1887

.10,252 13 1888

.10,913 91 1889....

. 10,287 43 1890....

.12,848 86 1891.

.5,610 20

Making a total of added taxes....

$60,490 04 It is alleged that the action of the auditor in so certifying said amounts for taxation was unauthorized; there was no foundation therefor in fact; it was not in pursuance of the requirements of apy statute in ascertaining and certifying to the defendant the additional amount of

Insurance Co. v. Hard.

a

taxes so charged, and that the auditor acted wholly without jurisdiction in the premises.

It is claimed by the plaintiff that its property, and all of it, was fairly and fully listed for taxation according to its average value, and the same as other property was listed for taxation during said years by the owners of property in Medina county.

The company sets forth that the returns so made by it were not false; that there was no evasion by it at any time in the matter of making a due return of all its property for taxation at its fair value, and that it has in all respects complied with the requirements of the statute in respect to the amount and the value thereof.

The complaint is that the treasurer is about to collect the said taxes so assessed against the company by the auditor as well as the statutory penalty of fifty per centum thereon, all of which, it is averred, is illegal and contrary to justice and equity, being an unjust discrimination against the plaintiff and subjecting it to taxation greatly beyond the amounts required to be paid by other persons, and the prayer of the petition is for an injunction to restrain the collection of said sum, $60,490.04, or any part thereof.

The answer filed by the defendant, as treasurer, avers that on or about the first of April, 1892, A. L. Corman, being then the auditor of Medina county, having reason to believe and did believe that the defendant had made false returns of its taxable personal property to the auditor of said county for each of the years hereinbefore specified, served a notice upon the plaintiff to that effect, and that thereupon one of plain. tift's directors and the general manager appeared before the auditor on April 7, 1892, and asked to have the hearing of the matters continued to April 9, 1892, which was granted upon said application; and that upon April 9, 1892, plaintiff was given an opportunity to show that its returns of taxable property to the auditor of said county for each of said years were correct, but the plaintiff did not appear, and failed to show that its returns for any one of said years were correct; and that hereupon the auditor, as was hisl egal duty under secs. 2781 and 2782, Rev. Stat., proceeded to and did correct said returns upon satisfactory and competent evidence, and from said evidence found that the returns made by said company of its property for each one of said years were false, and that he thereupon found the true amount for each one of said years that the plaintiff should have returned as and for its true return of taxable personal property, and that to that sum he added the statutory penalty of fifty per centum, and deducted therefrom the sum each year actually returned, and assessed taxes upon the difference and placed the same upon the tax list in his office and upon the proper duplicate, and certified the same to the treasurer of the county for collection as other taxes.

The answer denies that the plaintiff's returns as made by its officers for any one of the years enumerated were correct, but avers that they

Medina Common Pleas.

were false, and were so made for the purpose of evading the payment of its fair and just share of taxes.

It is claimed by the defendant that the amount returned by the officers of the plaintiff company did not exceed from fifty to sixty-six per centum of its credits, monies and investments in stocks and bonds.

It is claimed by the defendant that in 1886, the plaintiff had and owned $1,213,234.32 taxable personal property, to which the auditor added fitty per cent., making the sum of $1,819,336.00, and deducting therefrom the returns made by the plaintiff, to-wit, $880,864.00, which left a balance for that year of $98,972.00, and in like manner said auditor made his finding for each one of said years.

The term of office of Elbridge G. Hard expired since this suit was commenced, and James Newton succeeded him in office, and has filed his supplemental answer setting up this fact, which the reply admits.

A large amount of documentary evidence was submitted to the court upon the hearing in connection with the oral testimony of a number of witnesses touching the depreciation of real estate and the general value of real estate mortgages during the years covered by this inquiry, and also as to the manner of valuation of personal property for taxation in Medina county and some adjoining counties during the same time. The question was also very fully argued by counsel, both orally and upon briefs submitted to the court.

And the question, therefore, presented is, shall the sum which the auditor of the county lias so certified to the treaurer for taxation, stand and be collected, or shall the court modify or entirely appul the action of the auditor in the premises? And this raises a number of questions both of law and of fact which have been very fully and very ably presented to the court by the learned counsel in the case.

Perhaps the first question to be determined by the court, upon the evidence in the case, relates to the finding of the auditor in the matter of the correction of these tax returns for the years mentioned, and this is primarily a question of fact. Did the company omit assets or property that should have been included, or did it undervalue the property that was listed?

And another question arises in the case, which is quite important, which relates to the method of computing the amounts to be added by way of penalty, the penalty being fifty per centum.

It is claimed by the plaintiff company that the penalty of fifty per centum should be based entirely upon the amount omitted by the return, whereas the auditor took the amount of the return as he found it should have been made, and upon that sum added the penalty of fifty per centum, and deducted from this gross amount the amount returned, so that it is claimed by this method the plaintiff would be required to pay a penalty not only upon the amount which it failed to return, but also

Insurance Co, v. Hard.

and upon

upon the amount which it did return, which it is claimed would be oppressive and inequitable. This presents a legal question.

Again, it is claimed before any penalty can be annexed by the auditor it must be ascertained and found by him upon evidence that the return made by the company was false; not merely that it was an erroneous account, either in the amount of property or in the valuation thereof, but that it was false and made for the purpose of escaping taxation.

It is claimed in this connection that allowing the auditor's correction to stand as to the amount and value of property as shown by the corrected lists, the amount of tax added, including penalty of fifty per centum on omitted property, would be $36,357.90, instead of $60,490.04, which includes a penalty of fifty per centum on property that had been listed for taxation and was not omitted. So this raises a question of law as to the true intent and meaning of sec. 2781, Rev. Stat., under which these corrections and additions were made.

Another question presented relates also to the auditor's finding in regard to the assets of the company–property, it is claimed, such as goods, credits and balances in the hands of agents in other states, business done in other states. It is claimed that the auditor had no right in making his findings or in his corrections to include assets, notes, credits, monies, etc., of that description, the claim being that during the same years the company was doing business and had agencies throughout Indiana, Michigan and Illinois and other states, and that in the prosecution of the business, notes of farmers were sometimes taken for premiums upon insurance policies, these potes running variously from sixty days to six months ; these notes were collected at these agencies and the money remitted to the company; and that perhaps, the correct amount of business of that description, within and without the state, was from $202,000.00 in 1886 to $234,000.00 in 1891.

In fine, it is claimed that the auditor's statement includes not only its assets in the way of credits at its agencies in Ohio, but also in all of the other states in which it was doing business at that time, and this, it is asserted and argued, he had no right to do.

Dependence is placed upon sec. 2744, Rev. Stat., and it is claimed that the plaintiff is one of those corporations whose return for taxation is governed by that section, which requires the listing of all their personal property, monies and credits within the state, and that under this language the plaintiff was only required to list its monies and credits at such agencies as are within the state.

Another question presented and argued by counsel relates to the proper valuation for taxation of the property that admittedly should have been listed here for taxation. It is claimed that the auditor listed this property at its face value, whereas it should have been listed at its true value in money. A large amount of the assets of the company is evidenced by notes and mortgages upon farm lands and property, indeed

Medina Common Pleas.

its assets are chiefly of that description, and it is claimed that although these loans were secured by mortgages, that in valuiug them and listing them for taxation the officers of the company were warranted in taking into account the depreciation in the value of farming lands during the current years, as affecting the market value of the securities so held by the company; and it is claimed on the average amount of such mortgages the depreciation in the value of farm lands so pledged for the payment of loans caused a shrinkage of fully twenty-five per centum in the value of such mortgage securities. It is claimed also that the auditor's statement in regard to the bills receivable, covering balances in the hands of agents, is excessive, and it is claimed that such balances are liable to shrinkage, from various causes, of fully thirty per centum of their face value, and that a deduction should be made from the auditor's statement for the amount of such shrinkage.

Another question arises in the case upon the testimony offered and upon the arguments of counsel touching the rule or custom of listing property. It is claimed on the one hand that in Medina county, and other counties, it has become a fixed rule and practice in the listing of personal property to value it at from sixty to sixty-six per centum of its true value in money. It is claimed that that is the rule as to real estate ; and bank stocks are not listed at more than 66 2–3 per cent; and that the owners of notes and mortgages and other credits, in accordance with a general practice or custom, list intangible property of that description at from sixty to sixty-six per centum of its true value in money, and even less.

On the other hand such custom is denied, and it is claimed that the statute fixes the rule, and that there is no legal warrant or excuse whatever for listing property at less than its true value in money; that the fact that one person has so listed, or that certain banks, or all banks, are so listing their property, is no excuse whatever. The law furnishes the rule, and any custom in that respect, or any rule established by any board of revision or equalization fixing a rule contrary to the rule of the statute, is void and constitutes no excuse for listing property at less than its true value in money.

The point is also made that unless the auditor found that the returns for the five years from 1886 to 1891 were false, as the language of that section has been construed by the courts, then he had no jurisdiction whatever to proceed in the premises, and no right or power to make corrections, or place upon the duplicate property omitted or undervalued, unless it is found that the returns were in fact false.

There are a number of other questions, perhaps, incidentally that have been argued in the case, but the above presents the principal questions.

These questions I will endeavor to consider and determine about in the order in which I have stated them.

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