
    VALUATION OF PERSONAL PROPERTY FOR. PURPOSES OF TAXATION.
    Common Pleas Court of Erie County.
    Cedar Point Resort Company v. C. H. Nuhn, Treasurer, et al.
    Decided, 1913.
    
      Taxation — Method of Valuing Personal Property — Profits Derived from, its Use Not a Factor to he Considered — Sections 5388, 5404 and 5405.
    The value of personal property for the purpose of taxation, whether belonging to an individual or a corporation, should be based on its true value as property, and not on its value as a unit or going concern and with reference to the use made of it by the owner and profit derived therefrom.
    
      King & Ramsey, for plaintiff.
    
      Clarence D. Laylin, Assistant Attorney-General, contra.
   Stahl, J.

This is an action to restrain the treasurer from collecting certain taxes and to declare void a certain portion of the assessment placed upon the personal property of the plaintiff, the Cedar Point Resort Company. The action originally was begun against' the treasurer and auditor of Erie county, and subsequently the Tax Commission of Ohio was made a party defendant.

By the petition and the answers of the several defendants and the reply and the evidence and agreed statement of facts it is admitted that the plaintiff is a corporation engaged in conducting a summer resort in Erie county; that it owns about 600 acres of land bordering upon Lake Erie; that about 112 acres of such real estate is located in the township of Huron, and the balance in the city of Sandusky; that said real estate is assessed for taxation at the sum of $344,510. It is further admitted that the officers of the corporation made a return to the auditor of Erie county of the property of said corporation in the year 1912, and in said return fixed the value of the personal property at a figure which the plaintiff believed such personal property was worth. But the auditor of Erie county, not being satisfied with said' valuation, fixed a valuation thereon of $181,000, and that thereafter the plaintiff appealed to the Tax Commission of Ohio, and that upon said appeal the Tax Commission increased such value placed upon said property to $201,490. The plaintiff thereupon tendered to the treasurer of Erie county $646.29, being the amount the plaintiff claims can lawfully be assessed against such personal property, and the treasurer refused to receive the same, claiming that the tax due upon said personal property is $2,125.-79.

The plaintiff claims in its petition that' the auditor arbitrarily fixed the value that ho placed upon said personal property, and that the Tax Commission did so without observing the true rule of valuation.

It is admitted that the auditor, in determining such valuation, ascertained the market value of the issued capital stock of said company, and that he took this sum as the total value of the company’s plant or resort, and that from this he subtracted the value of such real estate as assessed for taxation and assumed that the difference was the value of the personal property.

It is admitted that the Tax Commission determined from the books of the company that the net income of the company for one or two years prior to the time in question was $55.012, and figuring that the company was entitled to earn 10 per cent, upon its investment, it assumed that by reason of this system of reasoning that the value of the plant or resort was $550,000 and it thereupon subtracted the assessed value of the real estate from this sum, thereby reaching what it claimed was the value of the personal property.

And it is further admitted by the plaintiff that the net income of the plant was such sum of $55,012, and that the capital stock issued is $1,000,000 fully paid rnp.

The court understood that it also was agreed and admitted upon the trial that the personal property of the plaintiff, if considered separate from its use. by the company, and as separate and distinct articles of property, was worth on the day preceding the second Monday in April, of 1912, the sum of $60,-970.75; but counsel for tbe defendant insisting that their understanding was that that only applied to tangible personal property, and a rehearing being had, it is shown thereon that there was cash in bank, in addition to such tangible property, the sum of $74.27; and the court finds that that sum was the only asset of the company, other than said tangible-property covered by said agreement. So that on that day the personal property o£ the company, if estimated as the plaintiff claims it should be estimated, was worth $61,045.90.

The defendant claims that the property of the Cedar Point Resort Company should be assessed as a unit or as a going' concern, and the value of the personal property ascertained and determined in connection with its use by the company; and, therefore, that the method pursued by the auditor and the Tax Commission was correct; and this claim is based upon Sections 5404, 5405, and 5406 of the General Code.

The plaintiff claims this is an incorrect method, and that under the law of Ohio the value of plaintiff’s personal property is to be determined merely as such property at its true value in money without reference to the use made of it by the plaintiff company.

If the plaintiff is correct, the injunction should be sustained. If it is not correct, the injunction must be dissolved.

An elaborate and very able brief has been presented to the court by the Attorney-General in support of the contention of the defendants, and it has been forcefully argued by counsel for the plaintiff in support of plaintiff’s contention.

Article XII, Section 2, of the Constitution of Ohio, provides:

“Laws shall be passed, taxing by a uniform rule, all moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise; and also all real and personal property according to its true value in money.”

To secure and bring about this provision of the Constitution of Ohio, various and sundry acts have finally been incorporated in the General Code of Ohio.

Sections 5366 to 5403 of the General Code constitute a chapter relative to the listing of personal property by individuals, and Sections 5304 arid 5414 constitute a chapter relative to the listing of general corporations and banks. But all these sections being sections relative to the general subject of taxation, must be looked to and construed together so as to form an harmonious whole.

It was said by the Supreme Court in the case of City of Cincinnati v. Connor, 55 O. S., 89:

“It is to be presumed that a code of statutes relating to one subject, was governed by one spirit and policy, and. intended to be consistent and harmonious, in its several parts. And where, in a code or system of laws relating to a particular subject, a general policy is plainly declared, special provisions should, when possible be given a construction which will bring them in harmony with that policy. ’ ’

Section 5388, being one of the sections in the chapter relative to the listing of personal property by individuals, provides:

“Sec. 5388. In listing personal property, it shall be valued at the usual selling price thereof, at the time of listing, and at the place where it may then be. If there is no usuai selling price known to the person whose duty it is to fix a value thereon, then at such price as is believed could be obtained therefor, in money, at such time and place. ’ ’

Section 5404 provides:

“The president, secretary and principal accounting officers of every incorporated company, except banking and other corporations whose taxation is specifically provided for, for whatever purpose they may have been created, whether incorporated'by the, law of this state or not, shall list for taxation, verified by the oath of the person so listing, all the personal property thereof, and all real estate necessary to the daily operations of the company or corporation within the state, at the actual value in money.”

Section 5405 provides:

“Return shall be made to the several auditors of the respeciive counties where such property is situated, together with a statement of the amount, hereof which is situated in each township, village, city, or taxing district therein. Upon receiving such returns, the auditor shall ascertain amd determine the value of the property of such companies, and deduct from the aggregate sum so found of each, the value as assessed for taxation of any real estate included in the return. The value of the property of each of such companies, after so deducting the value of all the real estate included in the return, shall be apportioned by the auditor to such cities, villages, townships, or taxing districts, pro rata, in proportion to the value of the real estáte and fixed property included in the return, in each of such cities, villages, townships or taxing districts. The auditor shall place such apportioned valuation on the • tax duplicate . and taxes shall be levied and collected thereon at the same rate and in the same manner that taxes are levied and collected on other personal property in such township, village, city or taxing district.”

It is claimed on behalf of the defendants that Sections 5404 and 5405 authorize and require the listing of such property by a corporation as a unit and in the manner done by the defendants, because of the fact it is a corporation. It is further claimed and asserted that this is proper under Section 5388 without reference to Sections 5404 and 5405; and it is said that this is the true construction of Section 5388 upon the authority of the case of State, ex rel, etc., v. Holliday, 61 O. S., 352.

That was an action in which the question of the right of the state to assess certain telephone instruments of the Bell Telephone Company was involved. The telephone company did not sell these instruments, but rented them to the subscribers, and the state claimed the right to assess them against the company at a peculiar value on account of all the facts connected with their use, and this claim of the state was sustained in that case.

It has been many times held that the opinion in each case, and the law as laid down therein, must be viewed in the light of the facts of that particular ease. And it is my opinion that, so viewing that case, it can not be held to support the contention or claims of the defendants. If the defendants’ claims based upon this decision could be sustained, then if two men, forming a partnership in the city of Sandusky, should purchase a number of automobiles, and should with them conduct an auto of taxicab livery, and should by reason of attention to business and courteous treatment of their patrons, develop a large b.usiness, thereby practically controlling such industry in this city, and by reason of those fects annually make an exceedingly large profit and income, then it would be proper to assess such automobiles, not with reference to the distinct value of such machines, but with reference to the business conducted by such partnership and the amount of the income received in such business. If that claim based upon that decision be correct, then, if two men in a yillage were engaged in the draying business, owning property exactly of the same character and quality, and one of them should obtain a larger proportion of the business of the community than the other, and thereby make a larger amount of money annually than the other, then the valuation to be placed upon his.dray would be greater than that placed upon the dray of his competitor. It is clear that such a procedure would violate the plain provisions of the statute. That indeed would be a tax upon a man’s industry and his income. It is clear to my mind, therefore, that Section 5388 will not sustain the contention claimed for it by the attorneys for the defendants with reference to the method of listing and valuing the property of individuals.

But it is claimed, and this is perhaps the principal contention of the defendants, that Sections 5404 and 5405 do sustain this contention, because the plaintiff is a corporation, require this method of procedure. It having been determined that this method of procedure could not be used in assessing the property of an individual, let us now determine whether it is proper with reference to the personal property of a corporation? It seems to me that this question can be determined by a proper construction of these two sections, rather than by considering statements made by the Supreme Court in the construction of other statutes in cases that have heretofore been decided, however logical such statements may appear to be or however pertinent they may seem with reference to the question under Consideration.

For instance, it is said by the judge rendering the opinion in the case of State, ex rel, etc., v. Jones, Auditor, 51 O. S., 511:

“If the market, value — perhaps the closest approximation to the true value in money — of the corporation value as a while, were inquired into, the market value of the capital stock would become a controlling’ factor in fixing the value of the property. Should all of the stockholders unite to sell the corporate plant as an entirety, they would not be inclined to sell it for less than the market value of the aggregate shares of the capital stock. Besides, while the amount of the capita] stock may be limited by the charter and the laws governing it, the real and personal property of the corporation may be constantly augmented and may keep pace with any increase in the value of the capital stock. The market value of the capital stock, it is urged, has no necessary relation to the value of the tangible property of the corporation. But such is the well understood relation between the two, that not only is the value of the stock an essential factor in fixing the market value of the corporate plant, but the corporate capital or property has a reflex action on the value of the capital stock. ’ ’

And it is claimed that this statement of the judge supports the method adopted by the auditor, in fixing the value which he fixed upon this property; and if the value of the capital stock is a reflex of the value of the corporate property, it would be proper that this would be a true method in determining the value of the property as an entity.

It is, however, to be noted that this case arose under another section of the statutes, and with reference to an entirely different character of property, and an entirely different corporation, than the property and corporation here involved. What would be the effect of that method of determining the value of the personal property of a corporation if applied to all corporations generally? Let us suppose that a corporation engaged in the manufacturing business has real estate and personal property actively used in its daily business. Under the claim made by the defendants it would be the duty of the auditor to fix the value of this plant as an entity; and let us suppose that the value of such plant is the sum of $100,000,- when sp estimated. Let us suppose that the corporation has real estate which is not used in its daily operations of the value and which is assessed for taxation at $100,000. And let us suppose that the eapitaal stock is of the market value of $200;000. The whole property of the corporation is $200,000, and if the value of the one is the reflex value of the other, then the value of the capital stock is fixed by reason that all of the property, its plant and. the real estate, valued at $100,000 equals $200,000.

Now, if the auditor-is authorized to fix the value of the plant as an entity at $200,000, because the corporate stock is worth $200,000, and from this amount subtract the value of the real estate used in its daily business, and assess the difference against the personal property uSed^ in connection with its plant, then the corporation in that instance would be required to pay double taxation to the extent that the real estate not used in its daily business entered into the matter of fixing the value of the capital stock. The Legislature never intended that this statute should receive a construction that would permit that character of procedure.

But it is asserted that inasmuch as Section 5404 required the corporation to list for taxation all of the personal property thereof, and all the real estate necessary to the daily operations of the company, together with the moneys and credits of such corporation, and because Section 5405 requires the auditor to ascertain and deduct from such aggregate sum so found the value as assessed for taxation of any real estate included in the return, and to distribute the remainder among the different taxing districts in the county, that, therefore, it necessarily follows that the auditor must determine the value of such plant as a unit, because, as is said in the able brief of the Attorney-General:

“If all the auditor had to do was to value and assess each article of personal property possessed by the corporation according to the rules set down in the general taxation statutes for the assessment of personal property, then there would be nothing to apportion. Each separate article of personal property would be separately listed and assessed in the taxing district in which it had its taxable situs. There would be no over-plus to be apportioned among possible taxing districts.”

In my opinion, a true construction and correct interpretation of these two sections do not sustain this contention.

Section 5371 provides where personal property shall be listed for taxation. The purpose of that section is to designate that certain cities, townships or taxing districts shall have the benefit for the purposes of taxation of certain property; and the purpose of the provisions of these two sections is not to designate or provide a method of arriving at the value of the property of a corporation, but simply to secure a distribution of the amount levied against a corporation among the proper taxing districts. ,This construction of the Attorney-General leaves out of consideration one very important and decisive fact, the amount so found, after deducting the value of the real estate returned in the report, is not to be distributed among the taxing districts in proportion to the value of such real estate as listed for taxation. It is to be distributed among such taxing districts in proportion to the value of the real estate and fixed property included in the return. The question arises at oncé, what is meant by the term “fixed property”? In the judgment of the court it simply means the personal property that has its fixed situs in the several taxing districts.

Sections 5404 and 5405, as they now stand in the General Code of Ohio read slightly different than they did when the codifica* tion of the statutes were made by the codification commissioners, the section having been amended in Yol. 102 O. L., 60; but there is no change in the meaning of the statute or in its proper application or effect. Bnt a better understanding of these two sections can be had by tracing the history of them. These two sections-, and Section 5406, constituted one section in the Revised Statutes of 1880, and were divided into three sections by the codification commissioners. Section 2744 of the Revised Statutes did not provide, as is done in Section 5405 of the General Code, that the auditor should from the aggregate value of the property of the corporation subtract the value of the real estate named in the return, but it provided:

“In all eases return shall be made to the several auditors of the respective counties where such property may be situated, together with a statement of' the amount of s^eh property which is situated in each township, village, city or ward therein. The value of all movable property shall be added to the stationary and fixed property and real estate, and apportioned to such wards, cities, villages, or townships, pro rata, in proportion to the value of the real estate and fixed property in said ward, city, village, or township.”

It is clear to the mind of the court that the statutes require the officer of a corporation in his return to show th$e location of the various items of personal property which are susceptible of a fixed situs, as is shown or indicated by Section 5371 to which I have referred. But as the corporation might have property which is not subject to a fixed situs — assets, such as moneys and credits — the Legislature intended that the various taxing districts in which the active property of the corporation was located, and which it presumed aided in the creation of the credits and the moneys of the corporation, should have its fair share of the benefit of such moneys, credits, etc.

It is true that in the revision of 1880 in Section 2744, and indeed in the language of Section 5405 as it stood before its recent, amendment, reference was made to the movable property of a corporation. Nevertheless it is clear that reference was had to all property not having a fixed situs. These sections of the statutes were originally different sections of an act of the Legislature which was passed and took effect April 5, 1859, Yol. 56 O. L., 175, and found in S. & C., Yol. 2, 1438. As Section 5405 appeared in that act it read,

“The president, secretary, 'or principle accounting officer of every canal or slackwater navigation company, railroad company, turn-pike company, plank road company, bridge company, insurance company, telegraph company, or other joint stock company, except banking or other corporations whose taxation is specifically provided for in this act,”

shall make out the return in substantially the same way as was provided in Section 2744 of the Revised Statutes. It is made clear in the original act, taken in consideration with the development of the country at that time, that the Legislature intended that the property of railroads, together with all the personal property that had a fixed situs within the definition laid down in that particular section at a particular place should be credited to the particular place, and that the value of the property which had no fixed situs should be ascertained and divided among the various taxing districts according to such valuation and the valuation of the real estate therein named. So that it is clear to the court that these sections of the staute do not 'furnish any guide whatever to the method of arriving at the value of the property merely because it is the property of a corporation, and that it is only the purpose to secure proper distribution among the taxing districts; because, as I have suggested, the auditor is not to apportion according to the valuation of the real estate named in the return as it is listed for taxation, but according to the value of the real estate and fixed property named therein. The section requires that the officers shall name the taxing districts in which the various items of their personal property is located together with the value thereof. If, then; the value of the property of a corporation was to be taken as a whole, either by the method pursued by the auditor or by the Taxing Commission, it would be impossible for the auditor or the Taxing Commission to determine this vital thing which it is required to do in order to perform the duty of the auditor. On the other hand, the statutes specifically require that the officers of the corporation shall in their report name the taxing districts in which items of property are located, and fix the value thereof.

Now, it might be said, I realize, that if in a certain taxing district there was a distinct plant or manufacturing establishment of a corporation that its value would be determined by taking it as a unit. That, however, could not be claimed upon the authority of these two sections of the statute. It would have to be claimed upon the authority of the cases to which I have referred. As that is not the proper method to pursue as to the property of an individual,- it likewise is not the proper method to pursue as to the property of a corporation.

I find nothing in the evidence, nor the agreed statement of facts in this case, to indicate that the property of the Cedar Point Resort Company has not a fixed market value.. Certainly some of that property has a market value. Therefore, the contention of the state that the value thereof could not be arrived at in another method than that done by the auditor or the Taxing Commission is not sustained.

Upon the whole, it is my opinion that under the law of Ohio the property of the 'Cedar Point Resort Company must be listed for taxation at its true value in money without reference to the fact that it is the property of a corporation, and without reference to its use by the corporation, and as it would be if it were the property of an individual. I don’t think it is necessary for the court to give any consideration to the question raised in the briefs that the auditor had the right, or that it was the duty of the auditor, especially to fix the value if he believed the value named in the return was not correct. I don’t believe that it is necessary for the court to give any consideration to the question as to whether a method of that character, or of that kind, would be' constitutional; or that an act providing for that method of procedure would be constitutional. I think it enough to say that the court is very clearly of the opinion that the Legislature has not yet provided for adopting that method of taxation. The order of the court will be, that all of the assessment upon the personal property of the Cedar Point Resort Company in excess of $61,045.90 will be declared void, and that it pay taxes at the regular and usual rate of taxation for the year 1912 upon that sum.  