Caldwell Land & Lumber Co. v. Smith, 146 N.C. 199 (1907)

Nov. 27, 1907 · Supreme Court of North Carolina
146 N.C. 199

CALDWELL LAND AND LUMBER COMPANY v. JOHN M. SMITH.

(Filed 27 November, 1907).

1. Taxes, Unlisted — Notice—Collection—“Due Process” — Revisal, sec. 5232 — Constitutional Law.

Proceedings for tbe assessment, collection and enforcement of taxes are quasi judicial and bave tbe effect of a judgment and execution, and come witbin tbe “due-process clause” of tbe Constitution, Art. I, see. 17. While tbe Legislature has the constitutional right to provide for tbe listing, assessing and taxing of personal property omitted to be listed, as the law requires of tbe owner, for five or more preceding years, an opportunity must be given by notice to the taxpayer, permitting him to be heard before tbe board of assessors or the tribunal having the power to list and assess such property, or before the courts of the State in some appropriate proceeding, before the assessment can be conclusive.

2. Same — Parties—Injunction—“Due Process.”

An injunction will be granted to the hearing against tbe Sheriff for collecting back taxes on a solvent credit, under Revisal, sec. 5232, upon the ground that plaintiff was not given notice of the assessment, or opportunity to be heard before the board of assessors or the tribunal having the power to list or assess such property. The Sheriff is the proper party defendant, but the commissioners may make themselves parties if they think the rights of the county require it.

Civil actioN, beard, on motion to dissolve restraining order, by Ward, J., at chambers in Newton, on 9 July, 1907.

This action is brought by plaintiff, the Caldwell Land and Lumber Co., against defendant, Sheriff of Caldwell County, for the purpose of enjoining the collection of certain taxes assessed against its property. The facts disclosed by such allegations in the complaint as are not denied or are admitted by the answer are: The Board of Commissioners of Caldwell County, at its meeting in May, 1907, placed upon the tax list as a solvent credit certain notes, amounting to $417,000, executed by one George O. Shakespeare, 13 February, 1902, to pláintiff, and secured by a deed in trust. These notes had. not been listed for taxation. The Commissioners valued the *200notes at the sum of $417,000, being their face value, and assessed them for taxation at said sum as a solvent credit for the years 1902 and 1903, adding to the tax the penalty of 25 per cent., aggregating the sum of $7,655.16. No notice was given plaintiff, either of listing, valuing or assessing said notes. The Commissioners immediately placed the said tax list in the hands of defendant Sheriff for collection, and he at once advertised for sale plaintiff’s real estate, consisting of some 42,982 acres of land. Plaintiff instituted this action 12 June, 1907, asking for an injunction, etc. Judge Goun~ cill granted a restraining order, returnable before Judge Ward, who, on the hearing, 9 July, 1907, “continued the injunction until the final hearing of the cause.” He did not find any facts, simply referring to the pleadings. Defendant excepted ,and appealed.

W. G. Newland and Jones & Whisnwrvb for plaintiff.

Mark Squires, Lawrence Wakefield and ill. N. Ilarslum for defendant.

CoNNOR, J.,

after stating the facts: The Machinery Act (Revisal, sec. 5232), being the same as the act of 1901, sec. 69, ch. 7, and all other acts on the subject subsequent thereto, provides that “In all cases where any personal property, chose in action, or any property, except land, liable to taxation, shall have been omitted, or shall be omitted, in any future year from the tax list by the owner or persons required by law to list the same, the Board of Commissioners shall enter the same on the duplicate of the next succeeding year and shall add to the taxes of the current year the simple taxes of such preceding year, not exceeding five years, with 25 per centum added thereto, in which such personal property as aforesaid shall so have escaped taxation, and the said Board of Commissioners shall value and assess the personal property aforesaid for those years, and are empowered to examine witnesses and to call for papers to determine the value and to ascertain *201tbe persons liable for tbe tax upon said personal property.” This is tbe only section in tbe statute concerning or regulating tbe listing and assessment of personal property omitted from tbe tax list by tbe owners. It omits to provide that notice shall be given tbe owner, or to give bim any opportunity to be beard, either before or after tbe property is listed, valued and assessed. We have no doubt of tbe power of tbe Legislature to provide for tbe listing, assessment and taxing of personal property omitted to be listed as tbe law requires by tbe owner. Nor do we perceive any reason why it may not be taxed for five or more preceding years if it has escaped taxation'so long. These questions have been settled by several decisions of this Court. Kyle v. Fayetteville, 75 N. C., 445; Railroad v. Commissioners, 82 N. C., 259; Wilmington v. Cronly, 122 N. C., 388. It is tbe settled policy, and so required by tbe Constitution, that all of the property, including solvent credits, in tbe State shall be assessed and taxed at its value in money. Tbe method of enforcing this constitutional requirement is left with tbe Legislature, subject to other provisions of the Constitution securing to tbe citizen tbe right to be beard before bis property is subjected to taxation. We are also of tbe opinion that an industrial corporation is liable to pay tax on its solvent credits under such regulations as to tbe method of listing and assessment as may be provided by law. Of course, the special statutory provision prescribing tbe mode of assessing tbe property of banks and building and loan associations is exclusive of all others. A number of interesting questions are raised by tbe pleadings upon controverted allegations. In tbe absence of any finding of tbe facts, we are unable to discuss or decide them intelligently. There are, however, several questions respecting tbe procedure in such cases which we think best to dispose of at this time. We would hesitate to give the construction to the statute for which defendant contends. It must be conceded that the provisions of tbe section in regard to listing, valuing and assessing un*202listed property are painfully indefinite and obscure. While no express power is conferred upon tbe Commissioners after making tbe assessment to place tbe list so made in tbe bands of tbe Sheriff, we think that by a fair construction, in tbe light of tbe power conferred in other portions of tbe statute respecting tbe regular tax list, such power is given. The courts have, so held. “Assessments of escaped property are made nunc pro tunc, and it is immaterial that tbe regular periods for making and reviewing assessments, levying tbe taxes or placing tbe rolls in tbe bands of tbe collection officers have elapsed when they are made, unless the owner is thereby deprived of some constitutional right or tbe statute limits tbe time.” 27 Am. and Eng. Enc., 700. Tbe qualifying language' in this quotation presents tbe difficulty in this case. If tbe section stands alone and is to be construed without reference to other sections in tbe statute, or tbe universal principle that no property of tbe citizen may be taken or taxed without an opportunity to be beard before tbe board of assessors or tribunal having the power to list and assess such property, or before tbe courts of tbe State in some appropriate proceeding, we would find it difficult to reconcile it with section 17, Article I of tbe State Constitution. If, as contended by defendant, section 5233 empowers tbe Board of Commissioners, by simply examining the books of tbe Register of Deeds, to place upon tbe tax list any notes or other cboses in action secured by mortgage which they may find thereon for five preceding years, and, without notice to tbe supposed owner, to place a value upon them, assess them for taxation, add tbe penalty and summarily enforce tbe payment of such tax and penalty by a sale of tbe property of tbe owner, tbe protective provisions of section 17, Article I of tbe Constitution would, pro hac vice, be annulled. Tbe power to tax, it has been said, and tbe truth of tbe saying too frequently exemplified, is tbe power to destroy. While tbe power is essential to tbe life of tbe State, its enforcement by constitutional *203methods and within constitutional limitations is essential to the safety of the property of the citizen. “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 Am. and Eng. Ene., 704. The nature of tax proceedings is summary, of necessity. “Every inhabitant of the State is liable, by means thereof, to have a demand established against him on the judgment of others regarding the sum which he should justly and equitably contribute to the public revenues. Every owner of property in the State, whether he be an inhabitant or not, is liable to have a lien in like manner established against his property. Moreover, the persons who make the assessment lighten the burden upon themselves in proportion as they increase it upon others. They must act, to a large extent, upon imperfect and unsatisfactory information, and the danger that, when most honest and fair-minded, they will misjudge and thus do injustice, is “always imminent. It is, therefore, a matter of the 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 malcmg the privilege of being heard a legal right.” Cooley on Tax, 625. The learned author proceeds to say, and the importance of the subject, in the light of the loose and unsatisfactory provisions in our revenue laws, justifies the quotation, at some length: “In substance, the question will be whether the right to be heard in tax cases is a constitutional right and indefeasible. Upon this subject there is a general concurrence of authorities in the affirmative. It is a fundamental rule that, in judicial or quasi judicial proceedings affecting the rights of the citizen, he shall have notice and be given an opportunity *204to be beard before any judgment, decree, order or demand shall be given and established against him. Tax proceedings are not, in the strict sense, judicial, but they are quasi judicial, and, as they have the effect of a judgment, the reasons which require notice of judicial proceedings are always present when the conclusive steps are to be taken. 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 an opportunity to contest the justice of the assessment.” Cooley, 628. The text is illustrated and supported by an abundance of authority from both State and Federal'courts. No case is cited from this State, because no attempt, so far as records show, has been made to disregard in practice a truth so manifest and fundamental. It is held that, if possible, statutes will be so construed as to require notice. Kansas v. Pacific Railroad Co., 8 Kan., 558; Baltimore v. Grand Lodge, 60 Md., 280; Gibson v. Munson, 114 Mich., 671. Section 5235 makes provision for the equalization of values after notice. This, however, refers to the regular tax list,-and the time is fixed for making such equalization. Section 5236 provides for complaints by owners of property for improper valuation. This, of course, applies to property which has been listed by the owner. If he has no notice that claim is made, that he has omitted to list his property, and it is summarily listed, valued and assessed, and the list, with the force and effect of a judgment and execution, given to the Sheriff, how is he to make complaint — how is he to know until the “conclusive act is completed” either that his property is assessed or the value put upon it? ' We are clearly of the opinion that either the assessment is void and should be so declared, or that the plain*205tiff should have an opportunity to contest all of the questions in the court which would have been open to it if notice had been given at the inception of the matter. In view of the many and more or less difficult questions raised upon the pleadingsregarding the liability of the notes to taxation by reason of the peculiar facts relating to their execution, etc., and the manner in which they should be assessed, if liable, the parties should be permitted to litigate them in this action. The necessity for giving notice to owners of choses in action before assessment is manifest. It by no means follows that every note secured by mortgage is solvent to the extent of its face value, or that the full amount is due. Payments may have been made upon it. Again, “All bona fide indebtedness owing by any person may be deducted by the tax lister from the amount of said person’s credits.” Section 5227. If all of the notes, bonds and other choses in action appearing upon the Eegister’s books for five preceding years are to 'be regarded as solvent credits and listed at their face value, and if such listing and valuation is “conclusively correct,” having the “force and effect of a judgment and execution,” the question of securing revenue for the State and counties would be solved, but possibly the rights of the individual citizen would be sacrificed. For even so desirable a purpose the'end would hardly justify the means. If the plaintiff corporation had, during the years 1902 and 1903, a solvent credit for $417,000 subject to taxation which it omitted to list, it should, even at this late day, pay the taxes justly due upon it; but before the fact is conclusively established by a quasi judicial tribunal full and ample notice should be given and an opportunity to be heard afforded. We have no doubt that the plaintiff is entitled to injunctive relief pending the hearing. Purnell v. Page, 133 N. C., 125. By the same authority the Sheriff is the proper party defendant. If for any reason the Commissioners think that the rights of the county require, they may be made parties. We take the liberty of suggesting that the Legislature, at its next session, consider the propriety of *206amending section 6232, Revisal, so that provision be made for notice before the personal property omitted from the tax list be listed, valued and assessed.

The order of his Honor continuing the injunction is

Affirmed.