Ratterman, Treas., v. Ingalls.

In Insurance Co. v. Cappellar, 38 Ohio St. 560, the company disclosed the real facts to the auditor by returns on the blanks furnished, but deducted its re-insurance fund as a debit from its credits, and returned the balance for taxation. The auditor proposed to correct these returns under section 2781, for five years, and the suit was to enjoin this proposed action. As made by the company, the statements were unquestionably erroneous. The claim was made in argument by the learned attorney-general, that the returns were false, and he argued as is urged here, that the word "false" meant "not true;" that the returns did not comply with the statute, and hence were "false.” This was denied by counsel for the company, (now one of the eminent counsel for defendant in error in this case), who contended, as is here contended, that the returns were not "false," inasmuch as there was no concealment, or intentionally false statements, and that the returns showed every item, and the auditor had full knowledge of their character. The information as to ownership was given the auditor on the returns; in the present case like information was given by the taxpayer verbally. The court held that the returns were not false within the meaning of the statute, and confined the judgment to the amount due as taxes for the current year, without penalty.

It is insisted that in section 2782, the term "false statement" is used as meaning simply a false or incorrect statement, as held in Champaign County Bank v. Smith, 7 Ohio St. 42, where the language of section 46 of the act of 1852 (now incorporated into section 2782) is construed. And, as a result, it is claimed that a like signification must be given to like language in section 2781, on the principle laid down in Rhodes v. Weldy, 46 Ohio St. 234, that "where the same word or phrase is used more than once in the same act in relation to the same subject-matter and looking to the same general purpose, if in one connection its meaning is clear and in another it is otherwise doubtful or obscure, it is in the latter case to receive the same construction as in the former, unless there is something in the connection in which it is employed, plainly calling for a different construction." A

66

Ratterman, Treas., v. Ingalls.

full analysis of section 2782 is not necessary to the point we make. It is apparent on the surface that there is not full identity of subject-matter in the two sections, nor is the connection in which the term stands in one the same as in the other. In 2781, it is used, in effect, as the equivalent of evade;" in section 2782, it is used apparently in contrast with "evade." There is, therefore, manifestly, something in the connection in which the language is employed in section 2781,"plainly calling for a different construction." And while the general subject-matter is the same, a special subject-matter, to wit: penalty, is present in one section and absent in the other. The two sections were originally passed at different dates, and were intended to accomplish, in part, different results. One is intended solely for the correction of errors, from whatever cause arising, the taxpayer being liable for more than simple taxes only in case it is shown that the return was made with intent to evade the payment of taxes, and that liability being for costs of correction only; the other to correct false returns only, and impose a severe penalty upon those who make them, thus punishing the wrongdoer and serving as a warning to others.

It is not doubted that the legislature had full authority to provide for an inquiry into past years, and to prescribe such conditions, as, in its wisdom, seemed proper for ascertaining and placing upon the duplicate, taxes omitted to be returned for any cause, and there certainly would be no inequity, as between the state and the citizen, in opening up settlements for periods prior to the current year upon the ground of mere mistake. Such policy would but place the state in the same attitude towards its citizens as it places citizens in towards one another. But, had such been the purpose of the legislature, it seems natural to expect that that body would have employed plain, unequivocal terms, words admitting of but one meaning, and clearly expressive of the precise purpose intended. Our language is not lacking in words adequate to the expression of exact ideas. As we have already seen, the word "false" has a legal meaning, and we would suppose that if the legislature intended to use it in a more general

Ratterman, Treas., v. Ingalls.

sense, such intention would have plainly appeared by the context. Stephenson v. Higginson, 3 H. L. Cases 686. The terms of the entire section, however, not only do not clearly indicate a purpose to provide for correction of errors in returns for past years for mere mistake, but, while admitting of dispute as to the real meaning, nevertheless, tested by ordinary rules, as applied to a statute where a penalty or forfeiture is imposed, fairly imply, as we think, a purpose to limit such corrections to cases where the taxpayer is shown to have been in fault; and the courts have no other duty than to give effect to that language.

An examination of the cases upon the proper construction of tax laws, cited by defendant's counsel, fails to impress us that the conclusion of counsel is correct. The cases go to the extent of holding that revenue statutes are not to be regarded as penal, and therefore to be construed strictly, but are remedial in their character, and to be construed liberally carry out the purposes of their enactment. This need not

to

be disputed. But we discover no inclination in any of the decisions of the Federal courts to impose the penalties of the United States revenue laws upon the innocent. Indeed, the purpose seems to be to refuse to do so except where the language of the law will fairly admit of no other result. This is illustrated the case of U. S. v. Bbls. Spirits, 2 App. (U. S.) 305. The syllabus is: "Revenue laws inflicting penalties for their violation, are not to be construed strictly, nor with excess of liberality; but in such a manner, looking at their policy, purpose, spirit, and language, as will best effectuate the legislative intention. The courts will not construe a law imposing a forfeiture, as extending to property which, before seizure, has been sold to a person innocent of the offence by which the forfeiture is incurred, and who has purchased in good faith, unless the intention of Congress that the forfeiture should be absolute and instantaneous on the commission of the offense, be manifest and unmistakable."

Upon a consideration of the entire statute in the light of the authorities, and having in mind the purpose to be accomplished by this section, as heretofore held by this court,

Ratterman, Treas., v. Ingalls.

to wit: "not merely to afford a remedy for a recovery of what is due the state under its system of taxation, but also to secure honest returns by adding a penalty to the making of false ones," we are led to the conclusion that, in order to be "false" within the meaning of section 2781, there must appear, if not a design to mislead and deceive, at least such culpable negligence in the making of a return as carries with it the consequences of intentional default. Culpable negligence may well be said to be present where a party, under obligation to make a true statement, states that which is false in fact, and which he has no sufficient reason to believe to be true. It is the duty of the resident property owner to return his taxable property for taxation. In the performance of this duty he must use diligence and care in acquiring knowledge from sources where information is obtainable. If he uses such care, and acts honestly, making his return in accordance with his best knowledge and belief, after using all reasonable means to obtain an intelligent belief, his return will not be false within the meaning of section 2781. But this belief must result from a careful effort to perform the duty. Blind reliance upon an indolent belief that one's property is not taxable, without investigation, inquiry, or disclosure to the taxing officer, would show culpable negligence, as fatal to the claim of good faith and innocent purpose, as would a direct intent to deceive. With this construction we think the rights of both the state and the owner will be reasonably protected, and no injustice result to either party. The citizen is held to a high degree of vigilance in the performance of an important duty, and yet is not visited with severe penalties by reason of an honest mistake. This conclusion is believed to be in harmony with the holdings in the following cases: Breitung v. Lindauer, 37 Mich. 217; Pier v. Hanmore, 86 N. Y. 95; Bonnell v. Griswold, 89 N. Y. 122; Wright v. Smith, 5 Esp. 203; Black v. Ward, 27 Mich. 191; and to be fully sustained by Del. Div. Canal Co. v. Commonwealth, 50 Pa. St. 399.

There is force, too, in the consideration that the duty to make proper return is not satisfied by a return honest when

Ratterman, Treas., v. Ingalls.

made, but attaches to the taxpayer to such extent that if, before the return has been finally acted upon by the taxing officer, the party obtains knowledge that his return is incorrect, he should voluntarily correct it by a supplemental return, and that a failure to do this is, within the meaning of this section, an evasion which would authorize the auditor to add the penalty for the current year. He knows that unless such correction is made, the auditor, except he have information from other sources, will act on a return which is untrue, and the failure to speak, under the circumstances, may be regarded, in its nature, suppressio veri.

Applying these conclusions to the case before us, what should the judgment be? From the findings of fact we learn that, prior to the second Monday in April in the year 1881, the defendant took advice of eminent lawyers as to the taxability of the stock in question, and received opinions from them that it was not taxable under the laws of Ohio. During that month he informed the then auditor of Hamilton county that he owned such stocks, and discussed with him the question of their taxability. From a period long prior to this date, the auditor and boards of equalization of the county declined to take steps to compel returns of persons who, they knew, owned such stock; which action was approved by the auditor of state, and no instructions to the contrary were given by that officer prior to November, 1886. This conclusion of the taxing officers was generally known in the county of Hamilton, and the belief was practically universal in the county, for the period stated, that such shares were not subject to taxation. These facts were known to the defendant, and honestly entertaining the belief that the shares were not taxable, and having no intent to evade payment of taxes, he omitted the shares from his returns. Such, in brief, are the facts as found by the trial court. If the conclusion before stated as to what is necessary to constitute " a false return" be correct, it must be manifest that these facts do not show that the returns were "false."

As to the returns for the years 1881 to 1885, inclusive, there seems, therefore, no real question but that the judgment