People ex rel. Bank of the Commonwealth v. Commissioners of Assessments & Taxes

By the Court, Bonney, J. The question to be determined in this case is of very great importance, and should receive a more deliberate and careful examination than the press of business in this court will permit us now to give to it. The case, however, will undoubtedly be carried to the court of last resort, for final adjudication, and I have therefore less hesitation in stating the conclusion at which, upon brief consideration, I have arrived. The decision of the case, in my opinion, depends entirely upon the construction to be given to the statutes concerning the assessment of taxes on incorporated companies as amended by the act passed April 15th, 1857, (Laws of 1857, vol. 2, ch. 456, p. 1,) and, for the purposes of this decision, I assume that all stocks of the United States are exempt from taxation by the state governments; and not only that such stocks cannot he so taxed, eo nomine, but that individuals who are the owners and holders thereof cannot be taxed for the amount or value of the same as for personal property owned by them. (1 Kent’s Com. 425, &c. 6th ed. Weston v. — 514 — City of Charleston, 2 Peters’ U. S. R. 449. McCulloch v. State of Maryland, 4 Wheat. 316. International Life Ass. Society v. Com’rs of Taxes, 28 Barb. 318.) This relator, the Bank of the Commonwealth, is a domestic corporation •created by and under the laws of this' state, and subject to its authority and legislation. The statutes of this state relative to this subject, as amended in 1857, provide as follows: (1 R. S. 944, &c. 5th ed. § 1:) All moneyed or stock corporations, deriving an income or profit from their capital or otherwise, shall be liable to taxa-. lion on their capital in the manner hereinafter prescribed. § 3. The president &c. of every such incorporated company shall, on or before the first day of July in each year, make and deliver to the assessors a written statement, specifying ; 1. The real estate (if any) owned by such company, where situated, and the sums actually paid therefor; 2. The capital stock, actually paid in and secured to be paid in, excepting therefrom the sums paid for real estate arid the amount of such capital stock held by the state and by any incorporar ted literary or charitable institution; and 3. The town or ward in which the principal office of the company is situated or its business is carried on, or in which it is liable to be taxed. § 7. The assessors shall enter in their assessment rolls as follows: 1. In the first column, the name of each incorporated company liable to taxation, and, under its name, shall specify the amount of its capital stock paid in, the amount paid by such company for real estate then belonging to it wherever situated, the amount of its surplus profits or reserved funds, exceeding ten per cent of its capital after deducting therefrom said amount of said real estate, and the amount of its stock (if any) belonging to the state and to incorporated literary or charitable institutions. 2. In the second column, the quantity of real estate owned by such company within their town or ward; and, in the third column, the actual value thereof estimated as in other cases. 3. In the fourth column, the amount of capital stock of every such — 515 — company paid in and secured to be paid in, and of all such surplus profits or reserved funds as aforesaid, after deducting the sums paid out for real estate then belonging to it, and the amount of stock (if any) belonging to the state and to incorporated, literary and charitable institutions. § 10. The capital stock of every company liable to taxation except such part of it as shall have been excepted in the assessment roll, or as shall have been exempted by law, together with its surplus profits or reserved funds, exceeding ten per cent of its capital after deducting the assessed value of its real estate, and all shares of stock in other corporations, actually owned by such company which are taxable upon their capital stock under the laws of this state, shall be assessed at its actual value and taxed in the same manner as other personal and real estate of the county.” Under these statutory provisions the assessment in this case has been made on said balance of the capital stock of the relator, and, as it appears to me, in exact accordance with those provisions. There is no question here of surplus profits or reserved funds, or as to the actual value of the stock, (whatever may be the meaning of that phrase as used in § 10 above referred to,) neither does it appear that any part of said stock was held by the state or by any incorporated, literary or charitable institutions; or was excepted in the assessment roll, or was by law exempted from taxation. But the relator insists that a deduction should have been made, not of any particular part or shares of the stock, as being for any cause exempt by law from taxation, but of the sum of $103,000 from the aggregate amount of the whole capital stock not invested in real estate, for the reason that such an amount ($103,000) of the moneys paid in for shares in said capital have been, by the bank, invested in stocks of the United States, and that such U. S. stocks are not subject to taxation by state authority. Under the statutes above referred to, as I understand them, taxes are assessed upon the amount of the capital stock of a — 516 — corporation ascertained in the manner prescribed: and not upon any property purchased or otherwise obtained by the corporation, or in which such capital or any part thereof may be invested, excepting only the real estate held by the company, which is subject to special rules of taxation, and must be assessed at the place where situated, whether in this state or elsewhere; and it is to be observed that the statute neither requires nor authorizes the insertion in any entry in an assessment roll made under § 3 above referred to, of any account or statement of the use made by a corporation of any part of its capital or other property, excepting only that part which has been used in the purchase of real estate, nor any specification of the personal property held by such corporation. These statutes clearly require that every moneyed or stock corporation shall be assessed for, and pay taxes upon, the whole amount of the balance of its capital stock paid in, and remaining after deducting the shares of stock, excepted or exempt as above mentioned, and such sum as shall have been invested in real estate, notwithstanding a portion, or even the whole, of such balance may be invested in stocks of the United States held by such corporation. And this construction, in my opinion, does not, as has been contended, conflict with the decision in the case of the British Commercial Life Ins. Co. v. Comm’rs of Taxes, (28 Barb. 318.) That Life Insurance Company was a foreign corporation, using a portion of its property in carrying on business in this state, and under the laws of the state liable to taxation therefor. It stood in the same position as a non-resident natural person, and the assessment was on the property held and used in business in this state, and not upon any shares or portion of the capital stock of the company. Neither, as I understand them, are the definitions of the terms “capital stock,” or “capital,” given in the opinions in the case of the Mutual Ins. Co. of Buffalo v. Supervisors of Erie, (4 Com. 442,) in any respect inconsistent with this construction. — 517 — But it is urged on behalf of the relator that said statutes of this state, if such be their true construction, are unconstitutional in so far as they provide for or authorize taxation by state authority of any part of the capital stock of the corporation which is invested in stocks of the United States. I cannot assent to that proposition. The state of Hew York has, by its laws, created or authorized the formation of this Commonwealth Bank and other like corporations, granting to them certain powers and privileges; and has also provided by law for the taxation of the capital stock of every such corporation. As soon as the capital stock is paid in it becomes, as stock, the subject of, and liable to, taxation; andas I view the law, it must, during the continuance of the corporation, remain so liable as stock irrespective of the property in which the money paid for thé stock may be invested, or any use that may be made of such money by the corporation ; and if any part of the money paid in for its stock shall at any time be invested in stocks of the United States, such investment cannot affect the right of taxation, for the reason that the assessment of taxes is not upon the stocks of the United States, or other property owned or held by the corporation, excepting only its real estate, but continues to be as it was before such investment was made, an assessment on the capital stock of the company created under the laws of the state and thereby expressly made the subject of taxation. The corporation which accepts and enjoys the privileges granted by the state must take them cum onere. And in my opinion there is no foundation for the suggestion made on the argument of this case, that the decision by the court below is an evasion of the admitted rule of law that U. S. stocks are not liable to taxation by state authority. It is not in form merely but in fact and in principle that this assessment is upon the capital stock of the relator, and not upon the property in which the money paid in for that capital is invested; which property may be, and doubtless is, changing from day to day. But to permit the relator to — 518 — escape taxation upon so large a portion of its capital because it has seen fit to invest the money received for such portion in stocks of the United States, would, in my judgment, be an evasion of the law of the state which created the corporation and made it liable to pay taxes on the amount of its capital. [New York General Term, September 17, 1860. Sutherland, Bonney and Leonard, Justices.] The order made at special term should be affirmed with costs. Order affirmed.