Hubbard v. Board of Supervisors

Wright, J. l. taxation: ofsharesinnationai banks, New cases could be more important than these now before us. They have received the attention due them at the hands of counsel, and from ^ ' us, the most careful and deliberate consideration. And we remark*in the first place, that the adjudications in other States and the Supreme Court of the United States, have recognized and settled some leading general principles, which, when applied to these cases, narrow very much the field of inquiry. The forty-first section of the act of congress, authorizing the taxation by and under State authority, of the shares of the shareholders in the associations in said act contemplated, provided, that the tax so imposed “shall not exceed the fate imposed upon the shares of any banks organized under- the authority of the State where such association is located. . Now the power of congress to declare that the bonds and securities issue,d and provided by the federal government, in carrying on and managing its fiscal affairs, shall be exempt from State taxation, is not, as we understand, denied. And as congress may prohibit, so it may allow such taxation, or prescribe the manner of its exercise. — 144 — Hence in the act before us, while there is no authority given to tax the capital of these associations, solely invested in United States securities, the power is conferred, under certain limitations, to tax the shares of the individual shareholders. Whether, in view of the pledge of the government exempting these securities from taxation, and the further thought that the capital of these associations thus invested, as such, cannot be taxed by the State, (2 Black. 620; 2 Wallace, 200,) it is competent to permit taxation of the shares, is a point not strongly urged by counsel; regarding, as they probably do, that it is definitely settled by the majority opinion of the Supreme Court in Van Allen v. Nolan (3 Wallace 573), and subsequent ones in the same court. For myself, I cannot but remark that the argument in favor of the exercise of that power, based upon a distinction between the capital and the shares, does not strike me with the most conclusive force. In addition to the cases herein after cited on the general subject, see upon this point: Whitney v. Madison, 23 Ind. 331; Salem Factory v. Danvers, 10 Mass. 514; Weston v. City Council, etc., 2 Peters, 449; Bank of Commerce v. New York City, 2 Black. 620. As already suggested, however, the distinction is clearly recognized and admitted, and the question can hardly now be regarded as. an oj>en one. See the following recent cases in the Supreme Court of the United States: Bradley v. The People, etc., and The People, etc., v. Commissioners of Taxes (two cases); Wright v. Steltz, Supreme Court of Indiana; Frazer v. Siebern, 16 Ohio St., 614 (Am. Law Reg. 6, 466, 483). The rule, therefore, now is, that shares in national banks may be taxed by State authority, and that too without regard to the amount which the association itself may have invested in federal bonds. — 145 — 0 _what dependent1S upon' Equally clear aud well-settled is the further proposition - that if the State law provides for the taxation of the capital of its own banks and not of its shares, and for the shares of the national banks, it fails to conform to the act of congress (section 41, June 3, 1866), and is therefore invalid. It follows, therefore, that if by our laws, the shares of banks organized in this State are not taxable, the shares of national banks cannot be, and the act of 1866, to be presently cited, is without force. Lincoln v. Assessors of Barton, 44 Barb. 148; Bank of Commonwealth v. Commissioners of Taxes, and cases before cited. 3._not aii- . iawsomhe state. The act in question provides that these shares shall be included in the valuation of the personal property of the holder, or owner, but not at a greater rate than is assessed upon other moneyed capital ^ hands of individuals, and that the real estate of such association shall be subject to taxation, etc. The second section points out the method of listing these shares, and of collecting the taxes so assessed. It will be observed that the act itself contains no proviso that this tax shall not “exceed the rate imposed upon the shares of banks” organized under the State laws. And notwithstanding the case of Van Allen v. Nolan (supra) would seem "to imply, that this was necessary, or, that the limitation must be contained in the act which imposes the taxation, we confess our inability to see • the propriety or force of the position. If the prior legislation taxes the shares, or makes them liable, either generally, as all other property, or to a given per cent, there is no necessity, in our opinion, for declaring in terms in the act taxing shares in national banks, that such taxation shall not exceed^ etc. The practical result to be attained, was to prevent any discrimination in favor of the State associations, or against those organized under the — 146 — laws of congress, and there is certainly no necessity to disclaim such purpose in the State act, which seeks, ostensibly, to do that which the national legislation permits. Keeping in view the accepted proposition that the taxation of the capital is not the taxation of the shares, we come to the question whether in this State, “ tlie shares of banks organized under its authority ” are taxable, or whether such taxation is upon the capital. And here is the ppint of difficulty; for if there is no tax upon the shares, though there may be upon the capital of State banks, these levies were illegal. If there is such a tax, then they were legal and the taxes should be paid. i. ■ — - organibanks. A question somewhat preliminary, however, may appropriately first receive attention. The act of congress it will be remembered, speaks of the State institutions as “banks oi'gaimzed under the., authority of the State,” etc. And now it is urged that we have no organized banks under our banking systems,that they have neither capital nor shares to tax, and that therefore there can by no possibility be an unjust discrimination against national banks. The argument we confess does not strike us as being in accord with the spirit and purpose of the law. The learned chief justice in the Van Alen case (supra), speaking for the minority of the court, goes so far as to say that the act “ witholds from the State whose policy does not allow the organization of hmihs, and pro•vide for the taxation of shares, the authority to tax the shares of the national banking associations.” It is not necessary for us to adopt this extreme view, for in this State we do authorize banking. And yet, if there would be no power to tax in the case stated by the Chief Justice, there certainly could not be where the law authorizes but the banks have not been organized. Not only so, but this provision is substantive, cannot be disregarded, and — 147 — was intended to. declare the rule as to the rights of the State and federal governments. The question is, what does-our law declare, and what is the method of taxation provided for? and not whether there is any property subject to taxation; "We are to inquire what is the legal mode of taxation, and not determine that by the fact that State banks are organized to-day and have surrendered their franchises to-morrow. If this year the act‘is legal, it cannot be made illegal the next, by the existence or nonexistence of an object upon which it .is to operate. If the law contemplates and provides the machinery for the establishment of such institutions, without further legislative action, and gives the scheme of taxation applicable to the same when organized, the courts will not stop to. investigate whether the machinery has or has not been put into operation. These banks within the meaning of the law, and for the purpose of measuring the rights of - the State as to the subject in question, are organized, and whether they shall be clothed with vitality, depends upon' individual action. And when men come to invest their means in national banks, they look to the lorn as the charter of their rights, and are not required to inquire whether State banks do or not exist. So that, without stopping to investigate whether State banks have or have not an actual organized existence at this time, we hold that the whole theory of the objection is unsound, and proceed at once to the main and cardinal inquiry, and this is, whether by our law the shares of State banks are subject to taxation. Aside from Certain exemptions not material to be noted, all property within the State, including that belonging' to any bank or company, incorporated or otherwise, whether incorporated by this or any other State, is declared subject to taxation. The property of a body corporate is to be listed by its principal accounting officer' — 148 — or agent. Depreciated bank-notes and the stock of corporations are to be assessed at their cash value. Each inhabitant of the State is to assist the assessor in listing all property subject to taxation of •■which he is the owner, etc. All private property is to be assessed and taxed in the name of the owner thereof on the first day of January, of the then current year, and each owner shall be required to pay taxes' thereon. The assessors are to have books properly ruled in which to enter the name of the individual, corporation, society, partnership or firm, to whom any'property shall be taxable, as also his or their property, includi/ng the amount of stock or sha/res -in any corporation or company, not regui/red hy law to he otherwise listed or taxed. These provisions are found in the general revenue law. Kev. §§ 712, 714, 719, 721, 752. Our laws provide also for the organization of two classes of banking institutions; a State hank and branches, and those, known as “free hanks ” under a general banking law. In the first (§ 1676), it is declared that the legislature shall never impose any greater tax upon the property employed in banking thereunder, than is imposed upon the property of individuáis. .The second act provides that taxes shall he levied on and paid hy the corporation and not upon the individual stockholders / the value of the property to be ascertained annually by the bank commissioners herein .provided for, and the rule of taxation shall be the same as that required to be levied on other taxable property by the -revenue laws of the State. § 1598. Upon this legislation, the argument for taxation is briefly this: The capital of these (State) banks is property, and, therefore, it is taxable. The shares in such banks are property, and, therefore, they are taxable. In other words, that the shares, as well as the capital, are taxable, and, therefore, the taxation of shares in national — 149 — banks conforms to the law; for such tax does not exceed the rate imposed upon banks organized under the authority of the State. If this argument is sound, then what is the necessity of the act of 1866 ? Shares in national banks are property. Under the general revenue law, they are as clearly so as shares in any other bank or corporation. Being property, they were taxable without further legislation, and this aet was entirely unnecessary. The fact, however, that a special declaration to this effect was deemed necessary, tends to show that prior thereto there was no law recognizing shares in banking corporations, as such, subject to taxation. But without designing to do more than suggest this thought, we pass to tlie legislation of which we have above given a condensed statement. We feel entirely clear that by our laws, these corpora-, tions (State and free, banks) are taxable property, and that the shareholders- are not to be taxed upon' their shares of stock. The proposition is not denied, that the State, in granting a franchise, might affix its own terms-as conditions of the grant. And, therefore, in such a case, it might be entirely competent to declare that shares and capital should both be subject to taxation. But that equality, which should never be lost sight of in any and every scheme of taxation, most manifestly dictates that this practical, if not theoretic double taxation, should not be allowed, except this appears to be the clearly expressed intention of the statute making the grant. And when the whole property is reached, as it may be, either through the shares or capital, and made to bear its due proportion of the public burden, the State ought not to ask more; nor should it in good faith be given more, unless the right thereto is cleax-ly deducible from the terms of the law, be it either general or special. — 150 — Now no. one, as it seems to us, can, from our entire ■legislation, fairly conclude that it was ever intended to tax both. It is not so said in terms certainly. It would not be so claimed as to partnership prpperty, and the interest of the individual members therein, and why any more in a corporation ? • Not only so, but the law itself quite clearly negatives such intention. How otherwise are we. to understand the provision that temes shall be levied on andjpaid by the corr ■poration, and not upon the individual stockholders, entirely harmonizing as it does with the declaration that •the individual shall pay taxes on his shares in a corporation not required bg law to be otherwise taxed? There can be no question that the tax is not only to be paid by the bank-, but levied on it, and not upon the stockholders. Any other construction would be, that t'he taxes against the corporation, against the property, shall be paid by the bank, and not by the stockholders, but the stockholders shall, nevertheless, pay on their shares. This is not warr .ranted by the language of the law, and is against its spirit and policy. So too, these provisions áre in accord with those which make liable to taxation property belonging to a bank, and that such property shall be listed by fhe principal accounting officer of the bank. §§ 712-714. And, indeed, it would be difficult to find so many provisions, in statutes passed at different times, upon any other subject, with so little conflict. They all point to the conclusion that it is the capital and not the shares which are to be taxed. And this has been substantially held in The Town of McGregor v. The McGregor Bank (12 Iowa, 79). All the cases, too, decided in the Supreme -Court of the United States, and in other States (most of which we have herein before cited), fortify this position. •The length of this opinion forbids that we should do more than thus refer to them. See further, Morkoc v. Hart — 151 — rauf, Sup. Court Penn.; First National Bank v. Portsmouth, 47 N. H.; Gordon v. Appeal Tax Court, 3 How. 135; Smith v. Bailey, 9 N. H. 423; Angell & Ames on Corp. § 460. s>_unauth0. mentfmode of relief. In conclusion, in answer to some points specifically made by counsel for the appellant in the third case, we remark that this is not an instance of mere erroneous or excessive assessment. It was without authority, and the bank was not bound within any of the cases ruled in this court,- to apply in the first instance for relief to the board of supervisors. If this was necessary, however, -the petition avers that the application was thus made; the correction ordered; that this, without the knowledge of the bank, until-long after the adjournment of the board, was subsequently reconsidered, wherefore, etc. And all these averments are taken as true on demurrer. It was certainly no part of the bank’s duty to presume that the board would reconsider its action. It is true that the owner is required to assist the assessor in listing his property. But it would be a most violent ■presumption to say that, because of this duty, without any averment that in the particular case it was discharged, the owner was estopped from complaining of an illegal or ■unauthorized levy. 6._parties ingi!o enjoin co cction. We entertain no doubt, that the county treasurer was a proper party defendant to the plaintiff’s petition. Whether the county should not have also been joined, is not made a point by the demurrer. . The treasurer (Young) was the officer having the process, and about to execute it. Upon principles long and well settled he was a proper party. We, therefore,-conclude, that as our legislation now stands, the shares in national banks in this State cannot — 152 — be taxed. The remedy is with the legislature. Other States, misapprehending the full purport and bearing of the national banking law, and in advance of its full exposition by the federal judiciary, have made the same mistake. In many of these their laws have been so amended as to meet the difficulty. If the act of congress shall remain unchanged, it will be for the legislative department here to take such action as may be deemed advisable .to subject this property to its due proportion of the public burdens. ‘ The first and third cases are affirmed — the second one reversed.