Maguire v. Board of Revenue & Road Commissioners of Mobile County

STONE, J.'

The authority to tax shares in national banking associations for State purposes, is uniformly held to be de *413 rived from the act of Congress, which confers the power. Rev. Stat. U. S. § 5219; Pollard v. State, ex rel. 65 Ala. 628 ; Farmers' National Bank v. Dearing, 91 U. S. 29 . Without such statutory concession, no such tax could be levied. The powér is conferred, not in general terms, but with limitations. The language is, that nothing in the laws of Congress “ shall • prevent all the shares of any association from being included in the valuation, of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the State within which the association is located; but the legislature of each State may determine and-direct the manner and place of taxing all the shares of national banking associations located within the State, subject only to the two restrictions, that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State, and that the shares of any national banking association owned by non-residents of any State shall be taxed in the city or town where the bank is located, and not elsewhere. Nothing herein shall be construed to exempt the real property of associations from either State, county or mu- ' nicipal taxes, to the same extent, according to its value, as other real property is taxed.” The leading policy of these restrictions can not be misunderstood. The first was intended to prevent unfriendly, discriminating assessments against investments in the stock of national banking associations, lest thereby such investments should be discouraged and hindered by excessive burdens. Hence, the burden should be no greater than that levied by the State on other moneyed capital in the hands of individual citizens. You may tax the shares, said Congress, for the-support of your government, which protects them in common with all other material interests, but you can not lay upon them heavier burdens than you lay on other moneyed capital. The act discriminates carefully between the capital stock of such banking associations, and the shares in such capital stock. “ The tax on the shares,” as said by Justice Nelson in Van Allen v. The Assessors, 3 Wall. 583 -4, “is not a tax on the capital of the bank. The corporation is the legal owner of all the property of the bank, real and personal; and within the powers conferred upon it by the charter, and for the purposes for which' it was created, can deal with the corporate property as absolutely as a private individual can deal with his own. . . The interest of the shareholder entitles him to participate in the net profits earned by the bank in the employment of its capital, during the existence of its charter, in proportion to the number of his shares; and., upon its dissolution or termination, to his proportion of the property that may remain of the corporation after the payment of its debts. This *414 is a distinct, independent interest or property, held by the shareholder, like any other property that may belong to him.” Speaking of the difference between the shares and the capital stock, we, in Sumter County v. National Bank, 62 Ala. 464 , said: “ It is the difference between the several parts and the whole; between the tributaries and the congregated volume which forms the river; . . between an artificial entity, called a corporation, having a local habitation and a name, capable of suing and being sued, and which may survive all the shareholders of any given period, and the several owners of the shares, who are commonly real persons, and who may undergo constant change by transfer or death, without disturbing or affecting the continuance or identity of the corporation.”

National banking associations, being the creatures of Congress, and owing their legal existence to that body; and the right of the States to tax any thing pertaining to them being derived from the grant made by Congress, it follows logically and legally that we must accept the power, with all the conditions and reservations they have annexed to its exercise. And it equally follows, and such are its uniform rulings, that the Supreme Court of the United States has the reserved power, in dernier resort, of revising', and, if need be, of reversing the rulings of the State courts, bearing on the exercise of this power by the States. The question of the restriction inrposed by Congress, that State taxation on the shares of national banks “ shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens,” has led to much contention, and, to our apprehension, somewhat varied rulings in that .court of last resort.-See Van Allen v. The Assessors, 3 Wall. 573 ; People v. Commissioners, 4 Wall. 244 ; National Bank v. Commonwealth, 9 Wall. 353 ; Hepburn v. School Directors, 23 Wall. 480 ; Adams v. Nashville, 95 U. S. 19 ; People v. Weaver, 100 U. S. 539; Pelton v. National Bank, 101 U. S. 143 ; Cummings v. National Bank, Ib. 153; Supervisors v. Stanley, 105 U. S. 305 ; Hills v. Exchange Bank, Ib. 319; Evansville Bank v. Britton, Ib. 322.

Until the enactment of the statute approved December 8, 1880. — Pamph. Acts, 7 — there was no express provision in our statutes for taxing the shares of national banks. We had provision for taxing the capital stock of incorporated companies. — Code of 1876, § 362, subd. 10. This did not affect national banks, for Congress had not granted power to the States to tax the capital stock of such associations. Our revenue system1 had also levied a tax on all other property, real and personal, not otherwise specified therein. — Same section, subd. 13. Under the clause last cited, attempts were made to assess and collect taxes on the shares of national banking associations. *415 Some of our earlier rulings maintained sucli assessment and collection, while we steadily declared that all attempts to tax. the capital stock of such associations was forbidden by law. National Com. Bank v. Mayor, 62 Ala. 284 ; Sumter County v. National Bank, Ib. 464. In Pollard v. State, ex rel. 65 Ala. 628 , the question was again presented of the power to tax the shares of national banking associations under subd. 13 of section 362, supra; and, overruling our former decisions, we held that that statutory provision did not authorize the assessment. The effect of that ruling was that until December, 8th, 1880, there was no statute in this State which authorized the" assessment of shares in national banks for taxes. We added: “Whether the recent act is so framed as to harmonize existing provisions of the Code with the requirements of section 5219 of the United States Revised Statutes, is a question which is not necessarily presented by the record, and is, therefore, left undecided in this case.”

The decision in the case of Pollard v. State, ex rel., supra, was rendered by this court, soon after the publication of the ruling of the Ú. S. Supreme Court in People v. Weaver, 100 U. S. 539 , and conformed to that ruling. There was then no later decision of that court, bearing on that question, and we had no option but to follow* it. But, if the question were left to our own uncontrolled and unaided judgment, we think we correctly ruled that our former statutes aid not justify the assessment we therein pronounced invalid. The case of People v. Weaver arose under New York statutes. Before the national banks were authorized, it had been enacted in New York that tax-payers should be allowed a credit of the amount of their just debts from the sum of their taxable property, and' should be assessed for taxes only on the excess. The statute also provided how the tax-payer’s indebtedness was to be made known. The result was, that taxes were assessed and collected only on the net value of the tax-payer’s estate — what he would be really worth, after paying his debts. In 1866 the legislature of that State provided that the shares of all banks, State and National, should be assessed and taxed at their value. This statute is confined in its terms to shares of stock in banks, and makes no mention of any indebtedness of the tax-payer to be deducted. Williams, a tax-payer, whose shares in a national bank had been assessed, appeared before the board of assessors, and claimed a deduction of the sum of his indebtedness from the value of his bank shares. Fie submitted his affidavit, in the form the older statute had required. The credit claimed was disallowed by the assessors, they holding that the later statute made no provision for such discount or deduction, but properly construed, denied' such deduction. And the courts of *416 New Y.ork confirmed their ruling. The case was then appealed to the Supreme Court of the United States. The judgment of the Court of Errors of New York was there reversed by a unanimous ruling of the court, Justice Miller delivering the opinion. Among other things, he said: “The statute of New York, as construed by the Court of Appeals, in refusing to plaintiff the same deduction for debts due by him, from the valuation of his shares of national bank stock, that it allows to those who, have moneyed capital otherwise invested, is in conflict with the act of Congress.” This appeal, it will be observed, raised the question, and only the question of Williams’ liability on the assessment of his shares of stock in the national bank. Speaking of the said statutes of New York, the United States Supreme Court, in the later case of Supervisors v. Stanley, 105 U. S. 305 , made emphatic what had been implied in their former ruling, that they were not entirely inoperative. They were only inoperative to the extent they actually taxed national bank shares at a greater rate than was assessed by the State on other moneyed capital. One question raised in the case of the Supervisors v. Stanley arose on the identical claim of Williams to have a discount of his debts, which had been ruled on in the case of People v. Weaver. The, case of Stanley, however, involved the liability of other shareholders to taxation, who were not shown to have any debts to be discounted from the value of their taxable property. The majority of the court held that this latter class had no cause of complaint against the New York statutes, or their construction by their Court of Appeals, because “ the denial of this right [deduction of indebtedness] does not affect him [the shareholder]. ITe pays the same amount of tax that he would if the law gave him the right of deduction.”

In the case of Evansville Bank v. Britton, 105 U. S. 322 , the question arose under the revenue system of Indiana. This statute allowed a credit to the tax-payer of the amount of his indebtedness from two named classes of taxable values: 1. Credits or money at interest, either within or without the State, at par value. 2. All other demands against persons or bodies corporate, either within or without the State.” Erom all other subjects of taxation, no deduction of indebtedness was allowed. The court made the same ruling in that as in the Stanley ease, namely: That when no deduction was allowed the tax-payer for his indebtedness, the tax on national bank shares was invalid. It was repeated, however,, that this principle would not apply to those shareholders, who failed to show they owed debts, which they claimed the right to have deducted.

The foregoing are the latest rulings of the Supreme Court of the United States on this question, that have come to our *417 knowledge. It will be seen that the validity of State taxation on national bank shares is made by them to depend, not so much on the frame of the State law which levies it, as it does on the operation of the statute on the individual tax-payer. In other words, unless the tax-paver is himself subjected to a greater rate of taxation on his bank shares, than he is on his other moneyed capital, then the State law is valid as to him, although as to other shareholders in the same bank it is invalid, because it denies to them discounts from the value of their shares, which it accords to them in the taxation of their other moneyed capital. "We submit if this ruling does not give to statutes, similar to those brought to view in the cases of Stanley and Britton, svypra, a very unequal, if not an oppressive operation. It requires, under one and thé same statute, a payment of taxes on all shares of stock held by one class, and relieves from taxation shares held by others, because, forsooth, they owed debts, and the law makes no provision for a deduction of the amount of the tax-payer’s indebtedness. And this, notwithstanding the debts for which deduction is claimed, do not, in amount, equal one-half, or even one-tenth of the value of the bank-shares held by such tax-payer. This will certainly give to a State statute an unequal operation, which its framers never could have contemplated. J ustice Beadley, dissenting, said : “It [the statute] is void, in my judgment, because it malíes no exception, but is general in its terms, subjecting to taxation the capital stock [shares of?] of national banks, without the privilege of deducting debts. Denying to it operation and effect as to those who desire to claim the benefit of the deduction, and giving it effect as to all others, is to tear a portion of the law out by the roots.” In our opinion J ustice Beadley’s opinion is the sounder; and if, in the interpretation of our statute, we come to the conclusion that it is invalid because it makes no-provision for proper deductions, we will hold it invalid m toto. Suppose a State statute should enact that shareholders in national banking associations who owe no debts, shall pay a tax thereon at their market value, at the same rate as that levied on lands and personal property ; but'if the shareholder owe debts, his shares shall not be taxed. Such tax might not be a direct violation of the enabling act of Congress. Could it be upheld in this State ? We apprehend not.-Const. of Ala. Art. 11, § 6; Mayor v. Stonewall Ins. Co. 53 Ala. 570.

By the act which became a law December 8, 1880 — Pamph. Acts, 7 — it was provided : “ That there shall be levied and collected on the value of each share of every national banking association located within this State, whether held by residents or non-residents of the State, the same rate of taxation as is levied on other moneyed capital, the same to be levied and collected *418 in the county where each such association is located and not elsewhere, and to be paid by each such association for the shareholders thereof.” This statute, it will be observed, conforms to the second of the two restrictions imposed by the enabling act of Congress. It is also within permitted bounds when it requires the tax to be paid by the bank for the shareholders.-National Bank v . Commonwealth, 9 Wall. 353 . It is contended for appellant that the statute is invalid, because it makes no provision for deducting the tax-payer’s indebtedness from the value of his shares, and taxing him only on the balance. Part of this argument, if not the whole, rests on the language of our statute, which declares and defines the subjects of taxation. One class of such subjects is expressed in this language (Code of 1876, § 362, subd. 8): “ All money loaned and solvent credits or credits of value, from which credits the indebtedness of the tax-payer shall be deducted, and the excess only shall be taxed.” In the case in hand, the shareholders were allowed a ■credit against the value of the shares, of the amount of their debts; and under the rule declared in Supervisors v. Stanley, and Evansville Bank v. Britton, supra, the assessment complained of in this case would be upheld, if carried to the Supreme ■Court of the United States. This meets the first of the restrictions imposed by the act of Congress; for the taxation was mot at a greater rate than is assessed on other moneyed ■capital in the hands of individual citizens of the State. Our statute is not materially distinguishable from that of Indiana ■on the subject of deductions; and if the sum. of the tax-payer’s indebtedness had been allowed to be deducted in Evcmsville Bank v. Britton, and the excess only had been-taxed, there is nothing stated in the opinions to §how that such assessment would not have been pronounced free from error. The reasoning of the court clearly shows that such assessment would have been maintained, for the tax-payer would then have had secured to him all the act of Congress requires.

It is argued, however, that our statute makes no provision for such deduction, and therefore the assessment must fall, being without the law. Can this be maintained ? It is our duty to so construe the language of the act as to uphold it, if its language, reasonably interpreted, will admit of it. The act of Congress, imposing the restriction we have been commenting on, had been on the public statute book for many years. Our own statute, providing for a deduction of the tax-payer’s debts from the sum of his money loaned and solvent credits, and taxing only the balance, had also been long in force. Money loaned and solvent credits are clearly moneyed capital, and probably constitute the most valuable part of what may properly be classed, in common parlance, as moneyed capital. Peo *419 ple v. Weaver bad been decided at the term — possibly a year— preceding our enactment of December 8, 1880. Is it improbable that our legislature had in view this ruling of the United States Supreme Court ? They certainly had the act of Congress in contemplation. The language of the act proves that. And did they not also consider its construction? We think we do no violence to the language of the statute when we hold, as we do, that it allows a deduction of the tax-payer’s debts, because another and very valuable class of moneyed capital, under our system, enjoys the privilege of such deduction. We tax such bank-shares, as we do other, and the most favored moneyed capital.

Inasmuch as our revenue system allows a deduction,of the tax-payer’s debts from only one class of taxable subjects' — money loaned and solvent credits — our own unaided judgment would possibly lead to the conclusion, that bank-shares, being an entirely different species of property, could not claim such deduction. What is the proper import of the words, “other moneyed capital,” in the act of Congress ? It certainly declares that shares in national banks are moneyed capital. The word other proves that. Does not this prove that Congress had in contemplation moneyed capital of like kind, or similarly invested? Now, from other moneyed capital of like kind, our statute, and, it would seem, the statute of Indiana, allows no deduction on account of debts of the tax-payer. But the ruling in Evansville Bank v. Britton, leaves this question not an open one. We conform our rulings to that decision.

Another objection to the validity of the present assessment is based on subdivision 10, section 362 of our Code, which enacts that “the capital stock of all incorporated companies created under any law of the State, whether general or special, except such portion of the capital stock as may be invested in property, and taxed otherwise as property, shall be subject to taxation.” The argument is, that because of this discount from the taxable value of other investments in corporations, arid which was not allowed in this case, this is a violation of the first restriction imposed by the act of Congress. We answer this objection as follows: The difference between the capital stock of a corporation and the shares of stock in that corporation is well marked, and perhaps is nowhere more clearly shown than in the opinion of Mr. Justice NelsoN in the case of Van Allen v. The Assessors, 3 Wall. 573 . In the one case the property is in the corporation, in the other it is in the individual. And Congress has not only recognized, but has declared the difference, in that it prohibits all State taxation whatever on the one, while it expressly permits it to be levied on the other. .The corporation owns the capital stock, *420 and whatever that stock may be invested in. As said by Mr. Justice NelsoN, “ the tax on the shares is not a tax on the capital of the bank. The corporation is the legal owner of all the property of the bank, real and personal. . . . The interest of the shareholder entitles him to participate in the net profits earned by the bank in the employment of its capital, during the existence of its charter, in proportion to the number of his shares; and upon its dissolution or termination, to his proportion of the property that may remain of the corporation after the payment of its debts.” -Van Allen v. Assessors, supra. And we may add, the insolvency or bankruptcy of the corporation would not imply the insolvency of the shareholder, nor would the fact that the corporation owned real estate constitute the shareholder a freeholder. Shares in corporations are jaersonalty, no matter what the capital stock may be invested in. So, a tax on the shares of national banks is not a tax on the government bonds, in which the capital stock is invested. Van Allen v. Assessors, supra. BuUa,tax_pn_the.capital_ stock of a bank, whose capital is. invested in government securities not allowed to be taxed, would be a tax on such securities, and illegal .-Bank Tax Case, 2 Wall. 200 . The result of these holdings is, that capital stock of a corporation, which is in-Amsted in non-taxable property, can not be made the subject of State taxation, while the shares-m the corporation can claim no such exemption. This is a clear discrimination between the two properties, and shows that taxing the one is not taxing the other. The nature and property of the capital stock in corporations are essentially different from the nature and property of the shares in such corporations.

Under our revenue system, we allow a deduction of the amount of capital stock invested in property and taxed as property, only from the assessed value of the capital stock of corporations. We grant no such deduction to the shareholders. Neither do we allow to the corporation, nor to the shareholder any deduction for debts the corporation or shareholder may owe. The discount on account of debts, permitted under our system, is limited to the single subject of solvent credits; for money loaned is, at last, but a credit. Hence, if the tax-payer own no solvent credits, he is'entitled to no discount, no matter what may be the amount of his indebtedness. To hold that a shareholder in a national bank is entitled to have his assessment reduced, because some part of the capital stock is invested in property, and taxed as such, would be to accord to him a double discount, while no other tax-payer is favored so much; would be, to allow him a credit for all debts due by him, thus placing him on an ecpiality with the owner of solvent credits, and to allow him a further deduction of a proportionate *421 part of the capital stock invested in property, thus placing him, an individual, on an equality with our artificial persons, called domestic corporations. Congress denied to us the right and power to discriminate against investments in national bank shares. It was not the intention of that body that our assessments on such shares should be lighter than the taxes we impose on other moneyed capital. ¥e consider this objection unavailing.

The second section of the act of December 8, 1880, is in the following language: “There shall be assessed and collected in any county where such '’association is located, upon each share of the capital stock of such association which has escaped taxation for any preceding year since 1874, the same rate of taxation, State and county, as was in each year assessed and collected upon other moneyed capital.” Under the first and second sections of the act we are construing, there was assessed at one time on the shares of the National Commercial Bank of Mobile, taxes for the years 1878,1879, 1880 and 1881. It is urged before us, that the assessment for the years preceding the enactment of the statute was unauthorized, and in violation of article 11, sections 4, 5 and 7 of the constitution of Alabama. Section 4 ordains that there shall not be levied, “ in any one year, a greater rate of taxation than three-fourths of one per centum on the value of the taxable property within this State.” Section 5, employing the same language — in any one yeevr — limits the rate of taxation for county purposes to one-half of one' per centum; and section 7, in the same terms, limits the rate to one-lialf of oney>er centrum,, for city, town, or other municipal purposes. The collective sum of the taxes assessed for the four years, shown in this record, greatly exceeds the rates above prescribed. It is contended for the ap-pellee that the word in in the constitution, though three times repeated, should be read for. Thus read, the constitutional limitations on the power to levy taxes would then be for any one year, instead of “m any one year.” "We have been referred to no authorities bearing directly on this question, and, after a pretty careful examination, we have found none.

It .will be borne in mind that until December 8, 1880, no legislative attempt was made in this State to tax the shares of national banking associations. It had been declared otherwise in McIver v. Robinson, 53 Ala. 456 , and in Sumter County v. National Bank, 62 Ala. 464 . In Pollard v. State, ex rel. 65 Ala. 628 , we reviewed those decisions, and overruled them, holding, as we have said, that until December 8, 1880, we had no statute authorizing the taxation of national bank shares. Till then we had not declared them a subject of taxation. The legislature levies State taxes, and the assessor assesses them. *422 Perry County v. Railroad, 58 Ala. 546, 559 . There shall not be levied in any one year a greater rate of taxation, is the mandate of the constitution. No tax on national bank shares having been previously imposed, during the year 1880, the legislature did levy such tax, and, by declaring it should be operative during all the time since 1874, the practical effect was to levy, within that one year, taxes that might exceed three-fourths of one per cent. We are speaking of the levy of taxes, a legislative function, and not of assessment, which is the work of the assessor. The constitutional inhibition is against levying. The purpose was, that property should not be excessively burdened, lest, perchance, it might be driven from the State, or the tax-payer ruined. Levying a tax per centum in one year, and declaring that the same rate is applicable to several preceding years during which no tax had been levied, would be equally burdensome to the tax-payer, as if the aggregate had been levied in gross. It would be levying in one year, providing for assessment in one year, and for collecting and turning into the treasury in one and the same year, a sum greatly in excess of the constitutional limit. And to what end ? Certainly for future administration and d;sbursement for it could not be applied to the support of government in the years then past. It is difficult to draw a distinction between such levy for one year, and in one year. In either event the burden is the same, and the use and application of the money the same. We hold the attempt then made to levy taxes for the years then passed, was violative of the constitution, and must fail. ■

This question is distinguishable from what is known as escaped taxes. They have only escaped the assessor. Such taxes had been levied, and therefore the constitution does not inhibit the assessment and collection. So, if there had been a levy of taxes, and by reason of defective machinery such taxes could not be collected, we would not doubt the power of the legislature to remedy the defect by retrospective legislation. What we declare is, that when the legislature proclaims or declares a new subject of taxation not theretofore taxed, or attempted to be taxed, and levies a tax. upon it, which, in the aggregate, transcends the constitutional limit, calling it a tax for past years can not heal its infirmity.

We have said above that the levy of taxes is a legislative function. The constitutional inhibition is against levying in any one year a greater rate of taxation than a specified per cent. Of course it was not intended by this, to prohibit the enactment of a statute which should operate from year to' year, until repealed or altered. The legislative function may be performed in one year, to be operative for successive years. *423 The meaning is, that a greater burden than three-fourths of one per cent, shall not be levied, or imposed in and for one year.

To the extent that taxes were assessed for the' years 1878 and 1879, the judgment of the Circuit Court is reversed, and here rendered, disallowing those assessments. In all other respects it is affirmed.

Reversed and rendered.