Hubbard v. Board of Supervisors

' I. Per Wright, J., Lowe, Cli. J., and Dillon, J., concurring. 1. Taxation: of shares in national banks. While the capital of national banks cannot be taxed by State antbority, the shares of shareholders may be, in a rate not exceeding that imposed upon the shares of banks organized in and by tbe authority of such State. 2. - WHAT THE POWER IS DEPENDENT UPON. But if the laws Of the State merely provide for the taxation of the capital of its own banks, and not of the shares held therein, a subsequent or further provision for the taxation of the shares of national banks is not in conformity with and is unauthorized by the act of congress provid- ■ ing for the organization of national banks, and is, therefore, invalid. 5. - NOT AUTHORIZED BY LAWS OF THE STATE. The laws of our ' State do not provide' for the taxation of the shares in the banks organized under its authority, but only of the capital of such banks, and, hence, chapter 108, Laws of 1866, providing for the taxation of . shares in national banks, was unauthorized and invalid. 4.-organization OF State banks. That there are in existence no organized banks under a State system which authorizes their organization, is an immaterial fact, and does not authorize the taxation of shares in national banks, unless the taxation of shares in the banks authorized by tbe State is also provided for. U. - UNAUTHORIZED ASSESSMENT : MODE OF RELIEF. In the Case of the assessment of a tax wholly unauthorized, it is not necessary, before filing a bill to enjoin its collection, for tbe aggrieved party to make application for relief to the board of supervisors. The case is not like that of a mere erroneous or excessive assessment. 6.-parties in A proceeding to enjoin collection. In a proceeding to restrain the collection of such unauthorized tax, the county treasurer is a proper party defendant. II. Per Cole, J., dissenting. 7. -Our law (Bev. § 712) expressly provides that all (except certain exempt) property, real and personal, is subject to taxation, and by the decision of the Supreme Court of the United States, shares in bank stock are property other and different from the capital, and liable to taxation: hence, by our statute, independent of the act of 1866, the taxation of shares in both our State and national banks is authorized.

Appeals from Johnson, Scott and Mahasha District Gowrts. Except as will be noticed in the opinion, these cases involve the question of the validity of the act of 1866 (ch. 108, p. 114), which provides for the taxation of the shares of national banks. They are all, in equity, to restrain the collection of the tax for the year 1866; and the essential point made is, that such taxation was not authorized in view of the language of section 41 of the act of congress of June 3,1864, providing for the organization of national banks. The relief was granted in the first and third cases, and denied in the second. Exceptions were duly taken and the cases are now before us upon the appeals of the parties respectively unsuccessful. Copies of counsels’ argument in this case are not found on the reporter’s file. Erom the elaborate argument of Mr. Bogers, the following is extracted. ■ Chapter 108, of the Laws of 1866, constitutes the law of this State which is claimed to authorize the taxation now in question. It is, in its terms, substantially identical with the statute of New York, of 1865, relative to the taxation of stock in the national banks. Both acts appear, on their face, to conform to the conditions of the act of congress above referred to, and any objection to their validity must be looked for elsewhere than in the text of these particular statutes. Such an objection, and a fatal -one, has been held to exist, in respect to the New York statute, arising out of the other existing legislation of the State, regulating the taxation of banks created by State authority. In Van Allen v. The Assessors (3 Wallace, 573), 5 Am. Law Beg. (N. S.) 609, it was unanimously determined by the Supreme Court of the United States, that ■a tax on the stock of national banks, levied in pursuance of the New York statute just referred to, was illegal, and must be set aside, for the reason that the other taxing laws of the State provided for no taxation upon the stoek of the State banks, to the stockholders, but required the hanks themselves to be taxed upon their capital, or property; and that the two statutes, taken together, failed to comply with the condition in the forty-first section of the act of congress: “ That the tax so imposed, under the laws of any State, shall not exceed the rate imposed upon the shares in any of the banks organized under authority of the State where such association is located.” The reason assigned is, that a tax to the bank, upon its capital, is not equivalent to a tax to the stockholder, upon his shares of stock — inasmuch as, in the former- case, .under previous decisions' of the court, the bank is exempt from taxation upon so much of its capital (even to the extent of the whole) as may be invested in non-taxable United States securities (2 Black, 620; 2 Wallace, 200), an exemption which does not extend to the stockholder, when taxed for the shares held by him.- The legislature of Iowa is in the precise predicament on this subject as that in which that of New York was thus adjudged to be; and the decision in Van Alen v. The Assessors is directly applicable to this case, and decisive of it in favor of the bank. That this is so, we shall endeavor to show, by an examination of our statutory provisions relative to taxation of State banks. The laws of this State provide for the creation of two-classes of banking corporations within the State, viz.,The State Bank of Iowa and its branches, and what are popularly known as “free banks,” to be organized under' the general banking law. We propose here to collate, for' convenience, the different provisions of the statutes, relative to taxation of these banks, and of corporations generally. The only provision in the law, authorizing the creation of the State Bank of Iowa, is the following section (1676) of the Revision: “ The general assembly shall never impose any greater tax upon property employed in banking under this act, than is, or may be, imposed upon the property of individuals.” In section 721 of the Revision (being part of the act to authorize general banking) occurs the following, which is-all that is contained in the last named act, relative to taxation of the .banks to be organized thereunder: “ Taxes shall he levied on and paid hy the corporation, and not upon the individual stodcholders, the value of the property; to he ascertained annually hy the hanlc commissioners herein provided for • and the rate of taxation shall be the same as that required to be levied on other taxable property by the revenue laws of the State.” In'the general revenue law, the following provisions are found: In section 712, of the Revision, among the various descriptions of taxable property, there is specified, “ property situated in this State, belonging to any bank or company, incorporated or otherwise, whether .incorporated in this or any other State.” Section 714 provides that, “ The principal accounting officer of a body corporate, company or society, shall assist the assessor in listing all the property of such body corporate,” etc. In connection with these two sections, the preliminary chapter in the Code, defining certain words of frequent occurrence in the statutes, may be referred to, whereby the term “property” is defined as including personal and real property; and “personal property” includes money, goods, chattels, evidences of debt, and things in action. Section 721, provides that, “ Depx-eciated bank-notes, and the stock of cox’pox’ations and companies, shall be assessed at their cash value.” Section 732, directs the board of supex-visors to furnish each assessor with books, propexdy xmled, in which to enter — First, the name of the individual, corporation, company, society, pax’tnership or firm, to whom any px’operty shall be taxable; second, his lands, etc.; third, “his personal property,” among which is designated, “ amount of stock, or shax*es, in any corporation or company, not required by law to be otherwise listed and taxed.” The foregoixxg are all the statutory provisions, bearing on the subject now in question viz.: the mode of taxation of State banks, under the laws of this State which have come to our notice. We contend, that the system of taxation thereby provided for, is, that the corporation itself is to be taxed, precisely as though it were an individual, upon its actual taxable property, real and personal; and that the individual stockholders are not to be taxed upon their shares of stock. If this position be sound, it follows, of course, that these banks cannot be taxed, upon any portion of their eapital or assets, invested in the bonds of the United States, any more than an individual can be so taxed; and thus the precise state of things, determined in Yan Allen v. The Assessors to be fatal to the power of the State to tax shares of stock in national banks, will have been demonstrated to exist in this State, and that decision will be brought to bear, incontrovertibly, upon the present case. The “ certificates of stock ” issued to the members, it has been well observed by an able judge, in a case of much note, “ are simply the muniments and evidence of the holder’s title to a given share in the property and franchises of the corporation of which he is a member.” Per Comstock, J., in Mechanics' Bcmlc, v. JY. Y. cfc JY. H. I?. B. Go., 13 N. Y. 621. Now, if this be so, it is obvious that the share of stock itself, the thing of which the paper certificate is “ the muniment and evidence of title,” is the holder’s “ share in the property and franchises of the corporation,” and that this cannot be a legitimate subject of taxation, in addition to the entire bulk of such property and franchises, considered as belonging to the corporate body itself, under any revenue system by which taxation is based upon, and measured by, the relative amount of property of the persons taxed.' To tax property as a whole, and then to tax besides the several shares in it, belonging to different individuals, is simply taxing the same thing twice: The statutes of Massachusetts provided for the taxation of the shares of capital stock in moneyed corporations, to the several stockholders, individually, at their respective places of residence. It has, accordingly, been held in that State, in a series of decisions, that it is a consequence of such taxation, that the corporation itself cannot be taxed upon its personal property, the whole value of the personal property being included in or represented by the shares of stock. These decisions are put distinctly oh the ground that otherwise the property would be twice taxed, which the legislature could not have intended. Boston Water Power Go. v. City of Boston, 9 Mete. 199 ; Boston provided that its capital stock should be divided into shares, to be holden and considered as personal est,ate. If was held that the land owned and held by the company' for purposes of the railroad, was not liable to be taxed otherwise than as personal estate; that each shareholder was taxable on his stock in the town where he resided, and not elsewhere; and that to allow the towns through which the road might pass, to tax it, would be subjecting it to a double taxation, “ which could be tolerated neither by the policy nor justice of the law, and the legislature could have designed no such thing.” Bangor di Piscataqua P. P. Go. v. Harris, 8 Shep. (Me.) 533. A striking similarity will be at once observed between this decision and that of this court, in Tollman v. The Treasurer of Butler Co., 12 Iowa, 531, in which it was held that, under the former, provision of our revenue act, providing that the property of railroad companies should. be taxed through the shares of stock, lands owned by such companies could not be taxed specifically The only difference between the two cases is, that the Iowa statute was more explicit than that of Maine. See also Gardiner v. Woolen Manuf. Go., 3 Greenl. 133. The exact converse of the Massachusetts and Maine cases, will be found in Smith v. Burley, 9 N. H. 423. There, the statute provided for taxing the property of corporations- themselves, in the towns where situated; and it was held that, consequently, the stockholders could not be individually taxed upon their shares. This, it was held, “ would in fact be a double taxation — once to the corporation itself, and again to the corporators, which would be unjust, oppressive, and unconstitutional.” These eases, with others, are stated in Angelí & Ames on Corporations, and it is observed by the learned authors (§ 460) that they “ are of importance, as recognizing the rule that the property of a corporation is not to be twice taxed.” And after stating the cases in 9 Mete. 199, and 9 N. H. 423, they add (§ 461): “ It appears, then, that the capital stock of a corporation may, in the discretion of the legislature be taxed as an aggregate to the corporation, according to its value, or to the stockholders on account of their separate ownership of it, but cannot be taxed at the same time in both modes.” It is sufficiently obvious that when the learned writers here speak of taxing the “ capital stock, as an aggregate .to the corporation,” they mean by the phrase “ capital stock,” simply the actual capital or property owned by the' corporation. In Gordon’s Exrs. v. Mayor of Baltimore, 5 Gill. 231, it was held by the Maryland Court of Appeals that the stock of a bank is the representative of its whole property, and that when a tax has been imposed on the stock in the hands of the shareholders, the real and personal estate of the corporation becomes exempt from taxation. “ To tax,” say the court, “ the real and personal property, and the stock, would be a double tax, and is therefore illegal.” The following cases will be found strongly to support the same views: Bank of Oape Fecur'y. Edwards, 5 Ired. (N. C.) 516 ; Ba/nk of Cape Fecur v. Doming, 7 Id. 55 ; Union Bank of Tenn. y. State, 9 Yerg. 490; Cases of Taxation, 12 Gill. & Johns. 117; State v. Berry, 2 Harrison (N. J.) 80 ; Gardner v. State, 1 Zabr. (N. J.) 527. The important case of Gordon v. Appeal Tax Court, 3 How. 135, in the United States Supreme Court, has a direct bearing on this point. 1. The interest of a stockholder, as represented by the shares of stock in a bank, is a distinct, i/ndependent interest or. property, held by the shareholder like any other property that map belong to himP Van Allen y. The Collector, 3 Wallace, 573,' “ and we add, of course is subject to like taxation.” Opinion of Nelson, J., in cases of Duer y. Commissioner of Taxes and Mead v. Commissioner of Taxes, for city and county of New York, in .Supreme Court of United States, reported in June, 1867, in American Law Register, p. 467. Also, Bradley v. State of Llbmois, U. S. Supreme Court; Wright, Auditor, v. Stilts, Supreme Court of Indiana. James A. Frazer y. S. W. Seibern et al., Supreme Court of Ohio, reported in American Law Reg. for June 1867, p. 466-487. Also, Union Banky. Tennessee, 9 Yerger, 490; Angelí & Ames on Corporations, § 438; Conwell v. Bank of Connersville, 15 Ind. 150. • ■ 2. By the revenue laws of Iowa, the shares of stock in bank are to be assessed and taxed to the shareholder as his individual property, while the property of the bank is to be assessed and taxed to the bank. See Rev, §§ 711-717, 719, 721, 722, 725, 733r-735. Also, Laws of 1866, chap. 108, p. 114. 3. Under the general banking law of this State, the shares of stock are the personal property of the shareholder, and the ta/xes are to be levied on and paid by the bank, bnt this only prescribes who shall pay the tax and not the corpus to be taxed, whether the capital or the shares of stock. This is left to be determined by the general revenue law. Revision, § 1598 (general banking law). See law passed at same time, March 23, 1858, Session Laws, 1858, § 7, p. 306, 307. 4. The proposition elaborated by the counsel for appellant, and upon which their whole argument is predicated, viz.: That the taxation to the moneyed corporation of its property, and to the shareholder of his shares of stock, is double taxation, is not correct as an abstract proposition of law, and is not sustained by the numerous authorities cited. The case of Boston <& Sandwich Glass Company v. Boston, (4 Mete. 184 [Mass.]) was under a statute which “ required the personal property held by a corporation, other them machinery, to be assessed by a tax upon the shares of the individual members of such corporations Held, that the corporation could not be taxed for the personal property, other them the machinery, because the statute expressly exempted it. Boston Water-Power Company v. Boston, 9 Mete. 199, was under the same statute. Also, Salem Iron Factory v. JDanner, 10 Mass. 518 top, 514 side paging; Amesbury Woolen Manufactory v. Amesbury, 17 Mass. '461. But in 11 Pick. 513, the contrary doctrine for which we contend, is strongly maintained. In the case of Bangor and Piscatagua Pailroad com-pony v. Harris, 21 Maine (8 Shep.),'533, tbe statute did not provide for taxing tproperty, real or personal, of corporations. Held, in the absence of such provision, tbat tbe depot of a railway company could not be taxed, while tbe stock could be taxed. It is conceded by tbe court, tbat the legislature could prescribe otherwise. But this case has been expressly overruled in tbe case of Cumberland Marine Railway v. Portland, 37 Maine, 444. Tbe case of Cardiner. Woolen Factory v. Gardiner, 5 Greenl. Ill, simply held tbat their statute was similar to tbat in Massachusetts. See 10 and 17 Mass., before cited. Also, see Augusta Bank v. Augusta, 36 Maine, 255. Smith v. Burley, 9 N. H. 423, expressly holds, tbat tbe legislature may tax. tbe property of manufacturing corporations to tbe corporations, and the shares to tbe individual stockholder, but tbat tbe legislature had not done so in tbat case. Cases of Taxation, 12 Gill & Johns. 117. Gordon's Executors v. Baltimore, 5 Gill, 231, follow Gordon v. The Appeal Tax Court, 3 How. 133. Tbe Supreme Court of tbe United States, in People v. Commissioners of Taxes, before cited from Am. Law Beg. p. 470, for June, 1867, by Justice Nelson, expressly bold tbat tbe above case in 3 Howard does not sustain tbe doctrine for which counsel cites it in this case, but only tbat, by a true construction of tbe act in question, tbe stockholders were within tbe scope of the exemption. The cases of Bank of Cape Fear v. Edwards, 5 Ired. N. C. 516; Bank of Cape Fear v. Pemihgf 7 Id. 55; also State v. Berry, 2 Harrison, N. J. 80; State v. Gardner, 1 Zab. N. J. 527, are all under statutes which expressly declare, tbat tbe stock shall be taxed, and tbat there shall be no other tax on the Hank. Tollman v. Treasurer of Butler County, 12 Iowa, 53’1, is in tbe same category. The doctrine so confidently relied upon by counsel for appellant is directly in conflict with Van Allen v. Nolan, and the eases following it, already decided by Supreme Court of United States, before cited. In Wright v. Stiltz, the Supreme Court of Indiana (see Am. Law Reg. June, 1867, p. 473) declares, that the doctrine that a tax upon the shares of stock of a bank is merely a mode of taxing the property of the bank, laid down by that court in Whitney v. Madison, 23 Ind. 331, is overturned in Van Allen v. Nolan, and they follow the latter case. In the case of MeCulloeh v. State of Maryland, 4 Wheat. 316, it is held, that “ the exemption of the bank of the United States from State taxation, does not extend to a tax paid by the real property of the bank in common with other real property within the State; nor to a tax imposed on the interest which the citizens of Maryland may hold in the institution, in common with other property of the same description throughout 'the State.” Shares of stock in the United States bank, owned by an individual, was in his hands, a legitimate subject of taxation, and was subject to a tax imposed on bank stock by an ordinance of the City of Charleston. 1 Nott. & McCord, S. C. 527; Beney v. Tax Collector, 2 Bailey, S. C. 654; see City of Utica v. Churchill, 33 N. T. 162-244. 5. The “property employed in banking” in section 1676 of the revision, means the capital, but does not include the separate and distinct property of the stockholder within the meaning of Van Allen v. Nolan. In Wright v. Stiltz, before cited, the court say “ the aggregate value of the shares is not measured by the net aggregate value of the assets of the corporation, but may be greatly more or less. The value of the shares depends mainly upon other elements, prominent among which are the value of the franchises, the management of the corporate business, and the consequent profits earned and paid in the form of dividends.” Section 1676 of the State bank law does-not there prohibit the taxing to the shareholder, .his separate interest represented by his share. 6.-The construction of the above section of the State bank act, by counsel for appellant in his printed argument on pages 21 and 22, is the same in effect as was claimed by counsel in case of People of New York v. Oomm/rs. of Taxes (Am. Law Heg., June, 1867, 468), under the first proviso of the forty-first section of the national bank act, and which was directly overruled, in that case — the court holding that “the meaning and intent of the lawmakers were that the rate of taxation of the shares should be the same, or not greater than upon the moneyed capital of the individual citizen which is subject or liable to taxation. 7. It is not alleged in the bill in this case that there is, in fact, in existence at the present time, any banks, either under the general banking law, or the State bank act. It is the unequal practical remit, discriminating against the national banks, which the Supreme Court of the United States hold to be a violation by the State revenue laws of the proviso in the forty-first section of the national bank act, and this is the very doctrine laid down by counsel for appellant in his printed argument, on page 21. How can the result be unequal if there be no State banks in existence to be favored ? The Ohio' Life Ins. ■ and Trust Oo. v. Debolt (16 How. 416) does not sustain the doctrine for which it is cited. 1. National banks can only be- taxed as provided by congress. Under proper State laws, the shareholders may be, bnt not the corporation. Van Allen v. Nolan, 3 Wallace, 573; Am. Law Reg. for June, 1867. 2. The plaintiff applied to the board of supervisors for relief from the illegal tax. • 3. But as the taxes were levied without authority of law, the collection thereof may be restrained by injunction. Maoklot v. Davenport, 17 Iowa, 379; IAtehfield v. Polk Go., 18 Id. 70; Duel v. Ball, 20 Id. 282; ■ Tallmcm v. Butler Go., 12 Id. 531; Morford v. Unger, 8 Id. 82; Langworthy v. Dubugue, 13 Id. 86; Fulton v. Davenport, 17 Id. 404.