Bank of Commerce v. State of Tennessee City of Memphis Bank of Commerce v. State of Tennessee

• Citation: 163 U.S. 416,41 L.Ed. 211,16 S.Ct. 1113
• Decision Date: 25 May 1896
• Docket Number: 669,Nos. 668,s. 668
• Parties: BANK OF COMMERCE et al. v. STATE OF TENNESSEE, to Use of CITY OF MEMPHIS. BANK OF COMMERCE et al. v. STATE OF TENNESSEE et al
• Court: United States Supreme Court

163 U.S. 416

16 S.Ct. 1113

41 L.Ed. 211

BANK OF COMMERCE et al.

v STATE OF TENNESSEE, to Use of CITY OF MEMPHIS.

BANK OF COMMERCE et al.

v. STATE OF TENNESSEE et al.

Nos. 668, 669.

May 25, 1896.

R. J. Morgan, T. B. Turley, and Wm. H. Carroll, for plaintiffs in error.

S. P. Walker and C. W. Metcalf, for defendants in error.

Mr. Justice PECKHAM delivered the opinion of the court.

This is a petition for a rehearing of some of the questions heretofore decided in these cases. A decision was rendered in them a short time ago, and a portion of the judgment in each case was reversed, and the cases remanded to the supreme court of Tennessee for further proceedings therein. 161 U. S. 134, 16 Sup. Ct. 456. Application is now made on the part of the defendants in error in each case for a rehearing of the same upon the question of the jurisdiction of this court to review the decision of the state court in regard to the exemption from taxation of the so-called new stock, being stock that was issued since the adoption of the constitution of 1870. Leave was given both parties to submit briefs upon the question of jurisdiction, as also upon the merits of the question sought to be reviewed. Such briefs have been received, and we proceed to decide the question.

The bank was chartered in 1856 under the name of the Chattanooga Savings Institution, which name was subsequently changed to the Bank of Commerce, and its place of business moved to Memphis. In the charter was contained the following clause: 'Said institution shall have a lien on the stock for debts due it by the stockholders before and in preference to other creditors, except the state for taxes, and shall pay to the state an annual tax of one-half of one per cent. on each share of the capital stock, which shall be in lieu of all other taxes.' On the day of the adoption of the new constitution, May 5, 1870, the capital stock of this institution was $200,000. The second section of the charter contains this provision: 'The capital stock of said company shall be divided into shares of $50 each, and when 200 shares have been subscribed and the sum of one dollar per share paid therein, the shareholders may meet and elect five directors.' By section 4 it is provided that 'it may receive on deposit any and all sums not less than one dollar per week offered as stock deposits; * * * and when such deposits amount to $50 it may at the option of the depositor become stock in the institution.'

It appears that, on sundry days prior to June 1, 1887, the capital stock of the bank had been regularly increased, under this provision in its charter, to $600,000, and on the 17th of March, 1890, and on sundry days prior to June 1, 1890, it was again regularly increased to $1,000,000. There was no maximum capital fixed in the charter. In 1870, while the capital stock of the bank stood at $200,000, the new constitution of the state was adopted, which provided for the taxation of all property, which provision would include the shares issued since 1870, if they are not protected by the exemption clause in the charter above quoted.

These suits were brought by the defendants in error against the bank and the shareholders for the purpose of recovering the amount of taxes which had been assessed for several years then last past against the parties defendant, the bank and the shareholders. In the actions it was sought to recover, either against the bank on its capital stock, or against the shareholders by virtue of their ownership of the shares of the capital stock. It was not contended that both were liable to pay the tax, but that one or the other should be held liable. A single stockholder was chosen to represent the stockholders generally, and he was one of the holders of what may be termed the new shares; that is, shares issued since the adoption of the constitution of 1870. This was done under an arrangement between the parties, so that all the stockholders need not be made parties to the action.

The answer of the plaintiffs in error, the bank and the stockholders, claimed a total exemption from all taxation, both on the part of the bank and shareholders, excepting the tax provided for in the charter. Thus the claim of the state was that the bank or all the shareholders were taxable under the provisions of the general tax laws of the state, and it left it to the court to say which were thus taxable. But the state also claimed that, if the old shares of stock were not taxable, the new shares issued after 1870 were taxable, as they came into existence after the constitution provided for the taxation of all property, and they were not subject to the exemption clause contained in the charter of the bank. So the question submitted to the state court was, which of these two classes shall be taxed; or, if the old shareholders are not to be taxed, can the new shareholders be taxed? The supreme court of the state held that all the shareholders, both old and new, were proper subjects of taxation, and that the exemption clause in the charter did not apply to either, but it applied to the capital stock of the bank; and judgment was therefore decreed for a recovery against all the shareholders of both old and new stock for taxes assessed under the general taxation laws of the state. In the course of the opinion delivered by one of the learned judges of the state court, which was concurred in by the majority, it was stated that there was no difference between the rights of the shareholders of the old and the new stock with reference to the right of exemption from taxation under the charter clause; that, if the old shares were exempt the new shares were also exempt, and that the contract covered both classes of stock in the same way and to the same extent. But the judgment of the court was that enither class of stockholders was exempt from taxation on account of the shares of stock held by them, that the exemption clause applied entirely to the capital stock, and that hence the shares of stock were liable to taxation under the general laws of the state, and judgment was ordered against all the shareholders, both of the old and the new stock accordingly. Judgment at the same time went in favor of the bank, decreeing its exemption from taxation under those laws of the state.

The bank and the shareholders, through Mr. Omberg, t eir representative, sued out a writ of error from this court, and the judgment of the state court was thereby brought here for review. The claims of the parties upon that writ of error were, on the part of the plaintiffs in error, that the whole judgment of the state court was wrong, that neither the shareholders of the old nor of the new stock were liable to pay any amount of taxes other than the tax provided for in the charter, and that the same exemption applied to the bank. The defendants in error claimed that the whole judgment of the state court was right, and that all the shareholders were properly assessed; but that, if this were not so, and the holders of old shares were exempt by reason of the clause in the charter, such clause did not apply to the holders of the new shares of stock, and that they were liable in any event, and that, therefore, the judgment as against such new shareholders was right, and to that extent the judgment should be affirmed, even if it should be reversed as to the holders of the old shares of stock. This court held that, as to the holders of the old shares, the judgment was wrong, as the exemption in the charter applied to the holders of the shares of stock, and not to the capital stock itself. Concerning the further question whether the judgment was right as against the holders of the new shares of stock, the court held that it would not review the decision of the state court on that question; that, as the state court had granted the exemption claimed by the holders of the new shares by virtue of the contract clause in the charter, this court had no jurisdiction to review that decision, and therefore refused to do so. The whole judgment against all the stockholders, both of the new as well as of the old shares of stock, was reversed. In coming to that conclusion, and in reversing the whole judgment, we think this court inadvertently fell into error. The error consisted in mistaking a certain statement in a portion of the opinion of the court below for the judgment which it actually rendered. Instead of granting the exemption, the court refused it entirely, and the judgment which it actually rendered was against all the shareholders alike, both of the old and of the new shares; but in the opinion the court stated that no difference existed between the holders of the old as compared with those of the new shares of stock, and that the holders of the new shares were entitled to the exemption from the tax to the same extent that the holders of the old shares were, but, as the court determined, neither the old nor the new shareholders were...