Bank of Commerce v. Adams County

• Decision Date: 09 October 1922
• Docket Number: 22830
• Citation: 130 Miss. 37,93 So. 442
• Court: Mississippi Supreme Court
• Parties: BANK OF COMMERCE v. ADAMS COUNTY

93 So. 442

130 Miss. 37

BANK OF COMMERCE v. ADAMS COUNTY

No. 22830

Supreme Court of Mississippi

October 9, 1922

1 TAXATION. Actual and not fictifious sum of bank's undivided profits. surplus, and accumulations should be reported for assessment. The sum of its undivided profits surplus, and accumulations which a bank should give in to the tax assessor under the provisions of chapter 193, Laws 1920 is the sum of its actual undivided profits, surplus, and accumulations, and not that carried on its books, as such, in event that carried on its books should be fictitious.

2 TAXATION. Shares in bank should be assessed at true value.

Under chapter 193, Laws 1920, the shares into which a bank's capital stock is divided should be assessed at their true value.

HON. R L. CORBAN, Judge.

APPEAL from circuit court of Adams county, HON. R. L. CORBAN, Judge.

Petition by the bank of Commerce, filed with the board of supervisors of Adams county, praying that the assessment of its capital stock, etc., be reduced. From an order of the court approving the ruling of the board of supervisors declining the petition, the petitioner appeals. Reversed, and judgment rendered.

Judgment reversed.

Ernest E. Brown, for appellant.

Counsel for appellee says appellant contends for the assessment of its capital stock at sixty thousand dollars. Yet, appellant claims and the record shows that the market value of appellant's stock did not exceed sixty thousand dollars, that the true value of its capital stock did exceed sixty thousand dollars, and the actual value of its capital stock did not exceed sixty thousand dollars, or in short the record shows beyond question and without dispute the true value as well as the actual and market value of its capital stock augmented by its surplus and undivided profits did not exceed sixty thousand dollars. The "true value" in section 112, of Mississippi constitution mean simply actual or market value and so limits the assessment of property.

Chapter 193 of Laws of 1920, has the following proviso: "If the shares of such bank or banking association are of less value than par, they shall be assessed accordingly," indicating clearly an intent to reach the true or actual or market value in assessments of banks' shares of capital stock as augmented by its surplus and undivided profits.

Counsel for appellee seems to contend that only in the event the shares are of less value than par can they be assessed at their actual value, but if worth par or above, there must be added to the par value of the shares, the surplus and undivided profits as shown by the bank's books, and that, too, notwithstanding the book surplus and undivided profits are what cause the market or actual value of the shares to be worth par or above. He further contends that section 181 of Mississippi Constitution, authorizes in assessing banks the adding to the par value of their capital stock their surplus and undivided profits shown by their books. Had said section 191 intended to authorize any such assessment it would have provided in plain and unmistakable language for the assessment of shares of banks at their par value, augmented or increased by their surplus and undivided profits or at their par value plus the surplus and undivided profits shown by their books.

Instead of so doing, it merely authorizes "taxing the shares according to the value (augmented by the accumulations, surplus and unpaid dividends) exclusive of real estate, which shall be taxed as other real estate."

The plain, clear and unmistakable meaning of said section 181 is that the shares of banks as augmented or increased in value by the surplus and accumulations shall be assessed at the value thereof, that is at the actual or market or true value and said section 181 is in harmony with section 112 of Mississippi Constitution which requires property to be assessed at its true value. Near conclusion of his brief, opposing counsel says, on pages 3 and 4: "It follows, therefore, that if the court sustains the contention of appellant that the bank should have been taxed only on the market value of its stock, less the value of its real estate (a tax on the stockholders, not on the bank), the result will be that the bank, as such will escape all taxation whatever, except on its real estate."

I cannot imagine what counsel means by the above assertion, since there is nothing to justify it. The record shows beyond question that appellant should have been assessed upon its capital stock, surplus and undivided profits at the true, actual and market value thereof, to-wit: sixty thousand dollars less assessed realty of thirteen thousand, six hundred and sixty-nine dollars and fifty-four cents or for forty-six thousand, three hundred and thirty dollars and forty-four cents, and that as it was assessed too high to extent of twenty-six thousand and nine dollars and fifty-six cents and paid taxes thereon, it should recover a refund of two hundred and thirty-four dollars and eight cents from the state and three hundred and twelve dollars and twelve cents from Adams county, total five hundred and forty-six dollars and twenty, cents and all costs.

Wilmer Shields, for appellee.

The sole question raised in this case and presented to the court for decision by this appeal, is: Should a bank, the market value of its stock being above par, be assessed with the par value of such stock, augmented by its surplus and undivided profits, less the value of its real estate, or should it be assessed only with the market value of its stock, diminished by the value of such real estate? The answer to this question depends upon the construction placed by the court upon section 181, Constitution 1890, and section 1, chapter 193, Laws 1920, amending section 4273, Code 1906.

The language of section 181 of the Constitution, so far as here pertinent, is, "the legislature may provide for the taxation of banks and banking capital, by taxing the shares according to the value thereof (augmented by the accumulations, surplus and unpaid dividends), exclusive of real estate, which shall be taxed as other real estate."

Appellee takes the position that this language is not esoteric; that it means and was intended to mean precisely what the words employed seem to import; that "value" obviously means par value; that "augmented" means enlarged or increased; and that the assessment complained of was fully authorized by the section of the constitution under consideration.

It is the contention of appellant that the word "value" as used in the paragraph quoted, should be construed to mean "market value" and that the words in parenthesis, "augmented by the accumulations, surplus and unpaid dividends" should be wholly disregarded, or, at any rate, that they should be construed as though the word "as" was prefixed thereto. In other words, appellant is, in effect, asking the court to change by construction the wording of this paragraph of the constitution so as to make it read, "the legislature may provide for the taxation of banks and banking capital by taxing the shares according to the market value thereof, exclusive of the real estate, etc." Is it conceivable that the framers of the constitution, had they intended to say this, would have used the language they did? Can it be supposed that they deliberately resorted to circumlocution and made obscure and doubtful what could have been so easily made clear and certain? Most assuredly not.

The reasons for authorizing assessments of banks to be made in the manner subsequently prescribed by the legislature are not hard to discern. Banks in Mississippi are usually close corporations; their stock, as a rule, is not on the market; sales thereof are infrequent, in nearly all cases privately made, and the price undisclosed. It would be, therefore, except in rare instances, very difficult if not impossible, for the assessor or board of supervisors to successfully controvert the return of the market value of a stock made by a bank for the purpose of assessment.

On the other hand, every bank is required by law to publish at intervals a statement, under oath, of its condition. These statements show the par (not market) value of the capital stock, the surplus, undivided profits, etc., of the bank and are made for the information and guidance of the public and the customers of the bank, who deal and are invited to deal with the bank in reliance thereon. It was therefore provided by the constitution that the legislature might, as it did thirty years ago (section 3764, Code 1892), tax banking corporations on these book values, which could not be juggled with, and appellee insists, banks are absolutely estopped from asserting that such values, published to the world under oath, and upon the strength of which they solicit business, are illusory and fictitious.

It would be wholly contrary to public policy to permit a bank to make one statement of its condition and assets to the public and another to the tax assessor, and so far as counsel for appellee is aware, the right to do so has not heretofore been claimed by any bank in the state. Moreover, shares of stock in a banking corporation, as in other corporations, are the property of the stockholders, not of the bank, and are taxable, primarily, as the property of their respective owners. Such taxation is not a tax on the capital of the bank and may be laid without regard to the fact that part of the assets of the bank may be taxed separately. Logically, such stock should be assessed to its owner, but it is perfectly proper to require the bank to pay the tax in the first instance and look to the stockholders, or the dividends due them, for reimbursement. (See 37 Cyc. 827, IV.)

The latter method, obviously the most convenient and...