In re Assessment of First Nat. Bank of Chickasha
| Decision Date | 10 October 1916 |
| Docket Number | Case Number: 7912 |
| Parties | In re ASSESSMENT OF FIRST NAT. BANK OF CHICKASHA |
| Court | Oklahoma Supreme Court |
1916 OK 858
160 P. 469
58 Okla. 508
In re ASSESSMENT OF FIRST NAT. BANK OF CHICKASHA
Case Number: 7912
Supreme Court of Oklahoma
Decided: October 10, 1916
¶0 1. TAXATION--Property Subject--Exemptions--Power of Legislature. The power to exempt from taxation, as well as that of taxation, is an essential attribute of sovereignty. Generally, the power to make exemptions is included or involved in the right to apportion taxes, and exists in the supreme legislative power, unless expressly forbidden by constitutional limitation.
2. SAME--"Property"--State Bonds. Section 50, art. 5, of the Constitution, prohibiting the Legislature from passing laws exempting any property within the state from taxation, except such as is named in section 6, art. 10, was not intended to prohibit the Legislature from exempting from taxation the bonds of the state, issued in aid of its governmental functions. Such bonds being instrumentalities of government, do not constitute property within the meaning of the constitutional limitation against exempting property from taxation.
3. SAME--Exemptions--Constitutional and Statutory Provisions. There being no constitutional obstruction forbidding the Legislature from exempting from taxation the bonded indebtedness of the state, in the form of the state public building bonds, it follows, necessarily, that the act exempting said bonds from taxation is not, in that respect, unconstitutional.
4. SAME--Property Subject--Stock in National Banks. The taxation of shares of stock in national banks is permitted by Act Cong. June 3, 1864, c. 106, 13 Stat. 111, as amended by Act Feb. 10, 1868, c. 7, 15 Stat. 34 (Rev. St. U.S. sec. 5219 [U.S. Comp. St. 1913, sec. 9748]), provided they are taxed in the city or town where the bank is located, and at no greater rate than is assessed upon other moneyed capital in the hands of individual citizens of the state.
5. SAME--State Bonds--Power of Legislature. The statutory rule that the rate of taxation upon the shares in a national bank should be the same or not greater than upon the moneyed capital of the individual citizen which is liable to taxation, was not intended to cut off the power of the Legislature to exempt bonds of the state from taxation.
6. SAME--Exemptions--Power of Legislature--State Public Building Bonds. The issuance and sale of state public building bonds, authorized by chapter 89 of the act of the Legislature approved March 15, 1911 (Sess. Laws 1911, pp. 194-199), by which the state was enabled to raise money to accomplish and carry out a governmental purpose, and to the payment of which the good faith of the state was solemnly pledged, was an exercise of sovereignty, of the borrowing power, a use of the state's credit. And the bonds issued to enable the state to discharge its public functions are instrumentalities of government. They constitute the means resorted to by the state to effectuate the powers of government.
7. SAME. The intention of the Legislature to exempt the bonds from taxation being indubitable, the right to tax such bonds, whether directly or in legal effect, can be exercised under no circumstances, and is not therefore dependent upon the character of the owner or the statute under which the tax is assessed.
8. CONSTITUTIONAL LAW--Impairing Obligation of Contract--State Building Bonds. State public building bonds issued and sold pursuant to the act of March 15, 1911, and which by the terms of the act, as well as by express recital in the bonds, are made nontaxable, constitute a binding contract between the holder of such bonds and the state, which the latter under the guise of taxation may not constitutionally impair.
9. SAME--Impairing Obligation of Contract--Taxation. The constitutional inhibitions, both state and federal, against impairing contract obligations, is a limitation upon the taxing power, as well as upon all legislation, whatever form it may assume.
10. TAXATION--Property Subject--Exemption--State Building Bonds Owned by Bank. The contract between the state and the bank, in respect to the exemption of the bonds from taxation, extends to its shares of stock in the hands of individual shareholders, and entitles them to the right to deduct from the value of their shares that proportion of the value invested in the bonds.
11. SAME. The bonds being nontaxable for any purpose, and the state not having the power to tax the capital and surplus of a national bank, the shareholders, taxable on their shares, are entitled to proper reductions on account of the bank's ownership of said bonds, as any other view would ignore the covenant making the bonds nontaxable, and permit the state, in effect, to do that which it had contracted not to do.
S. P. Freeling, Atty. Gen., Smith C. Matson, Asst. Atty. Gen., John H. Venable, Co. Atty., and Allen K. Swan, Asst. Co. Atty., for plaintiffs in error.
Bond, Melton & Melton, for defendant in error.
Stuart, Cruce & Cruce and Hatchett & Ferguson, amici curiae.
SHARP, J.
¶1 February 18, 1910, the Legislature passed an act providing for the creation and management of what was designated the "Public Building Fund." Chapter 16, Sess. Laws 1910, pp. 21-25. Said act was by act of the Legislature amended March 15, 1911 (Sess. Laws 1910-11, pp. 194-199). The latter act provided that all moneys theretofore or thereafter received from the sale or rentals of section 33 of the public lands of the state, and lands granted in lieu thereof, the same being lands granted to the State of Oklahoma for charitable and penal institutions and public buildings, should constitute and be known as "The Public Building Fund"; that bonds of different denominations bearing interest at the rate of 5 per centum per annum, payable semiannually, should be issued against said fund, and that the State Auditor should, on or before the 1st day of April, 1911, issue public building bonds to the amount of $ 750,000, made payable to bearer, and place them in the hands of the State Treasurer for sale. The aggregate amount of bonds authorized was not to exceed the sum of $ 3,000,000, of which sum $ 2,451,500 was actually issued. The act provided that all outstanding warrants issued under the provisions of chapter 16 of the Session Laws of 1910 should become a valid lien against said building fund, and that the State Treasurer should receive sealed bids for the purchase of said bonds, or any part thereof at the time fixed, but that none of the bonds should be sold for less than par and accrued interest. The act further provided that the officers of the state, or of any municipality thereof, having charge of any sinking fund, could purchase said bonds from the State Treasurer at par. The proceeds of the sale of all bonds authorized was to be paid into the state treasury and used for the payment of the construction of charitable and penal institutions and public buildings. It was provided in section 7 that
"Any bank, trust or insurance company, organized under the laws of this state, may invest its capital and surplus in bonds, issued under the provisions of this act. The officers having charge of any sinking fund of the state or of any county, city, town, township or school district thereof, may invest the sinking fund of the state or of such county, town, township or school district in bonds issued under the provisions of this act, maturing prior to the date of the bonded indebtedness for the payment of which any such sinking fund is created. Said bonds shall also be approved collateral as security for the deposit of any public funds and for the investment of trust funds. Said bonds shall be nontaxable for any purpose."
¶2 By section 9 it was provided that:
"All bonds and interest thereon, when issued as provided for in this act, shall become payable out of the public building fund, arising from the sale or rental of section 33, and lands granted to the state in lieu thereof, until all of said bonds and interest thereon are fully paid. And the good faith of the state is solemnly pledged to administer the trust created by the terms of the Enabling Act and the Constitution of Oklahoma, to apportion and dispose of all lands granted to the state for charitable and penal institutions and public buildings, as the Legislature may prescribe, and safely keep and preserve the proceeds of the rental and sale thereof, and apply same to the payment of the bonds authorized by this act, and the interest thereon, as the same falls due, and to use such funds, constituting the Public Building Fund, for no other purpose or purposes. * * *"
¶3 July 19, 1913, the First National Bank of Chickasha purchased of the State Treasurer, with the approval and consent of the Comptroller of the Currency, public building bonds of the par value of $ 200,000. Said bank afterwards sold to the First National Bank of Minco, out of its purchase from the State Treasurer, bonds of the par value of $ 20,000. In the month of May, 1915, said bank made a return to the county assessor of its property subject to taxation for the year 1915, from which it deducted the assessed valuation of its real estate in the State of Oklahoma, separately listed in the name of the bank, and the public building bonds owned by it. The return as made by said bank was accepted by the county assessor, and was afterwards approved by the county board of equalization. July 20, 1915, the State Board of Equalization raised the valuation of national banks in Grady county having state building bonds deducted from their assessment in the sum of $ 200,000; and the assessment of Grady county was referred back to the county assessor and board of...
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