Inhabitants of E. Livermore v. Livermore Falls Trust & Banking Co.

• Decision Date: 19 December 1907
• Citation: 69 A. 306,103 Me. 418
• Parties: INHABITANTS OF EAST LIVERMORE v. LIVERMORE FALLS TRUST & BANKING CO.
• Court: Maine Supreme Court

69 A. 306

103 Me. 418

INHABITANTS OF EAST LIVERMORE

v. LIVERMORE FALLS TRUST & BANKING CO.

Supreme Judicial Court of Maine.

Dec. 19, 1907.

Agreed statement from Supreme Judicial Court, Androseoggin County.

Action by the inhabitants of East Livermore against the Livermore Falls Trust & Banking Company.

Action of debt to recover a tax assessed against the defendant for the year 1905. Action on an agreed statement of facts, and the case was sent to the law court for determination. The agreed statement is as follows:

"This is an action of debt by the plaintiff town, to recover against the defendant for taxes assessed against the defendant for the year 1905, the sum of $604.20.

"The defendant is a duly organized trust and banking company, and was incorporated by special act of the Legislature, approved March 25, 1895, being chapter 275, p. 373, of the Laws of 1895 (which chapter may be referred to by either party as a part of this statement), and has its legal residence and domicile in said town of East Livermore.

"It is agreed that the tax in question was assessed upon the following described property, to wit:

"6 shares of the capital stock of the First National Bank, Portland, Maine, par value, $600.

"48 shares of the capital stock of Casco National Bank, Portland, Maine, par value, $4,800.

"160 shares of the capital stock of Portland Trust Company, Portland, Maine, par value, $16,000.

"7 shares of capital stock of People's Trust Company, Farmington, Maine, par value $700, —and that the same was in addition to the franchise tax imposed upon said defendant and paid to the State Treasurer.

"It is further agreed that the formal proceedings in the assessment of said tax, and in demand, notice, and authority to bring this suit, were in due form and according to law.

"But the defendant has refused to pay said tax, and claims that the property upon which the same is assessed is not subject to said tax. as the property of said defendant.

"It is agreed that the following is a statement of the assets and liabilities of the defendant on April 1, 1905:

Liabilities.

Capital stock........

$ 50,000 00

Surplus .............

20,000 00

Undivided profits....

12,422 74

Unpaid dividends,....

43 20

Certificates of deposit

66,634 02

Time deposits........

389,619 28

(bearing int. @ 3 1/2%)

Demand deposits......

92,489 76

Due other banks

$631,209 00

Resources.

Loans on mortgages...

$179,611 61

Loans on collateral..

34,735 00

Loans on names.......

184,279 64

Loans on municipalities ......

701 75

Stocks and bonds.....

201,076 00

Expense .............

958 09

Furnitures and fixtures ............

5,600 00

Cash on deposit......

5,224 58

Cash on hand.........

19,622 33

$631,209 00

"It is agreed that the shares of bank stock hereinbefore mentioned as assessed as aforesaid were a part of the foregoing item of 'Stocks and Bonds' in said table of resources.

"Upon the foregoing statement, if the court decides that said property is subject to said tax, judgment is to be for the plaintiff for the amount of $509.20 with interest from the date of the writ. If said property is not subject to such tax, judgment is to be for the defendant."

Judgment for defendant.

Argued before EMERY, C. J., and WHITEHOUSE, STROUT, SAVAGE, CORNISH, and KING, JJ.

W. H. Newell, for plaintiff. John H. Maxwell and Heath & Andrews, for defendant.

EMERY, C. J. The Livermore Falls Trust & Banking Company, the defendant bank, was located and doing business in East Livermore on April 1, 1905, and all the shares of its capital stock were then taxable, and presumably were taxed, at their "just value," in some form in some town in this state, at least so far as such taxing would not be double taxation. Rev. St. c. 9, §§ 5 and 29. At that date, however, the bank had purchased and then owned as part of its assets certain shares in national banks and in other trust or banking companies located in this state. The tax assessors of East Livermore that year assessed a municipal tax against the defendant bank upon those shares. This suit is to recover that tax.

The defendant bank contends in defense that under the circumstances a taxation of those shares to the bank in addition to the taxation upon the shares of its own stock to its stockholders would be practically and in effect, if not technically, double taxation, which the taxing statutes taken as a whole do not show was intended by the Legislature, and hence the tax is not authorized. The plaintiff replies that the result is not double taxation in any legal sense, and, even if it were, the tax claimed is expressly authorized by the statute (Rev. St. c. 9, § 5), which enumerates "shares in moneyed and other corporations within and without the state" as property to be taxed to the owner. The importance of the question justifies extended consideration.

In the arguments and briefs and in many of the cases cited there was considerable discussion of the nature of such a tax, whether it was a tax upon the franchise of the bank, upon its deposits or depositors, upon its capital stock or otherwise. We see no need to follow that discussion. The tax sought to be recovered here is simply a tax on certain specific articles of personal property owned by a moneyed corporation, to wit, a banking corporation. It is undoubtedly within the letter of the statute cited. Rev. St. c. 9, § 5. The bank is the beneficial as well as the legal owner of the property. It does not hold the shares as security. It is not known, and it does not matter whether they were purchased out of the money paid in as capital stock, or out of the money deposited, or out of surplus and undivided profits. They were purchased with the funds of the bank, and are part of its assets available for the payments of its debts and for distribution among its stockholders upon liquidation.

There is also much discussion in the cases as to whether a tax upon corporate shares to the stockholder and another tax upon the corporate property, to the corporation, is double taxation. There are many cases favoring the plaintiff's argument that in legal theory a corporation is a distinct and different person from the owners of its capital stock, that its liabilities are not their liabilities, that its assets are not their assets, and hence that a tax on its property is not a tax on their property, and so is not double taxation within the legal meaning of that term. But whatever the strict legal theory, it is evident that in effect a share in a corporation is a share in its assets, that the corporation while holding the only title to its assets cognizable by the courts really holds and manages them, not for itself, but for its stockholders, that a gain or loss in assets or the value of them by the corporation is a corresponding gain or loss by its stockholders and hence, if the shares are severally taxed as such and the corporate assets are also taxed, the result is practically a double burden on the stockholder, or double taxation. The stockholders really pay both taxes. There are many authorities supporting this view. Thompson on Corporations, § 2813, and cases cited; Cook on Stockholders, § 567; Clark & Marshall on Corporations, pp. 754, 755, and note 59; 27 Am. & Eng. Ency. Law, 949, par. 3, and cases cited; Gardiner Factory Co. v. Inhabitants of Gardiner, 5 Me. 133; Augusta Savings Bank v. City of Augusta, 56 Me. 176; Sweetsir v. Chandler, 98 Me. 145, at pages 154, 155, 56 Atl. 584, at pages 587, 588; Tennessee v. Whitworth, 117 U. S. 139, 6 Sup. Ct. 649, 29 L. Ed. 833; In re Newport Reading Room, 21 R. I. 440, 41 Atl. 511; Cheshire Co. Tel. Co. v. State, 63 N. H. 167; Salem Iron Factory Co. v. Inhabitants of Danvers, 10 Mass. 514; Boston W. P. Co. v. Boston, 9 Metc. (Mass.) 199, 202; First National Bank v. Douglas Co., 124 Wis. 15, 102 N. W. 315; Commonwealth v. Bank, 118 Ky. 547, 81 S. W. 679; Stroh v. Detroit, 131 Mich. 109, 90 N. W. 1029.

It is suggested, however, that moneyed corporations such as banks are so different in nature from business corporations generally that they are not within the purview of those cases or of the above statement. We do not see any practical difference between them so far as taxes upon their property are concerned. A banking corporation (not speaking now of pure savings banks) is a business corporation pure and simple. It is not for charitable, literary, social purposes or for any other purpose than for business and business profits for its stockholders. It owes money and has money due it. It borrows money and uses the borrowed money in its business of discounting notes, dealing in stocks, bonds, etc. Its depositors are merely its creditors. They have merely loaned it money. They have no more concern with its assets or its investments than any other creditor has. Its stockholders have the same legal and equitable interest in its assets that the stockholders in any business corporation have in its assets. Moreover, there are decided cases including banks within the doctrine that taxes upon the shares and also upon the assets of a corporation constitute double taxation. In Bank v. Douglas Co., 124 Wis. 15, 102 N. W. 315, the bank recovered back a tax levied upon its real estate, the court assuming that it constituted double taxation not required by the statutes of Wisconsin. In Commonwealth v. Bank, 118 Ky. 547, 81 S. W. 679, the state sought to impose a tax on the notes, bonds, stocks, etc., owned by the bank, the shares of which were also taxed to the shareholders. The court held such a tax could not be imposed, and seems to assume that it was a double and destructive taxation, citing another Kentucky case (L. & E. Mail Co. v. Barbour, 88 Ky. 73, 9 S. W. 516), where such a tax was directly held to be double taxation. In Hempstead County v. Bank (Ark.) 84 S. W. 715, it was held that to tax a bank first on all its net assets, and then on its real estate, was double taxation, In Frederick Co. Com'rs v. Bank, 48 Md. 117, it was held that to...