Lilly v. Bd. of Commissioners of Cumberland Cnty.

• Decision Date: 30 June 1873
• Citation: 69 N.C. 300
• Court: North Carolina Supreme Court
• Parties: E. J. LILLY v. THE BOARD OF COMMISSIONERS OF CUMBERLAND COUNTY.

69 N.C. 300

E. J. LILLY

v.THE BOARD OF COMMISSIONERS OF CUMBERLAND COUNTY.

Supreme Court of North Carolina.

June Term, 1873.

Money deposited in banks loses its distinct character as money, and becomes a debt due to the depositor from the bank, and as such, is a proper subject for taxation.

Solvent credits are property, and like other property are liable to taxation under our Revenue law. Nor does it make any difference if such credits were derived from the trade of a merchant in the usual course of a business, also taxed.

ARGUENDO: The State, until forbidden by Congress, has the power to tax National Bank bills.

PETITION to the Board of Commissioners of CUMBERLAND county to reform the tax lists, heard by Burton, J., at Chambers, June, 1873, in the town of Fayetteville, upon the following CASE AGREED:

I. On the_____day of April, 1873, the plaintiff in giving in his list of taxables to the list-takers for Cross Creek Township, in said county, was required by them to list his money on hand the 1st day of April, 1873, and also his solvent credits, being debts due and owing to the plaintiff.

II. The tax lists, as made out by the list-takers for Cross Creek Township, was returned to the defendants, the Board of Commissioners of Cumberland county, who by their advertisement, appointed the 21st day of May, 1873, for the hearing before them of complaints of the action of the listtakers; at which time the plaintiff appeared and complained that he had been charged with a tax upon his money on hand and on his solvent credits, and prayed the defendants to correct the said list by striking therefrom the tax upon these subjects. This the defendants refused, and the plaintiff appealed to the Superior Court.

III. The money on hand listed by the plaintiff, is money deposited in bank, consisting of National Bank notes, and United States Treasury notes, which were received by him in the usual course of his business, and the solvent credits listed are notes and accounts owing to him by his customers--the defendant being a wholesale and retail merchant doing business in Fayetteville.

IV. That the business of the defendant is taxed by the laws of North Carolina, and the said money and notes are the direct proceeds of such taxed business.

The parties claim as follows:

I. The plaintiff insists that his money on hand and solvent credits are not subject to taxation under the Constitution and Laws of North Carolina, and the Constitution and Laws of the United States.

II. The defendants claim that these subjects of taxation are especially enumerated and defined in the Constitution and Laws of North Carolina, and that they are bound to impose the tax provided by law on these subjects.

The parties, plaintiffs and defendants, agree upon the foregoing case and submit the same to the Hon. R. P. BUXTON, Judge, &c., to determine the following questions:

1. Whether money on hand and solvent credits are subject to taxation by the Constitution and Laws of North Carolina and the Constitution and Laws of the United States.

2. Whether money on hand and solvent credits, which are the proceeds of a business taxed by the laws of the State of North Carolina, are proper subjects of taxation under the laws of North Carolina and the Constitution and Laws of the United States.

It was admitted that the money before designated was a general deposit in bank.

After argument, his Honor delivered his opinion as follows:

“I think it may be considered settled by the Supreme Court of the United States, in the case cited for the plaintiff, Bank v. Supervisors, 7 Wallace 26, and Veazie Bank v. Fennel, 8 Wallace 533, that United States Treasury notes and National Bank notes are exempt from State taxation, upon grounds of public policy, appertaining to the general government. So far as the case in hand is concerned, there seems to arise two questions necessary to be determined before it can be satisfactorily decided.

1. Do United States Treasury notes and National Bank notes after they are deposited by the owner to his credit in a bank continue to be the money of the depositor or the bank? If they continue to be the money of the depositor, then they contin??ne to be the evidence of debt due from the Government to the depositor, and according to the above recited case he is not to be taken on their account. If, however, they become the money of the bank then the Government no longer owes the depositor, but owes the bank, and the bank owes the depositor. In other words the depositor becomes the holder of a “solvent credit,” not upon the government, but upon the bank. The question of Government policy becomes eliminated from the case as a difficulty in the way of the taxing power of the State, and the remaining question would be,

2. Are solvent credits between citizens taxable by the State?

The first question relating to the nature and character of deposits in bank is incidentally touched upon in the case of Planters Bank of Tennessee v. Union Bank of Louisiana, decided at the last term of the Supreme Court of the United States, in which case the following language occurs: (I quote from the case as reported in the Raleigh News, 3d June, 1873.) Generally a bank becomes a debtor to its depositor by its receipt of money deposited by him, and money paid into bank ceases to be the money of the depositor and becomes the money of the bank, which it may use by returning an equivalent when demanded, by paying a similar sum to that deposited. A collecting bank is the debtor of the depositor, and is under obligation to pay on demand, not the identical money received, but some equal in legal value. But this is the rule where money has been deposited and where there has been no contract or understanding that a different rule shall prevail.

This passage I consider decisive of the question relating to the nature and character of deposits in bank, so far as deposits of a general nature as distinguished from special deposits are concerned. In the absence of a statement to the contrary, I consider the deposits referred to in the “case agreed,” to be general deposits subject to check. We have the case of an individual owning “solvent credits” on a bank. This brings me to the consideration of the second question:

2. Can the State of North Carolina tax solvent credits between individuals?

In the case of the State v. Bell, Phill. 76, and the cases therein cited, the general subject of State taxation, its nature, and the extent of its power, is discussed. “The taxing power is one of the highest and most important attributes of sovereignty. It is essential to the establishment and continued existence of the government.” To the same effect speak the Supreme Court of the United States in Nathan v. The State of Louisiana, How. 73: “The taxing power of a State is one of its attributes of sovereignity, and when there has been no compact with the Federal Government, or cession of jurisdiction for the purposes specified in the Constitution, this power reaches all the property and business within the...