Mercantile Bank v. State of Tennessee City of Memphis

• Decision Date: 02 March 1896
• Docket Number: No. 676,676
• Citation: 16 S.Ct. 461,161 U.S. 161,40 L.Ed. 656
• Parties: MERCANTILE BANK et al. v. STATE OF TENNESSEE, to Use of CITY OF MEMPHIS
• Court: U.S. Supreme Court

161 U.S. 161

16 S.Ct. 461

40 L.Ed. 656

MERCANTILE BANK et al.

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

No. 676.

March 2, 1896.

Bill by the state of Tennessee, for the use of the city of Memphis, against the Mercantile Bank and C. H. Raine.A decree for defendants was reversed by the state supreme court(31 S. W. 989), and they bring error.Affirmed.

This also is a bill filed by the state of Tennessee against the Mercantile Bank for the purpose of collecting taxes alleged to be due plaintiff below under the statutes of that state.

The bill alleges that the legislature of Tennessee, by an act passed February 29, 1856, incorporated the Gayoso Savings Institution, and by the third section of the act it was provided that the institution should '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.'The company, as complainants allege, was duly organized under the act of incorporation,—at what date it is now known, but, at all events, it was engaged in a general banking business in the city of Memphis from a date as nearly as 1856 down to the year 1869.In that year the institution failed, and a bill was filed by its president, John C. Lanier in the proper court, for an administration of the affairs of the company as an insolvent corporation under the laws of the state.In the course of the proceedings one E. B. McHenry was appointed receiver of the assets of the company by the court, and on the 11th day of June, 1880, the court directed the receiver to sell the charter of the company.On the 28th of June of that year the receiver did sell the charter, at public auction, for the sum of $201, to Julius A. Taylor, and the sale was afterwards duly reported to and confirmed by the court.On the 26th of March, 1881, the legislature of the state passed an act changing the name of the company to that of the Mercantile Bank, and thereupon Mr. Taylor undertook to sell the charter to John R. Godwin and others, who organized the bank with a capital stock of $200,000.Since the year 1885 the company has been carrying on a general banking business in the city of Memphis, claiming to be organized under, and to have all the rights, privi- leges, and immunities originally granted to, the Gayoso Institution, and that by virtue of this claim neither the defendant company nor its shareholders have paid any taxes whatever to the state, county, or municipality since its organization, except the one-half of 1 per cent. as provided in the charter.

Complainant charged that it was wholly incompetent to sell the charter of the Gayoso Savings Institution, and that the defendant company had no right or title thereto, and, especially, that it had no rightful claim to immunity from taxation as contained in that charter; and it is averred that all the stock of the defendant company was subscribed for and issued since the adoption by the state, on May 4, 1870, of the constitution of that year.For the year 1891 the capital stock of the company was assessed at a valuation of $160,000.The bill then further alleges the various statutes of the state of Tennessee providing for the assessment of shares or of the capital stock of corporations, and various other allegations are made tending to show a valid assessment either upon the capital stock or the shares of stock in the hands of shareholders, if the claim for exemption be not well founded.It prays for a discovery of the names of the shareholders, and that the court may determine whether the corporation or the shareholders have any immunity from taxation under the charter of that company, and that complainants have a decree against the defendant corporation for such taxes, with interest, etc.

To that billthe defendants filed a demurrer, and, as grounds thereof, stated that the defendant the Mercantile Bank is treated and sued in the proceeding as a corporation organized under the charter above mentioned, and exercising all the powers and franchises conferred by it, and in the enjoyment of the privileges and immunities bestowed by it, and that, therefore, the complainants cannot treat the defendant as a corporation under such charter, and at the same time deny its right and title thereto; that it cannot treat the defendant as a corporation under that charter, and then deny the existence of the charter; that it cannot sue the said defendant as a corporation, under the charter, for the purpose of imposing burdens on it, and then deny the benefit of the privileges and immunities conferred thereunder; that if the Mercantile Bank has no right or title to the charter, and if the charter was destroyed and ended by the judicial proceedings referred to, then there is no such corporation as the Mercantile Bank, and the business conducted under that name is a mere partnership, and the bill should have been filed against the persons composing such partnership.Another ground of demurrer was that it appeared in the third section of the charter above mentioned, under which the bank was organized, and it appears on the face of the bill, that the bank was to pay to the state an annual tax of one-half of 1 per cent. on each share of capital stock, which was to be in lieu of all other taxes, and that this constituted a contract between the state, on the one side, and the bank or shareholders, on the other, underwhich both the capital of the bank and the shares of stock in the hands of the shareholders were exempt, and that the various acts of the legislature subsequent to the grant of that charter, and providing for the assessment of the shares of stock in corporations, if applied to the defendant corporation, impaired the obligations of the contract, and are in conflict with section 10, art. 1, of the constitution of the United States, and are void.

This demurrer was overruled, with leave to insist upon the grounds thereof upon the hearing.

Complainants then, by leave of court, filed their amended and supplemental bill, adding various allegations not material to here notice, except that it was stated that, by a stipulation between the parties, the defendant corporation had assumed the payment of any liability that might be established against the shareholders therein, and that the defendantC. Hunter Raine should be made a defendant, in his capacity as a shareholder, and that whatever liability should be established against him should be taken as established against all the shareholders in the defendant corporation, and that the liability of all those established should be assumed by the defendant corporation.

To avoid the labor and expense of taking proof, and to bring the case to a final hearing, the parties then agreed upon certain facts, among which are the following: The charter of the Gayoso Savings Institution, and all amendments thereto referred to in the pleadings, are set forth in the statement.The first section of the charter named certain individuals, and it was enacted that they and their associates and successors 'be, and they are hereby, created a body politic and corporate by the name and style of the Gayoso Savings Institution, and by that name shall have succession,' etc.Provision is then made for subscription for the capital stock, which is to be divided into shares of $50 each, and when 200 shares shall have been subscribed, and the sum of $1 per share paid thereon, the shareholders may meet and elect five directors.The third section contains the exemption clause, which, as therein set forth, is as follows: '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 capital stock, which shall be in lieu of all other taxes.'Section 4 granted to it the usual banking privileges, as therein set forth.An amendment to this charter, passed March 26, 1881, changed the name of the Gayoso Savings Institution to the Mercantile Bank of Memphis.The statement also shows who were the owners of the capital stock of the Gayoso Savings Institution at the time of the commencement of the suit of John C. Lanier against the institution, mentioned in the original bill.

It is also stated that on the 5th day of March, 1881, Julius A. Taylor, the purchaser of the charter at the receiver's sale in June, 1880, and eight other persons, who were associated with him, held a meeting as stockholders of the Gayoso Savings Institution, the minutes of which meeting are therein set out.The minutes set forth that on the 5th day of March, 1881, a meeting of the stockholders of the Gayoso Savings Institution was held in Memphis, at which certain stockholders were present, and who were therein named, and that one of them was elected chairman of the meeting, and he reported that the requisite number of shares (200) had been duly subscribed to, as follows (giving the names of the subscribers), and that the sum of one dollar per share each had been paid in.It was then moved and seconded to proceed to the election of six directors, which was carried, and such directors were then elected.Just before the time of this meeting the parties therein named signed and executed a stock subscription paper, which is in the following words: 'We, the undersigned, agree to take stock in the Gayoso Savings Institution of Memphis, Tennessee, to the amount set opposite our respective names, and to pay the same in such manner as may be ordered by the board of directors, having this day paid in the sum of one dollar on each share.'(Here follow the names of the subscribers.)These are the 'stockholders' who are mentioned in the minutes of the stockholders' meeting.It is stated that this organization of the institution was continued regularly and without intermission, but without the actual transaction of any banking business until 1883, and that in April,...