People v. the Commissioners

• Decision Date: 01 December 1866
• Citation: 71 U.S. 244,4 Wall. 244,18 L.Ed. 344
• Parties: PEOPLE v. THE COMMISSIONERS
• Court: U.S. Supreme Court

71 U.S. 244

18 L.Ed. 344

4 Wall. 244

PEOPLE v. THE COMMISSIONERS.

December Term, 1866

THESE were two cases which arose upon a certiorari, prosecuted, the one by Denning Duer, as relator, the other by Ralph Mead, in the same way, out of the Supreme Court of the State of New York, and directed to the Commissioners of Taxes and Assessments for the City and County of New York, the defendants in error. The relator in the first case was a holder of certain shares of stock in the National Bank of Commerce in New York, a banking association organized under the National Bank Law. The relator in the second case held certain shares in the Corn Exchange Bank, in the city of New York, incorporated under the laws of the State. These shares, in both banks, had been assessed in the year 1866, for the purposes of taxation under the

State laws, by the commissioners, as personal property of the relator, in the place in which the banks were located.

In justification of their proceedings the commissioners relied upon:

First. The enactments, in the form of provisos, in the forty-first section of the National Bank Law, passed June 3d, 1864,² in these words:

'Provided, that nothing in this act shall be construed to prevent all the shares in any of the said associations, held by any person or body corporate, from being included in the valuation of the personal property of such person or corporation in the assessment of taxes imposed, by or under State authority, at the place where such bank is located, and not elsewhere; but not at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State.

'Provided further, That the tax so imposed under the laws of any State upon the shares of any of the associations authorized by this act, shall not exceed the rate imposed upon the shares in any of the banks organized under authority of the State where such association is located.'

Secondly. An act of the State of New York, passed April 23d, 1866,³ in these words:

'SECTION 1. No tax shall hereafter be assessed upon the capital of any bank or banking association organized under the authority of this State or of the United States; but the stockholders in such banks and banking associations shall be assessed and taxed on the value of their shares of stock therein; said shares shall be included in the valuation of the personal property of such stockholder in the assessment of taxes at the place, town, or ward where such bank or banking association is located, and not elsewhere, whether the said stockholder reside in said place, town, or ward, or not; but not at a greater rate than is assessed upon other moneyed capital in the hands of individuals in this State.'

The case was heard by the Supreme Court of New York on the return of the commissioners, as upon a demurrer thereto. The return stated that the commissioners did assess the relator upon the value of said shares, and included the same in the valuation of his personal estate.

That they made no allowance or deduction on account of investments by the bank in any securities of the United States.

That such a deduction or allowance was made in assessments upon insurance companies and individuals.

The Supreme Court gave judgment for the commissioners, which judgment the Court of Appeals affirmed.

The cases were now here for review, under the twenty-fifth section of the Judiciary Act; two questions, among others brought up but not considered by this court, being:

1. Whether the New York statute, of 23d April, 1866, was valid so far as it attempts to authorize the taxation of bank shares where the capital of such bank is invested in United States securities, exempt from taxation under the acts of Congress? a question argued separately in respect to State banks, and to those organized under national laws.

2. Whether the taxation of the shares of the several relators was not invalid, for the reason that an illegal discrimination was made in favor of other State corporations and individuals, citizens of said State?

Besides the two cases reported by name here, there were eight or ten cases in substance very similar to them, the cases being represented by different counsel.

The various relators, plaintiffs in error, were represented by Messrs. W. M. Evarts, B. D. Silliman, J. E. Burrill, and E. S. Van Winkle.

On the other side were, Messrs. C. O'Connor, A. J. Parker, R. O'Gorman, and W. Hutchins.

For the relators, plaintiffs in error:

I. The case of Van Allen v. The Assessors,⁴ adjudged, in fact, no more than that, under the legislation of New York as then existing, a tax could not be laid on shares in the national banks. That was the point of the case. Whether such an act as that passed 23d April, 1866, would be valid so far as it taxed bank shares, where the capital of the banks was invested in Federal securities, was not a question necessarily in the case.

[The counsel then proceeded to discuss at large the first question as related to national banks, upon the assumption that this question was still open in this court for discussion.]

II. There is no act of Congress authorizing the taxation of shares of State banks whose capital is invested in United States securities, and the State, in asserting its right to tax such shares, cannot invoke any power or authority from Congress, but must maintain such right as one of State sovereignty. It is evident from the opinions in Van Allen v. The Assessors, that the court, in sustaining the assessment and the State law under which it was made, place its judgment upon the proviso in the forty-first section of the act of Congress.

A question is now presented, whether, in the absence of any act of Congress authorizing the taxation of the shares of STATE banks, whose capital is invested in government securities, such taxation by the State can be supported.

On this point we submit:

1. The United States securities, in which the capital of the Corn Exchange Bank, which is a State bank, is invested, are included within the provision of the act of Congress, that such securities, 'whether held by individuals, corporations, or associations, shall be exempt from taxation by or under State authority.'⁵

2. It is settled, in adjudications of the Supreme Court of the United States, that the capital of such bank cannot be taxed upon any measure or computation of it which includes the investment in these United States securities, thus exempt by law from State taxation.⁶

3. It is also adjudicated by the Supreme Court of the United States, upon a unanimous judgment of that court, that a tax, incompetent to State authority when assessed to the corporation or association as owner, and upon its capital in bulk, is equally incompetent to State authority when as sessed to the shareholder as owner, and upon his shares.⁷

4. The tax complained of by the relators, depending for its validity, as it does, upon the mere vigor of the legislation of the State of New York, and being without aid from any legislation or permission of Congress, is necessarily invalid as respects the investment of the bank, in United States securities, exempt from taxation.

III. In making the assessment, the commissioners diseriminated against the shareholders of national banks, and in favor of insurance companies and individuals, by refusing to make to the former the same allowance which is made to the latter on account of investments in United States securities, and have thus assessed 'such shareholders at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens,' in violation of the act of Congress above referred to.

The only permissive legislation of Congress touching the subject to State taxation of the shares of national banks is found in the forty-first section of the National Currency Act of June 3d, 1864.

And the only permissive State legislation touching the taxation of shares of State banks is the act of April 23d, 1866, and by each of said acts it is provided that such taxation shall not be 'at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State.'

The two provisos of the forty-first section of the act of June 3d, 1864, respectively refer to different subject.

The first relates to the valuation at which the shares shall be assessed; and provides that it shall not exceed the rate of valuation at which other moneyed capital in the hands of individuals shall be assessed.

The second refers to the rate at which taxes shall be imposed on such valuation, after such assessment has been made, and provides that such taxes shall not exceed in rate, or percentage, that imposed on shares in State banks.

The question in this case is not as to any rate, or percentage, at which taxes have been imposed, but as to the rate or value at which the shares have been assessed.

The assessment of the shares held by the relator in the Bank of Commerce was invalid, because they were assessed at a greater rate than was assessed on the shares in insurance companies, and at a greater rate than was assessed on the capital of insurance companies; and hence were assessed at a greater rate than 'other moneyed capital, in the hands of individual citizens' of New York.

Insurance companies incorporated under the laws of New York are moneyed corporations.⁸ Such companies by the laws of New York are subject to taxation on their capital.⁹ But they were assessed, and could legally be assessed, only upon the balance or residue of their capital and surplus profits, after deducting therefrom the amount of bonds and other securities of the United States held by them.¹⁰

Insurance companies in New York are subject to taxation of their capital, and the owners of stock in such companies are consequently exempt from taxation thereon. The stock so held by them, therefore, could not, under the laws of New York, be included in the valuation of their personal property in the...