Porter v. the Rockford

• Decision Date: 31 January 1875
• Citation: 1875 WL 8249,76 Ill. 561
• Parties: SAMUEL R. PORTER et al.v.THE ROCKFORD, ROCK ISLAND AND ST. LOUIS RAILROAD COMPANY.
• Court: Illinois Supreme Court

76 Ill. 561

1875 WL 8249 (Ill.)

SAMUEL R. PORTER et al.

v.THE ROCKFORD, ROCK ISLAND AND ST. LOUIS RAILROAD COMPANY.

Supreme Court of Illinois.

January Term, 1875.

OPINION TEXT STARTS HERE

APPEAL from the Circuit Court of Rock Island county; the Hon. GEORGE W. PLEASANTS, Judge, presiding.

This was a bill in chancery, by the appellee against John V. Cook, county clerk, and Samuel R. Porter, collector of Rock Island, to enjoin the collection of a tax. The opinion of the court states all the material facts of the case. The tax sought to be enjoined was assessed and levied under the consolidated revenue act of 1872.

Messrs. KENWORTHY & BEARDSLEY, and Mr. WILLIAM H. GEST, for the appellants.

Mr. CHARLES M. OSBORN, for the appellee.

Mr. JUSTICE SCHOLFIELD delivered the opinion of the Court:

A number of cases have been submitted at the present term for our decision, in which substantially the same questions arise as in the present case. Inasmuch as the opinion in this case must be conclusive in those, we have, in considering the various questions involved, examined all the arguments filed by the distinguished and eminent counsel engaged in the several cases, with all the care and deliberation we could bestow, in view of the limited time within our control.

The bill filed by the appellee alleges that the Board of Equalization assessed against it, for the purpose of taxation for the year 1873, its property denominated “railroad track” and “rolling stock,” at the sum of $2,146,932, and its capital stock at the sum of $1,004,480, upon all which taxes are levied, the collection of which is sought to be enforced against appellee.

The present suit relates only to so much of these taxes as is claimed to be due in Rock Island county. The first objection urged is, that appellee owns no property upon which it can be held liable for the payment of taxes, which is described by the words “capital stock,” because, it is insisted, its capital stock has been sold to, and was, at the date of this assessment, the property of the shareholders and not of the corporation.

The legal property of the shareholder is quite distinct from that of the corporation, although the shares of stock have no value save that which they derive from the corporate property and franchise, and a tax levied upon the property of the one is not, in a legal sense, levied upon the property of the other. In Van Allen v. The Assessors, 3 Wallace, 583, Mr. Justice NELSON, in delivering the opinion of the court, said: “The tax on the shares is not a tax on the capital of the bank. The corporation is the legal owner of all the property of the bank, real and personal; and, within the powers conferred upon it by the charter, and for the purposes for which it was created, can deal with the corporate property as absolutely as a private individual can deal with his own. This is familiar law, and will be found in every work that may be opened on the subject of corporations. A striking exemplification may be seen in the case of The Queen v. Arnaud. The question related to the registry of a ship owned by a corporation. Lord DENMAN observed: ‘It appears to me that the British corporation is, as such, the sole owner of the ship. The individual members of the corporation are no doubt interested, in one sense, in the property of the corporation, as they may derive individual benefits from its increase, or loss from its decrease, but in no legal sense are the individual members the owners.’

The interest of the shareholder entitles him to participate in the net profits earned by the bank in the employment of its capital, during the existence of its charter, in proportion to the number of his shares, and, upon its dissolution or termination, to his proportion of the property that may remain of the corporation, after the payment of its debts. This is a distinct, independent interest or property, held by the shareholder like any other property that may belong to him.”

“There can be no question,” says Redfield, in his work on Railways, (vol. 2, 3d ed. 453,) “that the capital stock of corporations, or their property, both real and personal, is taxable to the corporation itself.”

After quoting from the opinion of Mr. Justice Wayne, in Gordon v. The Appeal Tax Court, 3 Howard, 133, he adds: “We here find the clear recognition of three kinds of corporate property taxable to the corporation, and the shares in the hands of the corporators distinctly defined as a fourth species of corporate property, which is taxable only to the owners or holders: 1. The capital stock. 2. The corporate property. 3. The franchise of the corporation-- all of which is taxable to the corporation; and the shares in the capital stock, which is taxable only to the shareholders.” And again, at page 460, sec. 2, he says: “The interest or right of a shareholder in a corporation is well defined by SHAW, C. J.: ‘The right is, strictly speaking, the right to participate, in a certain proportion, in the immunities and benefits of the corporation.’ This is a right or property as distinct from the capital stock of the company, or property of the company, as a debt is distinct from the debtor, or the mortgage debt from the mortgaged premises.” The distinction, as thus stated, between “capital stock,” which is liable to taxation against the corporation, and “shares of stock,” which can only be taxed against the shareholders, is also fully recognized in Oswego Starch Factory v. Dolloway, 21 N. Y. 449; The People v. Com'r of Taxes, 23 Id. 217-18; Minot v. The P. W. and B. R. R. Co. et al. (Supreme Court U. S.) 18 Wallace, 205. See also People v. Bradley, 39 Ill. 144; Bank of Republic v. County of Hamilton, 21 Id. 54.

We are satisfied, from a careful examination of the Revenue act, that the legislature did not, by the use therein of the words “capital stock,” mean ““shares of stock,” either separately or in the aggregate, but that they intended to designate thereby the property of the corporation. In the second clause of the first section, in declaring what shall be taxed, is included the “shares of stock of incorporated companies and associations;” and the fourth clause includes “the capital stock of all companies and associations now or hereafter created under the laws of this State.”

The third section prescribes the mode of valuation, and in the fourth clause it is required that “the capital stock of all companies and associations now or hereafter created under the laws of this State, shall be so valued by the State Board of Equalization as to ascertain and determine, respectively, the fair cash value of such capital stock, including the franchise, over and above the assessed value of the tangible property of such company or association.” And the section concludes with the proviso, that “in all cases where the tangible property or capital stock of any company or association is assessed under the act, the shares of capital stock of any such company or association shall not be assessed or taxed in this State.” Section six requires every person to “list his shares of stock, of joint stock or other companies (when the capital stock of such company is not assessed in this State),” and that “the property of a body politic or corporate shall be listed by the president or proper agent or officer thereof.”

By the 29th clause of the 25th section, it is made the duty of the person whose property is being assessed to state, in the schedule, to be by him delivered to the assessor, “the amount and value of shares of capital stock of companies and associations not incorporated by the laws of this State.” The capital stock or property of national banks is not to be assessed or taxed, but by the 35th section it is provided that “the stock holders in every bank located within this State, whether such bank has been organized under the banking laws of this State or of the United States, shall be assessed and taxed on the value of their shares of stock therein,” etc.

By the 40th section, “every person, company or corporation owning, operating or constructing a railroad in this State, shall return sworn lists or schedules of the taxable property of such railroad,” as is thereinafter provided.

The 48th section requires that, “at the same time the lists or schedules are required to be returned to the county clerks, the person, company or corporation running, operating or constructing any railroad in this State, shall return to the Auditor of Public Accounts sworn statements or schedules, as follows:

First. Of the property denominated railroad track, giving the length of the main and side or second tracks and turn outs, and showing the proportions in each county, and the total in the State.

Second. The rolling stock, giving the length of the main track in each county, the total in this State, and the entire length of the road.

Third. Showing the number of ties in track per mile, the weight of iron or steel per yard, used in the main and side tracks; what joints or chairs are used in track, the ballasting of the road, whether graveled or dirt, the number and quality of buildings or other structures on “railroad track,” the length of time iron in track has been used, and the length of time the road has been built.

Fourth. A statement or schedule showing: 1. The amount of capital stock authorized, and the number of shares into which such capital stock is divided. 2. The amount of capital stock paid up. 3. The market value, or if no market value, then the actual value of the shares of stock. 4. The total amount of all indebtedness, except for current expenses for operating the road. 5. The total listed valuation of all its tangible property in this State. Such schedule shall be made in conformity to such instructions and forms as may be prescribed by the Auditor of Public Accounts.”

The 50th section makes it the duty of the Auditor, annually, on the meeting of the State Board of Equalization, to lay such schedules before the board, and requires the board...