State to Use of City of Memphis v. Bank of Commerce

• Decision Date: 23 June 1895
• Citation: 31 S.W. 993,95 Tenn. 221
• Parties: STATE, to Use of CITY OF MEMPHIS, v. BANK OF COMMERCE. STATE et al. v. SAME.
• Court: Tennessee Supreme Court

31 S.W. 993

95 Tenn. 221

STATE, to Use of CITY OF MEMPHIS, v. BANK OF COMMERCE.

STATE et al. v. SAME.

Supreme Court of Tennessee.

June 23, 1895

Appeal from chancery court, Shelby county; L. T. Sneed, Chancellor.

Separate bills in equity by the state of Tennessee, for the use of the city of Memphis, against Bank of Commerce, and by the state and the county of Shelby, against the same defendant, to recover certain taxes. From a decree sustaining demurrers to both bills, complainants appeal. Reversed.

p>Page Metcalf & Walker and F. T. Edmondson, for appellants.

Morgan & McFarland, Julius A. Taylor, W. H. Carroll, L. & E. Lehman Gantt & Patterson, F. P. Poston, and Thos. M. Scruggs, for appellees.

GILLHAM Special Judge.

These cases involve substantially the same issues, and may be decided in one opinion. The first is a bill in equity, in the name of the state, for the use of the city of Memphis, to recover from the Bank of Commerce ad valorem taxes on its capital stock for the years 1887 to 1894, inclusive, taxes for the years 1892, 1893, and 1894 upon the surplus and undivided profits of the bank during those years, a privilege tax of $1,000 per year from 1889 to 1894, inclusive, and from the stockholders of the corporation taxes on the shares of stock held by them, respectively, during the years 1887 to 1894, inclusive. The second is a similar bill upon the part of the state of Tennessee and county of Shelby, covering a part of the same period. The taxes sued for, exclusive of the privilege tax, aggregate the sum of about $116,000. By stipulation of the parties, one shareholder is made a defendant to represent all the shareholders, and in the event of a decree against him, the same to be as established against all the stockholders, and a decree to be entered against the corporation. A demurrer was interposed by the defendants, setting up a claim of exemption from all taxation, under the terms of the charter, either upon the shares of stock or the capital stock, defendant bank having paid the charter tax. By agreement of the parties the cases were regularly brought to hearing, whereupon the chancellor sustained the demurrer and dismissed the bills, from which decree complainants in both cases have appealed. Defendants claim complete immunity from these taxes, by reason of a provision in its charter, in words as follows: "The said institution shall have a lien on the stock for debts due it by the stockholders, before and in perference 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." The bills claim-First, that the charter tax of one-half of 1 per cent. was laid on the capital stock leaving the shares of stock subject to general taxation in the hands of the shareholders; second, that if this be not the right construction, then the charter tax was laid on the shares of stock, leaving the capital stock and franchise taxable. The contention of the defendants is that the charter tax is on the shares of stock, and that both shares of stock capital stock, and franchise are absolutely exempt from all taxation, except the charter tax of one-half of 1 per cent. Complainants sue both the corporation and the shareholders and seek alternative relief dependent upon the construction which may be given this provision of the charter. The bills are so framed, and the cases so presented, that relief may be given either against the corporation or the shareholder, in so far as the taxes have been imposed and valid assessments made.

By an act of the legislature of this state, passed February 29, 1856, the Gayoso Savings Institution and the Chattanooga Savings Institution were created bodies politic and corporate, and by the third clause of that act each was given the powers, rights, privileges, and immunities expressed in the clause above quoted. By subsequent legislation the name of the Chattanooga Savings Institution was changed to the "Bank of Commerce," and its situs moved to Memphis. It has been adjudicated and settled by this court that the Bank of Commerce has and enjoys all the rights, privileges, powers, and immunities of the Chattanooga Savings Institution,-that it is, in truth, that institution under a new name. State v. Butler, 86 Tenn. 614, 8 S.W. 586. The charter was granted under the constitution of 1834, when the legislature had the power to grant such immunity from taxation, and is a contract by which the state is bound, the obligation of which may not be impaired by subsequent legislation or constitutional provision. Const. U.S. art. 1, § 10; Dartmouth College v. Woodward, 4 Wheat. 519; Farrington v. Tennessee, 95 U.S. 679; City of Memphis v. Farrington, 8 Baxt. 541; State v. Butler, 13 Lea, 408; Id., 86 Tenn. 614, 8 S.W. 586; City of Memphis v. Hernando Ins. Co., 91 Tenn. 549, 19 S.W. 758; Union Bank v. State, 9 Yerg. 490; Const. Tenn. art. 1, § 20.

"Shares of stock and capital stock are separate and distinct property interests, and form separate and district subjects of taxation." The taxation of both is not double taxation. City of Memphis v. Hernando Ins. Co., 91 Tenn. 549, 19 S.W. 758. To same effect are New Orleans v. Houston, 119 U.S. 277, 7 S.Ct. 198; Farrington v. Tennessee, 95 U.S. 687; Union Bank v. State, 9 Yerg. 490; Railroad Co. v. Morrow, 87 Tenn. 406, 11 S.W. 348; City of Memphis v. Ensley, 6 Baxt. 556; Tennessee v. Whitworth, 117 U.S. 135, 6 S.Ct. 645.

The rule that taxation shall be uniform, and that all property shall bear its just portion of the burden imposed by law for the public good, being so manifestly just, it follows that "he who claims an exemption from his share of the common burden must justify his claim by the clearest grant of organic or statute law." City of Memphis v. Hernando Ins. Co., 91 Tenn. 550, 19 S.W. 758. The right of taxation will not be held to have been surrendered, as expressed by Chief Justice Taney, "unless the intention to surrender is manifest by words too plain to be mistaken." Trust Co. v. Debolt, 16 How. 435. "If a doubt arise as to the intent of the legislature, that doubt must be solved in favor of the state." Delaware Railroad Tax Case, 18 Wall. 226; City of Memphis v. Hernando Ins. Co., 91 Tenn. 550, 19 S.W. 758. "The language in which the surrender is made must be clear and unmistakable." Erie Railroad Co. v. Pennsylvania, 21 Wall. 498, 499. "When exemption is claimed, it must be shown indubitably to exist." Farrington v. Tennessee, 95 U.S. 686. "The presumption is always against any surrender of the taxing power." Tennessee v. Whitworth, 117 U.S. 136, 6 S.Ct. 645. The same rule is announced in State v. Butler, 13 Lea, 406; Memphis Gas Light Co. v. Taxing District of Shelby Co., 109 U.S. 398, 3 S.Ct. 205; New Orleans City & L. R. Co. v. New Orleans, 143 U.S. 195, 12 S.Ct. 406. In Wilson v. Gaines, 9 Baxt. 551, Judge Turney, for this court, says: "Exemptions from taxation are contrary to public policy, and can only be granted in clear and unmistakable terms. They are not creatures of intendment or presumption. If the language in which they are claimed to be granted leaves it doubtful, the benefit of the doubt must be given to the state, the life of which is taxes." It is equally certain that, in construing such grant, it is our duty to see that the contract between the state and the corporation is sustained and enforced,-that nothing which has been granted shall be taken away. The idea is well expressed by Mr. Justice Swayne in Farrington v. Tennessee, 95 U.S. 682: "A compact lies at the foundation of all national life. *** Spotless faith in their fulfillment honors alike communities and individuals."

The defendants mainly rely upon the case of Farrington v Tennessee, 95 U.S. 679, as conclusive of the questions here raised, and base their contentions on the fact that this charter. with others, was construed in that case. The opinion was pronounced in the Case of the Union & Planters' Bank, and the construction was primarily of the exemption clause contained in the charter of that corporation. Several cases were heard with that of the Union & Planters' Bank, and were disposed of by the same opinion, as appears by a foot note at page 690. The charter of the Bank of Commerce was there construed, under the style of Wicks v. Tennessee, and the language of Mr. Justice Swayne, in disposing of the cases heard with the principal case, as given by the reporter, is as follows: "These cases are all disposed of by the opinion in Farrington v. Tennessee, 95 U.S. 679. The questions are substantially the same as in that case, and the results must be the same." Defendants construe that case as holding that the charter tax was laid on the shares of stock in the hands of the shareholders, and that the tax is in lieu of all other taxes, either of shares of stock or capital stock, franchise, etc. Complainants concede the first, but dispute the second, proposition, and contend that the adjudication in that case goes no further than to settle that the charter tax is on the shares of stock, and that the shares are exempt from all further or other taxation. They further contend that, when the case was under consideration by the supreme court of the United States in the Farrington Case, the full text of the exemption clause was not set forth in the agreed statement of facts upon which the case was heard; that certain material parts of said clause were omitted from the agreed stipulation, and that the present case is a new one, which requires another and a different construction of the defendant's charter from that given in the Farrington Case, 95 U.S. 679; that the correct construction of the charter in full is that the charter tax is laid on the...