State, to Use of City of Memphis v. Union & Planters' Bank

Decision Date07 June 1892
Citation19 S.W. 758,91 Tenn. 546
PartiesState, to Use of City of Memphis v. Union & Planters' Bank et al. Same v. Hernando Ins. Co. et al. SAME v. Bluff City Ins. Co. et al.
CourtTennessee Supreme Court

Appeal from chancery court, Shelby county; W. D. Beard, Chancellor.

Three suits by the state of Tennessee, for the use of the city of Memphis, against the Union & Planters' Bank, the Hernando Insurance Company and others, and the Bluff City Insurance Company and others, respectively, to recover certain taxes. Demurrers to the bills were sustained. Complainant appeals. Affirmed.

CALDWELL J.

This is a bill by the state of Tennessee, on behalf of the city of Memphis, to recover from the Union & Planters' Bank & $48,576.25 as ad valorem taxes on its capital stock for the years 1887 to 1891, inclusive, or, in the alternative, to recover from the stockholders of the bank the same amount, as taxes on the shares of stock held by them respectively, during those years. Demurrer was sustained, and the bill dismissed. Complainant has appealed. Defendants claim complete immunity from these taxes, by reason of a certain provision in the bank charter from the state. That provision is as follows: "That said company shall pay to the state an annual tax of one half of one per cent. on each share of stock subscribed, which shall be in lieu of all other taxes." Acts 1857-58, c. 166, §§ 10, 12; Acts 1869, c. 93. With respect to this provision, the primary claim of the bill, and of complainant's counsel at the bar, is that the charter tax of one half of 1 per cent. was laid on shares of stock, and that the words, "which shall be in lieu of all other taxes," relate alone to shares of stock; that those words were used for the sole purpose of expressing the legislature's intent to exempt the shares of stock from further taxation, and not with a view of granting any exemption to the capital stock of the corporation. In the alternative, the shares of stock are alleged to be liable to taxation if capital stock should be held to be exempt under the charter. The bill concedes the exemption of the one or the other, but denies that both are exempt. Demurrants assert that, by a proper construction of the charter, both shares of stock and capital stock are exempt absolutely from all taxation, except the one half of 1 per cent., expressly prescribed.

The charter was granted under the constitution of 1834, when it was within the power of the legislature to grant such exemption as it deemed best; hence the exact measure of immunity conferred in this instance, and that to which defendants are entitled, is to be ascertained from the language employed. All that was given must be held to be lawful. The charter is a contract, by which the state is bound, and whose obligation may not be impaired by subsequent legislation. Const. U.S. art. 1, § 10; Dartmouth College v. Woodward, 4 Wheat. 519; Farrington v Tennessee, 95 U.S. 684; City of Memphis v Farrington, 8 Baxt. 541; Const. Tenn. art. 1, § 20; State v. Butler, 13 Lea, 408, 86 Tenn. 614, 8 S.W. 586; Bank of Tennessee v. State, 9 Yerg. 490. "Shares of stock" and "capital stock" are separate and distinct property interests, and form separate and distinct subjects of taxation. The assessment or exemption of the one is not an assessment or exemption of the other; assessment of both is not double taxation. New Orleans v. Houston, 119 U.S. 277, 7 S.Ct. 198; Tennessee v. Whitworth, 117 U.S. 135, 6 S.Ct. 645; 95 U.S. 687, supra; Cooley, Tax'n, 231; Bank of Tennessee v. State, 9 Yerg. 490; Railway Co. v. Morrow, 87 Tenn. 406, 11 S.W. 348; City of Memphis v. Ensley, 6 Baxt. 553; Nashville Gas-Light Co. v. City Council of Nasvhille, 8 Lea, 406. The right of taxation is inherent in the state. It is a prerogative essential to the perpetuity of the government, and he who claims an exemption from the common burden must justify his claim by the clearest grant of organic or statute law. In Insurance Co. v. Debolt, 16 How. 435, it is said by Chief Justice Taney that the right of taxation will not be held to have been surrendered "unless the intention to surrender is manifested by words too plain to be mistaken." Brief extracts from other cases illustrate the importance and strictness of the rule: "If a doubt arises as to the intent of the legislature, that doubt must be solved in favor of the state." Delaware Railroad Tax Case, 18 Wall. 226. The court has, however, in the most emphatic terms, and on every occasion, declared that the language in which the surrender is made must be clear and unmistakable." Railway Co. v. Pennsylvania, 21 Wall. 498, 499. "When exemption is claimed, it must be shown indubitably to exist." 95 U.S. 686, supra. The presumption is always against any surrender of the taxing power. Tennessee v. Whitworth, 117 U.S. 136, 6 S.Ct. 645. See, to same effect, Wilson v. Gaines, 9 Baxt. 551; Railroad Co. v. Gaines, 3 Tenn. Ch. 604, 611; 13 Lea, 406, supra; Gas-Light Co. v. Shelby Co. Taxing Dist., 109 U.S. 398, 3 S.Ct. 205; New Orleans C. & L. R. Co. v. New Orleans, 143 U.S. 195, 12 S.Ct. 406.

In view of the foregoing rule we would have no hesitation, if the question were res integra, in holding that the provision of this charter does not exempt capital stock and also shares of stock from other taxation than that named for, to our minds, the words of the grant do not indubitably manifest an intention to exempt both from further taxation. Proceeding upon the idea that those words related to capital stock, and exempted it from all assessments except the charter tax, this court, in 1873, held that so much of a lot and building, purchased with its capital stock, as was necessarily used by the bank for the convenient carrying on of its business, was exempt from further taxation, and that other portions of the lot and building not so used were subject to be assessed as other property. De Sota Bank v. Memphis, 6 Baxt. 415. In another case the same charter provision was invoked by the stockholders, who claimed that it protected them against an ad valorem tax, which had been laid on their shares of stock. The chancellor held that the stockholders were so protected, but on appeal his decree was reversed, this court holding that the charter tax and exemption related alone to capital stock, and left shares of stock subject to taxation against the stockholders. City of Memphis v. Farrington, 8 Baxt. 539. The stockholders took the case into the supreme court of the United States, and there obtained a reversal of the decree of this court and an affirmance of the decree of the chancellor. Farrington v. Tennessee, 95 U.S. 679. In the argument at the bar in the present case, counsel on both sides placed great reliance on the opinion delivered in that case by the supreme court of the United States. On the one hand it was contended that its language sustains the primary claim of the bill in this case by limiting the charter tax and exemption to shares of stock alone; and, on the other hand, it is insisted that it justifies the demurrer by holding both shares of stock and capital stock exempt from other taxation than that prescribed by the charter. It is sufficient for us to say, at this point, that the only question for decision in that case was the effect of the particular words of the charter upon the rights of the stockholders. Shares of stock alone had been taxed, and stockholders alone were making the contest. The corporation was not before the court. Mr. Justice Matthews, while on the circuit, in referring to that case, said: "It was held that the words, 'in lieu of all other taxes,' as thus used, meant in lieu of all other taxes that might be imposed on that subject of taxation, viz., the shares of the capital stock; and that accordingly it excluded a tax on those shares assessed upon them against the individual shareholder as his property." Tennessee v. Whitworth, 22 F. 80. When the latter case reached the supreme court of the United States, Chief Justice Waite, in delivering the opinion, said of the Farrington Case that the question therein raised was whether the provision of the charter exempted the shares in the hands of the stockholders from any further taxation by the state," and that "the court, three justices dissenting, held that it did, because, as the charter tax was laid on each share...

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