State to Use of City of Memphis v. Home Ins. Co.

• Decision Date: 07 July 1892
• Citation: 19 S.W. 1042,91 Tenn. 558
• Parties: State, to Use of City of Memphis, v. Home Ins. Co. et al.
• Court: Tennessee Supreme Court

19 S.W. 1042

91 Tenn. 558

State, to Use of City of Memphis, v. Home Ins. Co. et al.

Supreme Court of Tennessee.

July 7, 1892

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

Bill by the state of Tennessee, on behalf of the city of Memphis against the Home Insurance Company and its stockholders. From a decree sustaining a demurrer to its bill, and dismissing the same, complainant appeals. Reversed.

CALDWELL J.

The state filed this bill, on behalf of the city of Memphis, to recover from the Home Insurance Company, and from the owners of its shares of stock, certain ad valorem taxes alleged to be due on capital stock and shares of stock respectively. Defendants, by demurrer, claimed exemption by virtue of the charter of incorporation, which was set out in the bill. The demurrer was sustained, and the bill dismissed. Complainant has appealed. The Home Insurance Company was chartered on the 2d of March, 1854. By the thirtieth section of the charter it was provided that "there shall be a state tax of one half of one per cent. upon the amount of capital actually paid in." Manifestly, this charter tax was laid upon the capital stock, and was by the legislature intended to operate as an exemption to the corporation from further taxation on the stock. Though not expressed in so many words, the exemption results by necessary implication from the language employed. The prescribed tax is the full pecuniary consideration to be paid by the corporation for the franchises granted by the state. Among those franchises is that of owning and using the capital stock for the purposes contemplated in the charter. To exact an additional tax upon the company's capital stock is to exact an additional consideration for the thing, or one of the things, granted in the first instance. That cannot lawfully be done. The charter is a contract, whose obligation the state cannot impair by tax laws or otherwise. Union Bank v. State, 9 Yerg. 490; State v. Union & Planters' Bank, 91 Tenn. 546, 19 S.W. 758. This contract binds, not only the state, but also the counties and municipalities, which are but agencies of the state government. The state may not lay an additional tax upon the capital stock of the defendant company, nor may the city of Memphis, for whose use this suit is brought. Id.; City of Memphis v. Hernando Ins. Co., 6 Baxt. 527; Nashville v. T, 5 Cold. 600.

This decides but half the case, however, and it remains to inquire whether the charter exemption extends to "shares of stock." "Capital stock" and "shares of stock" are different things, and form different subjects of taxation. A tax upon the one is not a tax upon the other, nor is an exemption of the one an exemption of the other. Before the law each must stand upon its own bottom. State v. Union & Planters' Bank, 91 Tenn. 546, 19 S.W. 758; citing New Orleans v. Houston, 119 U.S. 277, 7 S.Ct. 198; Tennessee v. Whitworth, 117 U.S. 135, 6 S.Ct. 645; Farrington v. Tennessee, 95 U.S. 687; 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 Gaslight Co. v. City Council of Nashville, 8 Lea, 406.

In the case at bar it has been seen that the charter tax is laid upon the capital stock, and that, by implication, that subject of taxation is to be exempted from further assessment. That tax is laid upon the one subject of taxation only; and the implication of exemption arising therefrom can by no fair construction be held to have greater scope. The implied exemption cannot be broader than the express tax. Only the subject or subjects covered by the tax are included in the exemption. As this court said in a recent case: "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." State v. Union & Planters' Bank, 91 Tenn. 546, 19 S.W. 758. Every presumption is against any surrender of the taxing power, and, if in a given case a doubt arise as to the intent of the legislature on this subject, that doubt must be solved in favor of the state. Unless the intention to surrender is manifested by words too plain to be mistaken, the right to tax must be held still to reside in the state. Insurance Co. v. Debolt, 16 How. 435; Delaware Railroad Co. Tax Case, 18 Wall. 226; Railway Co. v. Pennsylvania, 21 Wall. 498; Farrington v. Tennessee, 95 U.S. 686; Tennessee v. Whitworth, 117 U.S. 136, 148, 6 S.Ct. 645, 649; Memphis Gaslight Co. v. Shelby Co. Taxing Dist., 109 U.S. 398, 3 S.Ct. 205; Railroad Co. v. New Orleans, 143 U.S. 195, 12 S.Ct. 406; Wilson v. Gaines, 9 Baxt. 551; State v. Butler, 13 Lea, 406.

When this rule is applied to the case at bar, it becomes perfectly clear that shares of stock in the Home Insurance Company are subject to ad valorem taxation, in such manner as the state may, by proper statute, prescribe. The claim of exemption is not justified by a grant in the clearest terms. Indeed, it is supported by no...