State v. Memphis City Bank

• Decision Date: 07 July 1892
• Parties: State, to Use of City of Memphis, v. Memphis City Bank et al.
• Court: Tennessee Supreme Court

19 S.W. 1045

91 Tenn. 574

State, to Use of City of Memphis, v. Memphis City Bank 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 Memphis City Bank and its stockholders. From a decree sustaining a demurrer to its bill, and dismissing the same, complainant appeals. Reversed.

CALDWELL J.

The state brought this bill on behalf of the city of Memphis to recover from the Memphis City Bank and from its stockholders respectively, certain ad valorem taxes, alleged to be due on capital stock and on shares of stock. The bill was dismissed on demurrer, and complainant appealed.

The main defense is made upon the seventeenth section of the charter of the Memphis City Fire & General Insurance Company of which defendants claim the full benefit, and by which they contend that both capital stock and shares of stock are exempt from all taxation, except that prescribed therein. The language of that provision, so far as material to this contention, is as follows: "Be it further enacted, that there shall be levied a state tax of one half of one per cent. upon the amount of capital stock actually paid in, to be collected in the same way and at the same time as other taxes are by law collected, which shall be in lieu of all other taxes and assessments." The tax here prescribed is the pecuniary consideration to be paid by the corporation to the state for the franchises granted. It is expressly laid upon the capital stock, and is intended, obviously, to "be in lieu of all other taxes and assessments" on that subject of taxation. No additional tax can lawfully be laid upon capital stock, whether in favor of state, county, or municipality. The charter is binding, not only upon the state, but also upon county and municipality, which are but agencies of the state in administering the affairs of government. It is a contract whose obligation may not be violated by subsequent revenue laws or otherwise. Union Bank v. State, 9 Yerg. 490; State v. Union & Planters' Bank, 91 Tenn. 546, 19 S.W. 758; State v. Home Ins. Co., 91 Tenn. 558, 19 S.W. 1042; City of Memphis v. Hernando Ins. Co., 6 Baxt. 527; Nashville v. T, 5 Cold. 600. Whether the shares of stock are, by this charter, exempt from ad valorem taxation is a totally different question, for capital stock and shares of stock are distinct subjects of taxation. The assessment or exemption of the one is not the assessment or exemption of the other. State v. Union & Planters' Bank, 91 Tenn. 546, 19 S.W. 758; State v. Home Ins. Co., 91 Tenn. 558, 19 S.W. 1042; Union Bank v. State, 9 Yerg. 490; City of Memphis v. Ensley, 6 Baxt. 553; Nashville Gas-Light Co. v. City Council of Nashville, 8 Lea, 406; Railway Co. v. Morrow, 87 Tenn. 406, 11 S.W. 348; Farrington v. Tennessee, 95 U.S. 687; Tennessee v. Whitworth, 117 U.S. 135, 6 S.Ct. 645; New Orleans v. Houston, 119 U.S. 277, 7 S.Ct. 198; Cooley, Tax'n, 231. The charter "tax of one half of 1 per cent. upon the amount of capital stock actually paid in" is, therefore, not a tax upon shares of stock; nor is the exemption of capital stock from further taxation an exemption of shares of stock. That the charter tax is laid exclusively upon capital stock is too manifest to admit of debate; and, to our minds, it is equally clear that the words, "which shall be in lieu of all other taxes and assessments," refer alone to the same subject of taxation. But the one subject of taxation is mentioned; hence it would be illogical to give the exemption greater scope. The exemption contemplated follows in the legislative mind as a proper result from the tax imposed. The property protected from further burden is that upon which the specific burden is that upon which the specific burden is already imposed. The shares of stock are not liable for the charter tax; they are not embraced in the charter exemption; they are subject to taxation as other nonexempt property of the same kind.

If the taxability of shares of stock were left in doubt by the words of the charter, the doubt should be resolved in favor of the state. He who claims exemption from the common burden of taxation must justify his claim by the clearest grant from the state. Every presumption is against any surrender of the taxing power; and the state must be held to have the power of assessing all property taxable under the constitution, unless by authorized grant, in words too plain to be mistaken, an intention to surrender that power is manifested. State v. Union & Planters' Bank, 91 Tenn. 546, 19 S.W. 758; State v. Home Ins. Co., 91 Tenn. 558, 19 S.W. 1042; Wilson v. Gaines, 9 Baxt. 551; State v. Butler, 13 Lea, 406; Insurance Co. v. Debolt, 16 How. 435; The Delaware Railroad Tax, 18 Wall. 206; Farrington v. Tennessee, 95 U.S. 686; Tennessee v. Whitworth, 117 U.S. 136, 148, 6 S.Ct. 645, 649; Memphis Gas-Light Co. v. Shelby Co. Taxing Dist., 109 U.S. 398, 3 S.Ct. 205; New Orleans, City C. & L. R. Co. v. New Orleans, 143 U.S. 195, 12 S.Ct. 406. The language of the charters considered in Union Bank v. State, 9 Yerg. 490, and in State v. Home Ins. Co., 91 Tenn. 558, 19 S.W. 1042, is, in legal effect, the same as that here involved; and in each of those cases it was decided that capital stock was exempt from further taxation, but that the shares of stock were subject to assessment as other nonexempt property of the same kind. The only difference worthy of mention here lies in the fact that the words, "which shall be in lieu of all other taxes and assessments," appearing in this charter, are not found in the charters construed in those cases; and that difference is unimportant, being one of language merely, and not of legal import. In those cases exemption of capital stock from all other taxation arose by necessary implication from the fact that the legislature, in the charter, laid a prescribed tax upon that subject of taxation; while in this case the exemption there implied is expressed by the words, "which shall be in lieu of all other taxes and assessments." There the exemption followed as a legal result; here the same legal result is expressed in so many words without adding anything to the legal import of the charter.

Thus far, this opinion has proceeded upon the assumption that defendants are entitled to the full benefit of the seventeenth section of the charter of the Memphis City Fire & General Insurance Company, as they claim to be. Whether they are in reality so entitled remains to be considered. That company was chartered on the 24th of January, 1870. By that twelfth section of the charter it is provided "that the said corporation shall be capable in law *** of receiving in trust, from any person, money, jewels, plate, or other valuable thing." On the 26th of March, 1887, the legislature passed "An act to define the powers of corporations," as follows: "Section 1. Be it enacted by the general assembly of the state of Tennessee First. That any company incorporated under the laws of this state, having by its charter the right to receive moneys in trust or otherwise, shall be held to have, and shall have, the power, after the passage of this act, to receive deposits and loan the same and its capital on any kind of commercial or business paper or real estate, levy and sell exchange, and all kinds of public or private securities and commercial paper. Second. That the exercise of any of the foregoing powers by any corporation created or incorporated or chartered under the laws of this state shall not operate to forfeit or affect any franchise, right, power, privilege, or immunity granted to such corporation in and by its charter." Acts 1887, c. 190, § 1. On the 22d of January, 1889, another act was passed by the first section of which the name of the "Memphis City & General Insurance Company" was changed to "Memphis City Bank," and by the second section of which it was enacted "that such change of name, as provided for in the first section of this act, shall not operate to forfeit, affect, or abridge any franchise, right, power, privilege, or immunity granted to said corporation by its original charter." Complainant alleges, and defendants by their demurrer admit, that the Memphis City Fire & General Insurance Company was organized under its charter, and was engaged in a general insurance business until the passage of the foregoing act by which its name was changed; and that thereafter it abandoned the business of insurance, and employed its capital in a general banking business, in which it is still engaged. Upon these facts the question arises whether or not the Memphis City Bank is entitled to any immunity from taxation by virtue of the seventeenth section of the original charter, hereinbefore construed. In the absence of the acts of 1887 and 1889, it is clear that no such immunity would exist, for by the diversion of the capital stock from the business of insurance, and its employment in a banking business, it would cease to be within the protection of the original charter. De Soto Bank v. Memphis, 6 Baxt. 415; Bank v. McGowan, 6 Lea, 705; Bank v. Tennessee, 104 U.S. 493. Then what is the legal effect of those acts? A mere change of name, without a change of business, would make no difference whatever in the matters of taxation and exemption. Wallace v. Loomis, 97 U.S. 147; State v. Butler, 86 Tenn. 615, 8 S.W. 586. A change of business and transfer of corporate rights, privileges, and immunities by legislative authority have several times by this court been held to carry with them the same immunity from taxation enjoyed in the original business. State v. Butler, 13 Lea, 406; State v. Butler, 86 Tenn. 620, 8 S.W. 586. But those decisions were made with respect to changes...