Union & Planters' Bank v. City of Memphis

• Decision Date: 02 April 1898
• Parties: UNION & PLANTERS' BANK v. CITY OF MEMPHIS et al.
• Court: Tennessee Supreme Court

46 S.W. 557

101 Tenn. 154

UNION & PLANTERS' BANK v. CITY OF MEMPHIS et al.

Supreme Court of Tennessee.

April 2, 1898

Appeal from chancery court, Shelby county; Sterling Pierson Chancellor.

Bill by the Union & Planters' Bank against the city of Memphis and another. There was a decree for complainant, and defendants appealed. Reversed.

Metcalf & Walker, for appellants.

Carroll Chalmers & McKellar, for appellee.

McALISTER J.

This record presents a question of taxation. Complainant bank filed its bill in the chancery court of Shelby county to enjoin the city of Memphis and county of Shelby against the collection of taxes on its capital stock for the years 1896 and 1897. Two grounds of relief were outlined in the bill viz.: First. That the capital stock of said Union & Planters' Bank is exempt from general taxation by its charter or act of incorporation, which provides 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," and that this exemption has been adjudged by this court in two cases, which have the force of res adjudicata. Second. That, conceding the taxability of the capital stock, the legislature has made no provision for its assessment, but on the contrary has expressly declared, by section 10 of the act of 1895, that "no tax shall hereafter be assessed upon the capital stock of any bank, banking association or loan, trust, insurance or investment companies, but the shareholders in such bank or other associations shall be assessed and taxed upon the market value of their shares of stock therein." The city and county answered the bill; denying the want of power in the assessing officers to assess the capital stock of complainant bank, and denying, further, that the charter of said bank exempted its capital stock from taxation, or that said matter is res adjudicata, or that defendants are estopped by judgment. The city and county also filed cross bills for the collection of their taxes,--the amounts due the city for the year 1897, and the county for the year 1896, and also for the collection of city privilege taxes. It was admitted in a stipulation of agreed facts that the capital stock of complainant bank had been assessed by the board of equalization of Shelby county for the year 1896 at $217,000, and that complainant bank could not rightly contest the assessment, so far as the amount thereof was concerned. The comptroller's certificate was attached to the stipulation, showing the payment annually of the charter tax of one-half of 1 per cent. The chancellor, upon the hearing, was of opinion the bank was not liable for any of said taxes, and thereupon dismissed defendants' cross bills, and perpetuated the injunction. Defendants appealed, and have assigned errors as follows, to wit: "(1) The court below erred in holding that it was bound to follow the case of City of Memphis v. Union & Planters' Bank, 91 Tenn. 551, 19 S.W. 758, and to decree in favor of the exemption from general taxation of the capital stock of the complainant bank. It should have been decreed that the capital stock was subject to general taxation. (2) In any event, the court should have held that the judgment in the said case of City of Memphis v. Union & Planters' Bank, supra, was not res adjudicata as against the state or county; the county not being a party to that proceeding at all, and the state a nominal party only,--the only real party thereto being the city of Memphis. (3) It should have been decreed that the capital stock was legally assessed at $217,000; that the amounts due to the city and county, respectively, were as shown by the exhibits to the bill; and judgment in favor of the city and county, respectively, should have been rendered on the cross bill. (4) The bank should have been adjudged liable to the city for an annual privilege tax of $600, under the provisions of the act of 1889 (section 2, subsec. 7), by which the legislature enacted a municipal privilege tax on each banking institution of $1 on every $1,000 of capital stock paid in; the capital stock of the complainant bank being $600,000."

The first question to be decided is whether the property now sought to be taxed has been assessed; for assessment must precede taxation, and is an indispensable condition of the right to collect a tax. As already stated, the assessment act of 1895 provides that "no tax should hereafter be assessed upon the capital stock of any bank or banking association, but that the shares of stock should be assessed to the individual shareholder." Here is a direct legislative prohibition against any assessment of capital stock to the corporation for purposes of taxation, and a different system for the assessment of such stock is provided. The assessment of the capital stock of complainant bank to the corporation was made by the board of equalization of Shelby county, under section 51, c. 120, Acts 1895, which provides "that the county board of equalization shall have the power to add to the assessment lists any property subject to taxation and not assessed by the regular assessor." The act of 1895 further provides, viz. that all property--real, personal, and mixed--shall be assessed for taxation for state, county, and municipal purposes, except such as is declared exempt in the next section. Laws 1895, p. 203, § 1. After enumerating the exemption, it provides, "All other personal property whether belonging to individuals, corporations or firms." Id. p. 206, § 9, subd. 9. It is insisted on behalf of the city that these general provisions of the act of 1895 are amply sufficient to justify and require the assessment of the capital stock of this bank, and, such being the case, all particular provisions in hostility to the constitutional provision that all property must be taxed would fall. The constitution ordains that all property shall be taxed according to its value,--that value to be ascertained in such manner as the legislature shall direct, so that taxes shall be equal and uniform throughout the state. Article 2, § 28. It is true that under well-settled decisions of this court the capital stock belonging to the corporation and the shares of stock owned by the stockholder are separate and distinct subjects of taxation, and the taxation of one is not the taxation of the other; nor is the assessment of both subjects duplicate taxation. Railroad Co. v. Morrow, 87 Tenn. 417, 11 S.W. 348: State v. Bank of Commerce, 95 Tenn. 226, 31 S.W. 993. The value of such stock, under the plain provision of the constitution is to be ascertained in such manner as the legislature shall direct. The legislature, in its wisdom, has provided for the assessment of stock to the shareholder, and has determined that no tax shall be assessed upon the capital of the corporation. It was clearly within the power of the legislature to prescribe this method of taxing bank stock, and until the system is changed no ad valorem tax can be collected from the corporation on the capital stock. The mandate of the constitution requiring uniform taxation of uniform values is not self-executing, but depends for its enforcement upon appropriate legislation. This very subject is illustrated by a decision of this court in which the precise point was adjudged. In State v. Butler, 86 Tenn. 631, 8 S.W. 586, which was a proceeding for the collection of taxes claimed to be due the city of Memphis from the Bank of Commerce, it appeared that the assessment was upon the capital stock of the bank. The court held that "no recovery could be had upon such an assessment, since the act of 1873, provided that 'no tax shall hereafter be assessed upon the capital of any bank or banking association' etc., 'but the stockholders in such banks *** shall be assessed and taxed on the value of their shares of stock therein."' Chapter 118, § 8. This decision has remained unreversed and unchallenged from that time to the present.

It is also claimed that said bank is liable to the city of Memphis for certain privilege taxes. In the case of City of Memphis v. Union & Planters' Bank, 91 Tenn. 556, 19 S.W. 760, an effort was made to collect privilege taxes from this bank for the years 1889, 1890, and 1891, inclusive, and this court adjudged the bank not liable. Judge Caldwell said "Complainant seeks, in addition to what has alredy been stated, to recover from the bank $1,800, as privilege taxes for the years 1889, 1890, and 1891. These taxes are claimed from the corporation for the right of exercising its franchises,--for the privilege of doing a banking business. Manifestly, the charter tax was intended to cover this right or privilege. The language of the charter implies that in consideration of the public good, and the payment of the tax therein specified, the state will allow the corporation to exercise the franchises granted, without further taxation,"--citing City of Memphis v. Hernando Ins. Co., 6 Baxt. 527; Union Bank v. State, 9 Yerg. 490. In reply to this adjudication, counsel for the city argues, viz.: "It is not in the least denied, on our part, that this court has over and over again, under just such a charter as this, held that the corporation was not liable to a privilege tax. This line of decisions began with the case of Union Bank v. State, in 9 Yerg. 490, and runs through all the decisions on that subject down to and including the cases in 91 Tenn. It is, however, never to be forgotten that throughout this whole line of decisions this court was uniformly and consistently holding that under such a charter as this the charter tax...