The claim of the State seems to have been in the alternative, that either the corporation was liable for the taxes assessed under the general laws above referred to, or else that the shareholders were, and the bill was framed with the idea of obtaining a final decision in regard to which of the two parties was liable without making it necessary to commence two actions for that purpose. The defendants,
On the other hand, it is said that the difference in the language used in the two quotations is wholly immaterial in any event, and that whatever portion of the clause may have been omitted in the record in the Farrington case, the whole charter of the bank was before the court for its examination, and it cannot be supposed that in a case of such importance, argued by such eminent counsel as those who appeared in that case, there was anything overlooked or omitted. The claim is therefore made that the court must have regarded the portion of the clause omitted in the record as immaterial.
We do not think under the circumstances that we ought now to come to a different conclusion upon the question of exemption from that which was arrived at by this court in the Farrington case. As the whole charter was then before the court, we are not prepared to say that its force was misunderstood, or that there was an omission by the court to consider all the language of the exemption clause simply because a portion of it is omitted in the quotation from the record made in the opinion therein delivered. We are not inclined, therefore, to overrule or distinguish the Farrington case, and we must now hold that the charter clause of exemption limits the amount of tax on each share of stock in the hands of the shareholder, and that any subsequent revenue law of the State which imposes an additional tax on such shares in the hands of shareholders impairs the obligation of the contract and is void. This compels us to reverse the judgments herein against the shareholders.
Counsel for plaintiffs in error also urged in the course of their argument before us that the Farrington case not only decided that the shareholders were exempt from any further taxation by reason of this clause in the charter, but that the corporation was also thereby exempted, so that the only tax
Within this general claim of exemption is embraced the right to tax the stock in this bank issued since the adoption of the present constitution of Tennessee, in 1870. The charter (which was granted long before the adoption of that constitution) provides, section 2, that the capital stock of said company shall be divided into shares of $50 each, and when 200 shares shall have been subscribed, and the sum of $1 per share paid thereon, the shareholders may meet and elect five directors. Section 4 provides that the bank "may receive on deposit any and all sums not less than one dollar per week offered as stock deposits, ... and when such deposits shall amount to fifty dollars they may, at the option of the depositor, become stock in the institution." The parties to this suit agreed by stipulation that on the 5th day of May, 1870 (the day the constitution was adopted,) the capital stock of the bank was $200,000, and that on March 17, 1887, and on sundry days prior to June 1, 1887, it was regularly increased to $600,000, and that on the 17th day of March, 1890, and on sundry days prior to June 1, 1890, it was again regularly increased to $1,000,000. The Supreme Court allowed the claim of exemption and held that the stock issued since the adoption of the new constitution stood in all respects as to taxation the same as the stock earlier issued, notwithstanding the provision of the constitution for the taxation of all property, and that, therefore, the bank was not liable to the tax claimed by the state authorities. The validity of the claim made by the bank for exemption of the new as well as of the old stock was therefore admitted by the state court as a right protected by the Federal constitution.
The plaintiffs in error claim that as to this portion of the decision of the Supreme Court of Tennessee it cannot be reviewed by this court, because it was in favor of the bank. The bank by its answer to the bill drew in question the validity of the acts of the assessing officer of the State acting under the authority of the general statutes of Tennessee, providing
The state court decided in favor of the exemption claimed by the bank by virtue of its contract with the State. The protection of the constitutional provision was thus accorded it.
We are of the opinion that this court cannot in this case review that decision.
Section 709, Revised Statutes of the United States, gives jurisdiction to this court, among other things, upon writ of error to review the final judgment or decree in any suit in the highest court of the State in which a decision in the suit could be had, where is drawn in question the validity of a statute of, or authority exercised under, any State, on the ground of their being repugnant to the Constitution, treaties or laws of the United States, and the decision of the state court is in favor of their validity. Here the decision of the state court is against the validity of the acts of the assessing officer acting under the authority of the revenue laws as applied to the property of the bank, and it is in favor of the exemption claimed under the contract.
In Murdock v. City of Memphis, 20 Wall. 590, it was held that, under the provisions of the act of February 5, 1867, c. 28, 14 Stat. 385, of which section 709 of the Revised Statutes is substantially a transcript, it was essential to the jurisdiction of this court to review a question decided in a state court, that one of the questions mentioned in the Federal statute must have been raised and presented to the state court, and that it must have been decided by the state court against the right claimed or asserted by plaintiff in error under the Constitution, treaties, laws or authority of the United States. To the same effect are New Orleans Water Works Co. v. Louisiana Sugar Refining Co., 125 U.S. 18; St. Paul, Minneapolis & Manitoba Railway v. Todd County, 142 U.S. 282.
Accepting, as we do, the authority of the Farrington case for the point therein decided, which exempts the stock in the hands of the shareholders from any further tax than that which is provided for in the charter, and being concluded in this case by the decision of the Supreme Court of Tennessee in favor of the exemption of the capital stock of the corporation, we are not here called upon to examine the validity of the claim of the bank as to the decision of this court in cases preceding that of Farrington, where counsel allege it has been determined that both the corporation and the shares of stock in the hands of the shareholders are exempt from further taxation under clauses which are said to be similar to those in the charter under consideration.
In this case of The Bank v. The State of Tennessee, for the use of the city of Memphis, (the first of the above entitled actions,) the Supreme Court held that the bank was liable to pay the municipal taxes under the revenue law, (section 3, chapter 26, Extra Session Acts, 1891,) above mentioned, upon its surplus and undivided profits. Section 3 of that act has already been referred to, but the material portion of it is here set forth, and is as follows:
"Provided, that the surplus and undivided profits in such bank, banking association or other corporation shall be assessable to said bank or other corporation, and the same shall not be considered in the assessment of the stock therein."
The corporation, plaintiff in error, demands the same exemption from taxation on its surplus that has been accorded it for its capital stock, and it bases its contention upon the same clause of exemption in its charter. We think it cannot be sustained as to the surplus, which we believe is taxable under the law above quoted. This whole demand of exemption from taxation made by the bank and its shareholders must be considered
These cases show the principle upon which is founded the rule that a claim for exemption from taxation must be clearly made out. Taxes being the sole means by which sovereignties can maintain their existence, any claim on the part of any one to be exempt from the full payment of his share of taxes on any portion of his property must on that account be clearly defined and founded upon plain language. There must be no doubt or ambiguity in the language used upon which the claim to the exemption is founded. It has been said that a well founded doubt is fatal to the claim; no implication will be indulged in for the purpose of construing the language used as giving the claim for exemption, where such claim is not founded upon the plain and clearly expressed intention of the taxing power.
The capital stock of a corporation and the shares into which such stock may be divided and held by individual shareholders are two distinct pieces of property. The capital stock and the shares of stock in the hands of the shareholders may both be taxed, and it is not double taxation. Van Allen v. Assessors, 3 Wall. 573; People v. Commissioners, 4 Wall. 244, cited in Farrington v. Tennessee, 95 U.S. 687.
This statement has been reiterated many times in various decisions by this court, and is not now disputed by any one. In the case last cited, Mr. Justice Swayne, in delivering the opinion of the court, enumerated many objects liable to be taxed other than the capital stock of a corporation, and among them he instanced, (1.) the franchise to be a corporation; (2.) the accumulated earnings; (3.) profits and dividends; (4.) real estate belonging to the corporation and necessary for its business; and he adds that "this enumeration shows the searching
The surplus belonging to this bank is "corporate property," and is distinct from the capital stock in the hands of the corporation. The exemption, in terms, is upon the payment of an annual tax of one half of one per cent upon each share of the capital stock, which shall be in lieu of all other taxes. The exemption is not, in our judgment, greater in its scope than the subject of the tax. Recognizing, as we do, that there is a different property in that which is described as capital stock from that which is described as corporate property other than capital stock, and remembering the necessity there is for a clear expression of the intention to exempt before the exemption will be granted, we must hold that the surplus has not been granted exemption by the clause contained in the charter under discussion. The very name of surplus implies a difference. There is capital stock and there is a surplus over, above and beyond the capital stock, which surplus is the property of the bank until it is divided among stockholders.
The case of Bank v. Tennessee, 104 U.S. 493, does not hold to the contrary of this doctrine. This question was not therein discussed or decided. The question which was decided related only to the taxation of real property not used by the bank in its business, and it was held liable to taxation.
The case is no authority for the proposition contended for here, namely, that the whole surplus of this bank is exempt from taxation. No individual shareholder has any legal right to claim any portion of this surplus; until divided by the board of directors it remains the property of the corporation itself, and in the sense in which the words "capital stock"
We are, therefore, of opinion that the surplus was properly taxed, and that the bank's claim of exemption as to such surplus is without foundation in law.
MR. JUSTICE WHITE concurred in so far as the decree recognized the exemption of the shares of stock from all taxation except that enumerated in the contract, but dissented from the conclusion as to the power to tax the surplus and undivided profits.