Citizens' Bank v. Parker
192 U.S. 73 (1904)

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U.S. Supreme Court

Citizens' Bank v. Parker, 192 U.S. 73 (1904)

Citizens' Bank v. Parker

No. 2

Argued October 28, 1903

Decided January 4, 1904

192 U.S. 73

Syllabus

When a contract is asserted and the Constitution of the United States invoked to protect it, all of the elements which are claimed to constitute it are open to examination and review by this Court, and also all that which is claimed to have taken it away, and the writ of error will not be dismissed.

The rule requiring a strict construction of statutes exempting property from taxation should not be infringed, but, where ambiguity exists, it is

Page 192 U. S. 74

the duty of the court to determine whether doubt exists and to solve it and not to immediately surrender to it.

Where it is res judicata that the original charter of a bank by which its capital is exempt from any tax constituted a contract within the impairment clause of the Constitution, and that such exemption is not affected by subsequent charters and constitutions, and there is no doubt that the state intended to offer inducements to enlist capital in the early development of the state, and no license tax was demanded for fifty-eight years although that method of taxation was in force during the whole period, the exemption from any tax may be construed as including a license tax on occupation as well as taxes on property.

This suit was instituted in the civil District Court for the Parish of Orleans for the recovery of the sum of $2,400, claimed to be due from the bank for the year 1894 as a license tax for carrying on a banking business. The license is claimed to have been authorized by the following provision of act No. 150 of the General Assembly of Louisiana of 1890:

"That for each business of carrying on a bank, banking company, association, corporation, or agency, the license shall be based on the declared or nominal capital and surplus, whether said capital and surplus is owned, or in use, or on deposit in the state or elsewhere, as follows, to-wit: . . . Ninth class. When the said declared or nominal capital and surplus is four hundred thousand dollars or more, and under six hundred thousand dollars, the license shall be four hundred and fifty dollars ($450.)"

The bank pleaded the general issue, and that it was exempt from paying such license by the provisions of its charter, granted in 1833, and by section 4 of the Act of January 30, 1836, amending the charter, by which it was provided that

"the capital of said bank shall be exempt from any tax laid by the state, or by any parish or body politic, under the authority of the state, during the continuance of its charter."

It was alleged that the charter of 1833 and the amendment of 1836 were granted for a valuable consideration, and constituted a contract between the state and the bank, and that the act imposing the license impaired the obligation of the contract, and was therefore violative of the Constitution of the United

Page 192 U. S. 75

states. Certain judgments were also pleaded as res judicata and introduced in evidence, one of which was the decree of this Court in New Orleans v. Citizens' Bank,167 U. S. 371.

The trial court sustained the defense of the bank, based on its claim under its charter, but did not pass on the plea of res judicata. The court observed:

"I pass only on the main issue raised, without reference to the defendant's plea of res judicata. Inasmuch as it does not appear that the issue of exemption from a license tax has been presented in any of the cases and judgments relied on to support the plea."

Judgment was entered, dismissing the demand of the state. It was reversed on appeal to the supreme court, the court, however, dividing. 52 La.Ann. 1086. Elaborate opinions were delivered both by the majority and minority of the court. All of the contentions of the bank were held to be untenable, but the members of the majority did not agree upon the grounds. Mr. Justice Monroe, with whom concurred the Chief Justice, placed his decision on three grounds: (1) the plea of res judicata could not be sustained, because the validity of a license tax was not involved in the decrees or judgments pleaded; (2) license taxes were distinguishable from taxes on property, and the bank was not exempt from the former by its charter; (3) the act of 1874, extending the charter from 1884 to 1911, was to take effect in 1884, from which it was deduced:

"First, that the extension thus granted could add nothing not authorized by the constitution of 1868, under the dominion of which the act was passed, and which required the payment of a license; second, that the grant, to take effect in 1884, became subject to the constitution adopted in 1879, which also required, or authorized the legislature to require, the payment of the license;"

(4) even if this were not so, the acceptance by the bank of the Act No. 79 of 1880

"specifically and in terms subjected it to the constitution of 1879, and thereby placed it out of the power of the legislature to exempt it from the payment of the license imposed on other institutions of the same class. "

Page 192 U. S. 76

Mr. Justice Watkins delivered a separate opinion, and placed his concurrence on the distinction between a license tax and a property tax, and said that "the conclusion is perfectly clear that a property tax was only in contemplation of the legislature in framing that exemption." And also said that the license law under which the state proceeded "does not conflict with the contract clause of the federal Constitution by impairing the contract rights of the defendant bank under its charter." Concluding his opinion, the learned justice observed:

"In my view, it is unnecessary for this court to go into any discussion of the constitutional questions raised and adverted to in the opinion of the majority for the reason that, on the face of the charter exemption, which the bank pleads, its liability is apparent."

"It is my view also that the better course of decision is, and one more in harmony with the general jurisprudence of this Court, to avoid discussion of federal questions which only arise incidentally, and are unnecessary to the decision of the principal question at issue."

"Entertaining this view, I think it is preferable to pass the constitutional question under consideration, and reverse the judgment of the district court and sustain the license on the face of the charter and the law."

Mr. Justice Breaux and Mr. Justice Blanchard dissented, each filing an opinion.

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