Farrington v. Tennessee
95 U.S. 679

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U.S. Supreme Court

Farrington v. Tennessee, 95 U.S. 679 (1877)

Farrington v. Tennessee

95 U.S. 679

Syllabus

The charter of a bank, granted by the Legislature of Tennessee, provides that the bank "shall pay to the state an annual tax of one-half of one percent on each share of the capital stock subscribed, which shall be in lieu of all other taxes."

Held:

1. That this provision is a contract between the state and the hank, limiting the amount of tax on each share of the stock.

2. That a subsequent revenue law of the state, imposing an additional tax on the shares in the hands of stockholders, impairs the obligation of that contract, and is void.

The Union and Planters' Bank of Memphis is a banking corporation, doing business at Memphis, Shelby County, Tennessee, organized under a charter granted by the General Assembly of that state March 20, 1858, and amended Feb. 12, 1869, the tenth section of which provides that

"Said company shall pay

Page 95 U. S. 680

to the state an annual tax of one-half of one percent on each share of the capital stock subscribed, which shall be in lieu of all other taxes."

Sec. 1 of an act of the General Assembly of 1869-70, c. 81, provides:

"All shares of stock in any bank, institution, or company now or hereafter incorporated by or in pursuance of any law of this state or any other state . . . shall be valued and assessed and subject to taxation."

The bank paid the said tax of one-half of one percent for the year 1872.

Farrington was throughout that year the owner of one hundred and fifty shares of the stock of the bank, upon which the state and the County of Shelby, severally claiming the right under that act to do so, assessed against him for that year, taxes at the same rate that they were assessed and levied upon other taxable property. He resisted the payment of them upon the ground that by sec. 10 of the charter, the bank, its franchises and capital stock, and also the shares of stock of the individual stockholder, were subject to no taxation other than the specific sum nominated in the charter, and that the act in question impaired the obligation of the contract stipulating to accept that sum in lieu of all other taxes and was therefore in violation of Sec. 10, Art. I, of the Constitution of the United States.

A suit was brought to test the validity of the assessment in the Second Chancery Court of Shelby County; and it was agreed that in the event of a decision adverse to Farrington, judgment should be rendered against him for $60 and $180, the amount of the taxes assessed by the state and county respectively, with interest from the first day of January, 1873. If the decision should be in his favor, then the judgment should be that said taxes were illegally assessed; that said shares of stock were exempt from all other taxation except the aforesaid one-half of one percent to the state, as provided in the tenth section of the bank's charter, and further that the collection of said taxes be enjoined, and such other appropriate decree rendered as the court might deem proper, in order to protect him and his assigns from taxation on said stock. Each party reserved the right of appeal. The court rendered a decree enjoining the collection of the taxes, which was reversed by

Page 95 U. S. 681

the supreme court of the state on the ground that the said shares of stock were not the property or thing exempted, but other and different, and so were not within the protection of the charter and of the Constitution of the United States, and it was adjudged that Farrington should pay to the state and the county respectively the said sums of money assessed upon his shares of stock.

Farrington thereupon sued out this writ of error.

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