A bank, by its charter, is required to "pay to the state an
annual tax of one-half of one percent on each share of capital
stock, which shall be in lieu of all other taxes," and is
authorized to "purchase and hold a lot of ground" for its use "as a
place of business," and hold such real property as may be conveyed
to it to secure its debts. With a portion of its capital stock, it
purchased a lot with a building thereon, a portion of which it
occupies as a place of business. It took, to secure money loaned, a
deed of trust upon three city lots, which it subsequently purchased
under this deed, and now owns.
Held that the immunity from
taxation extends only to so much of the building the use whereof is
required by the actual wants of the bank in carrying on its
business. The remainder of its real estate is subject to
taxation.
MR. JUSTICE FIELD delivered the opinion of the Court.
The Bank of Commerce, plaintiff in this case, is a corporation
created in 1856 by the Legislature of Tennessee to engage in the
business of discounting notes, buying and selling stock, dealing in
exchange and gold and silver bullion, and receiving moneys on
deposit. Its charter provides that it
"may purchase and hold a lot of ground for the use of the
institution as a place of business, and at pleasure sell and
exchange the same, and may hold such real or personal property and
estate as may be conveyed to it to secure debts due the
institution, and may sell and convey the same."
The charter also declares that the
Page 104 U. S. 494
institution "shall pay to the state an annual tax of one-half of
one percent on each share of capital stock, which shall be in lieu
of all other taxes."
Previous to 1879, the bank purchased with a portion of its
capital stock a lot of ground in the City of Memphis, with the
improvements thereon, as a place of business, and has held the same
ever since. The improvements consist of a three-story brick
building, but the bank only uses the first floor for its business,
and leases out the cellar and the second and third stories to other
parties for a money rent.
On the 1st of January, 1880, the bank was, and ever since has
been, the owner of three other lots in the City of Memphis. It had
previously made loans to different parties and taken as security
for their payment a deed of the lots executed to a trustee. The
loans not being paid, the lots were sold under the deed and
purchased by the bank. The purchase was made solely to secure a
part of the debt, and the bank now holds the lots for sale, and
will sell them when practicable to restore to its legitimate
business so much of its capital as is invested in them.
In March, 1875, the legislature of the state passed an act
defining what property was exempt from taxation by the
constitution, what the legislature had the power to exempt and did
exempt, and what was taxable, and declaring that all other property
should be assessed and taxed. In the list of property designated as
exempt from taxation, that held by the Bank of Commerce was not
mentioned, and the act repealed all inconsistent laws.
Under this act, the lot of ground in the City of Memphis,
purchased by the plaintiff, with the building upon it and used as a
place of business, was assessed and taxed in the years 1879, 1880,
and 1881, for state and county purposes. The three lots were also
taxed in like manner for the years 1880 and 1881. The taxes were
paid under protest, and the bank commenced the present suit to
recover back the money. It appears to have been treated in the
state court as a suit in equity, and the chancellor sustained a
demurrer to the bill and dismissed the suit. The supreme court of
the state reversed the decree in part, holding that the bank was
not liable for the
Page 104 U. S. 495
taxes on so much of the lot and building as was used for its
business, but was liable for the taxes on the remainder and on the
three lots. From this latter decree the case is brought to this
Court by the bank, claiming exemption of the entire property from
taxation under its charter.
That statutes imposing restrictions upon the taxing power of a
state, except so far as they tend to secure uniformity and equality
of assessment, are to be strictly construed is a familiar rule.
Against the power nothing is to be taken by inference and
presumption. Where a doubt arises as to the existence of the
restriction, it is to be decided in favor of the state. The
restriction here, consisting in the declaration that a specific tax
on each share of the capital stock shall be in lieu of all other
taxes, is accompanied with authority to purchase certain real
property, "for the use of the institution as a place of business."
The bank had no express authority to invest its capital in real
property not required for that use. And it is to be presumed that
the exemption from other than the designated tax was in
consideration that the capital would be employed for its legitimate
purposes. It certainly would not be pretended that the corporation,
by turning its whole capital into real property and engaging in
real estate business, could then, by force of the charter, escape
liability to taxation for it under the general laws. But if the
exemption could not be carried to that extent, it is difficult to
fix any limit to the amount of real property which it may hold thus
exempt, unless we take that prescribed by the charter. In our
judgment, the limited exemption cannot be extended to property used
beyond the actual wants of the corporation in carrying out the
purposes of its creation. As well observed by the supreme court of
the state, the contract of exemption, beyond the extent prescribed,
ceased when taxable property was held for any other purpose.
It is true that the capital stock of a corporation may in a
general sense be said to be all the property in which the capital
is invested, so that an exemption of the capital stock, without
other words of limitation, may operate to exempt all the property
of the corporation.
Railroad Companies v. Gaines,
97 U. S. 697. But
where the purposes for which a corporation
Page 104 U. S. 496
may hold property is specified in connection with the exemption,
the limitation of taxation designated must be held to apply only to
property acquired for such purposes. This we consider to be the
general doctrine established by the numerous cases cited by
counsel. The case of
State v. Commissioners of Mansfield,
22 N.J.L. 510, decided by the Supreme Court of New Jersey, is a
leading one. There it appeared that the charter of the Camden and
Amboy Railroad and Transportation Company, after reserving certain
imposts, declared that "no other tax or impost shall be levied or
assessed upon the said company." The charter conferred upon the
company the general power to purchase, receive, and hold real and
personal estate, and it had acquired certain houses and lots in the
Township of Mansfield which it let to its workmen and employees.
These houses and lots having been assessed for taxes by the
authorities of the town, the corporation sued out a writ of
certiorari to revise their action, claiming that houses and lots
were exempt under the provisions of the charter stated. The court,
in deciding the case, said that the general power of purchasing,
receiving, and holding real and personal estate could only be
exercised to effect the purpose for which it was conferred by the
government; that the power to construct a railroad and establish
transportation lines upon it necessarily included the essential
appendages required to complete and maintain such a work and carry
on such a business, such as suitable depots, car houses, water
tanks, houses for switch and bridge tenders, and coal and wood
yards for the fuel used in the locomotives; that these were within
a fair construction of the exempting clause, because they were
necessary and indispensable to the operations of the company and to
the accomplishment of the objects of their charter, but that there
must be a limit somewhere to the incidental power of the company to
enlarge its operations and extend its property without taxation
under the exempting clause, and the court concluded that the
limitation must be fixed
where the necessity ends and mere
convenience begins; that the necessary appendages of a
railroad and transportation company were one thing, and that those
appendages which might be convenient means of increasing the
advantages and profits of the company were another thing;
Page 104 U. S. 497
that it might be advantageous for the company to purchase land
and erect houses for their employees and establish factories for
making their own rails, engines, and cars, and even to purchase
coal mines and supply itself with fuel, but these are not among the
necessary appendages of the company, and that the legislature, in
exempting the company from all other taxes except those mentioned,
only intended to include so much property as was necessary and
essential to a railroad and a transportation business such as the
corporation was created to construct and carry on. The court
therefore sustained the validity of the taxes on the houses and
lots in question. Numerous other cases to the same purport might be
cited.
The State v. Newark, 25 N.J.L. 315, 317;
Vermont Central Railroad Co. v. Burlington, 28 Vt. 193;
Railroad v. Berks County, 6 Pa.St. 70;
Inhabitants of
Worcester v. The Western Railroad Corporation, 4 Metc. (Mass.)
564. The doctrine declared in them -- that the exemption in cases
like the one in the charter before us extends only to the property
necessary for the business of the company-is founded in the wisest
reasons of public policy. It would lead to infinite mischief if a
corporation, simply by investing its funds in property not required
for the purposes of its creation, could extend its immunity from
taxation and thus escape he common burden of government.
As to the property which was purchased by the bank upon the sale
under the trust deed, there is less reason to contend for its
exemption from taxation. The express authority conferred upon the
corporation to hold real property, except that acquired for the use
of the institution as a place of business, was limited to such as
might be taken as security for debts; while held for that purpose,
it was subject to taxation as the property of the debtors. Its
liability in this respect to bear its proportion of the common
burden of government was not lessened because the bank, deeming it
might be more readily disposed of if freed from the debtor's right
of redemption, thought proper to purchase in the title.
Judgment affirmed.