Van Allen v. The Assessors, 70 U.S. 573 (1870)
U.S. Supreme CourtVan Allen v. The Assessors, 70 U.S. 3 Wall. 573 573 (1870)
Van Allen v. The Assessors
70 U.S. (3 Wall.) 573
1. The Act of June 3, 1864, "To provide a national currency," &c., rightly construed, subjects the shares of the banking associations authorized by it, and in the hands of shareholders, to taxation by the states under certain limitations (set forth in its 41st section), without regard to the fact that a part or the whole of the capital of such association is invested in national securities declared by the statutes authorizing them to be "exempt from taxation by or under state authority."
2. The act thus construed is constitutional.
3. The Act of 9th March, 1865, of the Legislature of New York, sometimes called the Enabling Act, and which enacts that shares in any of these national banking associations held by any person or body corporate shall be
"included in the valuation of the personal property of such person or body corporate, in the assessment of taxes in the town or ward where such banking association is located and not elsewhere,"
&c., but which did not provide that the tax imposed should not exceed the rate imposed upon the shares of any of the banks organized under the authority of the state, is not warranted by the act of Congress and is void, there having been under the legislation of the state no tax laid on shares in state banks at all, though there was a tax on the capital of such banks.
This was a suit involving the question of right, on the part of states, to tax shares in the national banking associations
created under the Act of Congress of June, 1864. The case was thus:
By these laws, the mode of organizing these associations was prescribed, their powers defined, and their duties enjoined. The Secretary of the Treasury was authorized to employ them as depositories of the public moneys, and as financial agents of the government, taking, however, sufficient security for the faithful performance of those duties. The general supervision of their action was committed to a comptroller of the currency, to be appointed by the President on the nomination of the secretary. No association could be organized with a less capital than fifty thousand dollars or less than one hundred thousand dollars in any place with more than six thousand inhabitants, or less than two hundred thousand dollars in any place with more than fifty thousand inhabitants. The whole capital was required to be paid in within five months; fifty percentum at the commencement and ten percentum every month thereafter. Of this capital, at least one-third was required to be invested in interest bearing bonds of the United States, which were to be deposited with the Treasurer of the United States. Provision was also made for the preparation of circulating notes of different denominations, of uniform general appearance, and for the delivery to each association of an amount of these notes equal to ninety percentum of the amount of bonds deposited with the treasurer. These notes were made payable by the associations to whom they were delivered, and they were required to pay them on demand. To secure more certainly prompt redemption by the several associations of these notes and of deposits, each association was required to keep always on hand an amount of lawful money equal, in certain cities named, to twenty-five percentum, and in other places to fifteen percentum of its outstanding
circulation and its deposits, and to accumulate a surplus fund equal to twenty percentum of its capital. In case of default in payment by any association, the notes were to be paid by the United States, and the bonds deposited were to be either cancelled or sold, at the option of the government. The entire amount of note circulation was limited to three hundred millions of dollars, to be apportioned among the associations in the different states and territories partly according to the rule of representative population and partly according to their existing banking capital, resources, and business. The notes were made receivable by all the associations for all debts and liabilities whatever, receivable by all associations employed as depositories, when deposited by the United States, receivable also by the United States for all dues except duties on imports, and by all persons for all dues from the United States, except interest on public debt.
Such are the distinguishing features of the National Banking or National Currency Act. The general objects of the act are apparent from them.
These associations possess under the act all the powers necessary for carrying on the business of banking by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt, by receiving deposits, buying and selling exchange, coin, and bullion, by lending money on personal security, by obtaining, issuing, and circulating notes according to the provisions of this act &c. The duration of the charter is twenty years.
Certain provisions, particularly ascertaining the duties and functions of these national banking associations, may thus be stated:
The persons forming an association are required to make a certificate, which shall specify, among other things, the amount of its capital stock, and the number of shares into which the same shall be divided, the names and places of residence of the shareholders, and the number of shares held by each. [Footnote 3] The capital stock is to be divided into shares
of $100 each, and is to be deemed personal property. The shareholders of the association are to be held individually responsible, equally and ratably and not one for another, for all contracts, debts, and engagements of such association to the extent of the amount of their stock therein at the par value, in addition to the amount invested in such shares. [Footnote 4] In the election of directors and in deciding all questions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock held by him. [Footnote 5] Fifty percent of the capital stock of every association must be paid in before it shall commence business, and the remainder in installments of at least ten percent per month till the whole amount is paid, and if any shareholder or his assignee shall fail to make the payment or any installment on his stock, the directors may sell the stock at public auction. [Footnote 6] No association can make any loan or discount on the security of the shares of its own capital. [Footnote 7]
By the 40th section of the act of 1864, it is enacted, the act of 1863 containing no such provision:
"That the president and cashier of every such association shall cause to be kept at all times a full and correct list of the names and residences of all the shareholders in the association, and the number of shares held by each, in the office where its business is transacted, and such list shall be subject to the inspection of all shareholders and creditors of the association, and the officers authorized to assess taxes under state authority, during business hours of each day,"
The 41st section of the same act of 1864 provides by one part of it for taxation by the United States. It imposes a tax of one percent annually on circulation -- one-half of one percent on deposits and then one-half of one percent on the capital beyond the amount invested in United States bonds, and after prescribing how the duty is to be collected, and the penalty for default &c., the section proceeds:
"(1) Provided that nothing in this act shall be construed to
prevent all the shares in any of said associations held by any person or body corporate from being included in the valuation of the personal property of such person or corporation in the assessment of taxes imposed by or under state authority at the place where such bank is located, and not elsewhere, but not at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state. (2) Provided further that the tax so imposed under the laws of any state upon the shares of any of the associations authorized by this act shall not exceed the rate imposed upon the shares in any of the banks organized under authority of the state where such association is located. (3) Provided also that nothing in this act shall exempt the real estate of associations from either state, county, or municipal taxes to the same extent, according to its value, as other real estate is taxed."
With this statute of the federal government authorizing banking associations in force, the Legislature of New York, on the 9th March, 1865, passed "an act enabling the banks of this state to become associations for the purposes of banking under the laws of the United States." [Footnote 8] The act, frequently called "The Enabling Act," imposed a tax upon all shares in national banks in the hands of their holders. The section laying the tax ran thus:
"§ 10. All the shares in any of the said banking associations organized under . . . the act of Congress held by any person or body corporate shall be included in the valuation of the personal property of such person or body corporate or corporation in the assessment of taxes in the town or ward where such banking association is located, and not elsewhere, whether the holder thereof reside in such town or ward or not, but not at a greater rate than is assessed upon other moneyed capital in the hands of individuals of this state, provided that the tax so imposed upon such shares shall not exceed the par value thereof, and provided further that the real estate of such associations shall be subject to state, county, or municipal taxes to the same extent, according to the value, as other real estate is taxed."
This act, it will be noted, laid no rate or tax whatever "upon
the shares in any of the banks organized under the authority of the state," as seems to have been contemplated as necessary by the second proviso of the 41st section of the National Banking Act of 1864, and indeed, under the legislation of New York, as it appeared, no rate or tax whatever was laid upon shares in state banks at all, though there was one laid on their capital.
However, assuming the validity of this state law whether with or without this proviso, the Board of Assessors at the City of Albany assessed one Van Allen for fifty shares owned by him of the capital stock of the First national Bank of that city, and assessed all the other shareholders in like manner for theirs. At the time of the assessment, the whole capital of the bank was invested in various obligations of the federal government, in regard to all of which Congress had enacted that, "whether held by individuals, corporations, or associations," they should be "exempt from taxation by or under state authority."
Van Allen and the other stockholders insisted before the board that the shares of the bank held by them as stockholders were not subject to assessment and taxation under state authority; that the enabling act of the New York Legislature of 9 March, 1865, was repugnant to the Constitution of the United States and also to the laws of the United States. These positions the board denied, and it enforced the tax which had been assessed. On a case stated by the stockholders on the one side and the Board of Assessors on the other, the question was now taken to the supreme court of the state, and thence to the Court of Appeals. This latter court -- the highest court of law or equity of the state -- having affirmed the authority of the Board of Assessors to lay the tax, the case came here on error. [Footnote 9]
Other cases like it, and represented by counsel, were also here from different places in New York. The magnitude
of the interests concerned will be readily conceived from the fact mentioned at the bar that, in December, 1865, the amount of stock in these national Banks, at its par value -- and the amount, therefore, either subject or not subject, according as this case should be decided, to taxation by the states -- was:
In the State of New York . . . $115,217,941.00
In the Union . . . . . . . . . 404,159,493.00
That the reader may be possessed not only of the essential case, but of some of its important incidents, it may be well to mention that, prior to the enactment of either of the national banking laws, and while its state bank system was in operation, the Legislature of New York (A.D. 1857) had enacted that the capital stock of the banks of the state should be "assessed at its actual value, and taxed in the same manner as other personal and real estate of the country." With the state system and the enactment just mentioned in force, several of the banks of New York became, soon after the rebellion broke out, owners of large amounts of the bonds of the United States, and in regard to which, as already said, Congress had, in the statute authorizing them, enacted [Footnote 10] that, "whether held by individuals or corporations, they shall be exempt from taxation by or under state authority." On a question between those banks as formed under the general state system in New York and the tax commissioners of the state, this Court decided, in March, 1863, in the Bank of Commerce v. New York City, [Footnote 11] that the tax referred to was a tax upon the stock, and that being so, it was by the settled law of this Court -- as declared in Weston v. City of Charleston, [Footnote 12] McCulloch v. state of Maryland, [Footnote 13] Osborne v. Bank of the United States [Footnote 14] (well known decisions of this Court, and in which Marshall, C.J., had given its judgment), and other cases, illegally imposed.
In April, 1863, just after this decision, the Legislature of New York passed another statute [Footnote 15] which enacted that
banks &c., should be liable to taxation on a valuation equal to the amount of their capital stock paid in, or secured to be paid in &c., in the manner now provided by law,"
&c. On a tax laid under this act by the commissioners upon the different banks of New York City, some of which had invested their whole capital in the securities of the federal government, and others of which had largely done so, the question was whether this second act did or did not also impose a tax upon the stock. This Court, on appeal from the highest court of the state, decided in the beginning of 1865, in what is known as the Bank Tax Case, [Footnote 16] that it did. It was within a few days after that decision that the enactment on which the present case arose -- a third enactment in the principal matter -- was made. Its language was obviously directed to avoid some difficulties which had proved insurmountable in the Bank Tax Case and in cases before it. Whether it did really avoid them, or whether the new legislation of the state had the fault of exalting the forms and phrases of legislation above its substance and effect, was in fact one great question in the case, others being (i) whether Congress had meant, by the first proviso to the 41st section of the act of 1864, to authorize states to lay a tax on shares in national banks whose whole capital consisted of national securities, declared in the laws authorizing them to be exempt from taxation by states, and (ii) whether, if it did, such an act would or would not be open to the objection of being an attempt by Congress to deliver over to others, powers vested by the federal Constitution in it alone, and be therefore an act unconstitutional.
A minor question -- treated preliminarily -- was whether, admitting the power of the state under the provisos of the 41st section of the act of Congress to tax the shares by an enactment framed with the limitations prescribed by the three provisos in it, this particular act of the State of New York, passed March 9, 1865, which apparently omitted the second one, was an enactment of the kind required.