1. By the second limitation in the proviso to the 41st section
of the National Banking Act, which enacts that the tax which the
section allows the states to impose on the shares held by persons
in the said banks "shall not exceed the rate imposed upon the
shares in any of the banks organized under the authority of the
state where such association is located," Congress meant no more
than to require of each state, as a condition to the exercise of
the power to tax the shares in national banks, that it should, as
far as it had the capacity, tax in like manner the shares of banks
of issue of its own creation.
2. Accordingly, where a state, having at the time only two banks
of issue and circulation, both of which two it had by contract with
them disabled itself from taxing beyond a certain amount, had also
numerous banks not banks of issue, having a far greater capital
than the two of issue, laid a tax on all shares of stock in banks
and incorporated companies generally -- the fact that it could not
collect a tax past a certain amount in the two banks of issue which
it had at that time was held no bar to the collection of the tax on
the shares of the national banks for a greater amount.
Prior to 1857, there had been in Missouri, and there were in the
state at that time, several institutions which -- under the name,
for the most part, of savings banks, loan institutions, saving
associations, and the like, though sometimes with the title of
banks only -- transacted business often known as "banking"
-- that is to say which received deposits, lent money, and dealt in
exchange, but which had not the privilege of issuing notes to
circulate as money; not, therefore, banks of
issue.
In the year just named, 1857, the state established ten banks
which, in addition to the powers of receiving deposits, lending
money, and dealing in exchange, had also the power of
issuing
paper money; the ordinary banks of deposit, discount, and
issue or circulation. There were thus in the state,
"banks" which were not banks of issue, and banks which were banks
of this kind. The act establishing the ten banks of issue declared
that
Page 76 U. S. 469
"
Each banking company (incorporated under it) agrees to
pay to the state annually
one percent on the amount of
capital stock paid in by the stockholders other than the state,
which shall be
in full of all bonus and taxes to be paid
to the state by the respective
banks."
And an act amendatory of the act of incorporation provided that
this one percent on the amount of capital stock should be a full
compensation for all taxes of every kind whatsoever.
In 1863, these ten banks of discount, deposit, and issue, as
also numerous other banks not banks of issue, but banks of the sort
first above described, being in existence, Congress, by act of 25th
of February, of that year, entitled "An act to provide for a
national currency," authorized the establishment of national banks;
giving power in the act to state banks to become national ones.
Under this act of Congress (the state legislature also authorizing
any bank, savings institution, savings association, or other
corporation having banking powers and privileges in the state,
under the laws thereof, to form associations for the purpose of
doing a banking business under the act of Congress of February
25th, 1863), eight of the already mentioned ten banks of issue, and
which had the privilege while state banks to pay the one percent
annually in lieu of all taxes, made themselves national banks. Two,
however, did not. These two remained state institutions with the
privilege of the one percent, as before. The old associations, that
is to say, the banks not of issue, all of which had charters
independently of the act of 1857, and which had not the privilege
to pay one percent in lieu of all other taxes, remained state
institutions.
In this state of things, Congress, on the 3d of June, 1864,
passed an act regulating the right of states to tax the shares of
national banks. The 41st section of this act [
Footnote 1] provided:
"That nothing in this act shall be construed to prevent all the
shares in any of the said associations, held by any person,
Page 76 U. S. 470
from being included in the valuation of personal property of
such person in the assessment of taxes imposed by or under state
authority, at the place where such a 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."
"
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 the authority of the
state where such association is located."
These enactments, federal and state, being in force, the
Legislature of Missouri, by an act of the 4th February, 1864,
concerning revenue, provided that "shares of stock in banks and
other incorporated companies" should be subject to assessment as
other property. The statute provided the mode of assessment as
follows:
"Persons owning shares in banks and other incorporated
companies, taxable by law, are not required to deliver to the
assessor a list thereof; but the President or other chief officer
of such corporation shall deliver to the assessor a list of all
shares of stock held therein, and the names of the persons who hold
the same."
"The tax assessed on shares of stock, embraced in said list,
shall be paid by the corporations respectively, and they
may recover from the owners of such shares the amount so paid by
them, or deduct the same from dividends accruing on such
shares."
Under this act, a tax of nearly two percent was levied by the
state on the assessed valuation of the shares of one Lionberger, a
resident of St. Louis, and a shareholder in the Third national Bank
of St. Louis. Payment of the tax being refused, the collector, a
certain Rouse, collected it forcibly. Lionberger thereupon brought
suit against him, in one of the state courts, for the alleged
wrongful act; asserting that the proviso in the 41st section of the
act of 1864, imposing a limitation on the power of the states,
had
Page 76 U. S. 471
reference to banks of issue alone; that the state had disabled
itself by its contract with them to tax that sort of bank otherwise
than it had contracted for (one percent), and that the assessment
and collection, if made under color of law, were without any legal
authority whatever. It was not denied that the two state banks of
issue held a very inconsiderable portion of the banking capital of
the state, and that the shares of all other associations in the
state (of which there were many, some created after 1857, and some
before), with all the privileges of banking except the power to
emit bills, were taxed like the shares in national banks. The court
in which the suit was brought decided adversely to the position set
up, and on appeal the supreme court of the state -- observing that
the moneyed associations, saving and banking institutions of the
state, were banks to all intents and purposes, and that their
shareholders were taxed at the same prescribed rate as the
shareholders in the national institutions -- affirmed the decision.
The case was now brought here for review. Many shareholders in the
national banks in Missouri had also refused to pay the tax laid
under the state statute, and the present case was in the nature of
a test case to settle its validity; more than $300,000 of such
taxes, as was said, being dependent on the judgment.
Page 76 U. S. 473
MR. JUSTICE DAVIS delivered the opinion of the Court.
This case has received the careful consideration of the court,
as well on account of the principle involved, as of the large
amount of money dependent on the decision of the suit.
It is no longer an open question in this Court, since the
decision in the case of
Van Allen v. Assessors, [
Footnote 2] that the shareholders in a
national bank are subject to state taxation, although the entire
capital of the bank be invested in the bonds of the United States,
which cannot be taxed by state authority. The difficulties which
have arisen since that decision do not relate to the abstract right
of taxation, but grow out of the supposed conflict of state
legislation with the provisions of the act of Congress on the
subject. The forty-first section of the Act of Congress of 3d of
June, 1864, [
Footnote 3]
placing these shares within the reach of the taxing power of the
states, annexed two conditions to the exercise of the power. The
state was forbidden to tax them higher than it taxed other moneyed
capital in the hands of its own citizens, or to impose on them a
tax exceeding the rate imposed upon the shares in any of the banks
organized under state authority. If there was no discrimination in
these particulars, the state could lawfully tax shares in the
national banks. It is conceded the tax exacted from the plaintiff
in error was not greater than was assessed on other moneyed capital
belonging to individuals or corporations, but it is claimed that it
is higher than the rate paid by the state banks.
Page 76 U. S. 474
And this brings us to the consideration of the main question in
the case. It is contended that the tax in question is invalid
because the two state banks chartered in 1857, which did not, like
the remaining eight, become national banks, cannot be taxed more
highly than one percent, while the assessment of the shares of the
plaintiff in error equals nearly two percent. It is not denied that
these two banks hold a very inconsiderable portion of the banking
capital of the state, and that the shares of all other associations
in the state (there being many), with all the privileges of banking
except the power to emit bills, are taxed like the shares in
national banks, but it is claimed the proviso in the forty-first
section of the National Banking Act imposing a limitation on the
power of the states has reference alone to banks of issue. To
ascertain the sense in which the word bank is used in the proviso
to this section, it is necessary to recur to the mischief which
Congress desired to guard against. The national banks were
established to provide a national currency at a time when the state
banks furnished the entire paper circulation of the country. In
providing a system by which the states where national banks were
located and did business could tax their shares, it was important,
as their notes came in competition with state bank paper, that
there should be no unfavorable discrimination against them. It was
easy to see that an unfriendly state could legislate so as to drive
them out of circulation, and this consideration induced Congress to
limit the state power of taxation in two particulars. In declaring
that national bank shares should be taxed like other moneyed
capital and that no burdens should be imposed on them from which
state banks were exempt, all was done that the necessity of the
case required. There was nothing to fear from banks of discount and
deposit merely, for in no event could they work any displacement of
national bank circulation. It seems, therefore, clear that the
proviso to the forty-first section was meant by Congress to apply
to banks of issue. It is proper in this connection to observe that
the changed condition of the banking interests of the country has
been the occasion of
Page 76 U. S. 475
further legislation by Congress on this subject, and that now
the power of state taxation over the shares of national banks is
subject only to the restriction that the taxation shall not be at a
greater rate than is assessed upon other moneyed capital in the
hands of individual citizens. [
Footnote 4]
Having determined that Congress, in imposing conditions on the
power of the state to tax, had reference to banks of circulation,
the question arises whether the tax in this case was invalid
because of the status of the two banks left in Missouri. According
to the words of the law, the tax was not warranted, but did
Congress intend that the law should have such an effect? Did it
contemplate that the shares of national banks should escape
taxation if the state complied so far as it had the ability to do
so with the requirements of the forty-first section of the National
Banking Act? In our opinion, the answers to these inquiries must be
in the negative. It is a universal rule in the exposition of
statutes that the intent of the law, if it can be clearly
ascertained, shall prevail over the letter, and this is especially
true where the precise words, if construed in their ordinary sense,
would lead to manifest injustice. [
Footnote 5]
It is very clear that Congress, in conceding to the states the
right to tax, adopted a measure which it was supposed would operate
to restrain them from legislating adversely to the interests of the
national banks. The measure itself had reference to prospective
legislation by the states, and its object was accomplished when the
states conformed as far as practicable their revenue systems to it.
Exact conformity was required, if attainable, but the lawmaking
power did not intend such an absurd thing as that the power of the
state to tax should depend on its doing an act which it had obliged
itself not to do. It was well known at the time, and Congress must
be supposed to have legislated on this subject with reference to it
that states, by contract with individuals or corporations, could
grant away the right of taxation,
Page 76 U. S. 476
and that this power had been frequently exercised. It was
equally within the knowledge of Congress that the policy on this
subject varied in different states, while some of them retained in
their own hands the power of taxation over all species of property
except such as were devoted to religious or charitable purposes,
others had parted with it to interests of a purely business
character, like banks and railroads. Can it be supposed that
Congress, in this condition of things in the country, meant to
confer a privilege by one section of a law which by another it made
practically unavailable? If the construction contended for by the
plaintiff in error be allowed, then a state so unfortunate as to
have a single ban whose shareholders are exempt by contract from
taxation in the manner provided by Congress can derive no benefit
from the power given to tax the shares of national banks. And this
further consequence would follow, that the shareholders of national
banks located in one state would escape all taxation, while those
whose property was invested in banks in a different locality, would
have to contribute their full share of the public burdens. This
Court will not impute to Congress a purpose that would lead to such
manifest injustice in the absence of an express declaration to that
effect. Without pursuing the subject further, it is enough to say,
in our opinion, Congress meant no more by the second limitation in
the proviso to the forty-first section of the National Banking Act
than to require of each state, as a condition to the exercise of
the power to tax the shares in national banks, that it should, as
far as it had the capacity, tax in like manner the shares of banks
of issue of its own creation.
Testing the case in hand by this rule, it is apparent that the
tax complained of was properly assessed and collected. Missouri has
complied, so far as it had the ability to do it, with the demands
of the law.
The legislature, as soon as the national banking system was
created, passed a law enabling the ten banks of issue in the state
to wind up their business in order that their shareholders could,
if they chose, transfer their interests to the
Page 76 U. S. 477
new system. Eight of these banks availed themselves of the
privilege, surrendered their charters as state corporations, and
became national bank associations. Two of them declined the
proposition tendered by the state, and are still doing business in
St. Louis. There is no way the state could compel them to
relinquish their charters, nor has it the power to tax their
stockholders on their shares of stock. Having contracted with these
banks to accept from them annually, in lieu of all taxes, one
percent on their paid-in capital stock, it cannot turn round and
assess a tax on the shareholders. As the state did all that it
could to conform its legislation to the requirements of the law, it
was therefore in a condition to impose the tax in question on the
shares of stock held by the plaintiff in error.
It is objected that the mode of assessment provided by the
general revenue law of the state is inconsistent with the
provisions of the act of Congress of June 3, 1864, as it requires
the tax assessed on the shares of stock to be paid by the
corporations respectively, instead of the individual shareholders.
This was one of the questions in the case of
National Bank v.
Commonwealth, decided at this term, [
Footnote 6] and it was there held that this mode of
assessment was not inconsistent with the terms of the law, but in
all respects unobjectionable. It is unnecessary to repeat the
argument presented in that case or to consider the point further,
as we see no reason to question the soundness of that decision.
Judgment affirmed.
[
Footnote 1]
13 Stat. at Large 111.
[
Footnote 2]
3 Wall. 573.
[
Footnote 3]
13 Stat. at Large 111.
[
Footnote 4]
15 Stat. at Large p. 34.
[
Footnote 5]
Dwarris on Statutes, chap. 12;
Perry v. Skinner, 2
Meeson & Welsby 477;
Stocker v. Warner, 1 C.B.
149.
[
Footnote 6]
Supra, <|76 U.S. 353|>353.
