State of Tennessee v. Union Planters' Bank Same

The first case was a bill in equity, filed January 26, 1893, in the circuit court of the United States for the western district of Tennessee by the state of Tennessee and the county of Shelby, in that state, against the Union & Planters' Bank of Memphis, a corporation organized under the laws of Tennessee, and having its place of business at Memphis, in Shelby county, and against S. P. Read and W. A. Williamson, citizens of the state of Tennessee, to recover taxes alleged to be due to the state and county for the years 1887-1891, under the general tax act of the state of 1887 (chapter 2).

The bill, after alleging that the original charter of the defendant corporation, granted by the state of Tennessee in 1858, provided 'that said company shall pay to the state of Tennessee an annual tax of one-half of 1 per cent. on each share of stock subscribed, which shall be in lieu of all other taxes,' and stating the provisions of the tax act of 1887, relied on by the plaintiffs, made the following allegations:

'The defendant bank claims that both its capital stock and the shares of stock in the hands of its stockholders are exempt from taxation by virtue of its charter. Complainants, however, are advised and submit that the exemption contained in said charter applies to the shares of stock only, and not to the capital stock of said institution, and that the latter, in any event, is subject to the taxing power of the state.

'It may be, however, that complainants are mistaken in the foregoing construction of the charter, and that the shares of stock are taxable, and the capital stock of said institution exempt. The question is one of law, and is submitted to the court for determination.'

In view of the latter alternative, the bill alleged that the corporation had each year refused, on demand of the assessing officers of the state, to give them a list of its stockholders; made Williamson, a stockholder, and Read, the cashier, of the bank, defendants; and required the latter to disclose on oath the names of the other stockholders, and the number of their shares, in order that they might be made defendants, and proper relief be had against them.

The bill also set forth the amounts of taxes due from the corporation in one alternative, or from the stockholders in the other, amounting on either view to more than $5,000; and concluded as follows:

'Complainants further state and show that the defendant claims that under and by virtue of the terms of its charter both its shares of stock and its capital stock are exempt from taxation, excepting only the one-half of one per cent. prescribed by the charter; and that the revenue law of the state, undertaking to tax the one or the other, is void, because in violation of the clause of the constitution of the United States, which forbids the state to pass any law impairing the obligation of a contract. It claims immunity from taxation upon that ground, and upon none other. The case is therefore one arising under the constitution of the United States, and within the jurisdiction of this court, this bill being brought to obtain an adjudication of the question of the exemption of the shares of stock, or of the capital stock, or both, of the defendant bank. Complainants aver that by the statute laws of the state of Tennessee they respectively have liens upon the capital stock of said bank, and upon any property in which the same may be invested, for the payment of any sums that may be adjudged due from the defendant bank on account of taxes laid on said capital stock, and liens upon the shares of stock in said bank for the taxes upon said shares that may be adjudged due thereon.

'Premises considered, complainants pray that the parties named as such in the caption be made defendants hereto; that subpoena and copy issue, returnable to the next proper rule day, according to the practice of the court, requiring them to appear and answer the allegations of this bill, the defendant G. P. Read answering under oath, and making discovery as asked in the body of the bill; that the court will construe the charter of defendant company, and pass upon the claim of immunity from taxation set up by defendant company and its stockholders, adjudging the liability of the one or the other, or both, to taxation, determining upon which the taxes are laid for the several years mentioned in the bill, rendering judgment accordingly, and enforcing the liens given by the statute laws of the state; and that the court will grant such further relief, general and special, as complainants in equity ought to have.'

The defendants filed an answer, admitting most of the facts alleged in the bill, and that the defendant corporation 'claims that under and by virtue of the terms of its charter both its shares of stock and its capital stock are exempt from taxation, excepting only the one-half of one per cent. prescribed by the charter; and that the revenue law of a state, undertaking to tax the one or the other, is void, because in violation of that clause of the constitution of the United States which forbids the state to pass any law impairing the obligation of a contract;' stating that 'it does claim immunity from taxation upon that ground, but not, as alleged in the bill, upon none other;' and setting up, as additional grounds of defense, that the exemption of the corporation and its stockholders from taxation, except as provided in its charter, had been adjudicated and established by the decision of this court in Farrington v. Tennessee, 95 U.S. 679, and by the decision of the supreme court of Tennessee in Memphis v. Union & Planters' Bank, 91 Tenn. 546, 19 S. W. 758; and also that they were so exempt from taxation under the constitution and laws of Tennessee; and insisting that the case was not one arising under the constitution and laws of the United States, nor within the jurisdiction of the circuit court of the United States.

The plaintiffs filed a general replication, and the court entered this decree: 'This cause came on for final hearing on the pleadings and proofs, and, having been argued by counsel and considered by the court, the court is of the opinion as follows, to wit: First. That the objection to the jurisdiction of the court set up in the answer of the defendants is not well taken; that the jurisdiction of the court should be sustained, and the cause determined on its merits. Second. That by the charter of the defendant bank both the capital stock of the said bank and the shares of stock therein are exempt from taxation. Third. That the defense of res judicata set up in the answer need not, therefore, be passed upon. It is therefore ordered, adjudged, and decreed that the bill of complaint herein be, and is hereby, dismissed at the cost of complainants.' The plaintiffs appealed to this court.

The second case was a like bill in equity, filed at the same time by the state of Tennessee and the county of Shelby against the Bank of Commerce, a corporation of Tennessee, and established at Memphis, and against its cashier, and one of its stockholders, both citizens of Tennessee; and was dismissed on demurrer, and the plaintiffs appealed to this court.

The third case was a bill in equity, filed October 22, 1891, in the chancery court of Shelby county, by the state of Tennessee and the city of Memphis against the Bank of Commerce and its cashier; and was substantially similar to the bills in the other cases, except in omitting the last paragraph but one, relating to the constitution of the United States, the jurisdiction of the circuit court of the United States, and the lien of the plaintiffs. The case was removed into the circuit court of the United States upon the petition of the defendant corporation, upon the ground that, by reason of the exemption in its charter, the tax act of Tennessee on which the plaintiffs relied was repugnant to the provision of the constitution of the United States that no state shall pass any law impairing the obligation of a contract. In the circuit court of the United States, a demurrer to the bill, on the same ground, was filed and sustained, and a final decree entered dismissing the bill. 53 Fed. 735. The plaintiffs appealed to this court.

Mr. Justice Harlan and Mr. Justice Field, dissenting. 53 Fed. 735, reversed.

S. F. Walker and C. W. Metcalf, for appellants.

Henry Craft, T. B. Turley, Wm. H. Carroll, and J. A. Taylor, for appellees.

Mr. Justice GRAY, after stating the cases, delivered the opinion of the court.