Van Allen v. The Assessors

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 an act passed February 25th, 1863, Congress provided for the organization of national banking associations; and the act was amended and re-enacted on the 3d June, 1864.

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 per centum at the commencement, and ten per centum 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 nots equal to ninety per centum 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 per centum, and in other places to fifteen per centum of its outstanding circulation and its deposits; and to accumulate a surplus fund equal to twenty per centum 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 accoring 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. 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. 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. Fifty per cent. of the capital stock of every association must be paid in before it shall commence business, and the remainder in instalments of at least ten per cent. per month till the whole amount is paid; and if any shareholder, or his assignee, shall fail to make the payment, or any instalment on his stock, the directors may sell the stock at public auction. No association can make any loan or discount on the security of the shares of its own capital.

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,' &c.

The 41st section, of the same of 1864, provides by one part of it for taxation by the United States. It imposes a tax of one per cent. annually on circulation; one-half of one per cent. on deposits, and then one-half of one per cent. 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.' 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 proved 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 9th 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.

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 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, 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. The City of Charleston; McCulloch v. The State of Maryland; Osborne v. The Bank of the United States (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, which enacted that 'all 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, 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?Numerous counsel appeared in the matter; some in this immediate case, others in other cases just like it from the other places. Among them Mr. Evarts, Mr. Sedgwick, Mr. Tremaine, Messrs. Edmonds and Miller, argued against the right of the States to tax, and Mr. Kernan, Mr. A. J. Parker, and Mr. Reynolds in favor of it. After naming such counsel it need not be remarked that everything possible to be well said was said as well as possible. The fact that the main matter is fully and admirably argued from the bench in the opinion of the court on the one hand, and in the opinion delivered in behalf of the judges who did not concur in it on the other-renders it unnecessary for the reporter to present the discussion at the bar.

Mr. Justice NELSON delivered the opinion of the court.