Ruffin v. Board of Commissioners.

It would be strange if capital-capital which has accomplished its mission could be diverted from its owners, and used against their protest to build up a surplus fund, when even a dividend, once declared, cannot be.

The controversy in this case really is, whether or not the defendant shall be compelled to pay the plaintiff the value of five shares, the amount which the directors have determined to retain as a surplus. If directing judgment for the value of those shares would bring the litigation to a close, I should go no further than make an order to that effect. But it appears to be necessary to provide for the indemnification of the plaintiff for the loss of his twentyfive shares, the transfer of which the defendant refuses to make upon its books. If I should order judgment merely for the value of the five shares, it is possible that the defendant would refuse to give the plaintiff a new certificate for fifteen shares, and to pay him the $500 which the directors have ordered to be paid to those who consent to relinquish two-fifths of their shares. To give the plaintiff adequate relief, it seems to me to be necessary to direct judgment for the value of the whole twenty-five shares. The defendant is liable for that value, having refused to permit the shares to be transferred upon its books.

Judgment for the plaintiff.

RUFFIN V. BOARD OF COMMISSIONERS.

(69 North Carolina, 498.)

Taxation of circulation of National banks.

The power of a State to tax the circulation of the National banks depends upon whether such circulation is for the use of the United States government or for private profit. Congress can protect the circulation of those banks, by forbidding the States to tax it; until this is done the States have the right to tax it.*

ETITION by the plaintiff to the board of commissioners of Orange county, praying a revision and correction of the list of taxables given in by her.

The court below ordered a correction of the tax list.

*This decision is only an obiter dictum. The court expressed a like opinion in Lily v. The Commissioners, 69 N. C. 300.

Ruffin v. Board of Commissioners.

T. L. Hargrove, for board of commissioners.

John W. Graham, contra.

READE, J. [After deciding that money deposited became the money of the bank and was taxable to the depositor only as "credit."] The point most discussed at this bar was whether United States treasury notes and National bank bills were liable to taxation by the State. And, although, as we have seen, it is not necessary to the decision of the case, yet, as his honor's judgment was based upon it, and as it is a matter of general interest, it may be proper that we should express our opinion upon it. It seems to be settled by numerous cases in the United States Supreme Court, cited in plaintiff's brief, beginning with McCullock v. The State of Maryland, that United States treasury notes cannot be taxed by the State, because they are of the means used for the support and administration of the United States government. And if a State could tax them, then unfriendly States might so tax them as to destroy their usefulness; and in that way, and to that extent, destroy the United States government. And it is equally well settled that the United States government cannot tax any of the necessary means used to administer the State government. But whether a State can tax National bank bills seems to be a debatable question. The case cited against the power of the State to tax is Veazie Bank v. Fenno, 8 Wall. 533 (ante, p. 22). We do not think that case supports the position. It is there decided by a divided court, that Congress may tax the circulation of banks chartered by the State; and that, although the tax was so heavyabout sixteen per cent as to destroy them. It is not pretended that this tax could have been imposed if the bank had been chartered for the use of the State and as a means of administering its government. But it is put upon the ground that they are corporations for private profit.

And the power of Congress to tax the circulation of State banks depends upon whether they are for the use of the State government or for private profit; so the power of the State to tax the circulation of National banks depends upon whether they are for the use of the United States government or for private profit. It is true they are authorized by Congress, as a currency, convenient and useful for circulation, just as State bank bills are authorized by the State. But in neither case have they necessarily any connection

Kyle v. The Mayor, Etc

with the government. The act of Congress authorizing National banks imposed a tax on their circulation of two per cent. And surely that would not have been done if they had been regarded as a part of the government, as that would have been the same as for the government to tax itself. The truth is that the United States government has no interest in National banks. It authorizes them in order to provide a currency, not for the government, but for the people. And it has the power to regulate and to protect them. To this end it provides for the redemption of their notes, protects them from the imposition of counterfeits and from injurious competition of State banks, by a heavy tax on State bank bills, and no doubt might further protect them by forbidding the State to tax them. But this has not been done, and until it is done we suppose the State has the power to tax them. It seems that all that is to be inferred from the decision in Veazie Bank v. Fenno, supra, is not that National bank bills are exempt, but that Congress has the power to exempt them from State taxation. See Lilly v. Commissioners of Cumberland, at this term, 69 N. C. 300.

PER CURIAM.

Order of the court below reversed.

KYLE V. THE MAYOR, ETC.

(75 North Carolina, 445.)

Taxation of shares of non-residents.

Under a State Constitution requiring all property not specifically exempt, to be taxed, State assessors must tax the shares of National bank stock belonging to non-residents of the State in the city or town where the bank is located, although there is no State statute expressly directing such taxation.

THIS

HIS was a civil action, for injunction and other relief, heard before his honor, Judge BUXTON, at Chambers, in Cumberland county, on the 20th day of November, 1875.

Plaintiff alleged in his complaint that he is a non-resident of the State; that he was the owner of 108 shares of stock of the People's National Bank of Fayetteville," on April 1st, 1875; that the same

Kyle v. The Mayor, Etc.

had been placed by the tax list takers for the town of Fayetteville upon the tax list, and that plaintiff had been assessed the sum of $182.50 as taxes thereon; that the tax list had been placed in the hands of the defendant Mallett for collection, and that he had levied upon certain real estate of the plaintiff, and advertised the same for sale, to satisfy said tax assessment. Plaintiff asked that defendants be restrained from selling said property, etc.

Upon this complaint his honor granted a restraining order, and an order to defendants to show cause on November 20th, why an injunction should not be granted as prayed for.

Defendants in their answer admitted the main allegations of the complaint, but they insisted that the tax assessed on plaintiff's shares of stock was uniform and at the same rate as was levied upon all other property subject to taxation in the town of Fayetteville, and that the same was valid and according to law.

Upon the hearing, his honor held that the assessment for taxation of plaintiff's shares of stock by the authorities of the town of Fayetteville, and all proceedings thereunder were without authority of law, and granted the injunction.

From which order defendants appealed.

Ray, for appellant.

McRae & Broadfoot, contra.

BYNUM, J. It is admitted that the town of Fayetteville possesses the power of taxation for corporate purposes, by virtue of its charter and the general laws of the State.

This concession, we think, is decisive of the case before us. For whenever the power is exercised, all taxes, whether State, county or town, by force of the Constitution, must be imposed upon all the real and personal property, money, credits, investments in bonds, stocks, joint-stock companies, or otherwise, situate in the State, county or town, except property exempted by the Constitution. Art. 5, §§ 3 and 7; art. 7, § 9.

It is the provision, and was the purpose of the Constitution, that thereafter there should be no discrimination in taxation in favor of any class, person, or interest, but that every thing, real and personal, possessing value as property, and the subject of ownership, shall be taxed equally and by a uniform rule.

Kyle v. The Mayor, Etc.

In this respect the present Constitution shows no favors and allows no discretion. If, then, the town of Fayetteville has the power to tax, the Constitution steps forward and commands that all property shall be taxed and by a uniform rule. Shares in a National bank are investments in stocks, and comprise the largest portion of the moneyed wealth of the country. They are not only a proper subject of taxation in themselves, but are made taxable expressly both by the Constitution of the State and the National Banking Act which brought them into existence and stamped upon them their character. National Bank v. Commonwealth, 9 Wall. 353; 4 id. 244. The Banking Act, ratified the 3d of June, 1864, and amended by an act ratified the 10th of February, 1868, confers upon the States in which they are located the power of taxing the shares in National banks. There are two restrictions upon the power. The first is, that the tax shall be no greater than is imposed upon other moneyed capital in the hands of individual citizens of such State. The second is, that shares owned by-non residents of any State shall be taxed in the city or town where the bank is located and not elsewhere. Therefore, if non-resident shareholders are not taxed in the State, county and town where the bank is, they escape taxation altogether. Taxation is prohibited in the State of the non-resident. Such gross inequality and injustice was never intended and is expressly provided against. By the Banking Act it is wholly immaterial where the shareholder lives. The taxing power looks, not for the individual, but for the bank. Where that is found the shares are taxed by the State, county or city of its locality.

In our view it was unnecessary for the Revenue Act of the State or the charter of the town of Fayetteville to tax specifically the National bank shares of either residents or non-residents.

Whenever and wherever these institutions spring into existence, and become the heads of moneyed investment and the representatives of wealth, the Constitution seizes them and exacts from them their proportional share of the public burdens. Neither the Legislature nor the town corporation can exempt them from taxation without doing violence to the Constitution.

In the view we have taken of this case, it is unnecessary to examine the several revenue and other acts of the Legislature, cited and commented upon in the argument. It is enough to know, first, that Congress has impressed these bank shares with the