City National Bank v. Paducah.

capital of the State is subject to a tax of fifty cents per share of one hundred dollars, in lieu of all other taxes. If the city of Paducah may tax National banks at $1.05 per share for the year 1875, it may increase the tax at any time to $2.50, the amount authorized by the Legislature, and to as much greater an amount as the Legislature may hereafter see fit to authorize. (It was conceded upon the argument that the tax for 1876 had been increased to $1.40.) Indeed, the Legislature may authorize like taxation by every municipality in the State, while the State banks, under their special charter, will escape their burden altogether. Certainly, here is a large discrimination in favor of State banks. I am not un mindful in this connection of the case of Lionberger v. Rouse, above cited, nor of the case of Hepburn v. School Directors, 23 Wall. 480, in which it was held that the exemption of small amounts of moneyed capital, in particular cases, would not invalidate the tax, if the great body of moneyed capital was subjected to it. In both these cases, however, the amount exempted was small in proportion to the aggregate amount of moneyed capital, and the great mass of moneyed property was subjected to the same tax levied upon the shares of National banks. It is true that the fifty-three State banks in Kentucky are not chartered by general law, but by special acts in each case; but this seems to me to make no difference. The fact remains, that, practically, the entire banking capital of the State pays a tax of fifty cents, in lieu of all other taxes, even upon its real estate. The law will look, not at the manner in which the tax is imposed, but at the result of the system. A like answer may be made to the argument that many of these State charters have expired, and that in renewing them the power to increase the taxation is reserved. This power never seems to have been exercised.

It is insisted, however, that although the legislation in question may discriminate in favor of State banks, there is no discrimination against National banks, inasmuch as "all other moneyed capital, in the hands of individuals," except shares in State banks, pays the same tax. Under the general laws of Kentucky (and the charter of Paducah adopts the same rule of assessment) property subject to taxation is listed in five classes :

1, Real estate; 2, horses, mules and the like; 3, cattle; 4, watches, plate, clocks, pianos, vehicles and harnesses; 5, "the assessor, after having taken the lists of all property required to be

Canfield v. The State National Bank of Minneapolis.

allowed by the equalization law, or upon the fact that shares owned by colored people may be taxed for the support of common schools in violation of the law applicable to other moneyed capital. These exemptions fall within the rule laid down in Hepburn v. School Directors, and Everitt's Appeal, 71 Penn. St. 216 (see post); and do very little to disturb the practical uniformity of the law. De minimis non curat lex.

But from whatever point of view this case is considered, the fact is apparent, that by the ordinance of Paducah a large tax is imposed upon the shares of National banks, from which the banking capital of the State is wholly exempt; and though the percentage is nominally the same, the tax is far more onerous than that laid upon other moneyed capital in the city. For these reasons it seems to me the legislation is in conflict with the act of Congress, and therefore invalid.

A decree will be entered perpetuating the injunction.

ed

it

CANFIELD V. THE STATE NATIONAL BANK OF MINNEAPOLIS.

(1 Northwestern Reporter, 173.)

National banks may take stock as collateral security.

A National bank loaned money and took stock in a corporation as collateral security therefor. Held, that it had not exceeded its powers.*

(Circuit Court, Eighth Circuit, District of Minnesota.)

N this cause a motion is made for an injunction, and is heard

a counter affidavit.

The allegations in the bill of complaint are briefly, that the complainant is the owner of about sixty-five acres of land in Hennepin county, in this district, of which he is in possession, and that the. defendants claim some interest therein adverse to him, and he de

* See First Nat. Bank of Charlotte v. Nat. Exchange Bank, ante, p. 124; and Shoemaker v. Nat. Exchange Bank, ante, p. 169.

Canfield v. The State National Bank of Minneapolis.

sires that the respective claims may be litigated. He states that the Minnesota Agricultural and Mechanical Association was organized in June, 1871, as a body corporate, with a capital stock of $40,000, represented by shares of $50 each, all of which was taken by certain parties therein named, and that the corporation soon after its organization, purchased the land now in possession of the complainant, for the sum of $10,000, and erected buildings upon the same of equal value. That the object of the association and the purpose for which the property was purchased and the buildings erected, were confined to holding fairs, of which one or two were held during 1871, and none since. That the real estate was placed under the control of William S. King, one of the stockholders, and a director, to be used by him as he saw fit, a majority of the stock being owned by him; and that prior to August 14, 1873, he had purchased and acquired the stock of the corporation, and that it had been transfered to him by the other holders and owners. Also that King had, prior to the above date, acquired the real estate in fee, and free from all claims and demands of the association, and of each of the other directors and former stockholders, with an obligation on the part of the association to make and execute a conveyance of the same to King, his heirs and assigns, or to such persons as he might designate as grantee.

The bill further states that the complainant contracted with King for the purchase of the real estate August 14, 1873, and the same was finally consummated and deeds were executed and delivered to him by King, and also by all of the directors of the association, but no delivery of any stock was made as he states on account of his forgetfulness and inadvertence in requesting it.

It also appears substantially in the bill, that Brackett, one of the directors, borrowed money of the bank in April, 1873, for which he gave his note and transferred as collateral to it, two hundred shares of stock of the Agricultural and Mechanical Association, and three promissory notes of William S. King, dated in November, 1872, for the payment of which the stock had been pledged; and also that R. J. Mendenhall, one of the directors of the association, borrowed money from the bank and gave his note, and transferred as collateral, one hundred shares of stock and certain notes of Wm. S. King, dated in 1872, for the payment of which the stock had been pledged.

It is charged that the bank has no title whatever or claim to the

Canfield v The State National Bank of Minneapolis.

remaining five hundred shares of stock, and that it was never deposited as collateral, or pledged in any manner.

The maturity of the notes for which the shares of stock were pledged is alleged, and that the bank is about to sell them at public auction, having given notice thereof.

The answer of the defendant, the bank, denies the material allegation in the bill as above stated, but admits that it holds the three hundred shares of stock substantially as therein set forth, and also states that in July, 1873, King, owner of the five hundred shares remaining, borrowed certain gas stock, property of R. J. Baldwin, the cashier of the bank, to enable himself to raise a certain amount of money, and, in consideration of the loan, transferred the five hundred shares to Baldwin, as security for the return of the gas stock, and also to retain as additional security for the payment of the Brackett and Mendenhall notes, held by the bank.

It is charged that the security taken by the bank is in violation of law, and an injunction is asked restraining the sale of the stock by the bank.

Palmer & Bell, for motion.

Geo. Bradley, contra.

NELSON, J. The shares of stock held by the bank are a security not objectionable, in my opinion, to section 5136, Rev. Stat. (U. S.), par. 7. If so, the right to sell three hundred shares pledged as collateral to the King notes, originally given Brackett and Mendenhall, is not doubtful. A second pledgee holds the security to the extent of the debt for which it is pledged, and can sell at any time. after the debt is due and payable. It is optional with the bank to stand to its remedy against the pledge or sue for its debt, and the law gave it the right to sell, ex mero motu, on proper notice of an intention so to do, or to file a bill in equity to foreclose and sell under a decree. Hilliard on Mortgages, vol. 2, Appendix, 526.

Although the King notes and the Brackett and Mendenhall notes had been overdue a long time, it is not deprived of this privilege given by law to select its remedy. It is charged that the bank has no title to the remaining five hundred shares of stock, and that the same have not been pledged or deposited with it as a collateral security for any sum whatsoever, or with any right to sell.

Pittsburgh Locomotive and Car Works v. State National Bank of Keokuk.

The answer of the bank, which was used upon the motion as an affidavit, denies this allegation, and the counter affidavit and exhibits produced by the complainant do not overcome, but rather support the substantial claim set up in the answer by the bank to lien upon this amount of stock.

Applying the usual rule, on motions of this kind, the complainant's equity is not so clear as to entitle him to an injunction, for there is reasonable doubt as to the facts upon which the motion is based, and the injury resulting from a sale of the stock is not improbable. The purchaser would take only such title as the pledger had at the time the security was given, and the rule of caveat emptor will govern.

Having come to a conclusion adverse to the complainant's application for the reason stated, it is not proper to consider at this time the effect of the judgment set up in the answer as a defense in a case in which the parties are substantially reversed.

Motion for an injunction denied.

PITTSBURGH LOCOMOTIVE AND CAR WORKS V. STATE NATIONAL BANK OF KEOKUK.

(2 Cent. Law. Jour. 692.)

National banks may take pledge of chattels,

National banks may take personal chattels (e. g., a locomotive) as security for loans and discounts.

(Circuit Court, Eighth Circuit.)

R

EPLEVIN for a locomotive engine. In July, 1873, the plaintiffs and the Miss. Valley & West. R. R. Co. (an Iowa and Missouri corporation) entered into a written contract, by the terms of which it "let" or leased to the railroad company the locomotive engine for nine months, for a sum equal to the value of the locomotive, one-fourth of which was paid at or near the date of the instrument, and the balance was to have been paid within the nine months. If paid, the plaintiff was to execute to the railroad com