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of stock was not made in the manner pre- wise and efficient modes of taxing their own scribed by sections 3609 and 3610, Pol. Code, corporate organizations, in order to make that the specific allegations in support of such taxation conform to the system of taxing the general allegations show that the various national banks upon the shares of their stock provisions of those sections were fully com- in the hands of their owners. All that has plied with, and that if the assessment be in- ever been held to be necessary is that the valid, it is so solely because those sections system of state taxation of its own citizens, provide a method of assessment and taxation of its own banks, and of its own corporations for national bank shares, the effect of which, shall not work a discrimination unfavorable in its practical execution, is to discriminate to the holders of the shares of the national in favor of state banks and other state banks. Nor does the act of Congress require moneyed corporations, and against national anything more than this; neither the lanbanks.

guage nor its purpose can be construed to go With one exception, all contentions made by any further. Within these limits, the manlearned counsel for plaintiff against the legal- ner of assessing and collecting all taxes by ity of the method thus adopted by the state the states is uncontrolled by the act of Congof California for the taxation of national ress." Citing this case, upon this point, the bank shares, appear to have been already Supreme Court said in the Dodge Case: "As, disposed of adversely to him by the Supreme then, no conflict necessarily arises between Court of the United States in the opinion de

the act of Congress and the state law solely livered in the case of San Francisco Nat. because the latter provides one method for Bank v. Dodge, Assessor, supra, wherein the taxation of state banks and other moneyed views expressed by the Circuit Court of Ap- corporations and another method for national peals for the Ninth Circuit as to similar con- banks, it follows that the contention that the tentions in another case (Nevada Nat. Bank state law, for that reason, is repugnant to the v. Dodge, 119 Fed. 57, 56 C. C. A. 115) were act of Congress is without merit." approved. It should be noted in passing that Dodge Case, however, it was held by the this is the first case that has come to this United States Supreme Court (four of the court, involving any question as to the valid- justices dissenting) that the California law. ity of sections 3609 and 3610 of the Political relative to the assessment of the property of Code, the cases above referred to having been corporations, as construed by the California instituted in the federal courts. It was spe- Supreme Court, does not compel the assessing cially pointed out by the United States Su

officers in the valuation of the property of preme Court in the San Francisco National such corporations, to include all those eleBank Case above referred to, following Dav

ments of value which are embraced in the enport Nat'l Bank v. Board of Equalization, assessment of shares of stock in national 123 U. S. 83, 8 Sup. Ct. 73, 31 L. Ed. 91, that banks, and that, for this reason, and the addithe mere fact that, under the laws of this tional reason, held to have been shown by state, shares of stock in state banks and the record in that case, that assessors generother state moneyed corporations are not per- ally in their assessment of state corporations mitted to be assessed and taxed, was not suff

had failed to include all such elements, the cient to show in a statute requiring the assess- law requiring the assessment of national bank ment and taxation of national bank shares,

shares at their full cash value to the holders any discrimination against national banks, thereof is, both by its terms and in its prac

provided a different method adopted by the tical execution, a discrimination in favor of

state for the assessment and taxation of the property of such state corporations, accomplished the inclusion in the assessment of the property of such corporations of all those elements which are embraced in the assessment of shares of stock in national banks to the holders thereof. It was said by the Supreme Court of the United States in the Davenport Case cited above, upholding a statute of the state of Iowa providing for the taxation on national bank shares, where no such assessment was allowable in case of a savings bank, the property of which was assessed directly to the corporation: "It is strongly urged that in no other mode than by taxing the stockholders of each and of all the banks can a perfect equality of taxation be obtained.

• It has never been held by this court that the state should abandon systems of taxation of their own banks, or of money in the hands of their other corporations, which they may think the most

other moneyed capital against national banks, forbidden by the act of Congress wbich authorizes the assessment and taxation of such shares.

It is claimed that the decision of the Supreme Court in the Dodge Case effectually determines for all time the question as to the validity or invalidity of our existing statute relative to the assessment of national bank shares. But we do not so understand the majority opinion in that case, or the effect of the decision rendered. It, doubtless, effectually disposed of the assessments involved in that case. Its decision to the effect that our statute relative to the assessa ment of national bank sbares cannot be enforced, so long as our laws relative to the assessment of state corporations are construed by this court not to require the as sessment officers to include in the assessment of such corporations all of those elements of value which are embraced in


an assessment of national bank shares, so The portion of the majority opinion in as to produce equality of taxation as re- the Dodge Case last quoted recognizes that spects national banks, is, also, undoubtedly a state is at liberty to adopt a method for a decision upon a federal question, binding the assessment of state corporations, under upon us. It may also be conceded that upon which all those elements of value which a showing in any case of such facts as were are embraced in an assessment of the shares held to be shown by the record in the Dodge of stock would be required to be included Case, as to the practical application of the in an assessment of the property of the corlaw relative to state corporations by as- poration to the corporation. Such was sessors generally, we would be compelled to the method upheld by the Supreme Court follow the decision in the Dodge Case, and of the United States in the Adams Exhold the assessment complained of void. press Co. Cases (Adams Express Co. v. But throughout the opinion in that case, Ohio State Auditor, 165 U. S. 194, 17 the Supreme Court recognized the rule re- Sup. Ct. 305, 41 L. Ed. 683; Id., 166 U. peatedly declared by it to the effect that in S. 185, 17 Sup. Ct. 604, 41 L. Ed. 365; the interpretation of the Constitution and Weir v. Norman, 166 U. S. 171, 17 Sup. Ct. statutes of a state, the construction placed 527, 41 L. Ed. 960), and in the State R. R. upon them by the court of last resort of Tax Cases, 92 U. S. 575, 23 L. Ed. 663. See, such state is conclusive and binding upon the also, Michigan Central R. R. Co. v. Powers, Supreme Court of the United States and (U. S.) 26 Sup. Ct. 459-462, 50 L. Ed. 744. all federal courts (see Smiley V. Kansas, Unless we are now prepared to repudiate 196 U. S. 447, 25 Sup. Ct. 289, 49 L. Ed. the doctrine of the case of People ex rel. 546), and that opinion ended as follows: Burke V. Badlam, 57 Cal. 594, and hold "Our conclusion, therefore, does not deny that section 3608 of the Political Code, prothe power of the state of California to as- hibiting any assessment of shares of stock sess shares of stock in national banks, pro- of state corporations is unconstitutional, it vided only the method adopted does not pro- must be held that such has been the method duce the discrimination prohibited by the or system provided by our laws for the asact of Congress. From this, of course, it sessment of state corporations, for the last would follow that, if the statutes of Cali- 25 years. That this must necessarily be so, fornia, either from their text or as con- will clearly appear from a consideration of strued by the highest court of that state, the provision of our Constitution declaring compelled the assessing officers in the valua- what property shall be taxed, the legislation tion of the property of state banks and other thereunder, and the decision above referred state moneyed corporations to include all to. Section 1 of article 13 of the Constitution those elements of value which are embraced adopted in 1879 was, so far as is material in the assessment of shares of stock in na- in this connection, as follows: "All property tional banks, so that there would be an in the state, not exempt under the laws of equality of taxation as respects national the United States, shall be taxed in proporbanks, the discrimination which we find to tion to its value, to be ascertained as proexist under the present state of the law in vided by law. The word 'property,' as used California would disappear." (The italics in this article and section, is hereby declared are ours.) Surely it cannot be contended to include moneys, credits, bonds, stocks, that this court is precluded by anything de- dues, franchises, and all other matters and cided by the United States Supreme Court things, real, personal and mixed, capable of in the Dodge Case from now holding that, private ownership.

*" No amendunder the constitutional and statutory pro- ment of this portion of the section has ever visions of this state, and the decisions of this been made. The section, as originally adoptcourt construing the same, the assessing of- ed, contained a proviso exempting growing ficers are compelled, in their valuation of crops, property used exclusively for public the property of state banks and other state schools, and such as may belong to the Unitmoneyed corporations for purposes of as- ed States, this state, or to any county, or sessment, to include all those elements of municipal corporation within this state. The value which would be embraced in an as- section has been amended to include among sessment of the shares of stock therein. the exemptions, property used for free pubWhether or not this is the proper construc- lic libraries and free museums. Other section of our revenue laws is a question as to tions have been added exempting certain which this is the court of last resort. While property such as buildings used solely for the views expressed on that question in the religious worship, state, county and municimajority opinion of the Supreme Court nec- pal corporation bonds, personal property of a essarily merit the respect and careful con- householder to the extent of $100.00, and sideration due to every expression of that fruit and nut bearing trees under the age justly distinguished tribunal, this court is of four years and grape vines under the age not compelled, or, indeed, at liberty, to fol- of three years, none of which changes is low it, if it is of the opinion that such views material to the question here under considerare erroneous. Addressing ourselves to this ation, except in so far as such changes question :

emphasize the fact that it has always been

recognized that nothing capable of private stock is the representative," but this portion ownership can be exempted from taxation, was eliminated by the amendment of 1881, unless it be specifically declared to be exempt of which we shall presently speak. The act by constitutional provision. There has never also included section 3610, providing for the been any question as to the effect of this assessment of shares of stock, “the assessmandatory provision of our Constitution. able value of each share of its stock” to be The definition of property required to be ascertained "by taking from the market taxed in proportion to its value was so value of its entire capital stock the value sweeping and comprehensive that it has uni- of all property assessed to it, and dividing formly been held that it inciuded everything the remainder by the entire number of shares capable of private ownership, and that the into which it is divided.” As was said in provision placed it beyond the power of the the majority opinion of the United States Legislature to exempt from taxation either Supreme Court in the Dodge Case, the words totally or partially anything capable of "market value" are, and as here used were, private ownership, not exempted by the Con- but synonymous with the terms "value" and stitution itself. This, of course, is so clear "full cash value," defined in section 3617, als to property specifically mentioned in the "for, eliminating exceptional and extraorprovision, such as bonds, stocks, franchises, dinary conditions, giving an abnormal value etc., as to require no argument. As said for the moment to stock, it is apparent that in Mackey v. San Francisco, 113 Cal. 392, the general market value of stock is its 397, 45 Pac. 696: "The Constitution not true cash value." We thus had in 1880, as only provides that all ‘property' shall be we have ever since had, a mandatory contaxed, but defines the word 'property' and stitutional provision, specifically requiring expressly includes 'bonds' in that definition, the asessment and taxation of shares of thus placing it beyond the power of the stock, and the assessment, under the statLegislature or the courts to say that bonds utory rule applicable to all property, then are not property within the meaning and

adopted and ever since in force, was to be intent of the Constitution.” The same is, of at the "full cash value," or, "market value.” course, true as to shares of stock, which are as those terms have already been defined. also expressly included. See Bank of Cali- It has several times been said, although it fornia v. San Francisco, 142 Cal. 276, 283, 75 is so self-evident as not to require statement, Pac. 832, 64 L. R. A. 918, 100 Am. St. Rep. that an assessment of the shares of stock 130.

as required by the Constitution would necThe taxation of all property not specifical- essarily include an assessment of every elely exempted, including shares of stock, was ment entering into and giving value to the thus required by constitutional provision. shares. For the purposes of taxation, all The cnly thing left for the legislative de- such elements, tangible and intangible, were, partment to do was to provide a method by the Constitution, in effect declared to be for the ascertainment of the value of the property subject to taxation. As we have property to be taxed. To this extent, the seen, the legislation of 1880 was entirely conconstitutional provision was not self-execut- sistent with this constitutional provision. ing. McHenry v. Downer, 116 Cal. 20, 24, By the act of March 7, 1881 (see amendments 47 Pac. 779, 45 L. R. A. 737. At its first to Codes 1881, p. 56, c. 53), certain changes session after the adoption of this Constitu- were made by the Legislature. Section tion, the Legislature, by act approved March 3607, providing that all property not exempt 22, 1880, amending certain sections of the must be taxed, was amended by the addiPolitical Code, performed its duty in this tion of a proviso to the effect that nothing behalf. Amendments to Political Code 1880, in the Code should be construed to require p. 5, c. 31. Substantially re-enacting provi- or permit double taxation, the provisions of sions of the Code in force at the time of sections 3627 and 3640 as to the assessment the adoption of the Constitution, by section of shares of stock directly were eliminated, 3627 it was provided that "all taxable prop- and section 3608 was added. The last-named erty must be assessed at its full cash value," section was as follows: "Shares of stock in and by section 3617 it was declared that "the

corporations possess no intrinsic value over terms 'value' and 'full cash value' mean the and above the actual value of the property amount at which the property would be of the corporation which they stand for and taken in payment of a just debt due from represent, and the assessment and taxation a solvent debtor.” In these respects there of such shares, and also of the corporate has never been an amendment of either of

property would be double taxation. Therethese sections. Section 3627, as then en- fore all property belonging to corporations acted, contained a provision to the effect shall be assessed and taxed, but no assessthat the proportionate value of the stock of ment shall be made of shares of stock, nor domestic corporations, for purposes of assess- shall any holder thereof be taxed therefor.” ment and taxation, should be its "market This section has been amended only once, value," deducting the value of such prop- viz., in 1899, and then simply by excepting erty assessed to the corporation "in this from its operation national banking associastate, or elsewhere, of which such capital tions.

It requires no argument to show that, what is the stock of a corporation but its this section was in absolute defiance of the property, consisting of its franchise and constitutional provision expressly requiring such other property as the corporation may shares of stock to be taxed in proportion own? Of what else does its stock consist? to their value, if its legal effect was to re- If all this is taken away, what remains? liere from taxation a single element that Obviously nothing. When, therefore, all of entered into and gave value to the shares the property of the corporation is assessed, of stock. As we have seen, the effect of its franchise and all of its other property the constitutional provision was to render of every character—then all of the stock of all of such elements for the purposes of the corporation is assessed, and the mantaxation, property required to be taxed in date of the Constitution is complied with. proportion to their value. This legislation * * * To assess all of the corporate propcould be sustained as a valid exercise of leg- erty of the corporation, and also to assess islative power only upon the theory that, un- to each of the stockholders the number of der our laws, all of these elements constitut- shares held by him, would, it is manifest, ed, for the purposes of taxation, property be assessing the same property twice, once "belonging to the corporation," which must in the aggregate to the corporation, the be included in the assessment of the property trustee of all of the stockholders, and again of the corporation. Upon this theory, sec- separately to the individual stockholders. tion 3608 was upheld by this court in the * * * In the case of the corporation, take case of People ex rel. Burke v. Badlam, away all of its property, which, it must be 57 Cal. 594, generally known as "Burke v. remembered, includes its franchise, and the Badlam.” The court there had under con- shareholder no longer has any property. sideration an application for a writ of man

* In the case of the corporations to date to compel the assessor of the city and which we have referred, the Legislature county of San Francisco to assess shares has declared that all the property held by of stock in various corporations, to the hold. | such corporations shall be assessed to them. ers thereof, and to assess to depositors in It has not attempted to exempt any property savings banks the sums deposited by them. from taxation not exempted by the ConstituSo far as the first proposition was concerned, tion itself, and, of course, could not do it the proceeding was brought to determine if it had. It has only said that the property the validity of section 3608, which

shall be assessed to the corporation, and shall claimed by the applicant to be in conflict not be again assessed for the same tax. This with the constitutional provision requiring | it had the right to say." stocks to be taxed. The case was most As we have seen, section 3608 could be upelaborately argued by eminent counsel, and held as a constitutional enactment only on the decision is clear and direct upon the the theory that under it and other existing question here under discussion. The opinion statutory provisions, everything entering inwas written by Mr. Justice Ross, and signed to and giving value to the shares of stock by Justices Sharpstein, McKee, and Thorn- was "property belonging to the corporation" ton, and Justices McKinstry and Myrick to be included in the assessment of the propspecially concurred in the views of the ma- erty of the corporation. What we have said jority upon the point we are considering. as to Burke v. Badlam shows that section It was held therein that the language of 3608 was therein held to be valid upon this the Constitution neither required nor permit- ground. That case has always been recogted double taxation-that the Legislature nized as involving the question as to the had the right thereunder to say, and had constitutionality of that section and as desaid by section 3608, that all of the property cisive thereon. See Spring Valley W. W. of the corporation should be assessed to the v. Schottler, 62 Cal. 69, 115; McHenry v. corporation and should not again be assessed Downer, 116 Cal. 20, 28, 47 Pac. 779, 782, for the same tax—that the property of the 45 L. R. A. 737; Bank of Cal. v. San Francorporation included its franchise and every- cisco, 142 Cal. 276, 285, 75 Pac. 832, 836, thing else evidenced by the certificates of 61 L. R. A. 918, 100 Am. St. Rep. 130. Of stock; that while the share of each stock

it we said in the case last cited: “This holder was undoubtedly property, it was case necessarily involved the question as to an interest in the very property held the constitutionality of section 3608 of the by the corporation, "his right to a propor- Political Code, prohibiting the assessment of tionate share of the dividends and other

shares of stock to the holders thereof. Such property of the corporation, nothing more” shares being undoubtedly property, unless --and that when all the property of the they were otherwise assessed, the section corporation, including its franchise, was

was clearly unconstitutional, in view of the assessed, which it was to be presumed provision of the Constitution requiring all would be done by the assessor in obedience property to be taxed. According to the deto the requirements of the law, any further cision of the court they were under the law assessment of the shares to the individual to be otherwise assessed-i. e., everything stockholders would be double taxation. to be represented by the certificates was to was said therein, among other things: "Now, be assessed to the corporation.” Burke v. Badlam, supra, is the only case prior to this and had valued the franchise for purposes appeal in which the precise question here of assessment at the sum of $750,000. As under consideration was necessarily involv- suggested by Mr. Justice Brewer in the dised. In the discussion of this question, that senting opinion in the Dodge Case, the state case nevertheless appears to have been en- was not challenging the assessment, and the tirely overlooked in the majority opinion of question as to whether the assessment should the United States Supreme Court in the have been higher was not considered. ProDodge Case. The views expressed in the ceeding expressly upon the authority of opinion in that case have never been question- Burke v. Badlam, supra, and Spring Valley ed by any later expressions of this court, Water Works v. Schottler, supra, it was and for more than 25 years the decision has held that such a corporate franchise was, stood as a construction of our statutes, to the under our laws, assessable as a part of the effect that those statutes require that every- property of the corporation, and the assessthing entering into and giving value to the

ment was sustained. It was not necessary shares of stock of a corporation shall be as- in that case to determine whether or not all sessed to the corporation as property of the of those elements, exclusive of the tangible corporation. This construction of the stat

property of such a corporation, that give utes of California has, during all this time,

value to the shares of sick, should be asbeen the only warrant for the enforcement of

sessed as "franchise," which was the assessthe statute prohibiting the assessment of

ment under consideration in that case. It shares of stock. In the later case of Spring

was enough for all the purposes of that case Valley W. W. v. Schottler, 62 Cal. 69, 118, this

that the corporation had such an assessable court said: “But, by declaring, as was done

franchise, and that the value thereof was at in section 3608, that shares of stock were

least a portion, if not all, of the difference not to be taxed because they possessed no between the tangible property and the ag. intrinsic value over and above the value of

gregate market value of the shares. But upthe property of the corporation which they

on the question as to whether the assessing stand for and represent, and as taxing of

officers are, under our laws, required to the shares and property both would be

assess in some form, as property of the double taxation, and therefore the shares

corporation, everything that gives value to should not be assessed, but the property

the shares, no doubt whatever as to the corshould, no doubt it was their intention to

rectness in any respect of any prior decision tax everything in the shape of property

was expressed in the opinion, or can reaowned by the corporation; that everything

sonably be implied therefrom. It was saiá entering into and giving value to the shares

by the dissenting justices in the Dodge Case, should be taxed. It cannot be doubted that

speaking of the construction placed by this the Legislature in acting on the subject of

court upon our statutes in this regard: "Obrevenue and taxation during the session of

viously, that court construes them as includ1881, did not intend to leave the system in

ing within the corporate property the agrelation to so important a matter in such a

gregate value of all the shares of stock, and shape, that so large an amount of property

that, while they forbid the assessment and as indicated by the difference between the

taxation of shares of stock in a state corporamarket value of the shares of corporations

tion, they require that all the value repreand the value of the tangible property of

sented by those shares of stock be assessed such corporations, should escape taxation. and taxed against the corporation; so that, To come to any other conclusion would be

when you ascertain the value of a single to impute to that body a most culpable der

share of stock, and multiply that by the numeliction of duty."

ber of shares in the corporation, you have the There is certainly nothing in the opinion

value of the corporate property subject to in Bank of California v. San Francisco, 142

taxation." This appears to us to be the necCal. 276,75 Pac. 832, 64 L. R. A. 918, 100

essary result of our decisions upon this Am. St. Rep. 130, which can reasonably be

question. Such a coestruction does not, of construed as throwing any doubt upon the

course, require the assessment as intangible doctrine of Burke v. Badlam, supra. That

property of the value of such tangible propwas an action brought to recover taxes paid

erty 'as is exempt from taxation under the under protest, and involved simply a question

laws of the United States and this state. as to the validity of an assessment of $750,000

It is urged that many elements entering upon the mere corporate franchise of a

into and helping to fix the market value of banking corporation, the plaintiff bank chal

stock, which would be included in an assesslenging the validity of the assessment upon

ment of the shares themselves, such as good the ground that it had no assessable fran

will, dividend, or profit earning power, etc., chise whatever. It appeared that the assess- could not be assessed by the assessing officers or had found that the difference between

as property of the corporation, and if they the value of the tangible property of the could be so assessed, there is nothing in our bank and the market value of its shares

law requiring the assessor to so value those was over $2,000,000, and had determined this things that the entire valuation of the propto be the value of the corporate franchise, erty of the state corporation will equal the

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