CASES DECIDED

IN THE

COURTS OF THE SEVERAL STATES.

MILLER V. HEILBRON.

(58 Cal. 133.)

Taxation-shares- California Code.

The provision of section 3640 of the California Political Code, as amended March 22, 1880, so far as it applies to National banks, is in violation of sec tion 5219, U. S. Rev. Stat., forbidding the taxation of National bank shares at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of the State.

A. S. Hart, Attorney-General, C. L. Jordan and H. L. Buckley, for appellant.

Geo. Cadwalader, for respondent.

MCKINSTRY, J. This controversy was submitted upon the following agreed statement:

"Whereas, doubts exist as to the rights of said defendant to collect the State, county and debris taxes upon shares of stock in the National Gold Bank of D. O. Mills & Co., come therefore, Nancy Miller, who is the owner and holder of four hundred and forty-seven shares of the capital stock of said bank, and said A. Heilbron, who is the tax collector of said county in which said

Miller v. Heilbron.

bank is located, and agree upon the facts herein stated, and submit them to the court, that the rights and duties of the parties hereto may be judicially determined.

"1. The National Gold Bank of D. O. Mills & Co. is a banking corporation created pursuant to the laws of the United States. in relation to the creation and organization of National banks with a capital stock of $300,000, divided into three thousand shares of $100 each.

"2. Jos. W. Houston, the assessor of said county for the year 1880, assessed said bank upon its real estate only, at the full cash value of such real estate, said bank claiming that its other property was not subject to taxation under State authority.

"3. For the same year said assessor assessed the aforesaid four hundred and forty-seven shares of Nancy Miller in manner following, to-wit: He first ascertained the aggregate market value of the whole three thousand shares of said bank, and deducted from such aggregate value the value of all property assessed to said bank, to-wit: The aforesaid amount at which he had assessed the real estate of said bank. The remainder after such deduction was then divided by the aforesaid total number of the shares of said bank, and thus the pro rata value of each share was ascertained after such deduction as aforesaid. The plaintiff, Miller, was then assessed for all her said shares at such pro rata value.

"4. For the same year said assessor assessed all the several banking corporations, and other corporations located in said county and organized under the laws of California, upon all their real and personal estate, at the full cash value of said property.

"5. For the same year said assessor assessed the shares of shareholders of said State banks and State corporations in the same manner as he assessed the said shares of said plaintiff Miller, except that in making the deduction mentioned, he deducted the value of all property assessed to said banks, being the whole amount of both real and personal estate, which had been assessed to said State banks and State corporations."

"6. That the rate of the aforesaid taxes for the year 1880 in said county was one dollar and thirty-five cents on each one hundred dollars' worth of property. That said Miller was assessed

Miller v. Heilbron.

in the same year for real estate in said county at the sum of ten thousand dollars, and on miscellaneous personal property other than said bank shares, the sum of one thousand dollars. The tax on said miscellaneous personal property was thirteen dollars and fifty cents, and on said real estate was one hundred and thirtyfive dollars. The tax on said bank shares was five hundred and twenty-five dollars and one cent. On the 23d day of December, 1880, plaintiff tendered to said tax collector the sum of one hundred and forty-eight dollars and fifty cents as payment of said taxes on said real estate and said miscellaneous personal property, which tender said tax collector refused unless the plaintiff should also pay the taxes aforesaid levied on said four hundred and forty-seven shares of stock. Plaintiff has not since paid or offered to pay said tax on said shares of stock.

"The matter in controversy is this: Plaintiff claims that said tax upon her said shares of stock is contrary to law, and is therefore illegal and void; and defendant claims that the same is lawful, and therefore good and valid. There is no controversy between them in relation to the validity of the aforesaid tax upon the real estate and miscellaneous personal estate of plaintiff, the purpose of this agreement being to obtain a decision as to the validity of the said tax upon said National bank shares.

"7. That in every instance (during said year 1880) of the assessment of banks doing business in the county of Sacramento, and organized under the laws of the State of California the value of the property assessed thereto was found to be equal to the value of the capital stock of such bank, and hence no assessment was made against said shares of capital stock, or for the value of the shares therein held by the shareholders.

"8. The foregoing stipulation is made subject to the following objections and exceptions:

"I. Plaintiff objects to the following language in subdivision 2 of said stipulation, to wit: Said bank claiming that its other property was not subject to taxation under State authority' on the grounds of irrelevancy and immateriality.

"II. Defendant objects to the fourth, fifth and seventh subdivisions of said stipulation upon the grounds:

"First. That the facts therein stated are irrelevant and immaterial.

Miller v. Heilbron.

"Second. That it is not competent to attack the determination of the assessor as to the assessable value of said shares of stock in this action, or otherwise than by an appeal to the Board of Equalization.

"Wherefore the parties hereto respectfully pray that the controversy may be judicially determined, and that the court render such judgment and grant such relief in the premises as is lawful and proper."

It is conceded that the power to levy a tax upon the shares of the National bank owned by plaintiff is derived from a section of an act of Congress which reads:

*Nothing herein shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such shares in assessing taxes imposed by authority of the State within which the association is located; but the Legislature of each State may determine and direct the manner and place of taxing all the shares of National banking associations located within the State, subject only to the two restrictions that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State, and that the shares of any National banking association owned by non-residents of any State shall be taxed in the city or town where the bank is located, and not elsewhere. Nothing herein shall be construed to exempt the real property of associations from either State, county or municipal taxes, to the same extent according to its value, as other real property is taxed." (U. S. R. S., § 5219, p. 1015.)

In People v. Weaver, 100 U. S. 543; 2 Nat. Bank Cas. 57, the words "other moneyed capital" were construed to mean money capital invested otherwise than in National banks.

Section 1 of article 13 of the State Constitution provides:

'All property in the State not exempt under the laws of the United States, shall be taxed in proportion to its value, to be ascertained as provided by law. The word 'property' as used in this article and section, is hereby declared to include moneys, credits, bonds, stocks, dues, franchises and all other matters and things, real, personal and mixed, capable of private ownership, provided that growing crops, property used exclusively for public schools and such as may belong to the United States, this State, or to any county or municipal corporation within this State, shall be exempt from taxation. The Legislature may provide, except in the case of credits secured by mortgage or trust deed, for a reduction from credits or debts due to bona fide residents of this State." The Legislature has enacted: "In assessing solvent debts not secured by mortgage or trust deed, a reduction therefrom shall be made of debts due to bona fide residents of this State." (Pol. Code, § 3628.)

Miller v. Heilbron,

Section 3640 of the Political Code as the same stood when plaintiff's shares were assessed -established the mode by which shares of the capital stock of corporations, associations and jointstock companies (including National banks) should be assessed. That section then read:

"Each person, firm or corporation owning or having in his or its possession any of the shares of the capital stock of any corporation, association or jointstock company, shall be assessed therefor. If the corporation, association or joint-stock company has its principal place of business in this State, the assessable value of each share of its stock shall be ascertained by taking from the market value of its entire capital stock the value of all property assessed to it, and dividing the remainder by the entire number of shares into which its capital stock is divided. The owner or holder of capital stock in corporations, associations and joint-stock companies whose principal place of business is not within the State must be individually assessed for such stock. Shareholders, in the statement required by section 3629 of this Code, shall specify the number of shares of stock held by them and the name of the corporation. The owner of shares of stock to be entitled to the reduction provided for in the section, must produce to the assessor a certificate of the assessment of the property of the corporation, association or joint-stock company."

In People v. Weaver, supra, the Supreme Court of the United States held that the restriction in the act of Congress "the taxation shall not be at a greater rate than is assessed upon other moneyed capital," etc. - means something more than that there should be no discrimination with respect to the percentage on any valuation which might be made; but that—taking the assessment, rate of assessment and valuation together the taxation on shares of National banks should not be greater than on other moneyed capital.

In making his assessment of plaintiff's shares in the National bank the assessor was obliged to pursue the mode prescribed in section 3640 of the Political Code, and could not deduct from their valuation debts due from here to citizens of the State.

"Credits" are declared to be property by the State Constitution. They are property in which other "moneyed capital" is invested than such as is invested in National bank shares. Yet as we have seen, the State law, enacted as permitted by section 1 of article 13 of the Constitution, requires the assessor in assessing credits, to deduct therefrom all debts due by the party assessed to bona fide residents of the State.