Miller v. Heilbron. Here is clearly a discrimination against the owner of National bank shares and in favor of the owner of credits. The former is assessed at a greater rate than is the latter. A section of a statute of New York relating to taxation, provided that if any person should make affidavit that the value of the real estate or personalty owned by him, after deducting his just debts, did not exceed a certain sum, to be specified in the affidavit, it should be the duty of the board of assessors to value such real or personal property at such sum and no more. * * * Another statute, after declaring that no tax should be assessed upon the capital of any bank-State or National - but that the stockholders should be taxed on the value of their shares of stock, provided, "in making such assessment there shall be deducted from the value of such shares such sum as is in the same proportion to such value as is the assessed value of the real estate of the bank or banking association in which any portion of their capital is invested, in which said shares are held, to the whole amount of the capital stock of said bank or banking association. And provided, further, that nothing herein contained shall be construed to exempt from taxation the real estate held or owned by any such bank or banking association; but the same shall be subject to State, county, municipal and other taxation to the same extent and in the same manner as other real estate is taxed." A citizen and resident of New York who had been assessed upon certain shares of a National bank, in the manner provided in the law of that State, last above referred to, made affidavit in accordance with the law first mentioned. He demanded of the board of assessors that the valuation on his shares should be reduced to $1-the sum fixed by his affidavit as the balance of value. The board of assessors refused to make the reduction. Out of these facts arose the action, People v. Weaver, supra. The case went to the Supreme Court of the United States. There Mr. Justice MILLER, speaking for the court, said: "It cannot be disputed - it is not disputed * * * that the effect of the State law is to permit a citizen of New York, who has money capital invested otherwise than in banks, to deduct from that capital the sum of all his debts, leaving the remainder alone subject to taxa Miller v. Heilbron. tion, while he whose money is invested in shares of bank stocks can make no such deduction." The foregoing language is applicable to the case before us. So far as the immediate question is concerned, there is but one difference between the law of New York and the law of this Statea difference of degree. There every person who had money invested in any personal property, except in shares of National or State banks, could have his just debts deducted from the assessment of such personal property; here, he who has his money capital in "credits," obtains a deduction to the extent of his just debts due residents of the State. It will be observed that by the law of New York a class of investments-to-wit, in shares of State banks was subject to the same taxation as shares in National banks. But the Supreme Court of the United States held the statute of New York, which attempted to deprive the owner of National bank shares of the right of deduction accorded to the owners of all other personal property, except shares in State banks, to be invalid, because in excess of the restricted power of legislation derived by the State from the section of the act of Congress hereinbefore quoted. In People v. Weaver, that court held, in effect, that by the act of Congress power to tax was conferred on the State, with the restriction that the taxation shall not be at a greater rate than is assessed upon any other moneyed capital. It would seem to be unnecessary to add that the restriction operates upon State legislation, and therefore the fact whether, in a particular instance, the owner of National bank shares owes any debts is immaterial. By the law of this State he is not permitted to deduct them if he does owe any. There is another reason why section 3640 of the Political Code -as the same read when the facts transpired out of which this controversy arose so far as it is applicable to the taxation of shares of a National bank, conflicts with the act of Congress. That section provided for taxing his shares to each person owning any of the shares of the capital stock of any corporation, association or joint-stock company-including incorporated National banks. It provided, further, that the assessable value of each share should be ascertained by taking from the market value of Miller v. Heilbron. the entire capital stock of the corporation the value of all property assessed to the corporation, and dividing the remainder by the entire number of shares. None of the personal property of a National bank can be assessed to the bank under any law of the State, while the personal property of a State bank (other than United States bonds) may be, and is assessed to such bank. Thus a reduction is allowed in ascertaining the assessable value of the shares of State banks which is not allowed in ascertaining the assessable value of the shares of a National bank. It is obvious therefore that the valuation of shares, "in the hands of individuals," of an incorporated State bank (where the value of personal property belonging to such bank has been deducted from the value of the entire capital stock), must be proportionately less than the value of shares of an incorporated National bank, belonging to individuals. It is no sufficient answer to this suggestion to say that by the State law the personal property belonging to a State bank was assessed to the bank, and so the tax thereon was indirectly paid by the individual shareholders. The restriction of the United States statute is that the taxation to the individual " owner or holder" of shares of a National bank shall not be at a greater rate than is assessed upon any other moneyed capital "in the hands of individual citizens of the State." It would be a strained interpretation of the statute to hold that a proportionable part in value of the personal property belonging to a State bank, and assessed to it, was "in the hands” of an individual shareholder in such bank. It was in the power of Congress to confer upon the State the right to tax shares in National banks with any limitations deemed proper. It has conferred the right to tax each individual owner of such shares, provided such taxation is not at a greater rate than is imposed upon any other individual who has moneyed capital invested in any other manner. If the Code had provided that the value of all the shares of a National bank should be assessed to such bank, the provision would be in excess of the power conferred by the act of Congress, and could not be upheld upon the proposition that the tax was indirectly imposed upon the shareholders. Without doubt then the act of Congress, by its terms, recognizes a distinction between taxation to the bank and taxation to the shareholders. The VOL. III-43. Hines v. Marmolejo. former is prohibited, the latter is permitted. So far as corporations are concerned, the subject of taxation, in respect to which the taxation must be ratably the same, are the shares of National banks and the shares of State corporations — in such case “in the hands of individuals." In view of the language employed in the act of Congress, a tax imposed upon a corporation is not the equivalent of a tax imposed upon its shareholders. Judgment affirmed. THORNTON, J., and SHARPSTEIN, J., concurred; Ross, J., concurred upon the ground first discussed by Mr. Justice McKINSTRY. Under U. S. R. S., § 5197, and section 1918, California Civil Code, the National banks in California may charge and receive such rates of interest as may be agreed upon. A PPEAL from a judgment for the plaintiff in the Twentieth District Court of the county of Santa Clara. BELDEN, J. S. F. Leib, for appellant. S. J. Hinds, for respondent. Ross, J. The sole point made by the appellants in this case is that in this State a National bank has no right to charge or receive a higher rate of interest upon money loaued than seven per cent per annum. Section 30 of the National Banking Act pro vides: * * * "Every association organized under this act may take, receive, reserve and charge on any loans interest at the rate allowed by the laws of the State or Territory where the bank is located, and no more; except that where, by the laws of any State, a different rate is limited for banks of issue organized under State laws, the rate so limited shall be allowed every association organized in any State under this act. And when no rate is fixed by the laws Hines v. Marmolejo. of the State or Territory, the bank may take, receive, reserve or charge a rate not exceeding seven per centum." By the first clause of this section National banks are authorized to charge and receive interest at the rate allowed by the laws of the State or Territory where the bank is located, and by the last clause, when no rate is fixed by the laws of the State or Territory, they are allowed a rate not exceeding seven per centum. Reading the entire section, and considering the two clauses together, as they must be considered, we are of the opinion that the word "fixed," used in the last clause, is used in the same sense as the word "allowed" in the first clause, and that by the words "the laws of the State or Territory" is meant statute laws. In other words, that the true interpretation of the act of Congress is that in those States and Territories having no statute upon the subject of interest the National banks are allowed a rate not exceeding seven per centum, while in those States and Territories having a statute on the subject they are authorized to charge and receive interest at the rate allowed other banks and individuals. From this view it follows that inasmuch as we have in California a statute (Civil Code, § 1918), providing "that parties may agree, in writing, for the payment of any rate of interest, and it shall be allowed according to the terms of the agreement until the entry of judgment," the National banks are also allowed to charge and receive such rates of interest as may be agreed on. We do not find any of the authorities cited by either of the parties to this controversy directly in point, but think the views here expressed find support in the case of Tiffany v. Nat. Bank of Missouri, 18 Wall. 409; 1 Nat. Bank Cas. 90; and are not in conflict with the decision in Johnson v. Nat. Bank of Gloversville, 74 N. Y. 329; 30 Am. Rep. 302; 2 Nat. Bank Cas. 302.* Judgment affirmed. SHARPSTEIN, MCKEE, THORNTON, JJ., MORRISON, Ch. J., and MYRICK, J., concurred. In Farmers' Nat. Gold Bank v. Stover, 60 Cal. 392, it was said: "Assuming for the purposes of the demurrer, that the bank knowingly took and was paid a greater rate of interest than that allowed by the law of the State, that did not constitute a defense to the action, either by way of set-off or payment of the promissory note in suit. 'The remedy given by the statute for the wrong,' say the Su *Reversed, 104 U. S. 271. |