Citizens' Bank of Louisiana v. Parker/Opinion of the Court

by Joseph McKenna

United States Supreme Court

192 U.S. 73

Citizens' Bank of Louisiana  v.  Parker

 Argued: October 15, 1902. --- Decided: for reargument December 8, 1902

1. A motion is made to dismiss. The ground of it is that, even if the charter of 1833 and the amendment of 1836 exempted the bank from license taxes, the bank, by accepting the act of 1880, which enabled the bank to make compromises with its mortgage creditors, became subject to the constitution of 1879, which, it is contended, authorized or required the legislature to impose a license tax. And, besides, the act of 1874, extending the charter, was subject to the constitution of 1868, and that required the payment of a license. Upon those grounds Mr. Justice Monroe based his opinion, and they, it is urged, involved state questions sufficient to sustain the judgment. But those grounds only had the concurrence of the Chief Justice. Mr. Justice Watkins did not assent to them and Justices Breaux and Blanchard dissented from them. The judgment of the court, therefore, does not rest upon them. The judgment rests upon the construction of the original charter,-that is, upon the contract between the state and the bank,-but to construe that is also our function.

But assuming that the judgment rests upon the grounds stated, we nevertheless have the power of review. The Federal question presented is, Did the bank, at the time of the imposition of the license tax sued for, have a contract with the state exempting it (the bank) from such tax? The elements of that question are the original contract and all subsequent legislation relating to the contract and which it is claimed modifies or changes it. The motion to dismiss is, therefore, denied.

2. The question presented on the merits has been simplified by the case of New Orleans v. Citizens' Bank, 167 U.S. 371, 42 L. ed. 202, 17 Sup. Ct. Rep. 905. The origin and history of the bank are there detailed, its charter and its exemptions are construed, its litigations with the city are recited, and their effect declared. We need only apply and extend the reasoning of that case to decide this.

It came here from the circuit court of the United States. It was brought in that court by a bill in equity to enjoin the taxing officers of the state and of the city of New Orleans from taxing the bank under certain provisions of a statute of the state for the assessment of the capital of banks. Under the statute the capital stock of banks which were represented by shares were not assessed by that name, but the shares were required to be assessed to the stockholders at their actual valuation as shown by the books of the bank, and the taxes assessed were required to be paid by the bank, which was given the power to collect the amount from the shareholders or their transferees. The real estate owned by the bank was directed to be assessed directly to it and the tax 'proportioned to each share of capital stock' and deducted from the amount of taxes of that share under the statute. The statute also contained provisions for its administration, and required property which had been omitted from the assessment rolls to be assessed for the current year and for three years back. The court adjudged the bank to be exempt from the taxation, and granted an injunction against the collection of the taxes for the designated years by the state of Louisiana, and the city of New Orleans, 'upon the capital, property, or shares of stock of the shareholders of said bank, whether assessed against the bank or its shareholders.'

The writ also enjoined the demanding or collecting from the bank of any state or city license tax. Commenting on the decree, this court said:

'The exemptions to which the decree below held the bank to be entitled related, therefore, to distinct objects of taxation, one not necessarily connected with or dependent upon the other, and may be summarized as follows: First. That the bank was not subject to taxation on its capital shares of stock or real estate, and furniture actually used for the carrying on of its banking business, and that the bank could not be lawfully obliged to pay the sum of any tax assessed on its shareholders. Second. That the stockholders of the bank were not liable for assessment on their shares of stock. Third. That the bank was also not subject to taxation on any real estate held by it which had been mortgaged to secure stock subscriptions and had become the property of the bank under foreclosure proceedings, because property so acquired became, by virtue of the purchase, a part of its capital stock. Fourth. That the nonliability of the bank to taxation embraced also immunity from the payment of a license tax to either the state of Louisiana or the city of New Orleans.'

The decree was affirmed as to the objects of taxation embraced in the 1st subdivision, and reversed as to those embraced in the 2d, 3d, and 4th subdivisions. Of the objects in the 4th subdivision it was said:

'We are at a loss to understand by what process of reasoning the decree was made to cover the question of the nonliability of the bank for license. It was not presented by the pleadings, and was entirely dehors the issue in the case.'

In sustaining the decree of the circuit court as to the objects in the first subdivision, necessarily there was involved the decision that the charter of the bank, both as originally granted and as extended, exempted the capital of the bank from taxation, and the exemption was not taken away by the constitutions of 1868 and 1879 by the acceptance of the act of 1874 by the bank, nor by the act of 1880. Many considerations were referred to which might have justified this as an independent conclusion, but the decision was mainly rested upon the judgments of the courts of Louisiana which had been pleaded as res judicata, and which judgments, it was decided, had concluded the controversies. There was a clear adjudication, therefore, of the right of exemption of the bank from a tax on its capital.

The ruling in New Orleans v. Citizens' Bank has been followed by the supreme court of Louisiana. In Penrose v. Chaffraix, 106 La. 250, 256, 30 So. 718, 720, the same questions were raised on the statutes of 1874 and 1880 and the constitutions of 1868 and 1879, as are raised in the case at bar. The court, replying to them, said:

'Both these contentions were passed upon and negatived in New Orleans v. Citizens' Bank, 167 U.S. 371, 42 L. ed. 202, 17 Sup. Ct. Rep. 905, and the effect of that decision of the Supreme Court of the United States is to maintain and carry the exemption into the extended period of the bank's charter.'

It is true that in a subsequent case (State v. American Sugar Ref. Co. 108 La. 603, 32 So. 965) New Orleans v. Citizens' Bank is criticized and its views are not concurred in as to what constitutes the thing adjudged and an estoppel in tax cases. But the thing claimed to have been adjudged was not a right claimed under the Constitution of the United States, and there was no intimation of disapproval of Penrose v. Chaffraix.

But if it can be contended that there is conflict between the state cases, New Orleans v. Citizens' Bank is, nevertheless, decisive of the questions adjudged by it. Deposit Bank v. Frankfort, 191 U.S. 499, ante, 154, 24 Sup. Ct. Rep. 154. And all the questions in the case at bar were adjudged by it except the question of the exemption of the bank from the payment of license taxes. That question is now presented, and we think the exemption exists. We deduce this not only from the words of the charter, but from the purpose of its enactment and of its extension. The bank was made an agency of the state. To have fostered it with aid and to have burdened it with taxation of any kind would have been inconsistent, considering the provisions of the act incorporating it, and it was immaterial whether it was constituted a quasi public corporation or entirely a private one. It was created to accomplish purposes in which the state took an interest, and the expectations which were entertained of it may be regarded in the interpretation of its charter. With the wisdom or folly of the charter we have nothing to do. Our sole function is to interpret it. It may seem, in 1903, to have been imprudent legislation. But how did it appear in 1833 and 1836? We must contemplate it as of that time. States act through men, and, of course, cannot have a greater appreciation or prophecy of things than men. Events may disappoint or baffle their purposes, but they cannot, for that reason, be relieved from their obligations. Nor can they necessarily be accused of folly. There are limits to the power of government, and the wisest provisions may be frustrated or turned to detriment by causes which no prescience can foresee. It is, therefore, to 1833 and 1836 we must turn, to the conditions and purposes of then.

The chief industry of Louisiana was agriculture, and it seemed to the state a wise policy to encourage and expand that industry, and the means selected was a bank which could make loans to the planters upon the security of their lands. Capital was necessary. Private persons were to be induced to subscribe, and the state aided by an issue and pledge of its bonds. It was careful to make provision for control. No act of administration could be undertaken without its consent. It was represented by six members on a board of twelve directors. It, besides, contemplated the probability of profits, and made provision to share them. The scheme was large and hazardous. Private capital had to be tempted to it, and the state, besides contributing its credit, offered the inducement of a relief from burdens. There is no doubt of this, and the dispute is only as to the degree, and, on an ambiguity which may be asserted upon a distinction in the form of taxation, a limitation is attempted to be put upon the comprehensive and expressive words of the bank's charter. This seems to us not justified. The words of the charter are 'the capital of the bank shall be exempt from any tax.' The word any excludes selection or distinction. It declares the exemption without limitation. And why should there have been limitation? What purpose was there to serve by making a distinction between the forms of taxation? The state did not intend to so limit its aid. It did not mean to help the bank to do business and then tax the business when done,-relieve it and burden it at the same time. Retain the right to impose as an occupation tax that which it gave up as a right to impose as a property tax.

This view is sustained by contemporaneous construction of the bank's charter. It was not only the immediate sense of the officers of the state, but their continued sence through a number of years, that the bank was exempt from all taxation, and when the right of taxation was asserted a license tax was not included. And we have authority for saying that a license tax was not demanded during a period of fifty-eight years, notwithstanding the many changes in the administrative officers of the state; that during all that time, 'even from and inclusive of the very first revenue act (that of 1813), adopted after the admission of the state into the Union, license taxation as a means of revenue was provided for and enforced,' and for a portion of the time (from 1869) license taxes were imposed upon banks.

Stress is put in the argument at bar upon the distinction between taxes on property and taxes on occupations. The distinction exists and counsel have cited Louisiana decisions in which that distinction has been held to justify license taxes, notwithstanding clauses in charters exempting capital stock from taxation. a review of theoses cases is not necessary. They were all rendered subsequently to 1836, and they depended upon the application of the constitution of 1868 or 1879, or special circumstances not applicable to the charter of the Citizens' Bank. And those cases did not embarrass the court in defining the scope of the charter of the Citizens' Bank in the decisions presently to be considered.

That the distinction between property taxes and license taxes was recognized in Louisiana in 1833 or 1836 is not very clear, but subsequently the distinction was certainly not always considered as justifying a power to impose license taxes. In New Orleans v. Southern Bank, 11 La. Ann. 41, the general law of the state, approved April 30, 1853, called the Free Banking Law, was considered. The law provided 'that bankers and banking companies, doing business under this act, shall be taxed upon their capital stock (italics ours) at the same rate as other personal property under the laws of the state.' It was held that the provision was a contract with the individual corporations formed under the act, and a license tax imposed by the common council of the city under an act passed in 1842 (Session Acts of 1842, p. 17), which empowered the city to levy a license tax on certain enumerated occupations and 'all other callings, professions, or business,' was illegal.

The same question was presented again in State v. Southern Bank, 23 La. Ann. 271, upon a license tax imposed by the revenue laws of 1889. The court was urged to overrule New Orleans v. Southern Bank. The court refused to do so and affirmed the doctrine of that case, and held the act 'violative of § 10, article 1, of the Constitution of the United States.' The supreme court of Louisiana, therefore, as early as 1853, construed a provision exempting the capital stock of a bank from taxation except at a particular rate as exempting the bank from a license tax. In other words, it was held that a license tax was virtually a tax on the capital of the banks, and, we think, that must be held of the tax in the case at bar. Whatever the tax may be called,-one on property or one on occupations,-if its final incidence is on the capital, it is comprehended in the exemption contained in the charter. As we have already pointed out, the language of the charter is universal; and it was said in Citizens' Bank v. Bouny, 32 La. Ann. 239, 'That language is broad enough to cover everything which, during its existence, should enter into and make part of the capital of said bank.' If the language is broad enough to preclude a tax upon that which may become part of the capital of the bank, it is broad enough to preclude a tax which may become a burden upon the capital. Whatever diminishes the income of a bank diminishes its capital under the provisions of the charter of 1833. It was said in the Bouny Case: 'By the 29th section of the original charter, 'all the profits made by said corporation shall be added to and made a part of its capital,' except a certain fraction of any excess of profits over what was necessary to pay the bonds issued by the bank.' And the sum of $159,238.62 accumulated profits were held not to be liable to taxation. And fully as significant was the exemption declared of the sum of $636,450, assessed to the shareholders of the bank as 'value of capital stock.' It was said: 'Even if the shareholders be liable to taxation on their shares (upon which we express no opinion), under the peculiar and exceptionable nature of the charter of the Citizens' Bank, we think it cannot be forced to pay the taxes assessed to its shareholders.' In other words, the burden of tax could not be put upon the bank, however it could be imposed upon the stockholders.

We may recur to Penrose v. Chaffraix. It was a proceeding to recover the payment of a tax for the year 1899, imposed upon a certain number of shares of the capital stock of the Citizens' Bank held by Chaffraix. Exemption was asserted under the clause of the bank's charter which we have quoted. This was one of the questions left open by this court in New Orleans v. Citizens Bank, and left open in the Bouny Case. The exemption, nevertheless, was sustained. It was recognized that in some jurisdictions, 'including the Supreme Court of the United States,' it was held that the exemption of the capital of a corporation from taxation does not of necessity include the exemption of the shareholders on their shares of stock. But the court considered that it was not necessary to approve or disapprove the doctrine, and rejected it as inapplicable to shares in the Citizens' Bank, because the intent of the legislature was otherwise. And that intent was deduced 'not only from the words of the charter,' but from the purposes for which the bank was instituted, and they were vividly described. Because of them, it was in effect said, and of the bank's relation to them and the state's relation to the bank, the state 'granted the clause quoted above, exempting from taxation.' And it was observed, 'at that time the refined distinction between the capital and the capital stock of a corporation had not been made by the courts, or was at least unrecognized as yet in Louisiana.' We see, therefore, that in the Bouny Case it was held that a tax on that which might become capital, or a tax which the bank would have to pay, is illegal. In the Chaffraix Case it is held that a tax which falls on the stockholders of the bank is illegal. In other words, the effect of the two cases is that a tax which falls upon the capital or is to be paid by the bank or its stockholders, is prohibited. A license tax has surely some one of those effects.

It is urged, however, that neither the Bouny Case nor the Chaffraix Case can be adduced as authoritative. The argument is that a judgment in the case at bar has become the law of the case, and that it cannot be affected by what was or has been decided in some other case, and that the judgment in the case at bar rested on non-Federal grounds which were sufficient to sustain it, to wit, the construction and application of the constitutions and statutes of that state. The argument is the same as that directed against our jurisdiction, and has been answered. When a contract is asserted, and the Constitution of the United States invoked to protect it, all of the elements which are claimed to constitute it are open to our review; and, also, all of that which is claimed to have taken it away. We are certainly not confined to the decision under review. To hold that would surrender the power of review. That decision, of course, claims our first and a most thoughtful consideration, but in the right to challenge it is the right to go outside of it, and certainly nothing can afford more light or persuasion than the utterances of the same tribunal on prior and subsequent occasions.

These propositions, then, are established: the exemption granted to the bank in 1833 and 1836 was not taken away by the acts extending its charter, and the application thereto of the constitutions of 1868 and 1879. This was the thing adjudged in New Orleans v. Citizens' Bank, 167 U.S. 371, 42 L. ed. 202, 17 Sup. Ct. Rep. 905.

The exemption of the charter includes a license tax. This, for the reasons stated, must be regarded as part of the contract between the state and the bank. And in reaching that conclusion the rule requiring a strict construction of statutes exempting property from taxation has not been infringed. We recognize the force and salutary character of the rule, but it must not be misunderstood. It is not a substitute for all other rules. It does not mean that whenever a controversy is or can be raised of the meaning of a statute, ambiguity occurs, which immediately and inevitably determines the interpretation of the statute. The decisive simplicity of such effect is very striking. It conveniently removes all difficulties from judgment in many cases of controverted construction of laws. But we cannot concede such effect to the rule, nor is such effect necessary in order to make the rule useful and, at times, decisive. Its proper office is to help to solve ambiguities, not to compel an immediate surrender to them,-to be an element in decision, and effective, maybe, when all other tests of meaning have been employed which experience has afforded, and which it is the duty of courts to consider when rights are claimed under a statute. Will courts ever be exempt, or have they ever been exempt, from that duty? Has skill in the use of language ever been so universal, or will it ever be so universal, as to make indubitably clear the meaning of legislation? Has forecast of events ever been so sure, or will it ever be so sure, as to make inevitably certain all the objects contemplated by a statute? We think not, and there never will be a time in which judicial interpretation of laws will not be invoked, and it cannot be omitted because a doubt may be asserted concerning the meaning of the legislators. We repeat, it is the judicial duty to ascertain if doubt exists.

The judgment is reversed and the cause remanded for further proceedings not inconsistent with this opinion.

Mr. Justice Brewer, with whom the Chief Justice concurs, dissenting:

Notes