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As I have already suggested, there was a propriety as well as necessity for the establishment of a fixed and arbitrary measure of valuation of corporate stock, arising from the difficulty in the case of moneyed corporations of arriving at actual cash value. Such arbitary rule of valuation might, in many cases, work injustice by assessing property as existing that had been wholly or principally lost. But if profits were made, if the market value of the stock exceeded the par value, the moneyed corporation escaped taxation on such excess, while the manufacturing and turnpike corporation would be assessed upon the cash value of the stock when the same was above as well as when below par.

The act of 1863 is more severe upon moneyed corporations than were the provisions of the Revised Statutes. Under the latter the surplus profits or reserved funds were not subject to assessment, but under the act of 1863 they are liable to be assessed.

If the act of 1863 does not assess the property of the corporation, why are these surplus profits subjected to assessment? They are no part of the capital stock paid in or secured to be paid in, as these words are understood by those who insist that the capital stock and the property of the corporation are not one and the same thing. If these surplus profits are invested in stocks of the United States they are surely exempt from taxation, and what good reason can be assigned why they should not also be exempt when they are purchased with capital?

The words capital and capital stock are used in several different senses as well in the statutes as in common parlance. The sum specified in the charter of a corporation as the amount of money which it must have subscribed in order to authorize it to exercise its franchises, is called capital stock. Again, this amount when paid in by the corporators is called the capital stock. But the more accurate definition of the words is given by this court, in the case of the Buffalo Mutual Insurance Company vs. Supervisors of Erie, 4 Comst. 442, in which it was held that the stock, or capital stock, of a corporation is the fund or capital, consisting of money or goods employed in conducting the business of the company. In other words, the property which the company employed in its business.

Within this definition, the word valuation, in the act of 1863, becomes very significant, and manifests an intention on the part of the legislature to treat the capital as property, and to subject it to taxation as such.

It seems to me, therefore, that from these several provisions of the statutes, and from the decisions of the courts, it is obvious that the capital stock of a corporation is the property which it owns, and which it uses in the transaction of its business; and that when the law requires the capital of a corporation to be taxed, it means the property thus owned by it, and which represents the capital; and when it directs the valuation of the stock, the valuation must be regulated by the value of the property so owned, unless another and arbitrary valuation is required to be made.

If I am right in this, then United States stocks owned by the bank at the time an assessment is made are taxed, if the whole capital is taxed without exempting such stocks, in direct violation of the authority of the federal government.

There is nothing in any of the provisions of the tax laws that gives support to the position that the tax upon the capital stock, required by the act of 1863, is in effect a tax on the franchise, or, as Judge NELSON expresses it, a royalty for the grant of the franchise. A franchise is undoubtedly property, and it may be taxed, and it is quite probable that such a tax would not conflict with the constitution or laws of the United States. But I cannot find that any such tax has ever been assessed in this state, and so radical a change in the system of corporate taxation would not be introduced without clearly manifesting such intention. None has been manifested.

Again, it would be somewhat absurd to assess a bank a gross sum on its franchise and then deduct from it money paid out for real estate and stock held in such corporation by the state, and literary and charitable associations. If the legislature had, in the act of 1863, expressly provided that the franchise might be assessed, and then authorized the foregoing deduction, no person could wink so hard as not to see that it was designed as an evasion of the decision of the Supreme Court of the United States.

I entertain no doubt, that the tax assessed on the relator was a tax on the stocks of the United States held by it, and which are exempt from taxation by the constitution and laws of the United States, nor that such tax is unconstitutional and void.

WRIGHT, J., concurred with MULLEN, J.

The question raised in this case is a case. Yet we cannot avoid the conclufresh illustration of the inherent diffi- sion, that the present tax is in subculty in our complex form of govern- stance a tax upon the securities of the ment, of drawing the line between the United States. Some reliance has been rights of the General Government and placed by those who sustain the tax on the powers of the respective states. On an expression by NELSON, J., in the the one hand, the instruments of the Supreme Court of the United States General Government, such as securities, (People vs. Com'rs. of Taxes, 2 Am. Law are exempt from state control or taxa- Reg. N. S. 614) that a tax of this kind is tion; on the other, the states may, by a a tax on the corporate franchise. This device derived from some conceded remark was, however, merely a dictum. power, attempt to substantially exerSuch evidently was not the intention cise the control which has been exof the legislature, and no stress was plicitly denied to them. In the present laid upon this view by any members of case it is notorious that the Legislature the court in deciding the principal case. of New York disguised, under a thin For the sake of the utmost brevity conveil, its intention to thwart in part the sistent with clearness, and without redecision of the federal judiciary, that viewing or repeating the arguments United States securities are not subject found in the judges' opinions, our views to state taxation. It is well known that are submitted in the form of proposithe banks of New York are very large tions. holders of these securities, and that in the exigencies of the times, it may be necessary to call on them to subscribe for more.

Prudence would seem to dictate that they should be placed in no inferior condition to other holders of these securities. Yet the legislature has taxed them, while most other corporations as well as individuals are exempt. As the law stands at present, the legislative design has been successful. The decision is, however, subject to review by the Supreme Court of the United States.

Our own views upon this subject may be extreme; and it is with unfeigned diffidence that we venture to differ from the majority of the court in the present

I. It seems to us that there is a marked distinction between the law under which this case was decided and the Revised Statutes. The Revised Statutes substantially provided for a tax on the capital stock of moneyed corporations paid in, and secured to be paid in, excepting the sums paid for real estate. The assessors were in no case to estimate the value of the real estate, unless it happened to be situated within their own town or ward. This valuation was made for the purpose of local taxation. Under this system, every element necessary for an assessment of taxes on capital stock was furnished in advance to the assessors. They had a mere clerical duty to perform, which was to

deduct the sums paid for real estate from the capital stock paid in. Under the law of 1863, three interests are mentioned-capital stock, earnings, and real estate. There is a plain departure from the language of the Revised Statutes concerning real estate. The assessors are not required to deduct the "sums paid for real estate," but "the value of the real estate." This may be much more or much less than the amount paid for it. The worth of the real estate can only be ascertained by a valuation, or act of the mind on the part of the assessors. The same remark may be made of the surplus earnings. The only method of ascertaining the earnings, is by an estimate of their value, or by a valuation. They do not always appear in the form of money, but rather in the guise of commercial paper, and it might be necessary to determine whether it was available or worthless. The third interest would logically require an estimate also, but the law arbitrarily provides that the assessors need not exercise any actual judgment, but must accept an arbitrary valuation, depending on the capital stock paid in. The system, under the two laws, is so different that we think no safe conclusions can be drawn from the decisions under the Revised Statutes, which will apply to the law of 1863. In other words, when the law of 1863 provides for taxation on a valuation equal to the amount of capital stock paid in and surplus earnings, deducting the value of real estate, the word "valuation" is employed in its ordinary sense of "estimation" as to surplus earnings; the word value is employed as to real estate in the signification of the result of an act of valuation, and no reason is perceived why the word "valuation" should not have the same sense in its application to capital stock, except that the judgment of the assessors is controlled by the

arbitrary standard of the statute. Every interest is thus the subject of valuation; one is measured by a fixed standard; the other two by the best judgment of the assessors. Their minds act in each case; in one, the evidence of value is furnished by the statute; in the other two, the evidence is unrestricted. Under this view the United States securities should have been deducted from the subject valued, and a tax including them is void.

II. But assuming that the intention of the legislature was to restore the system established under the Revised Statutes, we are still of opinion that the tax is upon property, and that the object of that legislation was to establish an arbitrary standard of valuation of capital stock as property.

If we look at a bank at the moment of its organization, it cannot be denied that a tax on its capital stock is a tax on its property. The language of the Revised Statutes leads to the same conclusion. The capital stock actually paid in, or secured to be paid in, is the subject of assessment; the sums paid for real estate are to be deducted. These words are unmeaning unless they apply to property. Nothing can show the intention more clearly than the 10th section (1 Rev. Stat. 416, 10): "The capital stock of every company liable to taxation, except such part of it as shall have been excepted in the assessment roll, and by the previous sections of this title, shall be assessed and taxed in the same manner as the other real and personal estate of the county," &c. All capital stock is here used as synonymous in meaning with real and personal estate, although two modes of assessing it are provided. The phrase "capital stock," is not used in a technical sense; if it were, it would not have been distributed into "real and personal estate." If then a bank, since its organization, has sustained no de

preciation of its property, and has employed its capital in the ordinary business of banking, dividing its earnings among its stockholders, a tax on an amount equal to its capital stock, is a tax on its whole property. In the exceptional case, where its stock has been depreciated, the tax is still on its property, though all inquiry into its actual amount is precluded by the statutory rule. It does not seem that the case is different from a law which should provide that taxes should be laid on individuals upon an amount equal to the property which they possessed at the last state census. If their property continued unchanged in amount, an assessment would be made upon their actual estates. If it had appreciated or depreciated, an unchanging tax would still be levied. In other words, such a law would cause a uniform instead of a fluctuating charge upon the tax-payers, in reference to their property. Such a system may have its advantages. The land-tax in England is of this kind. "In the year 1692, a general valuation was made of the income of all the land in the country, and upon that valuation the land-tax continues to be levied to this day, so that the tax of four shillings in the pound upon the rents of land, is a fifth of its rent in 1692, and not of the actual rent at the present day" (SAY's Pol. Economy 440, Philadelphia translation, 1832). If the land should become valueless, there could be no doubt that the owner would still be taxed on his property at an arbitrary valuation. If the New York Revised Statutes had provided that lands belonging to moneyed corporations should be taxed at a valuation equal to the amount paid for them, the provision would have been quite analogous to the English land-tax. III. The question recurs, whether the state legislature can constitutionally preclude all inquiry into the amount of - property which corporations or indi

viduals possess. Beyond doubt, it can when only state action is concerned. There are no general restrictions in the state constitution upon the legislative exercise of the power of taxation. But it is a very different question, whether this can be done when its effect would be to interfere with a power of the General Government. Suppose that the New York Legislature had frankly stated its intention-suppose it had enacted in the body of the law that the corporation should be taxed upon an amount equal to the capital stock paid in, deducting the value of its real estate, but without any deduction for its United States securities. Would such a law have been constitutional? We think not. Yet the legislature has substantially done this. It has directed the value of real estate to be deducted from capital stock, thus tacitly including United States securities, and required the value of surplus earnings to be added, even though invested in the bonds of the General Government. The United States securities, as we have previously said (2 Am. Law Reg. N. S. 39), are the instruments or machinery by which the power of Congress to borrow money is exercised. No state can by any law interfere with the free and unrestricted use of these instruments. It would seem that so transparent a device to impede their action as this recent one of the New York Legislature, should not be sustained.

The argument ab inconvenienti is here very strong. If the state legislature can in this circuitous manner thwart the action of the General Government, the power of Congress to borrow money is greatly restricted, if not practically nullified. From the nature of the case, this power must be exercised in connection with the moneyed corporations at our great commercial centres. An unfriendly or indifferent legislature might have the General Government completely

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