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Opinion of the Court, per DENIO, Ch. J.

any further amount, the bank may own it one day and part with it the next. If the shareholder is taxed on the footing of a part owner of the assets, a problem must be solved on each occasion on which the assessment is made, to ascertain what aliquot proportion of the whole assets, deducting the debts, consists in this exempt stock, and the tax must be a fractional part of each share, which would generally be a perfectly impracticable operation. A shareholder has, no doubt, a certain interest in all the property of the corporation. What I contend for, is, that it is not the interest of an owner of the property which the bank possesses. If any party, except the corporate body, has the interest of an owner, the creditors have such an interest. Neither they or the stockholders can touch an item of the property. They cannot transfer or incumber it. They have none of the powers of disposition which are incident to the ownership of property. If there is anything which assimilates the interest of the creditors and shareholders to that of owners, the creditors certainly approach nearest to that character, for they are first entitled to be paid; and in case of insolvency, the proceeds arising from the conversion of the assets are to be first applied to the payment of their demands. Now, when the constitutional inhibition, as construed by the courts, or the express provision contained in the laws providing for loans, speak of the bonds as not liable to State taxation, the meaning is, that the owners of these bonds are thus exempt, not that all persons having a collateral interest in them are exempt. The expression is elliptical, for the idea of taxing a note or bond, distinct from its ownership by some person, natural or artificial, is of course an absurdity. The owner is taxed in respect to the bond or on account of its ownership by him. If I am right in considering the banks as the owners of the bonds, and the shareholders as having a collateral interest respecting them, on account of their title to share in the profits, then it is the banking corporation, and not the shareholders or creditors, which are entitled to claim the exemption.

The Court of King's Bench has, in a recent case, taken the same view respecting the ownership of the shareholders in

Opinion of the Court, per DENIO, Ch. J.

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the property of a corporation. The British acts of parlia• ment forbid the registry of a ship as a British vessel unless it is wholly owned by British subjects. If a part owner is not a subject, it cannot be registered. A mandamus was sued out to compel the registry of a vessel owned by a British corporation, some of the shares in which were owned by foreigners. The judgment was for the plaintiff, sustaining its right to a registry. Lord Chief Justice DENMAN said: “It appears to us that the British corporation is as such the sole owner of the ship. * The individual members of the corporation are no doubt interested, in one sense, in the property of the corporation, as they may derive individual benefit from its increase, or loss from its destruction; but in no legal sense are the individual members the owners." (The Queen v. Arnaud, 9 Adolph. & Ellis, N. S., 806.)

I do not consider the case called “The Bank Tax Case" (reported in 2 Wallace, 200), as at all hostile to the conclusion above expressed. This court had held that the Bank of the Commonwealth was taxable, without regard to the amount it had invested in federal stocks, under an act of the legislature of this State, passed in the year 1863, which declared that all banks, banking associations, and other moneyed corporations and associations should be liable to taxation on a valuation equal to the amount of their capital stock paid in or secured to be paid in,” &c., "in the manner provided by law.” We considered the tax thus provided for, to be imposed upon the corporation as a legal being, wholly irrespective of the securities in which its capital might be invested. We found that under a former system of tax laws, contained in the Revised Statutes, such had been repeatedly adjudged to be the rule; and that if the bank had lost a part of its capital, or had added to its assets by an accumulation of profits, it did not in any manner affect the amount for which it was taxable. (The Bank of Utica v. The City of Utica, 4 Paige, 399; The People v. The Board of Supervisors of Niagara County, 4 Hill, 203; The Farmers' Loan and Trust Co. v. The Mayor, &c., 7 Hill, 261; The Oswego Starch Factory v. Dolloway, 21 N. Y., 449.) This was a point, as

Opinion of the Court, per DENIO, Ch. J.

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will be seen by these cases, well settled in this State. The law, thus adjudged, we understood to be concurred in by the Supreme Court of the United States, or, at least, by the eminent judge who prepared the opinion of the court in the case reported in Wallace, in a part of his opinion in the former case of The Bank of Commerce v. New York City, reported in 2 Black., 620. He there said that, according to the former system of taxation, meaning that which was contained in the Revised Statutes, banks were taxed on their nominal capital, without regard to loss or depreciation.

According to that system of taxation,” he said, “it was immaterial as to the character or description of property which constituted the capital, as the tax imposed was wholly irrespective of it. The tax," he added, “was like one annexed to the franchise as a royalty for the grant.” We were of opinion that the intention of the act of 1863 was to return to that system, and if we had been correct in that assumption, it certainly would have followed that it was immaterial whether the capital was invested in United States bonds or any other securities. The determination in the Bank Tax Case, by which our judgment was reversed, proceeded upon the ground that we had misconstrued the act of 1863, and that it was not a tax on the banks, nominally, which was intended, but was a tax upon their property and assets, valued by an artificial standard. If our act of 1863 had declared the tax to be imposed upon the amount of the nominal capital, irrespective of the mode of its investment when the tax came to be assessed, we suppose our judgment would have been affirmed, instead of being reversed.

It is argued that the congress had not the constitutional power to enact the provisions contained in the bank act of 1864. The argument is, that as the Constitution had exempted public stocks from taxation by the States, it was not in the power of congress to subject them to such taxation. It is material to remember that there is no language of the Constitution to that effect. But the Supreme Court has considered that the exertion of the taxing power of the States upon these securities would, or might, impair the

Opinion of the Court, per DENIO, Ch. J.

ability of the government to raise money by loan for public purposes, and hence would be hostile to the congressional power to borrow money; and it is easy to see that the faculty of borrowing upon securities which should enjoy that immunity, might in some degree promote the negotiation of loans. But, is this an advantage which may not be waived by the national legislature? There are, frequently, other public objects connected with a loan beyond the mere purpose of realizing the amount required to be borrowed. One purpose of the government, organized by the Constitution, is declared to be to promote the general welfare of the people of the United States. No doubt the maintenance of the State governments, to which the possession of pecuniary means to be acquired by taxation is essential, is intimately connected with the general well-being of the people. Suppose, then, congress should come to the conclusion that the placing of the general governinent, in respect to a loan, upon the same footing with other borrowers, would not essentially affect the ability to negotiate such loan, while it would greatly conduce to sustain and promote the interests of the State governments in their pecuniary arrangements, and would moreover more effectually secure domestic tranquillity, which is another object aimed at by the Constitution, is the supreme legislature powerless in the premises ? I cannot believe that such is the case. The inhibition of the States to tax the money of their citizens invested in national loans, is predicated of the power to borrow money on the credit of the United States. It is a power conferred in the same general terms as the power to regulate commerce, and it has frequently been decided in the Supreme Court of the United States, and in this court, that an act of a State legislature, having the effect of a commercial regulation, is not a violation of the Constitution, if congress has not exercised their undoubted authority over the subject in the particular case. (Wilson v. The Black Bird Creek Swamp Company, 2 Peters, 250; Sturges v. Crowningshield, 4 Wheat., 193; Moore v. Housten, 5 id., 1; Cooley v. The Board of Wardens of Philadelphia, 12 How., 299;

Lemmon v. The People, 20 N. Y., 562, 613.) If by
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Opinion of the Court, per DENIO, Ch. J.

omitting to legislate on the subject, the States are left free to act, a fortiori, an express permission to the States to act, would not be objectionable. In the Pilot case, above referred to from 12 Howard's reports, the State of Pennsylvania had passed an act for the regulation of pilots. It was shown in the opinion in the case, that this State law was in substance a regulation of commerce. But congress had never assumed to enact a pilot system; but the several maritime States had generally done so, and congress had, at an early day, passed an act declaring that pilots should continue to be regulated “by such State laws may respectively hereafter enact for that purpose.” The pilot act of Pennsylvania was declared to be valid, on the ground that congress could waive, in favor of the States, the right which the Constitution had conferred upon it by the power to regulate commerce. I consider this a strong precedent for holding that the national legislature is competent to waive the right, which under the decisions of the federal court it possesses, to provide for the negotiation of loans, which shall not clothe the securities with an exemption from State taxation. If, therefore, it could be held, that the taxation of these shares was the taxing of the bonds which the corporations hold, I should yet think that the taxation was lawful under the permission contained in the banking law of the United States.

It is further urged that these shareholders are taxed at a rate beyond the limits prescribed in the proviso in the act of congress. We do not perceive this to be so. The stock is assessed at the amount represented by the shares respectively. It is not shown that they are not of that value. Then the tax is at the same rate per cent as other moneyed capital in the hands of individual citizens. Our laws do not authorize the taxation of shares in banks organized under the authority of this state. We tax our domestic banks on their capital pursuant to the act of 1863, and it is presumed that the taxing officers conform to the judgment in the Bank Tax Case, reported in 2 Wallace, by deducting the part invested in United States bonds. This exemption is made because the banks which are taxed are the owners of these bonds.

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