S. 177, 33 Sup. Ct. 474, 57 L. Ed. 787, that the exchange properly so called should be confined to cases where the common carrier is not acting as such. That seems to us a perverse conclusion from a proviso permitting "common carriers" to exchange.

it then stood contracts for services off the line were unlawful. 12 I. C. C. 10, 12. Then the Amendment of 1910 was passed, and passed, we must suppose, having the opinion of the Commission and the notorious longstanding form of existing contracts in view. The contracts are complex, as we have said, and entire. We cannot believe that an act which purported to allow them meant to break them up. The Commission seems not to have believed it in its first ruling upon the amended act.

Nothing is gained by referring to the provisions in other sections or to those of the section to which the proviso is attached, for the provision is that nothing in the act, in whatever section it may occur, shall be twisted into preventing the exchange. The passion for equality sometimes leads to hollow formulas and the attempt to bring these arrangements under the head of undue preferences and the like hardly seems a natural result of the statute. No one knows which of the two would be found to be preferred as having the best of a very complex bargain. All the great benefits derived on one side are the consideration for all those conferred upon the other. The railroad and the telegraphed by a narrow construction of the act we behave grown together in mutual dependence lieve would be great, with no advantage so and we are told that contracts of this sort far as we can see to any other users of the for long terms have been nearly universal for lines or roads. We do not go into more mififty years. The contracts had been called to nute discussion because the result reached the attention of Congress repeatedly by the must stand on the plain words of the act, Commission, which, in December, 1906, stat- the meaning of which is confirmed rather ed that, so far as it could see, the full per- than made doubtful by the circumstances in formance of them by the carriers would not which the proviso was enacted and the events affect any public or private interest adverse- that had gone before. ly. It held however that under the law as

Judgment and decrees affirmed.

Our opinion is confirmed by a consideration of the further additions to section 1, in 1910, allowing free passes to *be given to the employés of telegraph, telephone and cable lines, and by some further matters of detail referred to in the judgments of the Courts below of which we have cited the reports. The interdependence of the companies is very intimate, and the trouble that would be caus

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(248 U. S. 476)

BANK OF CALIFORNIA, NATIONAL ASS'N, v. RICHARDSON, Treasurer of State of California.

(Submitted Oct. 14, 1918.

able resources of banks for the purposes of taxation are reached under the law of California, not by an immediate levy on the banks as the owner, but by annual assessment Decided Jan. 27, and tax thereon made by the State Board of Equalization against the stockholders of banks. The state law places the duty upon the banks to pay the tax assessed against their stockholders, with the obligation on the

1919.) No. 262.

10-NATIONAL BANKS

1. TAXATION
STATE AUTHORITY.

Rev. St. § 5219 (Comp. St. § 9784), furnish- stockholders to repay, sanctioned by a right

es the exclusive rule governing state taxation as to national banks.

conferred upon the banks to sell the stock of any stockholder failing to refund.

2. TAXATION

11-NATIONAL BANKS STOCK OWNED IN OTHER NATIONAL BANK.

Under Rev. St. § 5219 (Comp. St. § 9784), authorizing states to tax stock of national banks to the owners of the shares, one national bank may be taxed as stockholder of another such bank.

3. TAXATION

11-NATIONAL BANKS

STOCK IN OTHER NATIONAL BANK AS AS

SETS.

Rev. St. § 5219 (Comp. St. § 9784), merely authorizing states to tax stock of national banks to the owners of the shares, does not allow stock of one national bank owned by another such bank, and so taxed to it, to be considered as assets of the owner bank for purpose of taxing its stockholders on their shares. 4. TAXATION 10- NATIONAL STOCK OWNED IN STATE BANK.

A national bank, being subject to state taxation as a federal agency only to the extent authorized by Rev. St. § 5219 (Comp. St. § 9784), is not taxable as a stockholder of a state bank. 5. TAXATION 11-NATIONAL BANKSSTOCK OWNED IN STATE BANK AS ASSETS.

Stock of a state bank owned by a national bank, but not taxable to it, is to be considered an asset of it, in determining the value of stock in it taxable under Rev. St. § 5219 (Comp. St. § 9784), to its stockholders.

BANKS

The decision below, in so far as it rested upon the state law, is binding and we put that subject out of view. To understand the contentions as to the law of the United States requires a brief statement of the tax levied and the particulars in which it is complained of. The capital of the bank was $8,500,000, evidenced by 85,000 shares of the par value of $100 each. D. O. Mills & Company was a national bank established at Sacramento and the California Bank was a stockholder in that bank to the extent of 2,501 shares. The California Bank was also the owner of 1,001

Mr. Justice Pitney, Mr. Justice Brandeis, and shares of stock in the Mission Bank, a bankMr. Justice Clarke, dissenting. ing corporation organized under the state law

In Error to the Supreme Court of the State and doing business in San Francisco. The of California. Board of Equalization in 1915 fixed the value of all the assets of the California Bank at the sum of $15,775,252.67. The Board includ

The Bank of California, organized under the National Banking Law (Act June 3, 1864, c. 106, 13 Stat. 99) and established in San Francisco, commenced this suit to recover the amount of a tax, levied against its stockholders in 1915 under the law previously stated, which it had paid under protest claiming that the tax was not only unlawful under the state law but illegal under the law of the United States governing the right of a state to tax national banks and their stockholders. The case is here to review a judgment denying the right to recover, on the ground that the tax had been lawfully exacted under both the law of the state and that of the United States.

Action by the Bank of California, National Association, against Friend William Richard-ed in the assets making up this amount the son, State Treasurer of California. Judgment for defendant was affirmed by the Supreme Court of California (175 Cal. 813, 165 Pac. 152), and plaintiff brings error. Reversed and remanded.

stock standing in the name of the California Bank, both in the D. O. Mills National Bank and in the Mission State Bank; the first, the Mills National Bank stock, being computed as worth $625,546.30, and the second, the Mission State Bank stock, as worth $121,916.50.

Upon these valuations, the Board assessed the California Bank as a stockholder in the Ben-D. O. Mills National Bank and as a stockholdde-er in the Mission State Bank for the shares of stock which it held in those banks, valuing each at the sum previously stated. Besides,

*Mr. Chief Justice WHITE delivered the the stockholders of the California National opinion of the Court.

Except as to real estate, which is taxed directly in the name of the owner, all the avail

were assessed for the value of the assets of that bank, including in the amount *the full value of the shares of stock owned by the

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

Mr. E. S. Pillsbury, Mr. F. D. Madison, Mr. Oscar Sutro, and Mr. Alfred Sutro, all of San Francisco, Cal., for plaintiff in error.

Mr. U. S. Webb and Mr. Raymond jamin, both of San Francisco, Cal., for fendant in error.

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bank in the Mills National and Mission State | power in the states to tax the banks, the naBanks.

[1] The controversy grows out of the asserted illegality of the twofold tax levied on the assessments of the California Bank as a stockholder in the Mills National Bank and in the Mission State Bank. Its solution depends upon the effect of Rev. St. 5219 (Comp. | thereof from arising from the existence of St. § 9784), the text of which is in the margin.1

tional agencies created, so as to prevent all interference with their operations, the integrity of their assets, or the administrative governmental control over their affairs. Second, preservation of the taxing power of the several states so as to prevent any impairment

the national agencies created, to the end that the financial resources engaged in their development might not be withdrawn from the reach of state taxation, but on the contrary that every resource possessed by the banks as national agencies might in substance and effect remain liable to state taxation.

Without considering some modifications made by the Act of February 10, 1868 (15 Stat. 34, c. 7 [Comp. St. § 9784]), which are negligible for the purposes of the questions before us, the section is but the reproduction of a provision of section 41 of the Act of June 3, 1864, dealing with the organization of national banks. 13 Stat. 99, 112. The forms of expression used in the section make it certain that in adopting it the legislative mind had in view the subject of how far the banking associations created were or should be made subject to state taxation, which presumably it was deemed necessary to deal with in view of the controversies growing out of the creation of the Bank of the United States and dealt with by decisions of this court. McCulloch v. Maryland, 4 Wheat. 316, 436, 4 L. Ed. 579; Osborn v. Bank, 9 Wheat. 738, 867, 6 L. Ed. 204; Weston v. Charleston, 2 Pet. 449, 7 L. Ed. 481.

*There is also no doubt from the section that it was intended to comprehensively control the subject with which it dealt and thus to furnish the exclusive rule governing state taxation as to the federal agencies created as provided in the section. All possibility of dispute to the contrary is foreclosed by the decisions of this court. People v. Weaver, 100 U. S. 539, 25 L. Ed. 705; Mercantile National Bank v. New York, 131 U. S. 138, 154, 7 Sup. Ct. 826, 30 L. Ed. 895; Owensboro National Bank v. Owensboro, 173 U. S. 664, 19 Sup. Ct. 537, 43 L. Ed. 850; Covington v. First National Bank, 198 U. S. 100, 25 Sup. Ct. 562, 49 L. Ed. 963.

Two provisions in apparent conflict were adopted. First, the absolute exclusion of

The first aim was attained by the nonrecognition of any power whatever in the states to tax the federal agencies, the banks, except as to real estate specially provided for, and, therefore, the exclusion of all such powers. The second was reached by a recognition of the fact that, considered from the point of view of ultimate and beneficial interest, every available asset possessed or enjoyed by the banks would be owned by their stockholders and would be, therefore, reached by taxation of the stockholders as such. Full and express power on that subject was given, accompanied with a limitation preventing its exercise in a discriminatory manner, a power which again *from its very limitation was exclusive of other methods of taxation and left, therefore, no room for taxation of the federal agency or its instrumentalities or essential accessories except as recognized by the provision in question.

[2] Let us come to consider whether the

taxation in question was sanctioned by the Act of Congress as thus understood. We do so, first, from the point of view of the twofold tax which was based on the ownership by the California Bank of stock in the D. O. Mills National Bank, and, second, as to the taxes which resulted from the ownership by the California Bank of stock in the Mission State Bank.

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1 "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

In Bank of Redemption v. Boston, 125 U. S. 60, 8 Sup. Ct. 772, 31 L. Ed. 689, it was determined that the stock held by one national bank in another is governed by the power to tax stockhouers given by the statute. Hence, the circumstance of the ownership of the stock by the California Bank in the D. O. Mills National Bank in no way deflects the operation of the statute. This being the case, as the taxation of the California Bank as a stockholder in the Mills Bank conformed to the grant of power to tax stockholders of national banks, it results that the assessment' for taxation made upon that basis was within

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 the state authority and was rightly decided association owned by nonresidents of any state shall be taxed in the city or town where the bank SO to be. 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."

[3] But the principle upon which this rests inevitably leads to the further conclusion, that the inclusion of the stock ownership of the California Bank in the Mills Bank as an

485

*486

f

asset of the California Bank for the purpose a federal agency only to the extent authorizof taxing the stockholders of the latter banked by the statute, the taxation of that bank was a disregard of the provision as to taxing as a stockholder in the Mission State Bank stockholders fixed by the statute. was without the scope of the statute and beyond the power which it conferred.

Indeed, it is apparent that the use of the power conferred by the statute to tax the California Bank as a stockholder in the Mills National Bank and in addition to avail of such stock ownership for the purpose of taxing the shareholders of the California Bank, was but to accept the statute on the one hand, and to exert on the other a power which could have no existence consistently with the statute. To say that the two taxes, the one levied on the bank as a stockholder in the Mills National Bank, and the other levied on the stockholders of the California Bank, were valid because a taxation of different persons, the California Bank on the one hand and the stockholders of the California Bank on the other, serves only to emphasize the plain disregard of the statute which would result from the enforcement of the taxes in question.

But while this is true, it also follows that as the stock in the Mission Bank belonged to the California Bank and was part of its general assets embraced by the comprehensive power conferred to tax such assets in the absence of some provision of the statute to the contrary, which as we have seen, was the case with regard to the stock held in the D. O. Mills National Bank, the assessment of the stock in the Mission Bank as an asset of the California Bank against its stockholders was within the scope of the grant given by the statute and was, therefore, valid.

It is undoubted that the statute from the purely legal point of view, with the object of protecting the federal corporate agencies which it created from state burdens and securing the continued existence of such agencies despite the changing incidents of stock ownership, treated the banking corporations and their stockholders as different. But it is also undoubted that the statute for the purpose of preserving the state power of taxation, considering the subject from the point of view of ultimate beneficial interest, treat-ings not inconsistent with this opinion. ed the stock interest, that is, the stockholder, and the bank as one and subject to one taxation by the methods which it provided.

From what we have said, it follows that the court below erred in refusing to order the refunding of the sum paid for the taxes levied on the assessment made against the stockholders of the California Bank for the value of the stock held by that bank in the D. O. Mills National Bank, and which had been assessed against the California Bank as a stockholder in the Mills Bank; and further erred in so far as it refused to decree a refund of the amount paid for the tax levied on the California Bank as the result of the assessment on that bank as a stockholder in the Mission State Bank. In these particulars, therefore, its decree must be, and is reversed. Our order, therefore, is Reverse and remand for further proceed

Again, when the purposes of the statute are taken into view, the conclusion cannot be escaped that the transmutation of the stock interest of the California in the Mills Bank, into an asset of the California Bank subject to be taxed for the purpose of reaching its stockholders, is to overthrow the very fundamental ground upon which the taxation of stockholders must rest.

We do not stop to point out the double burden resulting from the taxation of the same value twice which the assessment manifested, as to do so could add no cogency to the violation of the one power to tax by the one prescribed method conferred by the statute and which was the sole measure of the state authority.

[4, 5] *Coming to consider the tax on the California National Bank as a stockholder in the Mission State Bank, different considerations are controlling, since the provisions of the statute and the ruling in the Bank of Redemption Case, supra, both in letter and spirit apply only to stock ownership by a national bank in another national bank. It, therefore, follows that as the California National Bank was subject to state taxation as

*487

*Mr. Justice PITNEY, dissenting.

Pursuant to the constitution and laws of California, the plaintiff in error, a national banking association located in that state, was required to pay the following three taxes for the year 1915:

(a) A tax upon the valuation of the shares of its own stock, assessed against the bank at its own request instead of being assessed in the names of its individual stockholders. Its shares are 85,000 in number, of the par value of $100 each ($8,500,000 in all), and were valued for taxation at the sum of $15,775,252.67; a valuation which took into account all the assets of plaintiff in error except the assessed value of its real estate (excluded pursuant to the provisions of the state constitution). Included in the estimate were the sum of $625,546.30, the valuation of 2,501 shares of stock of the Mills National Bank held by plaintiff in error, and the sum of $121,916.52 for the value of 1,001 shares of the Mission Bank (a state bank), likewise held by plaintiff in error. It appears that the Bank of California prior to February 5, 1910, was a state bank, and on that date was converted into a national association; and, being at that time a stockholder of the two other banks, was permitted, under section

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#489

5154, Rev. Stat. U. S. (Comp. St. § 9694), as it | court in that case-certainly are not advertthen stood, to continue to be such stockholder after becoming a national bank.

ed to in the opinion—but it would serve no useful purpose to bring them into the present discussion. Therefore I take it to be settled that under section 5219 a national bank may not be taxed by a state with respect to its ownership of shares in another corporation except shares in another national bank.

(b) A tax assessed directly against plaintiff in error as a stockholder of the Mills National, based upon the valuation already mentioned of 2,501 shares.

(c) A tax assessed directly against plaintiff in error as a stockholder in the Mission (state) Bank, based upon the above mentioned valuation of its 1,001 shares in that bank. In an action brought by the California National against Richardson as state treasurer to recover a part of the taxes thus paid, the supreme court of the state, following its previous decision in Bank of California v. Roberts, Treasurer, 173 *Cal. 398, 160 Pac. 225, denied recovery, and the case is brought here upon the ground that the state constitution and laws, in conformity to which the taxes were assessed, are repugnant to section 5219 of the Revised Statutes of the United States.2

This court now holds that while the California National was taxable as a stockholder in the Mills National Bank (Bank of Redemption v. Boston, 125 U. S. 60, 8 Sup. Ct. 772, 31 L. Ed. 689), the other taxes imposed against plaintiff in error were repugnant to section 5219 in two respects: (1) In that the valuation of the Mills National shares ought to have been deducted from the estimate of the valuation of the California National shares in making an assessment against the stockholders of the latter bank; and (2) in that plaintiff in error, as a national bank, was not taxable at all as a stockholder in the state bank, and that the tax last mentioned above was altogether erroneous.

Upon the last point I understand the case to be controlled by the decision of this court in Owensboro National Bank v. Owensboro, 173 U. S. 664, 19 Sup. Ct. 537, 43 L. Ed. 850, where it was held that section 5219 had the effect of exempting not only the operations and franchises but the property of the national banks from state taxation, except as to their real estate. There are weighty considerations to the contrary, which seem not to have been called to the attention of the

Sec. 5219. "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 impos

ed 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 associa

tions 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 nonresidents 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 associ

ations from either state, county, or municipal tax

es, to the same extent, according to its value, as other real property is taxed."

The supreme court of California, in the Roberts Case (173 Cal. 398, 405, 160 Pac. 225), held that since it was decided by this court in the case of Bank of Redemption v. Boston that section 5219 permits the taxation of the shares of a national bank in the hands of another national bank, a different rule could not be applied to the taxation of shares in a state bank owned by a national bank without violating that provision of section 5219 which prohibits the taxation of national bank shares at a greater rate than is assessed upon other moneyed capital. But this view seems to me untenable; it mistakes an exemption accorded to a particular holder of other moneyed capital for a restriction upon the rate of taxation that may be assessed upon other moneyed capital as a class of property. As we held in Amoskeag Savings Bank v. Purdy, 231 U. S. 373, 393, 34 Sup. Ct. 114, 122 (58 L. Ed. 274) the language of section 5219 "prohibits discrimination against shareholders in national banks and in favor of the shareholders of competing institutions, but it does not require that the scheme of taxation shall be so arranged that the bur-. den shall fall upon each and every shareholder aike, without distinction arising from circumstances personal to the individual.” The nontaxability of state bank shares in the hands of a national bank is attributable to the character of the national bank as a taxpayer, not to the quality of the state bank shares as an object of taxation.

And of course I agree that the California National was *taxable as a stockholder in the Mills National; it having been determined in Bank of Redemption v. Boston, 125 U. S. 60, 70, 8 Sup. Ct. 772, 31 L. Ed. 689, that section 5219 permits the taxation of a national bank owning shares of the capital stock of another national bank, by reason of that ownership, on the same footing with all other shareholders.

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