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of value which form part of the market or tangible property, viz., $2,943,096.92,-was selling value of shares of stock?
the value of the franchise, the assessor cerThree cases are cited to sustain the prop- tainly had the right to take the value of osition, viz., San José Gas Co. v. January, the shares into consideration in determin57 Cal. 614; Spring Valley Waterworks v. ing the value of the franchise; and, were we Schottler, 62 Cal. 69; and Bank of Califor- at liberty to review the judgment of the nia v. San Francisco, 142 Cal. 276, 64 L. R. assessor and of the board of equalization A. 918, 100 Am. St. Rep. 130, 75 Pac. 832. upon those matters, we could not say that
Before coming to consider the last case an assessment of $750,000 thereon is unjust, cited, which is the one principally relied or that it includes such elements as diviupon, we dispose of the two others by say- dend or profit-earning power, or good will,
ing that they do not support the proposi- which, it is claimed, should not be taken in• tion. The first simply decided that where to consideration in determining the value
a part of a tax was asserted to be illegal, of the property of the corporation." and a part was admitted to be valid, the After pointing out that these elements duty existed to pay the confessedly legal entered into the assessment of shares of part to justify relief concerning the por- stock at their market value, it was observed tion claimed to be illegal. The second case (p. 289, L. R. A. p. 924, Am. St. Rep. p. but decided that the franchises of corpora- 741, Pac. p. 838): tions were taxable as property, and, where "It is clear that, if the laws of the a corporation enjoyed other franchises than state properly express the intention that the right to exist as a corporation, and the everything that gives value to the shares of board of equalization, in assessing such a corporation shall be assessed as property franchises, had treated them as equivalent of the corporation, the true value of those in value to the selling value of the capital shares is a most important element in destock, the courts had no power to interfere termining the value of such property.” with the discretion lodged in the assessing In other words, the court simply declared officers. In the last-cited and latest-decided that if the law of the state properly excase, Bank of California v. San Francisco, pressed the purpose to tax everything of the controversy was this: The Bank of value, the assessor had a discretion to conCalifornia was assessed on its property. The sider what was the selling value of shares of difference between the value of such prop- stock in fixing the value of the franchise. erty and the cash or selling or market Instead of supporting the contention that value of the shares of stock of the corpora- the law obliged the assessor to attribute to tion was $2,943,096.92. The franchise, in the franchise the value of those intangible stead of being assessed for this amount, was elements which it was conceded were emvalued only at $750,000. This valuation braced in the assessment of shares of stock, was resisted by the bank, upon the ground the reasoning of the opinion is to the conthat it was so large that it must have in- trary. As the cash, selling, or market value cluded good will, dividend-earning capacity, of the stock in the case before the court etc., which, it was asserted, could not under was conceded to have been nearly $3,000,000 the law be embraced in an assessment of greater than the tangible property assessed franchises. The court elaborately reasoned to the corporation, and the assessor had (there being two dissenting judges) that, in valued the franchise, not at that sum, but view of the power of the assessors to value at only $750,000, it is patent that, if the property, it "could not say" that the as- law of California had been what it is now sessing officers had transcended their au- asserted the court held it to be, that the thority in making the valuation complained claim that there was an overvaluation of the of. Speaking of the duty of the assessing franchise would have been so frivolous as to officers, it was said (p. 288, L. R. A. p. require only a statement of the law to decide 923, Am. St. Rep. p. 141, Pac. p. 837): against the claim of overvaluation.
“ 'The duty of making the valuation was But the court made no such statenient. cast upon the assessor. The method of ar-On the contrary, it stated its inability to riving at the valuation, the process by judicially declare that an assessment was which his mind reached the conclusion (in extravagant and grossly unjust which was cases where, as here, it is not pretended more than $2,000,000 lower than it should that he acted fraudulently or dishonestly], have been if the law imposed the obligation is matter committed to his determination.' on the assessor of valuing the franchise by
This appears to be determinative of the difference between the value of the tangithe contention here made.
(p. 289, ble property assessed and the cash or selling L. R. A. p. 924, Am. St. Rep. p. 141, Pac. value of the shares of stock. This inability p. 838.)
Whether or not the whole differ- to give relief was placed solely upon the ence between the aggregate market value discretion which the law lodged in the asof the shares of stock and the value of the sessor. But this interpretation of the state ute serves only to further demonstrate the illustrated the case of the Bank of Califordiscrimination which has been previously nia would require us to disregard the agreed pointed out. This result is made clear statement. by comparing the discretion lodged in the Finally, it is contended that, even if the assessor in valuing the franchise of state state banks and other state moneyed corbanks or other moneyed corporations with porations were assessed as illustrated by the the duty resting on him as to the valuation valuation placed on the Bank of California, of shares of national banks. The wide differ- the complainant national bank has no reaence between the discretion on the one hand son to complain because the assessment put and the duty on the other will be addition- upon its shares of stock was relatively no ally demonstrated by a consideration of the higher than that put upon the Bank of Calidiscrimination against national banks which fornia, and therefore no discrimination was has arisen in the practical execution of the occasioned. This is predicated upon the fact statutes.
that the value per share affixed to the stock In the agreed statement of facts it was of the complainant national bank was not admitted that there are in the state of Cali- higher, having sole reference to the value of fornia 178 commercial (or state) banks, the stock as shown by the book value of the possessing a vast amount of capital, 18 of assets, and, considering allowable deducwhich were located in San Francisco. And, tions, than was the assessment put upon the to quote from the statement, "that the man. Bank of California, considering, alone, the ner in which franchises of commercial banks same elements. But there is no proof whatand trust companies were assessed for said ever that the stock of the complainant bank fiscal year ending June 30, 1901, by the had a market or selling value higher than assessor of the city and county of San Fran- the value affixed to it by the assessor; and cisco, is illustrated by the case of the Bank the items which were made the basis of the of California, a banking corporation organ- assessment against the stock are declared in ized under the laws of the state of Califor- the agreed statement to be the entire assets nia." The assessment in question, which it of the bank, and in the argument at bar on is thus declared in the statement of facts behalf of the assessor the value of the shares is illustrative of the other assessments of stock of the bank in excess of their book against state banks, was the one which was value is assumed to have been only nominal. involved in the controversy decided in the The proposition, therefore, comes to this,Bank of California Case, supra. It is then although the complainant national bank was recited in the agreed statement that the assessed at the full value of its stock, there total property resources of the Bank of Cali- was no discrimination in favor of the state fornia, correcting a misprint in the record, bank, albeit there was a difference in excess were $5,156,903.08; and that the market or of $2,000,000 between the value put upon the selling value of its capital stock was $8,- property and franchise of the state bank 100,000, a difference of $2,943,096.92; and and the sum which should have been levied that, deducting from the resources of the against it, if all the elements had been bank certain exemptions, the bank was as assessed which enter into the value of shares sessed for property at $2,311,774. To this of stock. And, thus analyzed, the contention last-mentioned sum was added for franchise is again reducible to this proposition,-that, tax, not the difference between the value of where property of one person worth a given the property and the selling value of the amount is assessed for its full value, no disstock, which, as stated, was nearly $3,000,- crimination in favor of another results when 000, but only $750,000. It is insisted in the latter is assessed for a sum greatly beargument that this statement shows but a low the value of the property assessed. single case of undervaluation of a state bank What has just been said disposes, also, of by the assessors, and therefore does not jus- the contention that, if the national bank tify the conclusion that, in the exercise of had been assessed under the state law by the their discretion, the assessors had gen- rule applied to state banks, it would have erally, as to state banks and corporations, had affixed to its property a slightly higher valued the franchises at less than the differ- valuation than was given as the value of the ence between the value of the property shares of its capital stock. Without stoptaxed and the market or selling value of the ping to point out the error in the calculation stock. But this contention disregards the by which this result is supposed to be demfact that, by the agreed statement, it was onstrated, it suffices to say that the contenexpressly admitted that the assessment in tion would have merit only in the event that question was illustrative of the assessments the property and franchise of all state banks upon the other state banks and moneyed cor- had no higher value than the book value of porations.
In view of the issues in the the shares of stock. The fallacy underlying cause, as to which the facts were agreed, to the whole contention cannot better be made say that the assessment in question only clear than by the mere reiteration of the statement that, under the facts as agreed, it state the reasons for my dissent. Section is obvious that the shares of stock of the 5219, Rev. Stat. (U. S. Comp. Stat. 1901, national bank were assessed for all they p. 3502), prescribes the conditions and limiwere worth under the rule of market or sell tations of state taxation of national banks. ing value, whilst the state bank was only In reference to it, we said in Owensboro assessed for $750,000 above the book value Nat. Bank v. Owensboro, 173 U. S. 664, 669, of the stock, although the cash, selling, or 43 L. ed. 850, 852, 19 Sup. Ct. Rep. 537, market value would have required an assess- 539: ment of nearly $3,000,000.
“This section, then, of the Revised StatMany contentions were argued at bar in- utes is the measure of the power of a state volving the assertion that the state law was to tax national banks, their property, or invalid because of deductions of debts or their franchises. By its unambiguous proexempt property which, it was asserted, the visions, the power is confined to a taxation law allows to state banks and other moneyed of the shares of stock in the names of the corporations on an assessment of their prop- shareholders, and to an assessment of the erty, and does not allow holders of shares of real estate of the bank." stock in national banks. Most of these con- By the section two restrictions, and two tentions are, in effect, disposed of by the only, are placed on the power of the state consideration which we have given to the to tax the shares of stock: “That the taxaproposition that the state law was void sim- tion shall not be at a greater rate than is ply because it established different methods assessed upon other moneyed capital in the of taxation as to the two classes of corpora- hands of individual citizens of such state, tions. In so far as the contentions referred and that the shares of any national banking to are not, in effect, disposed of by our con- association owned by nonresidents of any clusions on that subject, we content our state shall be taxed in the city or town selves with saying that we think all such where the bank is located, and not elsepropositions were rightly decided by the where." court below to be without merit, for the rea- No uniform rule is prescribed by Congress sons expressed in the opinion delivered by as to the mode of assessment or the manner that court in the Nevada Bank Case, to in which the state shall impose its burden of which the court referred, and upon which it taxation on the shares of stock in national placed its rulings. We decide this case banks. Each state is left to determine that solely upon the record before us. Our con according to its own judgment. All that is clusion, therefore, does not deny the power demanded is that in fact neither the rate of of the state of California to assess shares tax nor the assessment shall discriminate of stock in national banks, provided only the against national banks, and that the propmethod adopted does not produce the dis- erty subject to taxation shall not be burcrimination prohibited by the act of Con- dened in excess of the burdens cast upon gress. From this, of course, it would follow other moneyed capital. Davenport Nat. that, if the statutes of California, either Bank v. Board of Equalization, 123 U. S. from their text or as construed by the high-83, 31 L. ed. 94, 8 Sup. Ct. Rep. 73. est court of that state, compelled the assess- The mandate of $ 1 of the Constitution of ing officers in the valuation of the property California is: of state banks and other state moneyed cor- “All property in the state, not exempt porations to include all those elements of under the laws of the United States, shall value which are embraced in the assessment be taxed in proportion to its value, to be of shares of stock in national banks so that ascertained as provided by law. The word there would be an equality of taxation as re- 'property,' as used in this article and secspects national banks, the discrimination tion, is hereby declared to include moneys, which we find to exist under the present credits, bonds, stocks, dues, franchises, and state of the law of California would disap- all other matters and things, real, personal, pear.
and mixed, capable of private ownership.” The decree of the Circuit Court of Ap- Thus, the Constitution requires the taxapeals is reversed; the decree of the Circuit tion of all property and a taxation in proCourt is also reversed, and the cause is re- portion to its value, and defines property as manded to the Circuit Court for further pro- including everything capable of private ownceedings in conformity with this opinion. ership. Certainly, if the mandate of the
Constitution is expressed in the statutes the Mr. Justice Brewer, with whom the shares of stock in national banks will be CHIEF JUSTICE, Mr. Justice Brown, and subjected to the same rate of taxation as all Justice Peckham concur, dissenting : other property in the state, including there
I am unable to concur in the foregoing in moneyed capital. It must, therefore, be opinion, and, believing that a grievous held that the legislation respecting the taxawrong is done to the state of California, will 'tion of national bank shares is in defiance
of the state Constitution before it can be assessed upon other moneyed capital in the adjudged in conflict with the equality pro- hands of individual citizens of this state. vision of $ 5219, Rev. Stat. Or, in other “3610. The assessor charged by law with words, that the legislature of California dis- the assessment of said shares shall, within regarded the requirements of their own Con- ten days after he has made such assessment, stitution in order to subject to taxation give written notice to each national banking property protected by Federal laws.
association of such assessment of the shares The legislation of California in this re- of its respective shareholders; and no pergard is found in § 3608 of the Political sonal or other notice to such shareholders of Code, as amended in 1899, and two addi- such assessment shall be necessary for the tional sections enacted in that year, num- purpose of this act. And, in case the tax on bered 3609 and 3610:
any such stock is unsecured by real estate “3608. Shares of stock in corporations owned by the holder of such stock, then the possess no intrinsic value over and above bank in which said stock is held shall bethe actual value of the property of the cor- come liable therefor; and the assessor shall poration which they stand for and repre-collect the same from said bank, which may sent; and the assessment and taxation of then charge the amount of the tax so col. such shares, and also all the corporate prop- lected to the account of the stockholder own. erty, would be double taxation. Therefore, ing such stock, and shall have a lien, prior all property belonging to corporations, save to all other liens, on his said stock, and and except the property of national bank- the dividends and earnings thereof, for the ing associations not assessable by Federal reimbursement to it of such taxes so paid." statute, shall be assessed and taxed. But The rule of valuation is prescribed by the no assessment shall be made of shares of 5th subdivision of $ 3617 of the Political stock in any corporation, save and except Code, which provides that "the terms 'value' in national banking associations, whose and 'full cash value' mean the amount at
' property, other than real estate, is exempt which the property would be taken in pay. from assessment by Federal statute.
ment of a just debt due from a solvent debt“3609. The stockholders in every national or.” It is true that prior to 1881 market banking association doing business in this value was made the rule of valuation, but state, and having its principal place of busi- the section prescribing that rule was, so far ness located in this state, shall be assessed as it applied to national bank shares, adand taxed on the value of their shares of judged void by the supreme court of the stock therein; and said shares shall be state (Miller v. Heilbron, 58 Cal. 133), and valued and assessed as is other property for wholly repealed by the legislature (Stat. taxation, and shall be included in the valu- 1881, p. 59), and in lieu of that the present ation of the personal property of such stock rule of valuation established. But the rule holders in the assessment of the taxes at the of valuation is not so material, and, doubtplace, city, town, and county where such less, an established market value would be national banking association is located, and the amount at which property would be not elsewhere, whether the said stockholders taken in payment of a just debt due from a reside in said place, city, town, or county, solvent debtor. The main thing is that the or not; but, in the assessment of such same rule of valuation shall be applied to shares, each stockholder shall be allowed all the assessment and taxation of national the deductions permitted by law to the hold- bank shares as of other moneyed capital. ers of moneyed capital in the form of sol. And the express declaration of g 3609 is vent credits, in the same manner as such de that the shares in national banks “shall be ductions are allowed by the provision of valued and assessed as in other property
for taxation.” paragraph 6 of § 3629 of the Political Code of the state of California. In making such the method of reaching the property of state
From the sections quoted it appears that assessment to each stockholder, there shall corporations for purposes of taxation is by be deducted from the value of his shares of treating the corporation as owner of all, and stock such sum as is in the same proportion casting
the burden of taxation directly upon to such value as the total value of its real es-it, while, on the other hand, in obedience tate and property exempt by law from taxa- to the requirements of the Federal statute, tion bears to the whole value of all the taxation in respect to national banks is shares of capital stock in said national limited to an assessment and taxation of the bank. And nothing herein shall be con- shares of stock. But there is no discriminastrued to exempt the real estate of such na- tion if the same property is reached by each tional bank from taxation. And the assess- method, and by each subjected to the same ment and taxation of such shares of stock rule of valuation. By § 3608 all the propin said national banking associations shall erty of state corporations must be assessed not be at a greater rate than is made or' and taxed, and the word "property” is departs.
fined by the Constitution to include, not the tax thereon paid, who but the stockhold. merely tangible assets, but also “franchises, ers pay it? It is true that it is paid from the and all other matters and things, real, per- treasury of the corporation before the money sonal, and mixed, capable of private owner- therein is divided, but it is substantially the ship.” Everything, therefore, which is a same thing as if paid from the pockets of part of the property of a state corporation the individual stockholders. To assess all is subject to assessment and taxation. No of the corporate property of the corporation, other or larger burden is cast upon shares and also to assess to each of the stockholders of national banks, and surely there can be no the number of shares held by him, would, it discrimination when the entire property in is manifest, be assessing the same property the one instance is taxed as a whole to the twice, once in the aggregate to the corporacorporation and in the other instance sub- tion, the trustee of all the stockholders, and divided and taxed to the stockholder. The again separately to the individual stockwhole is neither less nor more than all its holders, in proportion to the number of
But it is said there is no specific shares held by each. As well might it be command to include in the property of a contended that the property of a partnerstate corporation the good will, dividendship should be assessed to the firm, and, in earning power, and the like, and that they addition, that the interest of each partner are necessarily included in the selling value in the firm property should be assessed to of the stock of any corporation. It is true, him individually. If I have an interest in these items are not in terms mentioned, but partnership property, my interest therein is neither are desks and furniture. The lan-property. It is the right I have to share guage is general, so general that it includes in the profits and property of the firm, in everything, not excepting good will, divi- proportion to the interest I own. dend-earning power, and the like, for they property rights are confined to the property are "capable of private ownership.” They held by the firm, just as the property rights belong to the corporation. There is no good of the stockholder in the corporation are will in a share of stock over and above the confined to the property held by the corporagood will which belongs to the corporation, tion. In the case of a partnership, take and, if the corporation sells and conveys all away all the property of the firm, and I that it possesses "capable of private owner- have no longer any property as a partner. ship,” it sells and conveys its good will, In the case of the corporation, take away and there is nothing left of good will or all of its property, which, it must be rememanything else belonging to the stockholders. bered, includes its franchise, and the share- · This is so plain that he who runs may read. holder no longer has any property. The It is hardly necessary in a matter so clear cases are parallel. If in the one case it is to refer to the decisions of the supreme competent to assess to the corporation all of court of California, and yet they are direct the property held by it, and to the individual upon the proposition. Thus in Burke v. stockholders the respective interest owned Badlam, 57 Cal. 594, the court said (pp. by each therein, so must it be competent to 601, 602):
assess to every partnership the property “Now, what is the stock of a corporation held by the firm, and to each individual but its property, consisting of its franchise partner his interest therein. It is clear to and such other property as the corporation our minds that in the one case the partner, may own? Of what else does its stock con- and in the other the stockholder, would be sist? If all this is taken away, what re- compelled to pay twice on the same propmains? Obviously nothing. When, there- erty, which is neither required nor perfore, all of the property of the corporation mitted by the Constitution. In the case of is assessed,—its franchise and all of its corporations to which we have referred the other property of every character,—then all legislature has declared that all of the propof the stock of the corporation is assessed, erty held by such corporations shall be asand the mandate of the Constitution is com-sessed to them. has not attempted to plied with. This property is held by the exempt any property from taxation not esccorporation in trust for the stockholders, empted by the Constitution itself, and, of who are the beneficial owners of it in cer- course, could not do it if it had. It has tain proportions called shares, and which only said that the property shall be assessed are usually evidenced by certificates of to the corporation, and shall not be again stock. The share of each stockholder is un assessed for the same taw. This it had the doubtedly property, but it is an interest in right to say.” (Italics in this and succeed. the very property held by the corporation. ing quotations are mine.) It is his right to a proportionate share of It will be seen from this quotation that the dividends and other property of the cor- the court places partnerships on the same poration,-nothing more. When the prop basis as corporations. If the partnership erty of the corporation is assessed to it, and sells out its property, including its good will