54 F. 73 | U.S. Circuit Court for the District of Eastern Louisiana | 1893
This case has been submitted upon an application for an injunction pendente lite. The defendants are about to levy and collect a tax upon the shares of the bank. The question to be passed upon is whether the shares are exempted from taxation. The original charter was granted in 1833. Acts 1833, p. 172. That act contemplated that the capital of the bank, which was fixed at $14,000,000, would be obtained by the issuance by the bank of its own bonds. The subscribers for the stock were to pay nothing upon their subscriptions, but were to furnish mortgages upon cultivated lands and slaves to secure the payment of their subscriptions. These mortgages were to be held as a security for the payment of the bonds. The bank, after three years of
“Taxation shall be equal and uniform throughout tee state. All property shall be taxed in proportion to its value, to be ascertained as directed by law. The general assembly shall have power to exempt from taxation property actually used for church, school, or charitable purposes. The general assembly may levy an income tax upon all persons pursuing any occupation, trade, or calling; and all such persons shall obtain a license, as provided by law. All tax on incomes shall be pro rata on the amount of income, or business done; and all deeds of sale made, or that may be made, by collectors of taxes, shall be received by courts in evidence as prima facie valid sales. The general assembly shall levy a poll tax on all male inhabitants of this state over twenty-one years old, for school and charitable purposes, which tax shall never exceed one dollar per annum.”
The first question is as to the meaning and intent of the legislature in that part of the amended charter of 1836 upon the subject of the exemption of the bank from taxation; that is, the first question is, did the legislature, in the amended charter, — having established certain relations of the state to the bank, and declaring in section 4, p. 17, Acts 1836, “And the capital of said bank shall be exempted from any tax laid by the state, or by any parish or body politic under the. authority of the state, during the continuance of its charter,” it being provided that “the charter should continue fifty-one years,” (section 30, p. 192, Original Charter Acts 1833,) — mean that the exemption should arbitrarily cease at the end of 51 years, or that the exemption should continue so long as the existing relations of the state to the bank should require that the charter should continue?
In dealing with this question, regard must be had to the rule that, when it is claimed a statute creates an exemption from taxation, it is to be strictly construed, and that the presumption is against it. The foundation of this rule shows its meaning. It is founded upon the doctrine that taxation is so essential to the welfare of the state that the contract of exemption must be clearly
I will snm up the statutory relations of the state to the bank thus disclosed by saying: The state furnished the entire capital by the loan of its own bonds, and, till the bonds were paid, all the stock,
It is the whole charter, the object of the exemption, and the destination of the profits of the institution, which require this inference. The supreme court, in Bank v. Bouny, 32 La. Ann. 245, held that, without regard to this clause expressly exempting from taxation the capital, the reservation of the profits for the extinguishment of ihe bonds of the state oantained in the charter of 1836 prohibited the taxation of the accumulations by the state. If a corporation without capital, save as derived from its profits, is, by the scope and meaning of its charter, so destined and dedicated to the purposes of the state that, even without specific exemption of its accuinu-la Hons, they cannot be taxed by the state, it must follow that when, in the same charter, the capital is expressly exempted during its existence under the charter, the express exemption is in keeping with the implied, and inheres in the charter throughout its original and prolonged term, if it be kept alive by the state, to render this exclusive destination ©r dedication available to itself. This was the view of the legislature in 1874, when they extended the charter. The act making that extension is Act No. 40, p. 77, and, with its title and preamble, is as follows:
“Whereas, by reason of the great loss suffered by the agricultural interest of the state in consequence of the late war, it would be ruinous for the stock*78 holders to pay within the next thirteen years, before the limitation of the charter of the Citizens’ Bank of Louisiana, the amount of arreared installments and interest due by them, as well as the balance of their indebtedness; and whereas, the sacrifice of the lands mortgaged for the payment of the state bonds issued in favor of the bank would endanger the security of the state; and whereas, it is the interest of the state that a prolongation of the charter of the Citizens’ Bank of Louisiana be allowed, so as to enable said institution to collect the debts due by the stockholders, and thereby facilitate the payment <Kf the state bonds:
“Section 1. Be it enacted by the senate and house of representatives of the ,tate of Louisiana, in general assembly convened, that the provision of the thirtieth section of thé act entitled ‘An act to incorporate the Citizens’ Bank of Louisiana,’ approved April 1, -1833, which reads as follows: ‘And the charter shall continue for and during the space of fifty-one years from the passage thereof,’ — be amended and re-enacted as follows: ‘That the charter of the Citizens’ Bank of Louisiana shall continue for and during the space of twenty-five years from and after the time fixed for its liquidation by the said charter, and shall expire on the thirtieth of January, 1911.’
“Sec. 2. Be it further enacted, etc., that the Citizens’ Bank of Louisiana, through its board of directors, be, and is hereby, authorized to extend, with the consent of the holders thereof, all the state bonds issued in its favor under the second section of the act entitled ‘An act amendatory and supplementary to the several acts relative to the act to incorporate the Citizens’ Bank of Louisiana,’ approved January 30, 183G, now outstanding, as well ag all interest warrants issued by said bank falling due from and after the passage of this act, to such time and on such conditions as may be agreed upon with the holders of said bonds and interest warrants: provided, said extension be not made for a longer period than twenty-five years from the respective maturities, and at no higher rate of interest than the said bonds now bear.
“Sec. 3. Be it further enacted, etc., that the present act shall be in force from and after its passage, any law to the contrary notwithstanding.”
There certainly are grave difficulties in the way of maintaining that under this statute, which, is a tripartite contract, — that i& a contract between the state, the bank, and. the bondholders, — the state can secure the extension of its own bonds for the period of 25 years, and the continuation of the charter which, in effect, destines the profits of the bank to the payment of its bonds for 2 years beyond that period, and at the same time disregard that destination by imposing a tax which, by the decision of the supreme tribunal of the state, is held to be so inconsistent with that destination as to be prohibited by it. It is to be observed that the legislature merely extended the charter, inferring that the original words "during its continuance” carried with them the original exemption throughout the period of the extension. I think in- this the legislature drew the inference from the entire charter, which a study of it requires.
The reason in the original charter, as amended in 1886, for making the duration of the exemption coextensive with any prolongation of the charter, inhered in the purpose which was paramount with the state upon the subject of time in connection with the existence of the bank, in that the bank and the exemption must endure till the bonds she had borrowed had been paid; but in the extension of the charter, and the continuance of the exemption, two other parties also had an interest and fixed rights, — the bank and the bondholders.
It is unnecessary to speak of the interest of the bondholders, and there is a complication as to their right to insist upon the exemp
The respondents, the tax officers, say it has waived this right by assenting to the condition of Act No. 79, Acts 1880. It is conceded that the directors of the bank gave the assent, as required by that act. The act is as follows:
“Whereas, due proof has been shown to the house in which this bill originated that article 48 of the constitution has been complied with, therefore:
“Section 1. Be it enacted by the general assembly of the state of Louisiana, that the Citizens’ Bank of Louisiana, in addition to the powers now conferred hy law, shall have power to compromise and settle the liability of the mortgage stockholders of said bank arising out of the'stock mortgages granted by' them to secure their subscriptions to the capital stock of said hank; said compromises to he made when deemed judicious by said bank, and with the assent of the bondholders: provided, the same be approved by the directors on the part of the state, as provided in this act, on such terms as may bo agreed upon; and, when effected, the said stock mortgages to be released and canceled.
“Second. That all sums realized from said compromises, as well as from the enforcement of said mortgages, by the usual legal proceedings, shall be held and applied by toe banking department of said bank to toe satisfaction of toe bonds of toe state, issued in aid of toe bank, and to toe legal liabilities of said mortgage stock department, and to toe necessary expenses of said department.
“Third. That toe directors for the state on the board of, said bank shall be increased to live, to be appointed by toe governor, when this act shall he accepted hy toe bank, whose duties shall be toe same as now provided hy law; and, in addition thereto, they shall supervise toe compromise, as contemplated in section one of this act. and for this purpose they shall hold meetings, when called upon so to meet by the president of the board of directors of the Citizens’ Bank, and shall keep a record of their meetings, and no compromises under too provisions of this act shall bo effected without toe approval of toe majority of said directors on toe part of toe state.
“Fourth. That this act shall not be binding or confer any right upon toe bank unless accepted within twelve months from the date of this act, and under toe conditions prescribed in articles 234 and 237 of the constitution; such acceptance to be manifested by toe bank in writing, and filed in toe office of toe secretary of state. *• * *”
“The general assembly shall not remit the forfeiture of the charter of any corporation now existing, nor renew, alter, or amend the same, nor pass any general or .special law for the benefit of such corporation, except upon the condition that such corporation' shall thereafter hold its charter subject to the provisions of this constitution.”
Article 5 is as follows:
“The right of the people peaceably to assemble and petition the government, or any department thereof, shall never be abridged.”
I take it to be undeniable that the “right of petition,” as that expression is used in the constitution of the state, means the right of every being, natural and artificial, to apply to any department of government, including the legislature, for the redress of grievance or the bestowal of right, and is a further guaranty of the enjoyment of such redress or right when obtained, free from all forfeiture or penalty for having sought or obtained it. If these two provisions are read together, it is clear that they mean that the constitution prohibited the legisláture from at all impeding the right of petition, except that in case it remitted a forfeiture to a corporation, or altered its charter, or passed any general or special law for its benefit, it might interfere with that right, so far as to' exact a surrender of all privileges other than those which could be granted under the existing constitution. This was a power given to the legislature in case the alteration or amendment or general or special law was for the benefit of the corporation, and not, as in this case, where the amendment — the special law — was to enable the bank to apply certain securities to the payment of obligations upon which the state was an obligor, and thus to protect the credit of the state.
The question turns upon whether the thing sought was such a thing as is meant and specified in article 234. The thing granted was for the bank, with the assent of the directors appointed by the state, to realize for the state and bondholders out of the stock mortgages by compromise, i. e. without a foreclosure and sale. These stock mortgages were hypothecations of plantations and slaves. The destruction of slavery had reduced the value of the hypothecations more than half, or possibly two thirds. It was neeessary to find a purchaser for the mortgaged property, and at a price equal to the par value of the stock of the subscriber, or for the bank itself to become the purchaser of the property. The
My conclusion, therefore, is that the original charter contemplated and declared that the exemption should he coextensive with the charter, and that the bank has done nothing which can prevent her from insisting upon her capital being exempt from taxation, ⅛ accordance with the terms of her charter. The thing sought by this hill to be preserved from taxation is the shares of the stockholders. The thing exempted in the charter eo nomine, is the capital of the bank. In Bank v. Bouny, supra, the supreme court of this state held that, since the profits were pledged and impounded for the payment of the state’s bonds, taxation by the state of the accumulations and of the shares was prohibited. In New Orleans v. Houston, 119 U. S. 265, 7 Sup. Ct. Rep. 198, the supreme court of the United States held that under the statute prescribing the manner of collecting a tax upon the shares of a corporation, as it then existed, (and it is unchanged,) since the corporation is required to pay the tax, and must look to the dividends upon the si vares and to the stockholders for reimbursement, it was a tax upon the corporation itself. A fortiori would this be true when dividends are prohibited, and the profits or earnings of the corporations are otherwise destined. Let, therefore, the injunction pendente lite issue. *