Daniel v. Bank of Clayton County

154 Ga. 282 | Ga. | 1922

Atkinson, J.

The decision depends mainly upon a proper construction of section 10 of the general tax act of 1918 (Acts 1918, pp. 43, 78) which is: “Be it further enacted by the authority aforesaid, that no tax shall be assessed upon the capital of banks, or banking associations, organized under the authority of this State, or of the United States, located within this State; but the shares of the stockholders of the banks or banking associations, whether resident or nonresident owners, shall be taxed in the county where the banks or banking associations are located, and not elsewhere, at their full market value, including surplus and undivided profits, at the same rate provided in this act for the taxation of monied capital in the hands of private individuals. Provided, that nothing in this section contained shall be construed to relieve such banks or banking associations from the tax on- all real estate held or owned by them; but they shall return said real estate at its fair market value in the county where located. Provided further, that where real estate is fully paid for, the value at which it is returned for taxation may be deducted from the market value of their shares; and if said real estate is not fully paid for, only the value at which the equity owned by them therein is returned for taxation shall be deducted from the market value of their shares. The banks or banking associations themselves shall make the returns of the property and the shares herein mentioned, and pay the taxes herein provided. Provided further, that all property used in conducting or operating a branch bank shall be returned for taxation in the county where such branch bank may be located. The true intent and meaning of this section is that the bank itself shall return for taxation and pay the taxes on the full market value of all shares of said bank stock.” In adopting this law the legislature, knowing that shares of the capital stock in such corporations were liabilities of the corporations as distinguished from their assets (Mayor &c. of Macon v. Macon Construction Co., 94 Ga. 20.1, 21 S. B. 456), expressly required that such corporations should return for taxation and pay the taxes on “the shares of the stockholders” of such institutions. In making this provision it was also known that, according to the decisions of this court, the corporation would have a common-law right of reimbursement against the stockholders for taxes paid out on account of their shares of stock. Georgia State B. & L. Asso. v. Savannah, 109 Ga. 63 (35 S. E. 67). In these circumstances the requirement that the corporation should return for and pay the taxes on the shares of stock of the shareholders in the corporation was evidently intended merely as a convenient method, which is practiced in many jurisdictions, of taxing the property of the shareholders.

Construing the statute as indicated in the preceding division, the law is plain that the bank did not have the right to deduct from its tax return the value of the non-taxable United States liberty bonds and United States treasury certificates which it held as an investment. These properties of the corporation of course entered into and enhanced the value of the shares of stock in the corporation which it had issued to its stockholders; but the fact that the value of such shares of stock was no enhanced would not authorize a reduction of the amount of the non-taxable securities from the value of the shares of the capital 'stock issued to the stockholders. The early ease of Van Allen v. Assessors, 3 Wall. 573 (18 L. ed. 229), involved the right of a State to tax the shares of the capital stock in a national bank whose entire capital was invested in non-taxable United States securities; and, recognizing a distinction between the property of the corporation represented by its capital and thé property of the shareholders represented by their shares in the capital stock, it was held that the State could levy the tax. In the course of the opinion it was said: “ The tax on the shares is not a tax on the capital of the bank. The corporation is the legal owner of all the property of the bank, real and personal, and within the powers conferred upon it by the charter, and for the purposes for which it was created, can deal with the corporate property as absolutely as a private individual can deal with his own. . . The interest of the shareholder entitles him to participate in the net profits earned by the bank in the employment of its capital, during the existence of its charter, in proportion to the number of his shares, and, upon its dissolution or termination, to his proportion of the property that may remain of the corporation after the payment of its debts. This is a distinct independent interest or property, held by the shareholder like any other property that may belong to him. Now, it is this interest which the act of Congress has left subject to taxation by the States, under the limitations prescribed.” In Lionberger v. Rouse, 9 Wall. 468 (19 L ed. 721), it was said: “ It is no longer an open question in this court, since the decision in the case of Van Allen v. The Assessors, 3 Wallace, 573, that the shareholders in a National bank are subject to State taxation, although the entire capital of the bank be invested in the bonds of the United States, which cannot be taxed by State authority.” See also Cleveland Trust Co. v. Lander, 184 U. S. 111 (22 Sup. Ct. 394, 46 L. ed. 456). The later case of Home Savings Bank v. City of Des Moines, 205 U. S. 503 (27 Sup. Ct. 571, 51 L. ed. 901), recognized the soundness of the decisions in the cases of Van Allen and Cleveland Trust Company, supra, but distinguished those cases from the case then under consideration, saying: “ The theory sustaining these cases is that the tax was not upon the corporations’ holdings of bonds, but on the shareholders’ holding of stock; and an examination of them shows that in every case the tax was assessed upon the property of the shareholders, and not upon the property of the corporation. There is nothing in them which justifies the tax under consideration here levied, as has been shown, on the corporate property.” The defendant in error relies mainly on the decision in the Home Savings Bank case and quotes liberally from the opinion rendered therein. It appears from the opinion that there was no departure from the principles of law announced in the previous decisions of the Federal Court above cited, but the decision was made to turn upon a construction of the statute under which the tax was levied, the court holding that under a proper construction the statute there involved purported to require the corporation to return and pay the taxes on the shares of its capital stock as property of the corporation, without any right to reimbursement from the shareholders for taxes paid'on shares of stock held by them. Upon this basis it was held that the corporation had the right to deduct from its return of its corporate capital stock the value of the non-taxable assets of the corporation. That case is distinguishable from the case now under consideration, because the statutes are different and are construed differently under the decisions of this court. In Georgia State B. & L. Asso. v. Savannah, supra, it was said: “ This is not a tax against the corporation. The shares owned by the stockholders are the individual property of the stockholders, and are liabilities of the corporation, and not assets. . . It may be that under such circumstances the corporation would make payment of this tax a charge on its own funds, but it is not bound to do so. As was said by Chief Justice Bleckley in the case' of McGowan, supra, ‘ Of course, while the association is taxed upon this stock, it has or may have recourse to the owners for reimbursement . . ; the corporation is required to return it and pay the tax on it; but if it is necessary to equalize the matter as among the stockholders, the corporation can require the stockholder to pay the tax to it. This is simply a scheme to reach this class of stock conveniently, by making the corporation return it and pay taxes upon it, instead of the owner of the stock; . . . the adjustment of the matter to reach equality, among the stockholders being left to the corporation and the stockholders to make among themselves/ So that the tax imposed by this section is against the individual stockholder on his property, and, as a matter of law, there is no provision made for any kind or character of taxation by the act we are considering, against the property of building‘and loan associations. Judge Cooley, in his work on Taxation (2d ed.), 231, says: ‘A tax on the shares of stockholders in a corporation is a different thing from, a tax on the corporation itself or its stock, and may be laid irrespective of any taxation of the corporation when no contract relations forbid/ Citing 1 Cush. 142; 26 N. J. 181; 47 Pa. St. 106; 21 N. Y. 449; 39 Ill. 130; 15 Ind. 150; 3. Wall. 573; 15 Wall. 300; 8 Lea, 406; 32 La. An. 157. There can, therefore, be nothing in the claim in this case that the shares of stock taxed represent the property of the corporation.”

. It follows from what has been said that the judge erred in granting the injunction.

Judgment reversed.

All the Justices concur, except Mines, J., disqualified.