81 N.J.L. 45 | N.J. | 1911
The opinion of the court was delivered by
The Tax act of 1903 evinces an intent to tax at its true value all property not exempt. Section 2 enacts that "all property, real and personal, within the jurisdiction of this state, not expressly exempted b_y this act, or excluded from its operation, shall be subject to annual taxation at its true value under this act.” Section (5 requires the assessor.
If we look merely at the language of the act itself, the city’s contention seems the proper one. Personal property and real estate are both to be assessed at true value, and a statutory definition is attempted of the expression as used with reference to real estate. It is the price at which the property would sell at a fair and bona fide sale by private contract. Unless we are to assume that a. different meaning is to he attributed to the words when used in the twelfth section from that expressly given to them in the sixth, true value of personal property must mean market value under ordinary and normal conditions. It can hardly he that an expression which in the second section is applied to both real and personal property without distinction, takes different meanings in section 6 and section 12. This view is sustained by a careful examination of the language of section 17, which provides for the taxation of shares in national banks. We pass for the present the earlier history of the legislation and compare the language of the act with that of its immediate predecessor—the act of 1900. Pamph. L., p. 296. The latter provided that the amount of the assessment for the hank’s real estate should be
We proceed to consider the arguments urged Cor a different view. Section 17 of the act of 1903 requires the officers of the bank to give the assessor a statement of the amount of the assets, capital stock and surplus. This is thought to indicate that the legislature meant to limit the assessor to these three elements as +he basis of ail ascertainment of the true value. Such is not the necessary nor even the probable inference. It is probable that the intention was to compel the bank officers to furnish information which was essential in order to reach the true value with accuracy. True value is not always to be ascertained by the. simple method of reference to selling price in the market. Special circumstances may canso the market value to he either higher or lower than the true value. Stock may sell beyond its trae value because of a temporary artificial demand due to a corner in the stock; or, in spite of a large defalcation, not yet known to the public. A currency panic, a false rumor, or ignorance of the existence of assets not shown by published statements may cause the stock to sell below its fine value. The truth or falsity of some of these circumstances, which unduly exalt or depress the market price, may be tested by a truthful statement of assets, capital stock and surplus. It was therefore quite proper for the legislature to require such information to he furnished to the assessor. By section 17 of the act of 1866, the assessor, in addition to the statement of the bank officers, was authorized to take such other moans as might be in his power to ascertain the true amount for which the stockholders should be taxed. This provision is omitted from the act of 1903, and we are asked to infer from this omission that the legislature meant to confine the assessor to the statement of assets, capital and surplus furnished by the bank officers. We are unable to draw this inference in the face of section 14 of the act of 1903, which empowers the assessor to examine under oath any person or officer of a corporation touching the taxable property of
The language of section 17 of the act of 1903, repeated in the act of 1905 (Pamph. L., p. 457), “total valuation of the shares of stock assessed against the stockholders,” makes it necessary to ascertain the true value of each share, and multiply this by the number of shares to ascertain the total valuation from which the deductions are to be made. It is argued that the total value cannot be the market value for the reason that there is no such thing as a market value for the whole of the capital stock of a bank. We are not prepared to concede that there never is a market value for the whole stock, but no doubt the case would be exceptional. The true answer to this argument is that the legislature is contemplating what normally happens. Under the usual circumstances, there is a market value for all the stock that offers. If the argument is valid, the best of investment stocks have no market value since it would be impossible to convert them all into cash at once; and even the total of the deposits in the strongest banks is valueless since the effort to draw all at once would surely fail. What was in the mind of the legislature was the situation that exists in the ordinary ebb and flow of a normal market.
We think, therefore, that upon a proper construction of the Tax act, the true value at which shares of stock in a national bank are required to be assessed is, under ordinary and normal conditions, their exchange value in the market, and not their book or liquidation value; from the total valuation of all the shares there must be made such deductions as the statute permits. We have reached this conclusion by the considerations above presented independent of authority. It is gratifying to
Our statute, in accordance with the act of congress, enacts that the assessment and taxation of shares of stock in national banks shall not be at a greater rate than is made or assessed upon other moneyed capital in the hands of individuals in this state. Pamph. L. 1905, p. 457. It is therefore necessary to determine whether section 17 of the Tax act of 1903, as we construe it, is in accord with this requirement. The only ground on which it is challenged is that trust companies are assessed at a lower rate. The provision as to trust companies is found in section 18 of the act, which enacts that every trust company shall be assessed in the taxing district where its office is situated upon the full amount of its capital stock paid in and accumulated surplus. We must take it for granted, since the decision in Mechanics National Bank v. Baker, 36 Vroom 549, that trust companies do a business which is in competition with the business of. national banks. The latter therefore cannot be assessed at a greater rate than the former. It is not essential that the same method of taxation should be adopted, if, in fact, the rate that falls upon trust companies is equal to that imposed upon shares in national banks. Mercantile National Bank v. Mayor of New York, 121 U. S. 138. In that case a local tax was imposed upon trust companies assessed on the actual value of their capital stock, and a state franchise tax was imposed based upon their income. The method differed from that permitted in the case of national banks where the assessment was upon the shares of stock held by individual stockholders; but the Supreme Court held that taxation in this mode was at least equal to that upon the shares of the individual stockholders, and that there was, therefore, no illegal discrimination against national banks. Under our Tax act of 1903, the method of assessing trust companies and national banks is different, but the question to be decided is whether this difference is such as to amount to a discrimination against the national banks. We think it must be conceded that there would be such discrimination if trust companies were assessable only upon the
We do not overlook the decision of this court in Fidelity Trust Co. v. Board of Fqualization of Taxes, 48 Vroom 128. There is language in that opinion which conflicts with the view we have expressed, but an examination of the ease shows that the question was not directly involved or presented. The tax imposed upon the trust company in that ease had been based upon its capital and accumulated surplus, and it is noteworthy that the report shows, at the bottom of page 128, that the assessment was upon the capital and accumulated surplus and not upon capital stock and accumulated surplus as the act required. The tax thus assessed had been paid, and no question arose with reference thereto. The city thereupon undertook to assess the trust company in addition with the value of shares of national bank stock held by it, and the court held that these shares had already, in effect, been taxed, because the whole amount of the assets of the bank had been valued and its debts had been deducted therefrom, so that it was taxed like an individual upon its net worth. Counsel for the city had apparently argued that no harm was done to the trust company by this method, since, if it had been property taxed, the valuation would have been very much higher than it was; and it was in answer to this argument, and solely in answer to this argument, that this court used the language above referred to. It seems probable that the question was but little discussed, as was quite natural in view of the fact that the tax as assessed upon capital and surplus had been already paid, and the question involved was the taxability of certain specific
One argument remains to be considered. The act provides that no franchise tax shall be imposed upon trust companies, and it is said that in assessing the shares of national banks at their market value the value of the franchise is necessarily included. That is the fact; but it applies equally to the assessment of the capital stock of trust companies under the rule of Fidelity Trust Company v. Vogt which we have herein adopted- The express prohibition of a franchise tax on trust companies is not in point. The words “franchise tax,” in our legislation, have a special meaning, and signify the annual license fee exacted by the state for the privilege of doing business in corporate form. Honduras Company v. Board of Assessors, 25 Vroom 278, a ease which has been repeatedly cited and followed. Such a tax is in no sense a property tax. Section 5219 of the United States Bevised Statutes, sections 17 and 18 of our Tax act of 1903 and the act of 1905, above cited, deal only with the property tax. None of them assumes to deal with a payment, which is not really a tax, but a compensation paid 1o the government, state or national, as the case may be, for a special privilege—a license fee. This license fee is exacted by the state for the special privilege which the state grants to he a corporation, and the state may exact it or not as it chooses. The national government might exact a similar fee from the national hanks, which it creates. In fact it has not done so. In this respect national hanks and trust companies stand on the same level. Whatever value the franchise of either may add to the property of the shareholders is reached by the property tax imposed in the ease of national banks upon tire shares and included in the total valúa
The judgment of the board of equalization reducing the assessment must be set aside, with costs. It is agreed that if this is done the amount fixed by the county board is correct. The stock, therefore, should be assessed at that valuation.