This is an original proceeding by cer tiorari, whereby the relators seek to quash the record and proceedings of the Board of Equalization of the City of St. Louis in assessing certain of their property for tax-, ation.
The St. Louis Union Trust Company returned for taxation, as of June 1,1923, its property listed as follows:
“Assessment Division.
“Department of Finance.
“William Buder, Assessor.
“St. Louis, Mo., June 1st, 1923.
“Statement of tlie St. Louis Union Trust Company.
“Amount of Capital ............................$ 5,000,000.00
“Amount of Surplus or Reserve ................ 5,000,000.00
“Amount of Undivided Profits, Premiums or Earnings .................................. 932,015.26 •
'Total $10,932,015.26
*243 “Deduct:
“Book Value Corporation Stock ...................... $ 9,912,658.92
“Book Value Real Estate ....... 124,288.15 $10,036,947.07
“Total subject to tax .....................$ 895,068.19”
The item in this list of “Book Value Corporation Stock $9,912,658.92”, is еxplained in an exhibit attached listing about twenty corporations in' which the Trust Company held stock) aggregating in value the sum mentioned. On that list is the following item,:
St. Louis Realty & Security Co., 250 shares Book Value ..................$2,371,215.69
Deduction of the book value of the corporation stock held by the Trust Company, amounting to nearly ten million dollars, was on the ground that the corporations in which that stock was held were taxed on the value of their taxable assеts, and the shareholders in such corporation were not taxed as such.
The District Deputy Assessor, Mr. John H. Bole, who received the list, allowed all the deductions except the item of $2,371,215.69, representing the stock in th© St. Louis Realty & Security Company. He added it to the $895,068.19, returned as subject to taxation. The Trust Company took the matter before the Board of Equalization of the City of St. Louis, and that Board likewise disallowed the deduction claimed by the Trust Company.
The book valuе of the stock in the Realty Company was made up in this way:
Non-taxable securities consisting of U,. S. B,onds, Federal and Land Bank Bonds, Bonds of the Territory of Hawaii, Bonds of the City and County of Honolulu, Bonds issued by the Government of the Philippine Islands, aggregating ............$ 2,033,055.67
Railroad and Industrial Bonds Subject to taxation ......................................$ 242,365.14
Real Estate returned by the Realty Company for taxation June 1, ................................ 95,794.88
Total Book Value ......................■...........$ 2,371,215.69
The Board of Equalization allowed a deduction of the last two items, because the Realty Company as a corporation had paid taxes on them, and found that the item *244 of non-taxable securities should be included in the taxable valuation of the shares held by the Trust Company in the Realty Company, which increased the taxable property of the Trust Company from $895,068.19 to $2,928,123.86. The Board of Equalization in a record of its findings recited, among’ other things, a portion of the articles of association of the Realty Company, showing the purpose of its organization as a business corporation, incorporated under Article 7, Chapter 90, R. S. 1919. It found that the Realty Company was incorporated in 19101, with a capital of $25,000', all of which, with the exception of directors’ qualifying shares, was held by the St. Louis Union Trust Company, and that the Trust Company, as stockholders of the Realty Company, had from time to time prior to January 1, 1923, contributed to the Realty Company for the purpose of providing a surplus for that company, sums of money aggregating $2,345,915.69, and in the year 1923, prior to June first, contributed for the same purpose the sum of $300: It was found then that the amount mentioned, representing the non-taxable securities held by the Realty Company was as stated.
It wаs stated in the petition for the writ that Isaac Orr was, at all times mentioned, a shareholder in the Union Trust Company, owning one hundred shares of the capital stock, and therefore interested as such shareholder on the assessment.
Thus the question for determination is whether the non-taxable securities held by the Realty Company, and not subject to tax in its hands, shall be listed as a part of the taxable valuation of the shares held in said company by the said Trust Company.
I. Section 12775, Revised Statutes 1919, for the purpose of taxation, divides corporations into- two classes; it provides that “the property of manufacturing companies and other corporations, named in Article VII, Chapter 90, . . . shall be assessed and taxed as such companies or corporations in their corporate namеs.”
*245 It then provides that hanks and other1 institutions doing a banking business shall list to the assessor1 all shares held therein at their face value, and the value of the real estate represented by such shares of stock, and “all other values,” belonging to such corporation. The real estate owned by such corporation is assessed to the corporation, and “all other values” so listed are valuеd at their “true money value,” as the values represented by such shares of stock, for the purpose of taxing, them. The tax; on such shares is first paid by the corporation which is reimbursed by the shareholders.
Thus the shares in corporations first mentioned are not taxed, but the corporations pay the tax on all taxable property held by them. The tax on shares of stock in banks and in associations doing banking business, is paid by the shareholders. Under an Act of Congress, a state is authorized to tax the shares in national banks at their actual value. [Van Allen v. Assessors,
It is therefore claimed by respondent that the shares of stock in the Trust Company should be valued for taxation at their actual value, as shown by the . „ ,. •, •, , , property of the corporation, less real estate and such property a.s is otherwise taxed. Since the nontaxable securities held by the Realty Company are not otherwise taxed, their values should go into the list of values making up taxable assets of the Trust Company.
On the other hand the relators plant, their case upon the proposition that shareholders in a business corporation, like the Realty Company, are not taxable on the value of their shares, but all the taxes assеssable in *246 such cases are assessed againt the property of the corporation as such.
These two apparently incontrovertible and contradictory propositions it is our duty to reconcile.
II. As noted above, Section 12775; Revised Statutes 1919, provides that the property of corporations named in Article 7, Chapter 90[, “shall be assessed and taxed as such companiеs or corporations.” [State ex rel. Campbell v. Brinkop,
"When а corporation pays a tax upon its property, then to tax the stockholders on the value of their shares in the corporation would be double taxation. This is true whether an individual or a corporation owns the stock. [State ex rel. Gardner v. Harris,
Shares of stock in a corporation, like the Realty Company, are not taxable because all the taxable property of the corporation is assessed to the corporation and páid by it. Nontaxable property held by the corporation should no more be assessed against its shareholders than against the corporation. To hold otherwise would present this anomaly: ' Here are shares which are not taxable, and the corporation pays no tax on the property they represent, but the shares become taxable when held by another corporation, because the property which gives them value is non-taxable.
The reason why shares in a business corporation are not taxed is because the State already has exhausted its power in that respect. The non-taxable property owned by such corporation is in the same condition as the taxable property after the latter is taxed. In the one case, the State has exhausted its power to tax; in the other case it never had the power to tax. Non-taxable prop *248 erty is non-taxable under all conditions. When it cannot be taxed directly it should not be taxed indirectly.
This conclusion must be sound unless the all-inclusive provision of Section 12775, relating to “all other values” in banking corporations, incidentally is sufficient to overcome the reason of the rule as well as the letter of the same section relating- to the taxing of corporate property other than that of banks.
III. It is stated in some of the cases, that the provision in Section 12775, Revised Statutes 1919, assessing all values, except real estate belonging to banks, against their shareholders, thus including non-taxable securities in such values, was made in order to put state institutions of that kind on a par with national banks. The State took advantage of the permission granted by Congress, and in that statute placed all such institutions, state and national, upon the same footing. Then it becomes important to inquire why Congress saw fit to permit the taxation of stock in national banks whose property consisted of Government bonds? The reason is very well expressed in Van Allen v. Assessors,
“It will be readily perceived, on adverting to the act, that the powers and privileges conferred by it upon these associations (meaning the national banks) are very great powers and privileges;&emdash;founded upon a new use and application of these Government bonds, especially the privilege of issuing notes to circulate in the community as money, to the amount of ninety per centum of the bonds deposited with the Treasurer; thereby nearly doubling their amount for all the opеrations and business purposes of the bank. This currency furnishes means and facilities for conducting the operations of the associations, which, if used wisely and skillfully, ■ cannot but result in great advantages and profits to all the members of the association&emdash;the shareholders of the bank.”
Since a national bank has the privilege of issuing-bank notes up to ninety per cent of the non-taxable bonds *249 which it holds, the value of the shares in that cоrporation is determined, not by the mere income value of the bonds, hut by the property put at the disposal of the hank. Non-taxable securities are taxable as the property of a hank, not as such, but as associated with the privilege. In fact, such tax can hardly be said to be a tax of the non-taxable securities at all, for the Van Allen case goes further and says (l. c. 583), in replying to the argument that the act was unconstitutional:
“But this suggestion is scarcely well founded; for ivere we to admit, for the sake, of the argument, this to be a tax of the bonds of capital stock of the bank, it is but a condition annexed to the enjoyment of this new use and neto application of the bonds; and if Congress possessed the power to grant these new rights and new privileges, which none of the learned counsel has denied, and which the whole argument assumes, then we do not see but the power to annex the conditions is equally clear and indisputable. ’ ’ (Italics ours).
So here is an indication that the tax on the shares of a national bank, whose values are represented by non taxable securities, is not a tax upon those securities at all, but a tax upon the privileges which Congress has conferred upon those institutions in the use of such bonds. We will nоt assume that the Legislature of the State intended to put the state banks upon a different basis in the matter of taxation, or to subject their shares to a taxation for any reason other than that which Congress entertained in permitting the taxation of the property of national banks.
Now the non-taxable securities held by the Realty Company gave the Trust Company and its stockholders no such privilegеs as are enjoyed by a stockholder in a national bank. The Trust Company has no advantage over any other holder of stock in the Realty Company.
Government bonds in the hands of a natural person, bearing a low rate of interest, would be practically worthless if taxed at their actual value, because the tax in many instances would almost equal the interest. But in *250 the hands of a national bank they create an available income, much greater than the interest they hear. These non-taxable securities, held by the Realty Company, would probably be unprofitable in the hands of a natural person who might own them, if they were taxed. They would be equally unprofitable in the hands of the Realty Company if they were taxed. And the shares of stock held in the Realty Company by the Trust Company would be worth littlе if the value represented by them in nontaxable securities were subject to tax. The State would gain nothing beyond the immediate tax, by imposing a tax on these shares. The record does not show the rate of interest borne by the non-taxable securities held by the Realty Company, but it is safe to presume, as a matter of common knowledge, that, if they were taxed, the Realty Company could not afford to hold them and the Trust Company could not afford to have the Realty Company hold them. They would speedily be disposed of to persons who would hold them as non-taxable.
If the expression ‘ ‘ all other values, ’ ’ used in Section 12775 relating to banking corporations, should be construed literally to mean what it says, it would include all stock in corporations which pay taxes on their property. In this case some seven million dollars worth of such stock is not, and could not be, included by the assessor under the interpretation of the section in the authorities cited. Thus the literal meaning* of those words gives way to the purpose expressed in the first part of the section: the tax on the property of business corporations-shall be paid by the corporations and not by the shareholders.
While we must construе a statute to mean what it. says, we cannot conclude that the Legislature, by the comprehensive terms of Section 12775, intended to tax any property out of existence.
Therefore, we are justified in refusing to extend the meaning of the words, “all other values,” beyond their literal import in connection with their context. The “values,” taken into consideration in determining the *251 taxes to be levied upоn the shares in the Trust Company, must be values of property held by it, not values of property held by another corporation in which the Trust Company is a stockholder. Property, held by a business corporation in which the Trust Company holds stock, must be valued for taxation according- to the law relating to such corporation.
IV. It is argued with considerable persistence that the purpose of the Trust Company, in allowing the Realty Company to own the non-taxable securities instead of itself owning them, is to escape taxation and is an actual and constructive fraud upon the State. Since the Trust Company owns practically all the stock in the Realty Company, and in effect owns the securities, the property is held in the name of the Realty Company for the purpose of' avoiding taxation. Cases are cited where a taxpayer has changed the form of his property for a few days to cover the date on which it is assessed, or puts it out of his hands during that time and retains control of it. In all such cases evidence of actual fraud in order to escape taxation is apparent on the face of the transaction.
One case is cited, Holly Springs v. Marshall County,
In the prеsent case there was no finding by the Board of Equalization that there was any such purpose in having the Realty Company hold the non-taxable securities. In fact the investments in those securities had been made over a series of years. The finding of the board was:
*252 “That the St. Louis Union Trust Company, as a stockholder in the St. Louis Realty & Securities Company, from time to time, contributed to the St. Louis Realty and Securitiеs Company, for the purpose of providing a surplus for that company, sums of money which, prior to January 1, 1923, aggregated $2,345,915.69.”
Nothing’ is said about a purpose to avoid taxation. Of course we may infer that the Trust Company authorized the Realty Company to hold the non-taxable securities in order to avoid taxation of such securities if held by the Trust Company. But is that a fraud? Is there any fraud, actual or constructive, in holding property which is non-taxable in a way to avoid taxation?
In every case cited by respondent and the
amici curiae, taxable
property was manipulated in a way to avoid taxation. Here, there was no concealment. There is no fraud in doing a lawful act. A man may change his residence to avoid taxation; he may change the form of his property by putting his money in non-taxable securities, or in the form of property which would be taxed less, and is not guilty of fraud. [Draper v. Hatfield,
Government, state and municipal bonds, and the like, are made non-taxable in order to save to people who must pay them the payment of more taxes. If they were taxed the increased interest which they would bear would have to be paid by higher taxes. This, without any corresponding revenue from the taxation of such securities. It is a matter of common knowledge that taxable securities, although bearing' a higher rate of interest, are the most artful tax-dodgers known to the collector.
We conclude that the Board of Equalization of the City of St. Louis was without authority to add to the taxable list returned by the Trust Company as was done; *253 therefore, the record and proceedings of the said Board of Equalization should he quashed.
It is so ordered.