Counsel for plaintiffs in error also urged in the course of their argument before us that the Farrington Case not only decided that the shareholders were exempt from any further taxation by reason of this clause in the charter, but that the corporation was also thereby exempted, so that the only tax *that could[143 be collected from either the corporation, the shareholders, or both, was the of 1 per cent mentioned in the charter.

rial difference between the two provisions, and shareholder, and that any subsequent revel Je it held that the provision which gives a lien on law of the state which imposes an additional the stock for debts due the bank by the stock-tax on such shares in the hands of shareholdholders before and in preference to other cred-ers impairs the obligation of the contract, and itors, except the state for taxes, materially is void. This compels us to reverse the judgchanges the meaning from that contained in ments herein against the shareholders. the exemption clause quoted in the Farrington Case, and that the language as now quoted naturally implied that the tax referred to in the charter was upon the capital stock, and that the lien reserved by the state for taxes does not refer to the annual charter tax, for the reason that the charter tax was to be paid by the corporation, but that it referred to such | other or general tax as might be levied by the state upon the shares, thus showing that the intention of the state was to reserve to itself Within this general claim of exemption is the right to tax the shares in the hands of the embraced the right to tax the stock in this bank shareholders, and to exempt the stock as the issued since the adoption of the present Constiproperty of the corporation. It was also said tution of Tennessee, in 1870. The charter that it was neither natural nor reasonable to (which was granted long before the adoption of assume that the state reserved a lien on the that Constitution) provides (§ 2) that the capital shares which were the property of the share stock of said company shall be divided into holders to pay a tax that the corporation was shares of $50 each, and when 200 shares shall required to pay. In other words, it could not have been subscribed, and the sum of $1 per be supposed that the state required one person share paid thereon, the shareholders may meet to pay a tax and reserved a lien upon the prop- and elect five directors. Section 4 provides that erty of another to secure its payment, and that the bank may receive on deposit any and all if the lien of the state was reserved for secur sums not less than $1 per week offered as stock ing the payment of the charter tax the state deposits, .. and when such deposits shall was placed in the attitude of having volunta- amount to $50 they may, at the option of the derily postponed itself to every other creditor of positor, become stock in the institution." The the corporation because all creditors must be parties to this suit agreed by stipulation that on paid before the shareholder gets anything. the 5th day of May, 1870 (the day the Constitu 142]These reasons, which commended *them-tion was adopted), the capital stock of the bank selves to the supreme court of Tennessee, were was $200,000, and that on March 17, 1887, and sufficient in the judgment of that tribunal to on sundry days prior to June 1, 1887, it was show a difference in the meaning of the two regularly increased to $600,000, and that on clauses, and it therefore came to the conclusion the 17th day of March, 1890, and on sundry it did notwithstanding the decision of this days prior to June 1, 1890, it was again regucourt in the Farrington Case, and the share larly increased to $1,000,000. The supreme holders were held liable to pay the tax claimed court allowed the claim of exemption and held by the state authorities. that the stock issued since the adoption of the new Constitution stood in all respects as to taxation the same as the stock earlier issued, notwithstanding the provision of the Constitution for the taxation of all property, and that therefore the bank was not liable to the tax claimed by the state authorities. The validity of the claim made by the bank for ex

On the other hand, it is said that the difference in the language used in the two quota tions is wholly immaterial in any event, and that whatever portion of the clause may have been omitted in the record in the Farrington Case, the whole charter of the bank was before the court for its examination, and it cannot be supposed that in a case of such impor-emption of the new as well as of the old stock tance. argued by such eminent counsel as those who appeared in that case, there was anything overlooked or omitted. The claim is therefore made that the court must have regarded the portion of the clause omitted in the record as immaterial.

was therefore admitted by the state court as a right protected by the Federal Constitution.

The plaintiffs in error claim that as to this portion of the decision of the supreme court of Tennessee it cannot be reviewed by this court, because it was in favor of the bank. The We do not think under the circumstances bank by its answer to the bill drew in questhat we ought now to come to a different con- tion the validity of the acts of the assessing clusion upon the question of exemption from officer of the state acting under the authority that which was arrived at by this court in the of the general statutes of Tennessee, providing Farrington Case. As the whole charter was *for the assessment of its property, on the[144 then before the court, we are not prepared to ground that the authority exercised by the assay that its force was misunderstood, or that sessing officer under the Tennessee statutes there was an omission by the court to consider impaired the obligation of the contract entered all the language of the exemption clause sim-into between the state and the bank in its ply because a portion of it is omitted in the quotation from the record made in the opinion therein delivered. We are not inclined, therefore, to overrule or distinguish the Farrington Cuse, and we must now hold that the charter clause of exemption limits the amount of tax on each share of stock in the hands of the

charter, and the decision of the supreme court of Tennessee was against the validity of the authority so exercised under those general revenue laws.

The state court decided in favor of the exemption claimed by the bank by virtue of its contract with the state. The protection of

the constitutional provision was thus accorded | profits in such bank, banking association, or it.

We are of the opinion that this court cannot in this case review that decision.

U. S. Rev. Stat. 709, gives jurisdiction to this court, among other things, upon writ of error to review the final judgment or decree in any suit in the highest court of the state in which a decision in the suit could be had, where is drawn in question the validity of a statute of, or authority exercised under, any state, on the ground of their being repugnant to the Constitution, treaties. or laws of the United States, and the decision of the state court is in favor of their validity. Here the decision of the state court is against the valid ity of the acts of the assessing officer acting under the authority of the revenue laws as applied to the property of the bank, and is in favor of the exemption claimed under the contract.

In Murdock v. Memphis, 87 U. S. 20 Wall. 590 [22: 429], it was held that, under the provisions of the act of February 5, 1867 (14 Stat. at L. 385, of which U.S. Rev. Stat. § 709, is sub stantially a transcript), it was essential to the jurisdiction of this court to review a question decided in a state court, that one of the questions mentioned in the Federal statute must have been raised and presented to the state court, and that it must have been decided by the state court against the right claimed or asserted by plaintiff in error under the Constitution, treaties, laws, or authority of the United States. To the same effect are New Orleans Waterworks Co. v. Louisiana Sugar Ref. Co. 125 U. S. 18 [31: 607]; St. Paul, M. & M. R. Co. v. Todd County, 142 U. S. 282 [35: 1014]. 145] *We cannot, therefore, review the decision of the state court allowing the claim of exemption from taxation of the capital stock of the bank, although the consequence is that in these cases both the capital stock and the shares thereof in the hands of the shareholders escape any taxation other than the charter tax. Accepting, as we do, the authority of the Farrington Case for the point therein decided, which exempts the stock in the hands of the shareholders from any further tax than that which is provided for in the charter, and being concluded in this case by the decision of the supreme court of Tennessce in favor of the exemption of the capital stock of the corporation, we are not here called upon to examine the validity of the claim of the bank as to the decision of this court in cases preceding that of Farrington, where counsel allege it has been determined that both the corporation and the shares of stock in the hands of the share holders are exempt from further taxation under clauses which are said to be similar to those in the charter under consideration.

In this case of Bank of Commerce v. State of Tennessee for the Use of the City of Memphis (the first of the above-entitled ac tions), the supreme court held that the bank was liable to pay the municipal taxes under the revenue law (Acts 1891 (Extra Sess.) chap. 26, § 3), above mentioned, upon its surplus and undivided profits. Section 3 of that act has already been referred to, but the material portion of it is bere set forth, and is as follows:

"Provided that the surplus and undivided |

other corporation shall be assessable to said bank or other corporation, and the same shall not be considered in the assessment of the stock therein."

The corporation plaintiff in error demands the same exemption from taxation on its surplus that has been accorded it for its capital stock, and it bases its contention upon the same clause of exemption in its charter. We think it cannot be sustained as to the surplus, which we believe is taxable under the law above quoted. This whole demand of exemption from taxation made by the bank and its shareholders must be considered with [146 reference to the general rule governing claims of that nature. It is well known, has long existed, and is undoubted. New Orleans City & L. R. Co. v. New Orleans, 143 U. S. 192, 195 [36: 121, 122]; Vicksburg, S. & P. R. Co. v. Dennis, 116 U. S. 665 [29: 770], and many cases there cited; Farrington v. Tennessee, 95 U. S. 679, 686 [24:558, 560]: West Wisconsin R. Co. v. Trempealeau County Supers. 93 U. S. 595 [23: 814]; Tucker v. Ferguson, 89 U. S. 22 Wall. 527 [22: 805].

These cases show the principle upon which is founded the rule that a claim for exemption from taxation must be clearly made out. Taxes being made the sole means by which sovereignties can maintain their existence, any claim on the part of any one to be exempt from the full payment of his share of taxes on any portion of his property must, on that account, be clearly defined and founded upon plain language. There must be no doubt or ambiguity in the language used upon which the claim to the exemption is founded. It has been said that a well-founded doubt is fatal to the claim; no implication will be indulged in for the purpose of construing the language used as giving the claim for exemption, where such claim is not founded upon the plain and clearly expressed intention of the taxing power.

The capital stock of a corporation and the shares into which such stock may be divided and held by individual shareholders are two distinct pieces of property. The capital stock and the shares of stock in the hands of the shareholders may both be taxed, and it is not double taxation. Churchill v. Utica ("Van Allen v. Assessors") 70 U. S. 3 Wall. 573 [18: 229]; New York v. Tax Comrs. 71 U. S. 4 Wall. 244 [18: 344], cited in Farrington v. Tennessee, 95 U. S. 687 [24: 560].

This statement has been reiterated many times in various decisions by this court, and is not now disputed by any one. In the case last cited, Mr. Justice Swayne, in delivering the opinion of the court, enumerated many objects liable to be taxed other than the capital stock of a corporation, and among them be instanced: (1) the franchise to be a corporation; (2) the accumulated earnings; (3) profits and dividends; (4) real estate belonging to the corporation and necessary for its business; and he adds that "this enumeration shows the searching *and comprehensive taxation to [147 which such institutions are subjected where there is no protection by previous compact." And in Tennessee v. Whitworth, 117 U. S. 129 [29: 830], at page 136 [832], Mr. Chief Justice

the value of his shares to some extent, but that is not the same as if a tax had been laid upon those shares. In levying the charter tax it was conceded that the tax has always been measured by the par value of the shares of stock, while the actual value of such shares, because of the large surplus owned by the bank, may have been very much greater, and the statute under which the surplus is taxed provides that such surplus must not be considered in the assessment upon the stock; so that provision is made whereby a tax upon the surplus and the charter tax upon the shares of stock will neither be double nor unjust taxation. Although a surplus may be required by the national banking act, and also by the laws of good and safe banking, yet we do not perceive that this fact has any material effect upon the question.

The surplus belonging to this bank is "cor porate property." and is distinct from the capital stock in the hands of the corporation. The exemption, in terms, is upon the payment of an annual tax of of 1 per cent upon each share of the capital stock, which shall be in lieu of all other taxes. The exemption is not, in our judgment, greater in its scope than the subject of the tax. Recognizing, as we do, that there is a different property in that which is described as capital stock from that which is described as corporate property other than We are therefore of opinion that the surplus capital stock, and remembering the necessity was properly taxed, and that the bank's claim of there is for a clear expression of the intention exemption as to such surplus is without foundato exempt before the exemption will be granted, tion in law. *These views lead to a revers [149 we must hold that the surplus has not been al of sa much of the judgment as is against the granted exemption by the clause contained in shareholders, and the cases are therefore rethe charter under discussion. The very name manded to the state court for further proceedof surplus implies a difference. There is capi-ings in conformity with this opinion. tal stock and there is a surplus over, above, and beyond the capital stock, which surplus is the property of the bank until it is divided among stockholders.

The case of Bank of Commerce v. Tennessee, 104 U. S. 493 [26: 810], does not hold to the contrary of this doctrine. This question was not therein discussed or decided. The ques tion which was decided related only to the taxa. tion of real property not used by the bank in its business, and it was held liable to taxation.

Mr. Justice White concurs in so far as the decree recognizes the exemption of the shares of stock from all taxation except that enumerated in the contract, but dissen's from the conclusion as to the power to tax the surplus and undivided profits.

COUNTY OF SHELBY, CITY OF Memphis,
W. B. HENDERSON, ET AL., Appts.,

v.

UNION & PLANTERS' BANK.

(See S. C. Reporter's ed. 149–161).

State decisions, when not binding-capital stock of corporation-exemption of bank from taxa. tion.

state statute as to what contract is contained therein, and whether the state has passed any law impairing its obligation, is not bound by the previous decisions of the state courts, except when NOTE. As to direct taxes, see note to Scholey v. Rew, 23: 99.

As to power of states to tax, see note to Dobbins v. Erie County Comrs. 10: 1022.

The case is no authority for the proposition contended for here, namely, that the whole surplus of this bank is exempt from taxation. No individual shareholder has any legal right to claim any portion of this surplus. Until divided by the board of directors it remains the property of the corporation itself, and in the sense in which the words "capital stock" are 148]* used in the exemption clause the surplus does not form any part thereof. It is said that the purpose of incorporating a bank is to ena-1. This court when construing the meaning of a ble the institution to accumulate profits and to make dividends out of them, and that the dividends cannot be made until the profits have been accumulated, and that under this ruling profits would come under the description of surplus to be taxed before distribution in a div. idend. It is true that dividends cannot rightfully be made until profits have accumulated; but it is one thing to accumulate profits each six months or annually and then divide them among the stockholders by way of dividends, and quite another thing to accumulate profits year after year, and, while still declaring dividends, accumulate a surplus which is not so divided. The sums accumulated by way of profits between the regularly recurring divi dend days might not be regarded as surplus, provided those profits were regularly distributed in dividends. The surplus in this case is clearly not of that kind which has been saved for the purpose of being distributed by dividends. It may be true that the general effect of a tax on this surplus might indirectly operate upon the shareholder by possibly lessening

does not impair obligation of contracts; taxation of shares of national banks and other corporations,—

That taxation of stock or shares in corporation

see note to Providence Bank v. Billings, 7:939.

As to exemption from taxation; whether a contract or not; not implied,-see note to Tucker v. Ferguson, 22: 805.

As to when an injunction to restrain the collection

of a tax will be granted, see note to Dows v. Chicago, 20: 65.

As to when tares illegally assessed can be recovered

back, see note to Erskine v. Van Arsdale, 21: 63.
to declare state law void as in conflict with state
As to jurisdiction of United States Supreme Court
Constitution; to revise decrees of state courts as to con-
struction of state laws.-see notes to Hart v. Lam-
phire. 7 679; and Commercial Bank of Cincinnati v.
Buckingham, 12: 169.

they have been so long and so firmly established as to constitute a rule of property, but will decide independently whether there is a contract and whether its obligation is impaired.

2. There is a clear distinction between the capital stock of a corporation and the shares of stock of such corporation in the hands of its individual

shareholders, so that the taxation of the one property is not the taxation of the other. 8. A charter giving a bank a lien on shares of its capital stock for debts of shareholders, and imposing a certain tax on shares of stock to be in lieu of all other taxes, exempts such shares in the hands of shareholders from further taxation, but does not exempt the corporation from taxation on its capital stock or surplus or accumulated profits.

[No. 766.]

to have been surrendered. The exemption of the one does not by implication exempt the other.

Ohio L. Ins. & T. Co. v. Debolt, 57 U. S. 16 How. 416 (14: 997); Minot v. Philadelphia, W. & B. R. Co. ("Delaware R. Tax"), 85 U. S. 18 Wall. 225 (21: 894); Erie R. Co. v. Pennsylvania, 88 U. S. 21 Wall. 498 (22: 598); Tucker v. Ferguson, 89 U. S. 22 Wall. 575 (22: 816); Farrington v. Tennessee, 95 U. S. 686 (24: 560); Vicksburg, S. & P. R. Co. v. Dennis, 116 U. S. 665 (29: 770); Tennessee v. Whitworth, 117 U. S. 136 (29: 832).

An accumulated surplus is a distinct and separate subject of taxation.

New York v. Tar Comrs. 94 U. S. 415 (24: 164); Central Nat. Bank v. United States, 137 U. S. 355 (34: 703); First Nat. Bank v. PeterArgued January 20-22, 1896. Decided March borough, 56 N. H. 38, 32 Am. Rep. 416; State,

2, 1896.

North Ward Nat. Bank, v. Newark, 39 N. J. L. 380: State v. Bank of Smyrna, 2 Houst. (Del.)

APPEAL from a decree of the Circuit Court 99, 73 Am. Dec. 699.

of the United States for the Western District of Tennessee granting an injunction at the suit of the Union & Planters' Bank, to restrain the County of Shelby et al. from collecting any tax upon the surplus of the bank on the ground of a clause in the charter of the bank exempting such surplus from taxation. Reversed, and cause remanded with directions to dismiss the suit.

The facts are stated in the opinion.
Messrs. S. P. Walker, C. W. Metcalf, and
F. T. Edmondson, for appellants:

The only effect of the charter of the defendant bank is to exempt the shareholders, as in dividuals, from taxation on account of their shares of stock therein. The charter tax is laid upon the shares of stock, and the words "in lieu of all other taxes" mean in lieu of all other taxes upon the same subject of taxation -to wit, the share of stock. There is no exemption, express or implied, of the capital stock or franchises of the corporation.

Farrington v. Tennessee, 95 U. S. 679 (24: 558); Tennessee v. Whitworth, 22 Fed. Rep. 80, 117 U. S. 136 (29: 833); New Orleans v. Houston, 119 U. S. 265 (30: 411); Churchill v. Utira, ("Van Allen v. Assessors") 70 U. S. 3 Wall. 573 (18: 229); New York v. Tax Comrs. 71 U. S. 4 Wall. 244 (18: 344); Jones & N. Mfg. Co. v. Com. 69 Pa. 137; Union Bank v. State, 9 Yerg. 490; Memphis v. Farrington, 8 Baxt. 539; Cooley, Taxn. (1986) § 231.

The capital stock and shares of stock are distinct subjects of taxation; and, in the absence of a charter or contract exemption, the state would have had the undoubted power to 1x both the capital stock and the shares of stock.

Union Bank v. State, supra; Memphis v. Ensley, 6 Baxt. 553, 32 Am. Rep. 532; Nashville Gaslight Co. v. Nashville, 8 Lea, 407; South Nashville Street R. Co. v. Morrow, 87 Tenn. 406, 2 L. R. A. 853; Farrington v. Tennessee, supra; New Orleans v. Houston, 119 U. S. 277 (30: 415); Cooley, Taxn. § 231.

The power to tax both the capital stock and the shares of stock, in the absence of charter exemption, being undoubted, it must be adjudged that the power as to both subjects of taxation remains unimpaired, except to the extent that it appears, in unmistakable terms,

|

Messrs. William H. Carroll and Isham G. Harris, for appellee:

The legislature of Tennessee had the power under the state Constitution of 1834 to grant to corporations created by it exemption from taxation, and such exemption must either confer total or partial immunity from taxation, and extend for any length of time the legisiature might deem proper.

Knoxville & O. R. Co. v. Hecks, 9 Baxt. 445; State v. Butler, 13 Lea, 400; State, Memphis. v. Butler, 86 Tenn 614; University of the South v. Skidmore, 87 Tenn. 156; Memphis v. Union & P. Bank, 91 Tenn. 546; Memphis v. Memphis City Bank, 91 Tenn. 577; Farrington v. Tennessee, 95 Ú. S. 679 (24: 558); Tipton County v. Locomotire & Mach. Works, 103 Ú. S. 523 (26: 341); Bank of Commerce v. Tennessee, 104 U. S. 493 (26: 810); Hazen v. Union Bank, 1 Sneed, 115; Mobile & O. R. Co. v. Tennessee, 153 U. S. 499 (38: 798).

From the words employed to express the immunity from taxation, it is apparent the parties intended it should include all taxes; otherwise greater burdens are at once imposed on the bank in an excise tax, and the right to impose additional taxes reserved.

Tennessee v. Whitworth, 117 U. S. 137 (29: 832); Platt v. Union P. R. Co. 99 U. S. 48, 60 (25: 424, 428).

The taxes set out in the bill are direct taxes upon the funds out of which dividends must be declared, and are in substance as taxes on the shares of stock.

Postal Teleg. Cable Co. v. Adams, 155 U. S. 688 (39: 311), 5 Inters. Com. Rep. 1; Pollock v. Farmers' Loan & T. Co. 157 U. S. 429 (39:759).

The charter necessarily exempts all the prop erty of the bank required for the successful prosecution of its business.

The acquisition of surplus and undivided profit is indispensable to such prosecutiontherefore they are within the exemption.

Wilmington & W. R. Co. v. Reid, 80 U. S. 13
Wall. 264 (20: 568); Cook v. State, Camden & B.
C. R. Co. 33 N. J. L. 475; State, Camden & A.
R. & Transp. Co., v. Mansfield Comrs. 23 N. J.
L. 510; State, New Jersey R. & Transp. Co. v.
Hancock, 35 N. J. L. 537; State v. Flavell, 24
N. J. L. 370; Milwaukee & St. P. R. Co. v. Craw-
'ford County Supers. 29 Wis. 116; State v. Ross,

24 N. J. L. 497; Schuylkill Nav. Co. v. Berks | decisions of the state courts, whether there is
County Comrs. 11 Pa. 202; State, New Jersey a contract and whether its obligation is im-
R. & Transp. Co., v. Newark, 26 N. J. L. 519; paired. Louisville & N. R. Co. v. Palmes, 109
State, Elizabeth Libary A880., v. Leester, 29 N. U. S. 244, 256 [27: 922, 926]: Vicksburg, S. &
J. L. 541.
P. R. Co. v. Dennis, 116 U. S. 665–667 [29: 770,
7711; Mobile & O. R Co. v. Tennessee, 153 U.
S. 486, 492 [38: 793, 795].