# Memphis City Bank v. Tennessee/Opinion of the Court

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* Opinion of the Court
United States Supreme Court
161 U.S. 186
Memphis City Bank v. Tennessee
The question in this case is whether the corporation plaintiff in error could, while availing itself of the general act (chapter 190, Acts 1887, above referred to), change its business from that of insurance, as provided in its charter, granted in January, 1870, to that of banking, and still retain the exemption from the payment of any taxes other than those provided for in section 7 of that charter. After such change of business, and by virtue of section 14 of the general revenue law of the state, passed in 1887, the state assumed to tax the plaintiffs in error at a greater rate than that provided for in the original charter, and it is to collect these taxes that this suit is brought. At the time the act of 1887 (chapter 190) was passed, under which the corporation plaintiff in error claimed the right to change its business (while also at the same time claiming that right under its original charter), the constitution of Tennessee, adopted in 1870, was in full force. That constitution provided (article 2, § 28) that 'all property, real, personal or mixed, shall be taxed, but the legislature may except such as may be held by the state, counties, cities or towns.' By section 8, art. 2, of the constitution of 1870, it was provided, among other things, 'that no corporation shall be created or its powers increased or diminished by special laws, but the general assembly shall provide by general laws for the organization of all corporations hereafter created, which laws may at any time be altered or repealed, and no such alteration or repeal shall interfere with or divest rights which have become vested.'
Under these two provisions of the constitution, giving effect to both, the legislature could not, even by general law, grant or preserve an immunity from taxation, not otherwise existing, total or partial, to the capital stock or shares of a corporation. The twenty-eighth section of the second article of the constitution requires that all property shall be taxed, except such as is exempt by that section, or is by that section authorized to be exempt by the legislature; and the kind of property in question in this case does not come within either class spoken of in that section. We think that the change from the business of insurance to that of banking is a material and radical change, and to such an extent that the legislature, under the constitution of 1870, would have no power to continue an exemption from taxation granted by the charter to the insurance company, so that it should continue to exist in favor of a company exercising an exclusively banking business. The legislature was powerless, in the face of the constitutional provision mentioned, to provide 'that the exercise of any of the granted powers should not operate to forfeit any franchise, right, power, privilege or immunity' granted in the original charter. The supreme court of Tennessee has so construed the constitution. 91 Tenn. 574, 19 S. W. 1045.
That court holds that the legislature could not, by enacting such a proviso, in connection with the authority given by it to a corporation to change its business, transfer an exemption from taxation granted to that corporation, while exercising the powers originally granted to it by its charter prior to the adoption of the constitution of 1870.
The substantial effect of chapter 190, Acts 1887, when made applicable to any company having, by its charter, the right to receive moneys in trust or otherwise, was to grant a new charter, to the extent of granting banking powers, and the company, availing itself of the privileges mentioned in such act, took them subject to the constitution and laws then in force. It was not, properly speaking, a mere act increasing the powers of the corporation, so that such corporation could perform other acts of a nature similar to those which it was already authorized to perform by its original charter. It was not an increase, but it was a change, of powers, to the extent that those granted by the act of 1887 were of a totally different character and nature. An insurance corporation differs radically from a banking corporation, and the powers given to one cannot be exercised by the other without some authority granted by the state through its legislature. This corporation plaintiff in error, since the passage of the act in question, has not only availed itself of the privileges therein granted, but it has totally abandoned the exercise of the powers originally granted to it in its charter of 1870, and by such abandonment, on the one hand, and the exercise of the privileges granted to it by the act of 1887, on the other, it has become, in substance and effect, a banking corporation, and, necessarily, it must look to the act of 1887 as its authority for the exercise of its banking privileges. The original contract of exemption from taxation was manifestly granted to the original corporation, to be availed of by it while it was in the exercise of its corporate powers as an insurance company. It cannot be held to go with the corporation when it abandons the performance of the acts authorized in its original charter, and proceeds to exercise the privileges of, and do a business as, a banking corporation, by virtue of the act of 1887. As a result, when it assumes to make use of the privileges granted to it under the act last named, it must do so subject to the constitution and laws existing at the time when that act was passed, and its rights and privileges must be exercised in subordination thereto.
Upon the proposition argued by plaintiffs in error, that they have the right to engage in their present business of banking by virtue of the original charter, we are of opinion that such right does not exist. The power to receive in trust for any person moneys or other valuable thing, and of giving their acknowledgment therefor, and to loan their surplus funds as provided in the second section of the original charter, in no sense authorizes them to conduct a general banking business. They must look to the act of 1887 alone for their power to transact that kind of business, and, for the reasons we have stated, they are not entitled to the exemption provided for in section 7 of their charter.
Second, we do not think that the plea of res judicata can be upheld upon the facts as stated. The former judgment was entered in an action commenced long prior to the act of 1887, to recover taxes alleged to have become due while the corporation plaintiff in error was engaged in its original business of an insurance company, and the judgment was upon the right of its shareholders to be exempt from any further taxation than that provided for in the charter while the company was doing business as such insurance company. The judgment could, therefore, not be an estoppel, or operate in any manner as a bar to the maintenance of this action, based upon facts of a totally different nature, and arising long after the judgment was obtained in the former action.
The judgment must therefore be affirmed.
MEMPHIS CITY BANK v. TENNESSEE AND SHELBY COUNTY (No. 675), by stipulation, is to abide the event of foregoing case.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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