# Farrington v. Tennessee/Dissent Strong

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* Dissenting Opinion Strong
United States Supreme Court
95 U.S. 679
Farrington v. Tennessee
MR. JUSTICE STRONG, with whom concurred MR. JUSTICE CLIFFORD and MR. JUSTICE FIELD, dissenting.
I cannot concur in the judgments entered in these cases. If there be any doctrine founded in justic , and necessary to the safety and continued existence of a State, it is that all presumptions are against the legislative intent to relinquish the power of taxation over any species of property. In The Providence Bank v. Billings, 4 Pet. 514, Chief Justice Marshall, speaking for the court, said: 'As the whole community is interested in retaining it undiminished, that community has a right to insist that its abandonment ought into to be presumed in a case in which the deliberate purpose of the State to abandon does not appear.' In The Ohio Life Insurance And Trust Co. v. Debolt, 16 How. 416, Chief Justice Taney, speaking of legislative acts incorporating companies, said: 'The rule of construction in cases of this kind has been well settled by this court. The grant of privileges and exemptions to a corporation are (is) strictly construed against the corporation and in favor of the public. Nothing passes but what is granted in clear and explicit terms. And neither the right of taxation nor any other power of sovereignty which the community have an interest in possessing undiminished will be held by this court to be surrendered, unless the intention to surrender is manifested by words too plain to be mistaken.' This doctrine we have many times reiterated and applied. And I do not understand that it is now denied. But I think a majority of my brethren, in the judgments now given, have failed to apply it to the construction of the acts of the Tennessee legislature under consideration in these cases.
One other thing, it appears to me, should be regarded as settled beyond doubt. It is that a tax upon a corporation proportioned to the capital stock, or to the number of shares of its capital stock, is a different thing from a tax upon the individual shareholders of stock in the corporation. The capital stock, and the shares of that stock in the hands of stockholders, are different properties, and consequently distinct subjects for taxation. An exemption of the one is not of itself an exemption of the other, nor is the taxation of the one a tax upon the other in such a sense as to interfere with any exemption the latter may have from taxation. In The Delaware Railroad Tax, 18 Wall. 206, a clause in a charter providing that a company should, in addition to other taxes, pay to the treasurer of the State, for its use, one-fourth of one per cent upon the actual cash value of every share of its capital stock, was held to be not a tax upon the shares of the individual stockholders, but a tax on the corporation, determined by a rule which, though arbitrary, was yet approximately just. So, in Van Allen v. The Assessors, 3 id. 573, this court said a tax on shares of stock is not a tax on the capital of a bank, and that the shares are a distinct, independent interest or property held by the stockholder, and, like any other property that may belong to him, subject to taxation.
If, now, these two acknowledged doctrines are allowed to have their just effect upon the decision of these cases, I cannot see how the stockholders in the several corporations whose charters we are requested to construe can claim an exemption from taxation upon their individual shares of stock. The exemption clause in the charters of two of the companies is: 'Said institution shall pay to the State an annual tax of one-half of one per cent on each share of capital stock subscribed, which shall be in lieu of all other taxes.' The exemption clause in two other of the charters is in substantially the same words, except that the word 'company' is substituted for the word 'institution.' The clause in the fifth charter reads thus: 'That there shall be levied a State tax of one-half of one per cent upon the amount of capital stock actually paid in, to be collected in the same way and at the same time as other taxes are by law collected, which shall be in lieu of all other taxes and assessments.'
I agree with the majority of the court that there is no substantial difference in the extent of the exemption offered in these sev ral charters, though there is some difference in their phraseology. But I think that the benefit of the exemption is in each case for the corporation. It was not intended for the individual stockholder. The legislature were dealing with the proposed corporations. The corporate power granted and the immunities allowed were to the corporations, and the contract found in the charter was with the artificial being created, rather than with the natural persons who might have an interest in them. The language of the acts is, the 'institution' shall pay, or the 'company' shall pay, an annual tax, which shall be in lieu of all other taxes. It was, therefore, the institutions or corporations the legislature had in view, alike in imposing the tax and granting the immunity, and not the natural persons who might happen to own shares of stock in the corporations. It is true that in several of the charters the corporations are required to pay a tax on each share of capital stock subscribed, and in one upon the amount of capital stock paid in. Hence it has been argued the legislature had shares in view; and from this the further inference is sought to be drawn, that the purpose was to tax alike the corporations and the stockholders, and to exempt both from all other taxation. Such a construction is, however, directly in conflict with the ruling in The Delaware Railroad Tax, supra, and with the expressed declaration that the company or institution shall pay the tax to the State, which was to be in lieu of other taxation. Besides, the reference to each share of capital stock subscribed is easily accounted for, without holding that the shareholder, as well as the companies, were intended to be exempted. The amount of capital stock authorized for each company was fixed by its charter, and divided into shares. It was quite possible that the whole stock authorized might not be subscribed. In view of this, the companies were required to pay a tax, not upon their entire authorized capital, but to the extent of the shares subscribed. If such was the intent of the legislature, reference to the shares was necessary, and it raises no implication that the tax imposed was designed to be for the individual interest of the shareholders in the corporations, and that the exemption from further taxation was granted to them.
After all, the true question in these cases is, whether a contract in express terms between the State and a corporation, to exempt its property and franchises from taxation, shall, by construction, extend to and exempt the property of individual stockholders,-property which, for the purposes of taxation, is entirely different from that of the corporation. I think there is no ground for such a construction; none for any such implication. If, however, I am mistaken, it is certainly true that such a construction is not necessary. The words of the charter granting the exemption are fully satisfied by confining their operation to the corporations themselves; and I do not feel at liberty to give them a broader significance, in view of the settled rule I have noticed, that a State's right of taxation will not be held to have been surrendered unless the intention to surrender is manifested in words too plain to be mistaken. Had the legislature intended to extend the exemption beyond the companies themselves, it would have been easy to place the intent beyond doubt, by simply saying the tax should be in lieu of all other taxation of the company or its stockholders. But nothing like this, or equivalent to it, is found in the charter.
I find nothing in Gordon v. The Appeal Tax Court, 3 How. 133, so much relied upon by the plaintiffs in error, necessarily inconsistent with what I have said. That case has not been well understood. The circumstances were penculiar, and the decision rendered should be considered with reference to the peculiar facts which appeared in it. What was, in fact, decided we had occasion to observe in People v. The Commissioners, 4 Wall. 244, where Mr. Justice Nelson d rected attention to the circumstances that more or less controlled the judgment.
For these reasons, which I have not time to elaborate, I think the judgments of the Supreme Court of Tennessee should be affirmed.

## Notes

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