Nashville union and American. [volume] (Nashville, Tenn.) 1868-1875, 1874-07-28
TAXATION OF BANK STOCK.
what Special Chancellor McHenrv
Decided I'm the Third National Bank
Case.

what Special Chancellor McHenrv
Decided I'm the Third National Bank
Case.
Our notice on Sunday of Judge Nc
Henry's decision in this case was 1ecessa-
rily very imperfect, as we had not then had
access to the opinion, which was taken
from the courtroom by counsel. The
questions involved being Of public interest.
we now give our readers fuller account of
the case.
The grievance of the complainants. who
were the stockholders of the Third Ma
tioDal Bank, of Nashville, was that their
shares of stock in this bank, of which the
par value in tine aggregate was 100000,
were assessed for city taxation at S275,OOO.
each share being rated by the assessor al
S275, whereas the mere par value was only
500. Under the regulations governing
the matter the tax upon the shares in ma
tion2l banks, though falling upon the
stockholders individually, is paid in the
lump by the bank, as a convenient mode
of collection. The bank here had ten
dered 10 the city the tax per cent-upon
the par value in the aggregate Of the stock,
which had been refused, and the collector
preparing to distrain, thereupOn the stock
holders filed their bill TO enjoin him there
from.
In this bill, being driven to contend,
they occupied the whole field of possible
controversy, raising every question which
the ingenuity of cOnSummately able coun-
sci could conceive, and denying that they
were liable to pay TO the city any tax
whatever upon their stock, insisting, how
ever, that ii liable for any tax, it was, I'M
der the recent, revenue act of March %,
1873, limited to the rate imposed by the
State upon such capital.
The tax, as claimed by the city, was 2
per cent. upon S2T5,0O0, or $500; as at
first conceded 10y the bank officers, it was
5000; and, according TO the extreme DO
sitiOn Of the stockholders, that the city rate
was limited to that imposed by the State,
and further, that the assessment should be
confined TO the par value, il would be only
40 of l per cent. upon 100000, or 500.
Not much stress was laid upon the pO-
sitiOn that the shares were not, under ex-
listing State legislation, taxable at all by
the city, but il was earnestly insisted that
the assessment was void because made in
violation of the National Bank acts of
Congress, which restricted the taxation Of
shares in national banks to such as might
be assessed upon other mOneyed capital in
the hands of individual citizens. II was
urged that no other mOneyed capital had
been assessed by the city above par, and
that there had been, therefore, illegal dis
elimination against these shares. To this
it was replied that the Assessor had in every
instance sought fairly to assess every kind
of property, all forms Of mOneyed capital
included, and that if only these shares had
been rated above par, it was because only
they lVere actually above par.
Judge McHenry discussed all the ques-
tions Involved deliberately and cOmprehen-
siyely, and with mastery ability. The
principal points of the decision were the
| following:
That whilst the capital stock of the bank,
being invested in United States bonds,
/ could not be taxed, the shares of stocks,
belonging not 70 the bank but to iniivid-
ual stockholders, were, under the law of
Congress, taxable on their property, subject
| only TO the restriction that they should not
be taxed higher than other mOneyed capital
| inthe hands Of the citizens. That the power
10 tax these shares was not derived by the
| States from Congress, but was one Of that
class of powers, such as the power TO pass
| pilot laws, or quarantine laws, possessed
concurrently by the States and the Union,
until the latter saw fit 10 appropriate them
| exclusively to itself. That here Congress
had expressly left the taxation OF the shares
| in question in the hands of the States.
That Congress had not limited the as
seSsment of shares in national banks to the
par value. That it was clear, from a criti-
cal scrutiny of the national bank acts, that
| Congress had contemplated their value in
three aspects, the par value, the market
| value and the assessed value fOr purpose:
of State taxation; and that the last had
been left TO be regulated by the States, will
! simply the restriction that the shares should
! be placed upon an equal footing in this re-
| card with other moncyed capital in the
lands of individual citizens, this being
justly regarded rs sufficient protection fol
the shareholders.
That under the constitution of the State,
bank stocks can not be required 10 be as
sessed at par, irreSpectiyely Of their actua
value, as it exacted equal taxation
Of whatever is taxed at all, which i:
incompatible with enforcing equality o.
valuation upon what are actually unequal
in value and constantly fluctuating.
That the State legislation with regard tC
the taxation of such shares is in harmony
with the requirements of the national bank
acts Of Congress.
| That the section Of the act of March p,
1873, restricting municipal corporations t.
the State rate of taxation in certain cases
presented more difficulty. As TO this, three
positions had been assumed by the counsel
Of the city, viz: that it was prospective anC
did not apply to the assessment involved
that Of 1873; that it applied only to ''money
capital lOanCd,' TO "mOney invested II
banking" etc, and these shares werC
neither the one nor the other, and that II
was unconstitutional. That without goins
into these questions at length, it was sui
fcient to decide in the present case thai
the section did not prevent the collection o.
the tax assessed for the year 1873.
The foregoing is a sufficient, though in
complete, synopsis of this interesting de
cisiOu, the necessary length of which is too
great for our limited space. IL is one Of
the finest ofthuSe able decisions which have
so well vindicated the Governors selection
Of Judge McIienTy 10 preside in the case:
where Chancellor Cooper, being OF course
incompetent. These eases being Of the
very cream Of the practice of our Clancery
Court, the business of our foremost equity
lawyers, the choice Of our Bar for the higl
position he has already so well illustrated
and for which he is the standard=beareT o
that portion Of our community who are Is
pOcialiy interested in the purity and etilcl
cheney Of courts and the credit Of JurlSpru