Source: https://en.m.wikisource.org/wiki/Tappan_Collector_v._Merchants%27_National_Bank
Timestamp: 2019-04-20 21:16:50+00:00

Document:
APPEAL from the Circuit Court for the Northern District of Illinois, in which court the Merchants' National Bank of Chicago-a bank incorporated under the 'Act to provide a National currency,' &c., approved June 3d, 1864,  and having its banking-house and carrying on its operations of discount and deposit in the town of South Chicago, Cook County, Illinois-filed a bill against one Tappan, collector of county and municipal taxes, in the said town of South Chicago, Cook County, to enjoin his collection of such taxes upon any of the shares of stock in the said bank, assessed under a statute of Illinois, passed June 13th, 1867.
Some shares of the bank were held by persons resident in the said town of South Chicago, Cook County, where, as already said, the bank itself was situated, and where Tappan, the collector of taxes for that town, resided; but many were held by persons who, though residing in Illinois, did not reside in the town of South Chicago or in the county of Cook at all, but resided out of both; and many were held by persons who did not reside in the State of Illinois at all, but resided in other States altogether.
The grounds upon which the bill was filed were apparently that, under the constitution of Illinois, the taxes were not validly laid on the residents of the State who resided out of the town of South Chicago and out of the county of Cook; that therefore, under that constitution, which required uniformity of taxation, in respect to persons and property within the jurisdiction of the body imposing the same, there were no taxes laid on the shares of any persons resident in the town of South Chicago or in the county of Cook; and of course therefore no taxes on any shareholders resident anywhere in Illinois; and as the act of Congress authorizing a taxation by the State of shares in the National banks, owned by persons who were not residents of such State, declared that there should be no tax imposed on them which was not imposed on residents of the State, there was no tax laid on any shareholders anywhere.
The whole matter, it is thus obvious, turned upon the validity of the tax laid under the State act of June 13th, 1867, upon the shares of residents of Illinois who resided out of Cook County and out of the town of South Chicago.
'SECTION 2. The General Assembly shall provide for levying a tax by valuation, so that every person and corporation shall pay a tax in proportion to the value of his or her property, such value to be ascertained by some person or persons to be elected or appointed in such manner as the General Assembly shall direct and not otherwise.
'SECTION 40. The president and cashier of every association, shall cause to be kept at all times, a full and correct list of the names and residences of all the shareholders in the association, and the number of shares held by each; . . . and such list shall be subject to the inspection of all the officers authorized to assess taxes under State authority.
Subsequently to the passage, by Congress, of this National Banking Act, the State of Illinois passed the act of June 13th, 1867, under which the tax now resisted was laid.
'No tax shall be assessed upon the capital of any bank or any banking association, organized under the authority of this State, or organized under the authority of the United States; and located within this State.
The bill filed by the bank, after setting out the facts of non-residence, &c., already stated, and the violation of the Constitution in levying the tax complained of, and a threat of the collector to sell the stock of the bank, if the taxes claimed were not paid, alleged, by way of giving a jurisdiction in equity, that the shareholders refused to pay the taxes and forbade the payment of them by the bank, and threatened a multiplicity of suits against the bank in case it paid them, or in case it deducted the amount thereof from any dividends upon the stock; that if the collector sold the stock irreparable damage would be done to the stockholders; that the bank was the trustee of its stockholders, and as such entitled to protect their interests; and that a sale of their stock would prejudice the bank in the public mind, and work damage to it incapable of remedy at law.
The court below on demurrer to the bill for want of equity, disregarding the technical objection (for which Dows v. The City of Chicago  was cited as authority), that the bank had no power to interfere in the way in which it had done, in behalf of its stockholders,-and considering that the law of Illinois laying the tax was in violation of its constitution, decreed an injunction. From that decree this appeal was taken.
1. It will be admitted by opposing counsel, that the authorities of Cook County had no jurisdiction for the purposes of taxation over the person of any one who lived not in Cook County, but who lived out of it, in a different county; and that any tax laid by such authorities on that person must be void. Now, the act of June 13th, 1867, enacts 'that no tax shall be assessed upon the capital of any bank,' but that the stockholders in such banks 'shall be assessed and taxed on the value of their shares of stock therein.' The act relieves the capital-the property-of the bank from all tax laid by the authorities of the place where that capital, property, or bank is, and lays it on the stockholder wherever he may be. It forbids a tax in rem and establishes a tax in personam. Now, so far as respects stockholders in Cook County, who are within the jurisdiction of the authorities of that county for the purposes of taxation, this is lawful. Is it so under the constitution of the State in regard to those who do not reside in Cook County, but reside out of it and in other counties of the State? We think that it is not.
We assume, therefore, that shares of stock owned by residents in other counties of Illinois than Cook County, are not in any sense situated in Cook County.
Now, to apply these principles. Congress has no power to authorize a violation of the constitution of a State in the assessment and collection of taxes for State and local purposes. The National Banking Act of June 3d, 1864, cannot have meant to do this.
But when a resident of La Salle County, Illinois, owning the whole stock perhaps of half a dozen banks in Cook County, and owning nothing besides, is not taxed in La Salle County at all, how is the rule of uniformity prescribed by the constitution of Illinois observed? Yet under the statute of June 13th, 1867, this is the sort of taxation which does occur. For that statute provides no mode of assessing the shares of residents in the State at the place where they reside. In Trustees v. McConnell,  the Supreme Court of Illinois said that under the provision of the constitution which we have referred to, the legislature 'would have no power to exempt from taxation one species of personal property while it collected a tax from another within the same jurisdiction.' But when you give to the county of Cook the proceeds of taxation of shares owned by a resident of La Salle, do you not exempt the latter in the county where he lives, and tax his co-residents in that county to make up the deficiency? Is this taxation uniform in respect to persons within the limits of such county? We submit that it is not.
It ought, perhaps, to be observed, that when the act of June, 1867, was passed, controversy had arisen as to the meaning of the words (whose meaning certainly is not perspicuous) in the provisos to the forty-first section of the law of Congress, that the shares should be assessed 'at the place where the bank is located.' The framers of the State law doubtless supposed Congress to have required the shares to be assessed in and for the benefit of the taxing district of the bank's location; as courts of high respectability had supposed before them.
2. The technical objection that the bank cannot interfere in equity, in behalf of its shareholders, is without foundation. The bank occupies the position of a stakeholder. It is the custodian of the dividends of the shareholders. The shareholders insist that all the dividends be paid to them. The collector demands that a part be paid to him. The bank asserts and the demurrer admits that the shareholders have given notice to the bank that if it pay these taxes suits will be commenced at once against it. At the same time if it does not pay them the collector threatens to sell the shares, and so to get the taxes. It is obvious that the latter course, if taken would lead to further and harassing litigation, working that kind of injury to the corporation which, because the law affords no such beneficial and complete remedy for it as the nature of the case requires, may be deemed irreparable. Dows v. The City of Chicago is not applicable to such a case.
Mr. J. K. Edsall, Attorney-General of Illinois, contra, argued the case fully on principle and authority; citing among other cases, one decided in February, 1873, First National Bank of Mendota v. Smith, Collector,  in which the law here in question was held by the Supreme Court of Illinois to be valid under the constitution of the State.
^2 13 Stat. at Large, 102.
^3 Opinions of the Justices of the Supreme Court, 53 Maine, 594.
^4 Markoe v. Hartranft, 6 American Law Register, N. S. 490; Austin v. The Aldermen, 14 Allen, 364.
^5 15 Stat. at Large, 34.
^8 Union Bank v. State, 9 Yerger, 490; Conwell v. Connersville, 15 Indi ana, 150; Savings Bank v. Nashua, 46 New Hampshire, 398; Dwight v. Mayor, 12 Allen, 322; Austin v. Aldermen, 14 Allen, 364; McKeen v. Northampton, 49 Pennsylvania State, 519.
^9 Cooley, Constitutional Limitations, 496.
^11 Van Allen v. Assessors, 3 Wallace, 573.
^12 5 Chicago Legal News, 253.

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