Case Name: First National Bank of Shreveport vs. The Board of Reviewers of Assessments
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1889-03
Citations: 41 La. Ann. 181
Docket Number: No. 10,240
Parties: First National Bank of Shreveport vs. The Board of Reviewers of Assessments.
Judges: [Mr. Justice Fenner, absent during the argument at Shreveport, takes no part.]
Reporter: Louisiana Annual Reports
Volume: 41
Pages: 181–190

Head Matter:
No. 10,240.
First National Bank of Shreveport vs. The Board of Reviewers of Assessments.
However time it be, that United States bonds are not taxable as independent assets, and that their taxation does not depend upon constitutional provisions of the diiferent States, it is a matter beyond discussion, that, wlion tho capital of a bank is in part or in whole, invested in them, the shares of such banks, whether national or State, are liable to State taxation.
In the assessment of the shares of a bank, whose capital is represented by stock, it is immaterial whether the capital was or was not invested in United States bonds and Stato bonds, although, as a rule, the same be, themselves, 'exempt from taxation.
Tho words, “ all exempt property,” found in sec. 27 of Act 97 of 1886, relating to deductions from the amount- of taxos assessed to such shares, do not apply to United Statos bonds, or-to State bonds, in which the capital of a bank, State or national, represented by shares, has boon invested.
APPEAL from the First District Court, Parish of Caddo. Taylor, J.
Wise do Herndon for Plaintiffs and Appellants.
On the same side, on Application for Rehearing, Charles B. Singleton:
We have shown:
1. That your Honors’ construction of Act Ho. 97 is erroneous because, in one class of business organizations, whose capital is composed in part of bonds oxempt from taxation, you allow the amount of the bonds to be deducted from the capital, when assessed for taxation, but in another class of business organizations, equally entitled to .such deduction, you deny this right. This is unequal taxation, and therefore unconstitutional. Const. Art. 203.
2. Shares of Stock, under both State and federal law, are portions of the capital divided into parts and called shares; and all the shares are equal to all the capital. La. B. S. Sec. 297; B. S. U. S. Sec. 5134.
3. Shares separated from the stock have no value, except suchas the franchises may give them, which cannot bo taxed by a State.
4. That the franchises in this (jase are of little, or no value; but whatever valuó they may have must bo ascertained by a legal assessment. The Legislature cannot assess them or fix an arbitrary value upon them. Const. Art. 203.
5. That the division of capital into ports or shares cannot deprive a corporation of the right to have all bonds exempt from taxation composing a part of its capital, from being deducted from the capital, wlion assessed for taxation.
6. United Statos bonds in tho hands of any person, company, etc., cannot bo taxed by a Stato. 2 Wall. 200; 2 Black 627; 20 Ann. 447 ; 29 Ann. 751; 35 Aim. 601; and your Honor’s decision in this case.
7. That your Honors erred in confining “all exempt-property ” in Sec. 27 Act 97, to the exemptions found in Soo. 1 of that Act and Const. Art. 207.
8.That the Legislature construed said words, “ all exempt property,” in Sec. 19 of said Act by showing that tho Act included bonds which are made taxable in Sec. 1, and not by Art. 207 Const.
9.That the imposition of a tax on State bonds impairs the obligation of a contract, injures the Fisc, and reduces their market value.
10. That taxing bonds is against public policy, because it causes their disuse by banks.
11. That banks ought to be allowed, like other capitalists, to invest in bonds all their capital they can spare.
12. That the Sovereign should not complain that a capitalist invests all his money in untaxable bonds, because the Sovereign, by issuing bonds, invited liim to do so.
Henry G. Miller:
The 27th section of the Revenue Act of 1886, and not the federal decisions, on the power of States to tax shares of bank stock, controls this case. See Act No. 98 of 1886, 28th Section, page 144, § 27.
It is exclusively the legislative province to prescribe the method of assessing property for taxation. Heine vs. The Levee Commissioners, 19 Wallace, p. 665 j New Orleans vs. Houston, 119th United States Reports, p. 278.
Tho provision of tho Revenue Act of 1888, for the deduction of “all exempt property in assessing the shares of banks and other corporation,” requires the deduction of United States bonds, bonds of the State of Louisiana, and of the City of New Orleans, part of the capital of tlio corporations, all such bonds being non-taxable and fairly included in tho words “ all exempt property ” to be deducted, used in the Act. See Act of 1886 No. 98, section 28; Session Acts, page 144; Revised Statutes of the United States, § 2701; Murray vs. Charleston, 96th United States Reports, page 432; State ex rol. DaPonte, 35 Ann. 601.
The intention of the Act of 1886 manifested by its oxpress language, that in assessing shares of stock of banks and financial institutions prominent in the legislative contemplation, non-taxable bonds, i. e- United States, State and City bonds are to be deducted, is fortified by the well known fact, presumably known to tlio legislator, that save and except such tax and exempted bonds, no other non-taxable proi>erty is ordinarily owned or susceptible of being part of the capital of financial corporations, hence the deduction of “ all exempt property, ” required by tlio Act, in assessing shares of capital of financial corporations must, be deemed to refer to Rederal, State and City bonds as the only “ exempt property ” ordinarily part or capable of forming part of tho capital of such moneyed corporations.
The Revenue Acts since 1878, when the taxation of shares of stock was introduced in Louisiana, one and all directing the deduction in assessing the shares of banks and money corporations or all “ exempt property, ” have been construed by the revenue officials, and by all, to mean the deduction of United States, State and City bonds; lienee it must be tho conclusion that tho Legislature, in the various Acts upon the subject, of 1880, 1882, 1886 and 1888, have used the words “ all exempt property ” in their universally received significance, that is, the deduction of all non-taxable Federal, State and City bonds, part of tlio capital of such corporations. Seo Act 1878, p. 229, § 1, par. 8; Act 1880, p. 102, § 48; Act 1882, p. 128, § 28; Act 1886, p. 134, § 28; Act 1888, p. 123, § 27.
Leovy cij Blair, and Farrar, Jonas & Kruttschnitt.
Walter El. Boyers, Attorney General, and J. Henry Shepherd, District Attorney, for Defendants and Appellees:
National banks organized under Acts of Congress are subject to State legislation, except where such legislation is in conflict with some Acts of Congress, or where it tends to im. pair or destroy tho utility of such banks as agents and instrumentalities of the United States, or interferes with the purposes of their creation. Waite vs. Dowley, 4 Otto, 532.
The State has the right to tax tho shares of National banks, organized under the Banking Act of 1864. of tho United States, in tho hands of. the shareholders, regardless of tho investment of the whole capital of such banks in non-taxable National securities, declared to bo exempt from taxation by or under State authority. Section 21 U. S. Rev. Statutes, 138-162; Allan vs. The Assessors, 3 Wall 573; The People vs. The Commissioners, 4 Wall 244 -, National Bank vs. Tho Commonwealth, 9 Wall 353.
Exemptions from taxation are not favored and must he strictly construed. Dosty on Taxation, pages SO, 132. 133, 135; 32 Ann. 104; 33 Ann. 622; 34 Ann. 574; 35 Ann. 668.
Taxation shall he equal and uniform throughout the territorial limits of the authority levying the tax, and all property shall he taxed in proportion to its value. Const. 1879, Art. 203.
Section 40, Act 98, Acts of 1885, provides that on all taxes unpaid on the 31st day of December of each and every year shall hear interest at the rate of 2 per cent per month from said date.
Land & Land on the same side!

Opinion:
The opinion of the Court was delivered by
Bermudez, C. J.
The Bank and the stockholders join to obtain a reduction of the assessment put on the shares for the jear 1887.
From a judgment rejecting their demand they prosecute this appeal.
In May, 1887, the Bank returned to the assessor a statement showing the valuation of the capital stock to be $200,000, deducting therefrom the amounts then invested in United States bonds, $146,593 75, and in State bonds, $27,637 50, aggregating $174,231 25, leaving a difference of $25,768 75, as representing the value of the shares, which had been assessed at $100,000.
The Bank does not contend for the exemption of the shares, but insists that the Legislature having determined and directed the manner in which the shares of banking associations should be assessed to arrive at their value, and the assessment having- boon made in disregard of the method or process indicated, the assessment made ought to be rectified, and made pursuant to the mode prescribed by the law making power and which is contained in Section 28 of Act 98 of 1886.
Practically, the contention is that, taking- the cash value of the shares to be $200,000, they ought not. to be assessed at even half of that sum, because part of the capital of the bank having" been invested in exempt property (United States and State bonds), the amount of the investments ought to be deducted from the value of the shares, and that, by this oxieration, the assessment ought to be of $25,768 75, and no more.
However true it be, that bonds or obligations of the United States are not taxable and that their taxation does not dex>end upon the constitutional provisions of the different States of the Union, it is conceded, as a matter beyond the domain of discussion, "that shares in banks, whether State or National, are liable to taxation by a State, although thecaxrital of the bank maybe entirely invested in United States bonds."
Indeed, clearly to that effect are the Federal statutes and the jurisprudence on the subject. U. S. Kev. Statutes, Sec. 5219; 3 Wall 573; 4 Wall 244 ; 9 Wall 353; 23 Wall 480; 95 U. S. 19; 100 U. S. 539; and Mercantile Bank vs. New York, 1886, 121 U. S., pp. 145-162, in which anterior jurisxn-udenco is reviewed.
The solitary question presented in this controversy, is, therefore, simply:
Whether the shares of the stockholders have, or not, been assessed in the manner pointed out by the act of 1886.
The section relied upon, which it is unnecessary to transcribe at length, directs that no assessment shall be made of the capital of a National or other bank, whose capital is represented by shares; but that the shares shall be assessed to the stockholders, and that "all pro-property owned by the bank which is taxable under Section 1 of this act, shall bo assessed directly to the bank and the pro rata of such direct property taxes and of all exempt property, proportioned to each share of capital stock, shall be deducted from the amount of taxes assessed to that share, under this section."
The contention is, that, under the terms of this law, all the exempt property of the bank should be deducted from the evaluation of the shares, and that, if this be done, as the United States and State bonds are exempt property, they should be counted out and the shares assessed at the difference only.
The question hence arises: What is the meaning of the words "all exempt proper by, " found hi the statute?
Two things are quite clear : First, that the power of the State to tax the shares, though the capital be invested in United States bonds, is formally recognized by Federal jurisprudence; and, second, that the legislative intent was to tax such shares, though the capital was thus invested.
' It cannot be that the language used means all property exempt by Federal or State provision, for the plain reason that if it thus meant, the whole capital of the bank could be invested in such exempt property, and the consequence would be that the bank would have no cash on hand wherewith to transact its hourly financial operations, and that the shares, which the Federal law and jurisprudence allow to be taxed, and the State intended to tax, would escape all taxation whatever, however much their value might exceed that of the capital invested. This would bo writing out the statute entirely.
The conclusion is, therefore, unavoidable that the words mean, all exempt property which do not form part of the capital of a bank represented by shares, and that it is a matter of no significance whether the capital was or not invested, or how it was invested, as the assessment complained of is neither of the bond, nor of the capital, but simply of the shares by which that capital is represented.
It is, nevertheless, insisted that the State bonds in which, part of the capital has been invested are exempt from taxation by State authority and that the amount invested in them should be deducted from the assessment of the shares, which was of 50 per cent, of their admitted market value, say: $100,000.
Granting that State bonds are as much exempt as United States bonds, when not constituting, in whole or in part, the capital of a banking institution, represented by shares, it is evident that, when they constitute, to any extent, such capital, the shares which represent the capital, may be assesessed at their market value, without any deduction from the assessment of the value of such bonds.
Hence it follows that neither the United States bonds, nor the State bonds, in which the capital of the bank was invested, had to be deducted from the assessment put upon the shares.
For those reasons, and those assigned by Mr. Justice Poché, it is ordered that the judgment appealed from be affirmed with costs.
[Mr. Justice Fenner, absent during the argument at Shreveport, takes no part.]