Case Name: City of Jackson v. Deposit Guaranty Bank & Trust Co.
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1931-03-23
Citations: 160 Miss. 752
Docket Number: No. 29233
Parties: City of Jackson v. Deposit Guaranty Bank & Trust Co.
Judges: 
Reporter: Mississippi Reports
Volume: 160
Pages: 752–792

Head Matter:
City of Jackson v. Deposit Guaranty Bank & Trust Co.
(In Banc.
March 23, 1931.)
[133 So. 195.
No. 29233.]
W. E. Morse, of Jackson, for appellant.
Butler & Snow, Geo. T. Mitchell, and Flowers, Brown & Hester, all of Jackson, for appellee.

Opinion:
Griffith, J.,
delivered the opinion of the court.
The experience under the State Bank Guaranty Law, originally enacted in 1914 (Laws 1914, c. 124) and amended in 1922 (Laws 1922, c. 172) an'd in 1926 (Laws 1926, c. 251), was such that when the Legislature convened in 1930 it was found that there was a deficit in the depositors' guaranty fund of between three and four million dollars. The gathering' clouds of financial depression and distress were clearly seen and the apprehension of further and numerous bank failures to occur in the years 1930 .and 1931 was definitely felt. It was foreseen, as an inevitable future consequence, that, if the said law were continued in its full operation, the deficit already large would increase to the point where the necessary assessments to retire the guaranty certificates would drive all the more important and reliable state banks into the national system, and leave the depositors' fund hopelessly aground. It was; therefore, determined to suspend the general operation of the guaranty system until the elapse of such time as, under reasonable assessments, the outstanding certificates already issued could be liquidated.
Thereupon the Legislature enacted on March 11, 1930, the statute now known as chapter 22, Laws 1930. Its provisions so far as material to the case at bar are, in brief: (1) That until all guaranty certificates issued and due to be issued, up to the date of the passage of the act, shall have been paid, .the guaranty features of previous acts shall be suspended, and no' further guaranty certificates shall be issued. (2) For the retirement and liquidation of said outstanding certificates, assessments not to exceed five in any one year, of one-twentieth of one per centum of the average unsecured deposits of the bank, less capital and surplus, shall be made and collected. (3) A depositors' protective fund not to exceed three hundred thousand dollars for each calendar year shall be created by the collection of three per centum on that part of the surplus of the bank exempted from taxation under section 11 of the act, said protective fund to be applied pro rata to the payment of depositors of banks failing during the particular year, each calendar year being a separate period both as to the collection of said protective fund and for the pro rata application thereof. (4) The compulsory creation of a surplus equal to the capital stock by the carrying to' surplus each year of one-half the net profits of that year until the surplus shall amount to not less than one hundred per cent of the capital stock. (5) The investment of said surplus in bonds of the United States, or state of Mississippi, or in those of the counties, districts, and municipalities of the state. At this point, we may insert in full the text of section 11 of the act which forms the chief center of the attack in this case: "Provided the surplus is invested as provided in the preceding section that to encourage banks to accumulate surplus and thereby better maintain themselves as public institutions and to justify the requirements that while operating as state banks they meet the assessment made by the State Banking Department from year to year to pay the outstanding guaranty certificates, the surplus of all state banks in an amount not exceeding one hundred per cent of their capital at the time of the passage of this act, or at the time of their organization if organized after the passage of this act, shall be exempt from all taxation until the outstanding guaranty certificates as described in this act are liquidated as herein provided, at which time such exemptions shall cease. In returning their property for taxation for the year 1930 and thereafter, so long as the bank pays the guaranty assessments as herein provided, each bank shall deduct such exempt surplus from the valuation of the shares of capital stock arrived at in' the manner provided by section 1 of chapter ,193 of the Laws of 1920, being section 8203 of Hemingway's Code of 1927, for the purpose of fixing the valuation on which state, county and municipal taxes shall be paid; provided that where banks existing under the national laws comply with the provisions of this act, the basis for the taxation of the shareholders thereof shall be the same as for state banks."
The general power of the Legislature to enact legislation of this sort is sustained by the Supreme Court of the United States in the recent case, Abie State Bank v. Weaver, 51 S. Ct. 252, 75 L. Ed. — —(decided February 24, 1931). The attack here, however, is under several different and specific sections of our constitution; and these we will now notice in the order in which the parties have presented them in their arguments, omitting one or two points which seem not to have been seriously urged, and which do not require attention.
It is the first contention of appellant that the said eleventh section of the act in question is violative of section 61 of the constitution, which latter section ordains that "no law shall be revived or amended by reference to its title .only, but the section or sections, as amended or revived, shall be inserted at length. The contention is that this section 11 attempts to amend section 1, chapter 193, Laws 1920, without inserting the lato ter section in full as amended, and reliance is had upon the often-cited case of Seay v. Laurel Plumbing Co., 110 Miss. 834, 71 So. 9. To carry the construction of the said constitutional section to the limits contended for in the present cage would greatly embarrass the progress of legislation, would incumber many enactments with a useless redundancy, and would cast legislation as a rule into greater uncertainty in respect to the validity thereof than would he endurable. In Heidelberg v. Batson, 119 Miss. 510, 525, 81 So. 225, 226, it was said that "the purpose of section 61 of the constitution is to prevent ambiguity and uncertainty with reference to the amendment of previous acts, but we find no uncertainty in the act here in question. ' ' We are satisfied with that announcement, when taken in connection with the full discussion by the court in Hart v. Backstrom, 148 Miss. 13, 113 So. 898, and those cases being applicable and controlling here, we hold that the point made by appellant under said section 61 of the constitution is not well taken.
It is next contended that the act in question is violative of section 87 of the constitution which ordains that: "No special or local law shall be enacted for the benefit of individuals or corporations, in cases which are or can be provided for by general law, or where the relief sought can be given by any court of this state; nor 'shall the operation of any general law be suspended by the legislature for the benefit of any individual or private corporation or association, and in all cases where a general law can be made applicable, and would be advantageous, no special law shall be enacted." It is the contention that the general bank guaranty law of the state was suspended in its operation, and during said suspension the proceeds of the assessments on deposits are to be applied to the liquidation of the past outstanding certificates, thereby suspending a general law for the benefit of individuals and private corporations. The inherent power of the Legislature to suspend the operation of a general law is not questioned. That power could not be questioned, for the quoted section of the constitution, implies the power of suspension and places a limitation upon it, and states the limitation. Granted the power of suspension, then it follows as. a necessary consequence that a general law may be suspended by another general law. The question then simply reduces itself to-'the inquiry whether the act here under review is a general law, which we answer in the affirmative. "A law is general in the sense of such a constitutional provision [referring to said section 87, Const.] when it applies to and operates uniformly on all members of any class of persons, places, or things requiring legislation peculiar to the particular class dealt with by the law." State v. Gilmer Grocery Co., 156 Miss. 99, 125 So. 710, 717; State v. Speakes, 144 Miss. 125, 109 So. 129; Toombs v. Sharkey, 140 Miss. 676, 106 So. 273.
The evil at which the particular clause in the constitutional section, here brought into consideration, was chiefly directed, was the previous practice of suspending a general law in part in favor of certain individuals or corporations, thereby making them favorites, while the law continued in its operation as to all others not so favored. Here, however, the operation of the law is suspended as to all alike, and is general, wherefore there is no constitutional objection that in another respect the present act may apply beneficially to a particular class, since it operates uniformly on all members of that class, upon all who are entitled therein, and the class is germane to the subject of the legislation and is not an arbitrary classification without regard to its just relation to the thing to be effected. See authorities cited next foregoing paragraph.
The observations in the two preceding paragraphs dispose of the contention, that the act is in contravention of section 90 (h) of the constitution, which prohibits local, private, or special laws for the exemption of property for taxation. "We áre holding' that the legislation here attacked is a general law, and is not local or private or special.
The next contention is that the act is violative of sections 112 and 181 of the constitution. The first section, 112, provides that: "Taxation shall be uniform and equal throughout the state. Property shall be taxed in proportion to its value. . . . Property shall be assessed for taxes under general laws, and by uniform rules, according to its true value. . . . But all such property shall be assessed at its true value. . . ." And section 181 provides that: "The property of all private corporations for pecuniary gain shall be taxed in the same way and to the same extent as the property of individuals, but the legislature may provide for the taxation of banks and banking capital, by taxing the shares according to the value thereof (augmented by the accumulations, surplus, and unpaid dividends), exclusive of real estate, which shall be taxed as other real estate. . . ." Hinder these two sections, appellant challenges the power of the legislature to exempt the surplus of banks for any purpose.
The power of the Legislature to exempt from -taxation is no longer an open question in this state. Through a long course of judicial decision and legislative action it has become firmly settled that the power of exemption is within the legislative discretion, subject only to the limitation that the exemption shall not be arbitrary; that is to say, it must have some just and rational relation to the promotion of the public welfare. The question has recently been under review here and the court has said that: "the only limitation upon the legislative power to exempt property from taxation is that 'there must underlie the exercise of the power "some principle of public policy that can support a presumption that the public interest will be subserved by the exemption granted" . . . and the classification of the property exempted "must be basjed on some reasonable ground, and some real difference which bears a just and proper relation to the object sought to be accomplished." ' " Miller v. Lamar Life Ins. Co. (Miss.), 131 So. 282, 286; City of Jackson v. Mississippi Fire Ins. Co., 132 Miss. 415, 95 So. 845. Under these settled principles, if and when the commercial and financial conditions of the country, and particularly within the state, have become such as to justify it, for the safety and soundness of banks and their preservation for the public service, the Legislature could exempt all banks from all taxation, so long as the predicate conditions continued to exist. If then banks could be exempt from all taxes, it would seem to follow as a logical and legal consequence that the exemption could be in part, as is the case here.
But it is argued that, when the Legislature has adopted the scheme of taxation for banks permitted by section 181 of the constitution, and has segregated bank property for assessment upon a basis different from that of individuals, then the prescribed alternative mode of assessment "by taxing the shares according to the value thereof (augmented by the accumulation of surplus, and unpaid dividends) " must be observed in its entirety and as an exclusive method, and cannot be divided for the purposes of exemption into parts. While this argument is plausible and persuasive, we think that the language of the Supreme Court of the United States in the recent case of Bain Co. v. Pinson, 51 S. Ct. 228, 229, 75 L. Ed. — (decided February 24-, 1931), is applicable here: ' ' The interpretation of constitutional principles must not be too literal. We must remember that the machinery of government would not work if it were not allowed a little play in its joints." If the principle of literalness contended for by appellant were applied to section 112 of the constitution, all exemptions would be excluded. There is no more reason for strict literalness in respect to section 181 than in regard to- section 112; and we hold, therefore, that the exemption of the bank surplus was within the legislative power, under the conditions present. The case of Adams v. Bank, 75 Miss. 701, 23 So. 395, relied on by appellant, is far different from this on its facts, as well as in respect to applicable principles. The concluding paragraphs of the opinion in that case distinguish it, in advance, from the case now being decided.
Finally, it is contended that the act is invalid because it attempts to regulate national banks by state legislation, the particular provision of the act which is. thus sought to be brought in question being the concluding portion of the above-quoted section 11 of the said act. The issue attempted to be raised in the respect mentioned is not properly before us. The national banks are not complaining here, and, so far as we can know, may never complain or have any cause so to do. See, on this point, City of Jackson v. Mississippi Fire Ins. Co., supra.; Miller v. Lamar Life Ins. Co., supra; Miller v. Columbus & G. Ry. Co., 154 Miss. 317, 122 So. 366.
¥e are of opinion that chapter 22, Laws 1930, is not violative of the constitution, and the judgment is therefore affirmed.
Affirmed.