Case Name: The People, ex rel. The Hanover Bank, vs. The Commissioners of Taxes and Assessments of the city and county of New York
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1862-10-22
Citations: 37 Barb. 635
Docket Number: 
Parties: The People, ex rel. The Hanover Bank, vs. The Commissioners of Taxes and Assessments of the city and county of New York.
Judges: 
Reporter: Barbour's Supreme Court Reports
Volume: 37
Pages: 635–660

Head Matter:
The People, ex rel. The Hanover Bank, vs. The Commissioners of Taxes and Assessments of the city and county of New York.
Stocks and bonds of the United States, owned by a resident of this state, maybe taxed, with other personal estate.
The act of congress of February 25, 1862, exempting such stocks from taxation, is valid, so far as' it relates to all- stocks, bonds, and other securities issued by the United States after the passage of the act.
Such securities are not subject to taxation under the state laws. Clerke, J. dissented.
Congress has no power, by retrospective legislation, to withdraw from state taxation stocks and other like securities, issued by the United States, already subject to such taxation; and the act of February 25,1862, so far as it exempts from state taxation United States securities previously issued, is extra-constitutional and inoperative.
THE relator, the Hanover Bank, having a capital of one million dollars, were assessed at $908,119, the assessors having deducted from the capital the value of the real estate, and stocks in other corporations. The bank objected to this assessment, and presented to the board of commissioners of taxes and assessments the statement and affidavit required bylaw, showing that it owned and held stocks, bonds and securities of the United States to the amount of $896,500; that all its other personal estate did not exceed $946,000, and that its debts were not less than $841,000; that the whole value of its personal estate, over and above its debts, exclusive of such United States stocks, bonds and securities, did not exceed $105,000. The board of commissioners- refused to exempt the United States stocks, bonds and securities from taxation, and assessed the personal estate of the bank at $908,119. The relator sued out a writ of certiorari, for the purpose of having such decision reviewed and corrected on the merits, in pursuance of the statute. (Laws of 1859, p. 684, § 20.)
Charles Tracy, for the relator.
I. These stocks, bonds and securities of the United States are exempt from taxation, under state authority. (1.) They are so exempt on -grounds of constitutional law, independently of any statute'-specially conferring such exemption. (Const. U. S., art 1, § 8; art. 6, § 2. McCullough v. State of Maryland, 4 Wheat. 316, 409, 413, 417, 432, 436. Osborn v. U. S. Bank, 9 id. 738, 859, 864, 865. International Life Assurance Co. v. Com’rs of Taxes, 17 How. Pr. R. 206, 210. Weston v. City Council of Charleston, 2 Peters, 449. Providence Bank v. Billings, 4 id. 563, 564. Smith’s Com. 317. People v. N. Y. Tax Com’rs, 32 Barb. 509, 512. See also 23 N. Y. Rep. 192, S. C.) (2.) Such exemption is now secured by the act of congress, passed February 25, 1862, entitled “ An act to authorize the issue of United States notes, and for the redemption' and funding thereof, and for funding the floating debt of the United States.” The second section of that act concludes thus: “ all stocks, bonds and other securities of the United States, held by individuals, corporations or associations, within the United States, shall be exempt from taxation by or under state authority.” (Stat. at Large, 37th Congress, p. 346.) (3.) The providing of such exemption was an important financial measure of the federal government. The statute was passed in order to borrow money; and this exemption increased the value of the securities to be issued, strengthened the public credit and. promoted the taking of .the loan. To confer such an exemption, as a means of more effectually exercising the power to borrow money and carry on the general financial affairs of the United States, was clearly constitutional. ■ (4 Wheat, 431, 432, 435, 436. 9 id. 864, 865, 867. 2 Peters, 467, 468.) (4.) This bank, and other capitalists, have loaned to the government large amounts on the faith of this declared exemption, at rates which would not have been given if the securities-were to be subject to state taxes. In case the exemption were held void, and the securities were subject to the proposed tax, the federal government would be bound to indemnify the holders, and of course would do so; (Jeff. Branch Bank v. Shelly, 1 Blackf. 436, 446;) and the result would be that the tax commissioners, indirectly, but effectually, had laid a tax on the treasury of the United States. “ The states have no power, by taxation or otherwise, to retard, impede, burden or in any.manner control the ojDerations-of the constitutional laws enacted by congress to carry into execution the powers vested in the general government.” (4 Wheal, 436.) (5.) This exemption has been fully sustained by judicial decision in Hew Jersey.
II. The relator does not lose the benefit of the exemption by reason of its being a bank, or a corporation. (1.) Since the statute of 1857, the property of corporations in this state is assessed and taxed like the property of natural persons. Taxes un corporations, under that statute, are not in the nature of license duties or bounties exacted as the price of franchises given, but are a part of the general tax assessed upon property in proportion to its actual value. The nominal amount of capital of a corporation no longer governs the assessment; and the fact that the holder is a body corporate affects neither the subjects nor rate of assessment. (Laws of 1857, vol 2, p. 1, ch. 456, § 3. Id. p. 122, ch. 536, § 3. 1 R. S. 392, § 20. Oswego Starch Factory v. Dolloway, 21 N. Y. Rep. 449. People v. Tax Com’rs, 23 id. 192. Utica Cot. Manuf. Co. v. Sup. of Oneida, 1 Barb. Ch. Rep. 432, 448.) (2.) The view expressed in this court in 32 Barb. 509, 512, 516, 517, that the tax assessed against a corporation is assessed upon the aggregate amount of its capital, and not upon the property constituting the capital, is overruled by the decision in 23 N. Y. Rep. 192. The statute of 1857 having placed corporations on the footing of individuals in this respect, a bank must be assessed upon its property as as such, in conformity to the general statutes governing the whole subject of taxation. (1 R. S. 387, § 1; 388, § 3; 391, § 9. Sess. Laws, 1851, ch. 176, § 6. 1 R. S. 5th ed. 912, § 25.) (3.) The statutes of this state contemplate the existence of exemptions from taxation, and secure them to corporations as well as individuals. (1 R. S. 388, § 4. Laws of 1857, vol. 2, p. 1, § 3. 1 R. S. 5th ed. 946, § 11. See 23 N. Y. Rep. 213 et seq.) (4.) The act of congress in question enumerates corporations and associations among the holders who have the benefit of the exemption. (Act of Feb. 25, 1862, § 3.)
III. The assessment being illegal, should be corrected by reducing the valuation of the taxable personal property of the bank to $105,000.
JET. JEE. Anderson and Greene C. Bronson, for the respondents.

Opinion:
Ingraham, P. J.
So far as the questions involved in this case were discussed and decided by the court of appeals, in the case of The People, ex rel. The Bank of the Commonwealth, v. The Com'rs &c., (23 N. Y. Rep. 192,) we do not feel 'at liberty to express any opinions at variance therewith. That case must he understood as deciding that stock of the United States, held by a corporation or by individuals, may be taxed under the laws of this state, where such taxation is general as applying to all personal property, and no unfriendly discrimination to the United States stock is applied by the state law; or in other words, that where the taxation was general on the personal property of an individual or corporation, property which, if nominally taxed as stock of the United States, could not be taxed, may be included in the general aggregate of property liable to taxation, and the tax thus be imposed.
It is conceded that property exempt from taxation by law must be deducted from the aggregate valuation of personal property thus subject to assessment, and this principle was afterwards settled by the unanimous decision of the court of appeals, in The People, ex rel. Hoyt, v. The Com'rs of Taxes, (28 N. Y. Rep. 224,) in which it was held that the personal property of an individual residing in this state, actually situated in another state or county, is not to be included in the assessment against him. And in the case first cited, Denio, J. says: u It follows, therefore, from the very language of the statutes, that if the Bank of the Commonwealth has invested a part of its capital paid in, in a stock which is exempt from taxation, such portion is to be excepted from the assessment."
While, therefore, this decision is to be considered as controlling, upon the question whether in assessing the aggregate value of the personal estate of an individual or corporation, stock of the United States should be included, still the question which has now been submitted to us formed no part of the matters upon which the court passed when the subject was before them. A distinction was then taken between the exemption from taxation of these stocks under the provisions of the constitution, which gave congress power to borrow money on the credit of the United States, and such exemption if specially enacted by an act of congress. • The learned judge says, " It is the constitution alone which is to be looked to, for congress has never passed any law on the subject," and the - court expressed no opinion on the question whether congress could enact a law by which the lenders of money to the government should enjoy the advantages of exemption from state taxation in respect to such loans; but it is said, " In the absence of any such statute, and resting upon the general grant of power contained in the constitution, we are of opinion that the claim to be exempt from taxation cannot be allowed to prevail."
Whatever, therefore, may be the individual opinions of the members of this court on these questions decided by the court' of appeals, we do not feel at liberty to re-examine them in this case; and the only difference which exists between that case and the present, is as to the effect of the provision of the act of congress of the 25th February, 1862, which says: "All stocks, bonds and other securities of the United States, held by individuals, corporations or associations within the United States, shall be exempt from taxation by or under state authority."
Two questions arise in regard to this enactment:
I. Whether, if constitutional, such a provision would exempt them under our laws; and
II. Whether congress can pass such a law limiting and restricting the powers of a state in regard to taxation.
Upon the first point I think there can be little difficulty. The act of 1857 expressly excepts from the personal property to be valued and assessed, all such part of it as shall have been exempted by law, and Denio, J. says: " It would be the duty of the assessors to inquire whether any of this property into which the capital had been converted was exempted by law from taxation. The bank is, as a general rule, assessed and taxed for all its property of every kind, but there is an exception as to such part of it as the constitution and laws of the union and of the state have, upon special reasons of policy, declared shall be exempted." There can be no difficulty under this decision, as well as under the statute, in coming to the conclusion that such deduction must be made, if the act of congress directing the exemption of the United States stocks and bonds from taxation is valid.
The cases which at various times have been decided in the United States court, (McCullough v. State of Maryland, 4 Wheat. 316; Weston v. City of Charleston, 2 Peters, 449; Osborn v. The United States Bank, 9 Wheat. 738,) and others which might be cited, all hold that special taxation against the stock, bonds or incorporations under the United States laws, was forbidden by the power given to the general government under the constitutional powers conferred upon congress in connection therewith. To this extent I consider the decision of the court of appeals, before referred to, as going. Denio, J. takes the-distinction between assessing the United States stocks and bonds specifically and including the value thereof in the valuation of a man's personal estate. He says, " An unfriendly act of legislation which should exclude the federal government from reverting to the money markets of a particular state for loans, though it might not seriously affect the exercise of the borrowing power elsewhere, would be so obviously hostile to the operations of the government that I am confident it could not be sustainedand again, (p. 207,) " If the federal stock can be taxed separately and specifically at any amount which a state legislature, or a municipality to which its power has been delegated, shall see fit, the government, in seeking to obtain money on loan, may be effectually driven out of the markets of such state."
If it be conceded that the right to borrow money by the congress of the United States, granted by the constitution, prevents the states from laying a specific tax on such bonds and stocks to an extent that would interfere with the government in borrowing money in such state, it seems to follow that the government must have the right to make such loans on such terms and limitations as they shall deem necessary to make such loans available; and that congress, in author izing such loans, is the body that must decide as to the conditions on which the loans may be taken. If the power to borrow involves the power to prevent the states from interfering with such loans by specific taxation, can there be any doubt that congress may, for the sake of securing such loans, say to what extent, if any, the states may tax the same, and add, to the terms on which the stock shall be issued, immunity from taxation throughout the country P If the states cannot impose a specific tax because it would impair the value, and thereby interfere with the power of borrowing, may not congress say that neither a specific or general tax shall be imposed by the states, in order to secure the success of the loan ?
The power to borrow money and to issue stock is undoubtedly a sovereign power, and embraces within it all necessary powers to carry it effectively into exercise. It cannot be restrained as to the place throughout the states in which it is to be exercised, nor the terms on which loans are to be made, nor the mode of transfers it may adopt, nor the place where they are to be made, nor the exemptions which such stocks shall have from public burdens. If congress had said no specific tax shall be laid on such stocks and bonds in any of the states, the power to do so would be conceded, under the decisions .of the United States courts, as well as the courts of this state. If they can prevent specific taxation, I see no reason why the same power will not enable them to forbid any taxation, if in their judgment such restriction is necessary to carry out the original powers to borrow money. Whether they exercise that power wisely or not, is not for the courts to inquire. The discretion is with them, the power is with them, and when exercised by them that exercise of power is within the constitutional authority " to make all laws which might be necessary or proper to carry into execution such power."
In The United States v. Fisher et al., (2 Cranch, 258,) the right of congress to give priority to debts due the United States is clamed under the general powers to make all necessary laws. In that case it was said, " Congress must possess the choice of means, and must be empowered to use any means which are in fact conducive to the exercise of a power granted by the constitution." The same was said by Chief Justice Marshall, in McGullough v. State of Maryland: "If the end be legitimate, and within the scope of the constitution, all the means which are appropriate, which are adapted to that end, and which are not prohibited, may constitutionally be employed to carry it into effect," and " The degree of its necessity is a question of legislative discretion, not óf judicial cognizance;" and, in Brown v. State of Maryland, (12 Wheat. 419,) it is said, " Questions of power do not depend upon the degree to which it may be exercised. If it may be exercised at all, it must-be exercised at the will of those in whose hands it is placed."
It must be apparent, then, if congress has any power to prohibit taxation of their stocks or bonds, specifically, or to give any privileges to those who buy the same, the extent to which taxation may be prohibited at all is an act of discretion, to be exercised by congress, and which cannot be the subject of judicial limitation. Legislative discretion should not be restrained by judicial decisions. It is the want of power, and not of discretion in the legislature, which can be reviewed by the courts.
If it were necessary to refer to the condition of public matters, as rendering it necessary that the general government should possess every power, to enable them advantageously to borrow money, very urgent reasons could be advanced, to show how necessary is the right to exercise such powers at the present time, to enable them to provide the means for the preservation of the government, but it is not necessary, under the views above expressed on these questions.
It is argued on behalf of the respondents that, even if the act of February, 1862, is valid, it cannot be made applicable to stocks issued previous to its passage. The ground upon. which the exercise of that power by congress is sustained is, that by such provisions the power of congress to borrow money is aided, and that to deprive that body of the power to prescribe the terms on which the loan could be made, and the privileges be conferred, therefore, would be to impair the power thus conferred by the constitution. I am at a loss to see how that necessity exists as to stocks which had been issued and paid for long before its passage. We are controlled by the decision of the court of appeals that, as to all stock issued before the passage of that act, it was subject to taxation with the other property of individuals and corporations. It is, then, presented as a simple statute, in regard to this stock, to exempt it from taxation by the states, passed long after the government had any interest in its value. Without such interest I should doubt the power to. exempt such stocks, any more than any other property, from taxation. As a declaratory act of the views of congress, as to their right to exempt stock from taxation, it would be of value, but it would confer no power which congress did not otherwise possess. If the right to exempt from taxation rests solely on the necessity of the power, in order to enable the United States rightly and advantageously to carry out the provision of the constitution as to borrowing money, such right could not with propriety be claimed in regard to stocks which had long before .been issued, and the consideration for which had long before been paid over to the government. Such property could with no more propriety be exempted from taxation by an act. of congress, if such legislation was necessary, than any other property on which taxes might be imposed.
An objection was taken to this proceeding that it was brought too soon, because no taxes had been imposed. .The proceedings are against the commissioners as assessors. Their duty is completed when the assessment is made out. The taxes are imposed hy the board of supervisors. . The proceedings are to correct the assessment, not the imposition of taxes.
It was said that there was no certainty that any tax would be imposed. Independent of the law which requires such taxes to be imposed equally upon all the property, returned as liable to taxation, it can hardly be supposed even within the bounds of possibility that an individual or corporation, returned as having large amounts of personal property subject to taxation, would not, at the present day, find a sufficient amount of taxes imposed thereon.
My conclusions are:
I. That, under the decision of the court of appeals, in The People ex rel. The Bank of the Commonwealth v. The Commissioners of Taxes, (23 N. Y. Rep. 192,) stocks and bonds of the United States, owned by a resident of the state, may be taxed with other personal estate.
II. That the act of congress, of February, 1862, exempting such stocks from taxation, is valid, so far as it relates to all stocks, bonds, and other securities issued by the United States after the passage of the act.
III. That-such securities are not subject to taxation under the state laws.
The respondents should be ordered to correct the assessment rolls, hy striking from the amount the stock, bonds, and securities, issued by the United States and held by the relator, of a date subsequent to the passage of the act of congress.
Barnard, J. concurred.