Charleston v. People's National Bank

The opinion of the Court was delivered by

Moses, C. J.

The single question presented by the case agreed upon in a controversy submitted without action between these parties is, whether the City Council of Charleston had a right to levy the tax on the twenty-five hundred shares of the stock referred to in the brief.

It is not necessary to repeat the facts on which our judgment is to be pronounced, for they are recited in the agreement which precedes this opinion.

The Ordinance of the City Council imposed the tax “ on the shares in the hands of its shareholders, respectively,” (Sec. 22, p. 96, City Ordinance, 1859-70), and if the shares upon which it is claimed the proposed tax is to operate can be comprehended within its terms the judgment of the Circuit Court must be affirmed.

*115 The institution in question was established and organized as one of the national banks, under the Act of Congress of 3d June, 1864, “to provide a national currency secured,” &c., (13 U. S. Statutes, 99.) For its formation it was necessary that a certificate should be prepared and filed with the Comptroller of the Currency at Washington, which should contain, among other things, a specification of the amount of its capital stock, and the number of shares into which it was to be divided. This'is the evidence of the amount of such capital stock and its distribution into shares, and these last are then fixed, designated and known at the Bureau of Currency by the record preserved in the proper office thereof. The Act further provides by its 13th Sec., p. 103, “for an increase of the capital from time to time, provided ‘that the maximum of such increase shall be determined by the Comptroller of the Currency; and no increase shall be valid until the whole amount of such increase shall be paid in, and notice thereof transmitted to the Comptroller, and his certificate obtained, specifying the amount of such increase of capital stock, with his approval thereof, and that it has been duly paid in as a part of the capital of such association.”

The argument, on the part of the respondent, proceeds upon the ground that the proposed increase of the capital by the said twenty-five hundred shares was effected by the subscription to that extent, and the acceptance of certain securities therefor, held,by the Cashier in trust for the association. If this is well’founded, then the increase does not depend on a compliance with the conditions expressed in the Act of Congress, but on arrangements which the shareholders, originally organized under it, may make with third persons, in the face of the very law to which they owe the existence of their association, and under which, it is to be assumed, they are at least to carry out the obligations which it imposes. The error is in the attempt to give force to these shares as valid and properly constituted shares of the association, before the approval of the Comptroller, when, in point of fact, the increase of the capital depended upon it. The resolution on the first day of July, 1871, to increase the number of the shares, by its very terms, made it dependent on such approval. Until obtained, the capital remained as originally fixed. The act of the stockholders to that end was no more than a proposition among themselves, the effect of which was subject to the assent of the higher authority designated by the Act of Congress. A solution of the proposition may be tested by the *116 enquiry, -whether, if before the 7th January, 1872, any one of the so-called stockholders could have required the association to issue a certificate for the shares so agreed to be taken by him. Only one answer could be given to it, and that, it appears to us, would conclude the respondent from imposing the tax, which must be upon shares of the capital stock, which, before the 7th January, 1872, was limited to the amount- originally allowed by the certificate of organization.

It is supposed that these additional shares are subject to the tax because the $250,000 which they represented was actually paid before the 1st January, 1872, and a semi-annual dividend declared and paid on them for the half year then ending. The ordinance in question “imposed the tax on taxable property within the said city in the hands of tax-payers on 1st January, 1872.”

The proposed increase of the capital was required by the Act of Congress to be paid in as a precedent condition, on the performance of which the approval of the Comptroller depended. If he had withheld, it, the very requisite which was necessary to make the money deposited the medium through -which'the certificates of the additional shares could of right be demanded, was wanting.

• That the money thus subscribed remained in possession of the bank, and that those who had advanced it, received on 7th January, 1872, a dividend for the half year ending on the first day of the said nionth, in common with the original stockholders, cannot affect the question. The original stockholders could apply the profits of the bank at their own pleasure, and if those who were interested in restricting the application of the dividends to the original stock do not complain, their want of objection can not convert what must be considered as mere proposals for stock into valid and legal shares. The tax is not on the dividend, but on the share. The view which the Comptroller of the Currency took of the liability of the said twenty-five hundred shares to the tax of the government is clear, from the fact that although the said banking association» on 3d January, 1872, returned to him, subject to taxation by the government, only seven thousand five hundred shares, he imposed no tax beyond them, and accepted the said return and payment as a compliance with the law.

While we are in no way bound by his decision, it cannot prejudice our conclusion, that the public officer charged by Congress with the duty of estimating the capital of these associations, on which *117 the U. S. tax was to be laid, on the same facts before him, with the knowledge of the further extension of the capital of this bank, did not exact any tax on the said twenty-five hundred shares.

The answer of the Court is, that the City Council of Charleston did not have the right to levy the tax on the twenty-five hundred shares under the facts stated.

The judgment of the Circuit Court is therefore reversed.

Wright, A. J., and Willard, A. J., concurred.