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June 2, 1902



Fuller, Harlan, Brewer, Brown, shiras, Jr., White, Peckham, McKenna; Gray took no part in the decision of this case.

Author: Brewer

[ 186 U.S. Page 231]

 MR. JUSTICE BREWER delivered the opinion of the court.

The right of the State to tax these shares of stock is not denied, but the contention of plaintiffs in error rests on the applicability of that part of section 5219, Revised Statutes, which reads "that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State." The purpose of this legislation was thus stated in Mercantile Bank v. New York, 121 U.S. 138, 155:

"A tax upon the money of individuals, invested in the form of shares of stock in national banks, would diminish their value as an investment and drive the capital so invested from this employment, if at the same time similar investments and similar employments under the authority of state laws were exempt from an equal burden. The main purpose, therefore, of Congress in fixing limits to state taxation on investments in the shares of national banks, was to render it impossible for the State, in levying such a tax, to create and foster an unequal and unfriendly competition by favoring institutions or

[ 186 U.S. Page 232]

     individuals carrying on a similar business and operations and investments of a like character. The language of the act of Congress is to be read in the light of this policy."

The laws of New York in reference to taxation of the shares of stock in national banks are like those in respect to the taxation of shares of stock in state banks, and there are many of the latter in the State. So it is not suggested that the State makes any discrimination between state banks and national banks, but it contended that the statutes of New York, in reference to the taxation of trust companies, are essentially different; that these trust companies are practically carrying on a banking business; that an enormous amount of moneyed capital is invested in them, and that as a result not merely a theoretical but a practical and burdensome discrimination is made against the moneyed capital invested in national banks. Commenting upon this, it was said by Mr. Justice Woodward, delivering the opinion of the Appellate Division of the Supreme Court in the case at bar:

"It is conceded on the part of the relators that the stock of the First National Bank was assessed upon the same principle applied in the assessment of the stock of the state banks doing business in their immediate vicinity, and that this was done under the provisions of section 24 of the tax law of 1896. In order to pronounce this provision of the law invalid we must, therefore, convict the legislature not alone of hostility to the national banks, but of hostility toward its own creations; we must reach the conclusion that the State of New York is seeking, by an exercise of its taxing power, to advance one class of moneyed corporations at the expense of another, both of which have been created by the legislature and both of which are engaged, presumptively, in promoting the interests of the people. There are no presumptions in favor of this idea, and there is no evidence in the case to show that any of the state institutions have ever complained of an inequality in taxation."

Further, in Mercantile Bank v. New York, supra, decided in 1887, the New York statutes in reference to the taxation of shares of stock of national banks were challenged on the ground of discrimination in favor of moneyed capital otherwise invested,

[ 186 U.S. Page 233]

     and several instances of such investment were called to the attention of the court, among them that of trust companies, and it received, as stated in the opinion, "separate consideration." It was held that the system of taxation prevailing in respect to them was not such as to vitiate the statutory methods of taxation of the shares of stock in national banks. It must be borne in mind that for a score of years prior to that decision there had been a series of cases coming to this court from different States, principally from New York, involving statutes with reference to state taxation of national banks, and that during these years changes had been going on in the legislation of the different States in order to conform to the rules laid down by this court in its successive opinions.

Counsel for plaintiffs in error insist that that case is not controlling, and for several reasons: One, because two amendments have been made in the legislation of New York, which it is said give full banking powers to trust companies, save in respect to the power of issuing circulating notes. The first is found in chap. 696, Laws of 1893, which added an eleventh subdivision to section 156 of the banking law (chap. 689, Laws 1892), and which in terms authorizes trust companies: "11. To exercise the ...

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