In the Express Company Case the court | property-its warehouse, drays, and personsaid (pp. 180, 181 [41: 963, 964]): al property-is of no greater value in the "Taking the whole act together, and in hands of the corporation than it would be view of the provisions of sections 4078 to if cwned and managed by the natural per4081, we agree with the circuit court that sons who are its stockholders. This is also it is evident that the word 'franchise' was true of its choses in action, etc. The value of nct employed in a technical sense, and unat its capital stock must necessarily be the the legislative intention is plain that the en- value of its tangible property, choses in actire property, tangible and intangible, of all tion, etc. It had no intangible property subforeign and domestic corporations, and all ject to taxation under the statute, and, as foreign and domestic companies possessing matter of law, could have none. no franchise, should be valued as an entirety, The revenue law of the state is not unconthe value of the tangible property be de-stitutional because it does not require natducted, and the value of the intangible prop- ural persons, possessing no special franchise erty thus ascertained be taxed under these or privilege, to make report of special privprovisions; and as to railroad, telegraph, ileges and franchises for taxation; nor is it telephone, express, sleeping car, etc., compa- unconstitutional in failing to require a renies, whose lines extend beyond the limits of port from all classes of corporations which the state, that their intangible property can possess the intangible property sought[676] should be assessed on the basis of the mile- to be taxed by this statute. The tax upon age of their lines within and without the tangible property of all corporations is elsestate. There is nothing in the stat- where provided for.” ute which exempts any intangible property owned by any corporation, company, or individual taxpayer from taxation, or discriminates between them. The tax mentioned in section 4077, is not an additional tax upon the same property, but on intangible property which has not been taxed as tangible property."

True it is, since the decision referred to, the court of appeals of the state of Kentucky has, it is asserted in the case of Louisville Tobacco Warehouse Company v. Commonwealth, on a rehearing (48 S. W. 420 [20 Ky. L. Rep. 1047]), examined the terms of section 4077, and is stated to have said:

"The latter clause, ‘also every other corporation, company, or association having or ex[675]ercising any special or exclusive* privilege or franchise not allowed by law to natural persons, or performing any public service,' seems to us to have been added for the purpose of including such corporations as were not strictly ejusdem generis with the companies previously enumerated, but which might possess exclusive privileges; and, as a provision for the future, to impose the intangible property tax upon corporations to be thereafter created, which might have exclusive privileges, or perform public services.

"The only authority relied upon in support of the contention that this language includes all corporations is the case of Western Union Telegraph Company v. Norman, 77 Fed. Rep. 27. But that case was in relation to a company specifically named in the statute under consideration. The question here presented did not arise in that, and was, presumably, not argued; and the suggestion made by the learned judge who delivered that opinion was made in argument in reaching a conclusion, to reach which the dictum cited was not necessary."

The opinion, however, from which the foregoing extracts are made, has not as yet been reported. But, if the court of appeals of Kentucky has given to the state statute the construction indicated, the ruling does not affect the present case, as banks are specifically mentioned in the statute.

The tax then, as defined in the law, as interpreted by the court of appeals of Kentucky and by this court in the opinions from which we have excerpted, is a tax nominally on the franchise of the corporation, but in reality a tax on all the intangible property of the corporation. The proposition then comes to this: Nothing but the shares of stock in the hands of the shareholders of a national bank can be taxed, except the real estate of the bank. The taxes which are here resisted are not taxes levied upon the shares of stock in the names of the shareholders, but are taxes levied on the franchise or intangible property of the corporation. Thus, bringing the two conclusions together, there would seem to be no escape in reason from the proposition that the taxing law of the state of Kentucky is beyond the authority conferred by the act of Congress, and is therefore void for repugnancy to such act.

It is, however, urged that whilst the taxes may not be in form imposed on the shares of stock in the names of the shareholders, and may be in form a tax on the franchise or property of the bank, nevertheless they are equivalent to a tax on the shares of stock in the names of the shareholders, and therefore do not violate the act of Congress. But this proposition concedes that the taxing statute does not conform to the act of Congress, and yet invokes its permissive authority, since, as already shown, without the grant made by the act of Congress there would be no power to tax at all. Passing, nevertheless, In deciding that the conviction of the cor- this contradiction, and looking beneath the poration for wilfully failing to file with the mere form, we come to the substance of state auditor the statement required by the things. The alleged equivalency, in order to Kentucky Statutes, sections 4077 and 4078, was erroneous, the court in that case, it is also stated, has, moreover, further observed: "Nor can the appellant corporation be said to have any intangible property subject to taxation under this statute. Its tangible

be of any cogency, must of necessity contain
two distinct and essential elements-equiva-
lency in law and equivalency in fact. Does
it contain cither? is the question..

"To be equivalent in law, involves the prop-[677]
osition that a tax on the franchise and prop-

174

erty of a bank or corporation is the equiva-
lent of a tax on the shares of stock in the
naines of the shareholders. But this propo-
sition has been frequently denied by this
court, as to national banks, and has been
overruled to such an extent in many other
cases relating to exemptions from taxation,
or to the power of the states to tax, that to
maintain it now would have the effect to an-
nihilate the authority to tax in a multitude
of cases, and as to vast sums of property up-
on which the taxing power is exerted in vir-
tue of the decisions of this court holding that
a tax on a corporation or its property is not
the legal equivalent of a tax on the stock, in
the names of the stockholders. A brief re-
view of the two classes of cases, by which the
doctrines just stated are overwhelmingly es-
tablished, will make the foregoing result
clear.

The earliest case in the reports of this
court is Van Allen v. The Assessors (1865)
3 Wall. 573 [18: 229]. The tax was on the
shares of stock in the names of the sharehold-
ers, pursuant to the act of Congress. Two
issues were presented, one the assertion that
the state banks were assessed on their capital
and surplus, and therefore that stockholders
in national banks were substantially discrim-
inated against. This was held to be well
taken; clearly, therefore, deciding that there
was no equivalency between taxing the cap-
ital and surplus in the hands of the bank and
taxing shares in the names of the sharehold-
ers, for if the two had been equivalent the de-
cision would necessarily have been otherwise.
The other question in the case was thus
stated by the court, through Mr. Justice Nel-
son, page 581 [18: 233]:

"The main and important question involved, and the one which has been argued at great length and with eminent ability, is, whether the state possesses the power to authorize the taxation of the shares of these national banks in the hands of stockholders, whose capital is wholly vested in stock and bonds of the United States."

This question was examined, and it was decided that, as the shares of stock in the hands of the shareholders were distinct and different subjects-matter of taxation from the [678] property or rights of the bank, there fore the power conferred by Congress could be exercised so as to tax the shareholders even although the property of the bank was invested in nontaxable bonds of the United States, because the two were distinct and different things.

the stock in the names of the stockholders, but by a negative affirmative it demonstrates that if the two are equivalent the tax in this case would be illegal, since the record here admits that a sum, at least the equivalent of the capital, surplus, and undivided profits of the bank, was invested in bonds of the United States. The contention of equivalency then destroys itself, and if it were conceded would bring about the illegality of the tax, in support of the legality of which the argument is advanced.

Following this came the decision in People v. New York Tax & A. Commissioners (1866) 4 Wall. 244 [18: 344], in which, reiterating the decision in Van Allen v. The Assessors, it was held, because the property of the bank was distinct and separate from the shares of stock in the names of the shareholders, therefore the latter were not entitled to deduct exempt property belonging to the bank from the assessment on their shares. The court said, again through Mr. Justice Nelson, and in part quoting from the opinion in the Van Allen Case (p. 258 [18: 350]):

The in

""The corporation is the legal owner of all the property of the bank, real and personal; and, within the powers conferred upon it by the charter, and for the purposes for which it was created, can deal with the corporate property as absolutely as a private individ-[679] ual can deal with his own. terest of the shareholder entitles him to participate in the net profits earned by the bank, in the employment of its capital, during the existence of its charter, in proportion to the number of his shares; and upon its dissolution or termination, to his proportion of the property that may remain, of the corporation, after the payment of its debts. This is a distinct, independent interest or property, held by the shareholder like any other property that may belong to him;' and, we add, of course, is subject to like taxation."

The next case in order of time is Bradley v. The People (1866) 4 Wall. 459 [18: 433]. The question which the case presented was whether a tax on the property or rights of the bank was the legal equivalent of a tax on the shares of stock in the names of the shareholders. The argument of counsel was that in determining this question the method was immaterial, but the substance would be considered. The argument urged (p. 460 [18: 433]): "Neither the national government, the creator of the species of property now taxed, nor the shareholders can be interested It is to be remarked that it is patent from in the methods which may be adopted by the opinion of the court that, if the shares the state for the imposition of the tax." of stock had been considered as in anywise The court, through Mr. Justice Nelson, after the equivalent of the bonds, in which the prop-eferring to the decision in Van Allen v. The erty of the bank was invested, the tax would Assessors, and the tax there imposed, said have been held invalid, despite the author- (p. 462 [18: 435]): ity to tax the stock given by the act of Congress, as such authority would not have been construed as authorizing a violation of the faith of the United States by taxing bonds issued by the government which were not subject to taxation. It follows, then, that not only did this decision refute the claim of equivalency between the tax on the bank or its property or franchises and the tax on

"It was in that case attempted to be sustained on the same ground relied on here, that the tax on the capital was equivalent to tax on the shares, as respected the sharehold ers. But the position was answered that, admitting it to be so, yet, inasmuch as the capital of the state banks may consist of the bonds of the United States, which were exempt from state taxation, it was not easy to see

that the tax on the capital was an equivalent | questions, interpreting the act of Congress to a tax on the shares."

with the liberality of construction resorted to in the Van Allen Case and those which followed it, the court in most of the instances rejected the charge of discrimination. The result of the cases in question tended to give efficient vitality to the grant of Congress to tax the shares of stock in the names of the shareholders. The argument now relied on would, if it were adopted, operate to destroy the power to tax, which the act of Congress sanctions.

In First National Bank v. Commonwealth (1870) 9 Wall. 353 [19: 701], a statute of the state of Kentucky which imposed a tax of fifty cents a share on bank stock, or stock in any moneyed corporation, of loan or discounts, owned by individuals, corporations, or societies, was held to authorize a tax on the shares of the stockholders, as distinguished from the capital of the bank invested in Federal securities, and this, although the [680]tax* was collected from the bank instead of the individual stockholders. In the opinion of the court, delivered by Mr. Justice Miller, a summary statement was made of the doc-poration is one thing and the taxation of the trine enunciated in the prior decisions recognizing the distinction between the property owned by an incorporated bank as a corporate entity and the property or interest of the stockholders in such bank, commonly called a share.

These cases, interpreting the act of Congress, have never been questioned, and indeed form the basis upon which the taxation of the shares of stock in the names of the shareholders allowed by the act of Congress has been made efficacious for the purpose of bringing a vast amount of property within the taxing power of the states, which would have been excluded had not the principles which the cases announced been established. If the postulate upon which they necessarily rest be overthrown by saying that there is an equivalency between the taxation of the property of the bank and the shares of stock in the names of the stockholders, it would follow that the principles upheld by the cases would disappear with the destruction of the reasons upon which they were placed. It would then necessarily follow that the grant by Congress of authority to tax the shares of stock in the names of the shareholders could not be exercised where the bank held bonds of the United States exempt from taxation; that the two things being the sanie, the shareholders would be entitled to deduct the property of the bank from the sum of the taxation of the shares; in other words, that the right to tax the shareholders would be a vain thing.

It cannot be doubted that, as a general principle, it is settled that the taxation of the property, franchises, and rights of a corshares of stock in the names of the shareholders is another and different one. This doctrine has been applied to sanction the taxation of the one where the other was covered by a contract of exemption. As the result of its application, it is unquestioned that much property has been brought within the range of the taxing power which otherwise would have escaped taxation. It is unnecessary to multiply citations on this subject, as the question has been in recent cases reviewed and restated fully by the court. Thus in Bank of Commerce v. Tennessee, 161 U. S. 146 [40: 649], it was said, through Mr. Justice Peckham:

"The capital stock of a corporation and the shares into which such stock may be divided and held by individual shareholders are two distinct pieces of property. The capital stock and the shares of stock in the hands of the shareholders may both be taxed, and it is not double taxation. Van Allen v. Assessors, 3 Wall. 573 [18: 229]; People v. New York Tax & A. Commissioners, 4 Wall. 224 [18: 344], cited in Farrington v. Tennessee, 95 U. S. 687 [24: 560].

"This statement has been reiterated many times in various decisions by this court, and is not now disputed by anyone. In the case last cited Mr. Justice Swayne, in delivering the opinion of the court, enumerated many[682) objects liable to be taxed other than the capital stock of a corporation, and among them he instanced, (1) the franchise to be a corporation; (2) the accumulated earnings; It has been suggested that other cases de- (3) profits and dividends; (4) real estate cided since the cases referred to, whilst not belonging to the corporation and necessary questioning the latter, in effect admit a doc- for its business; and he adds that 'this enutrine which tends to a contrary result. meration shows the searching and compre We do not stop to review in detail the cases hensive taxation to which such institutions from which this result is claimed to arise. are subjected where there is no protection by They are: Palmer v. McMahon, 133 U. S. previous compact.' And in Tennessee v. Whit660 [33: 772]; Bank of Redemption v. Bosworth, 117 U. S. 129 [29: 830], at page 136 ton, 125 U. S. 60 [31: 689]; Davenport Na- [29: 832], Mr. Chief Justice Waite, in detional Bank v. Davenport Bd. of Equaliza-livering the opinion of the court, says: tion, 123 U. S. 83 [31: 94]; Mercantile Bank v. City of New York, 121 U. S. 138 [30: 895]. It suffices to say that the claim is de[681]void of foundation. In all the cases referred to the taxation was specifically imposed on the shares of stock in the names of the shareholders, and the question presented, in various forms, was whether the provisions of state taxing laws created a discrimination in favor of other moneyed capital and against the shareholders in national banks, contrary to the act of Congress. On these

"That in corporations four elements of taxable value are sometimes found: First, the franchise; second, the capital stock in the hands of the corporation; third, the corporate property; and, fourth, the shares of capital stock in the hands of the individual stockholders.'

"The surplus belonging to this bank is 'corporate property,' and is distinct from the capital stock in the hands of the corporation. The exemption, in terms, is upon the payment of an annual tax of one half of one per

cent upon each share of the capital stock, | if the past development of the system be dewhich shall be in lieu of all other taxes. stroyed by recognizing, without reason, a prinThe exemption is not, in our judgment, ciple inconsistent with the law and destructgreater in its scope than the subject of theive of the safeguards which it imposes. tax."

The 6.

The system of taxation devised by the act of Congress is entirely efficacious and easy of execution. By its enforcement, as interpreted, settled policies of taxation have been evolved embracing large amounts of property which would not otherwise be taxable, and Argued March 14, 15, 1899. Decided April which, as we have seen, will escape taxation

N ERROR to the Supreme Court of the
State of Michigan to review a judgment
of that court deciding that the statute of
Michigan requiring the sale of thousand-mile
tickets violated no provision, either of the
Federal or the state Constitution, but was a
valid enactment of the legislature, and af-
firming an order for a mandamus, in an ac-
tion brought by Henry C. Smith against the
Lake Shore & Michigan Southern Railway
Company in the circuit court for Lenawee
county, Michigan. Reversed, and case re-
manded for further proceedings.

See same case below, 114 Mich. 460, 72 N.
W. 328.

Statement by Mr. Justice Peckham: [685] *In 1891 the general railroad law of the state of Michigan was amended by the legislature by Act No. 90, a portion of the ninth section of which reads as follows:

the state and the company, which the former had no right to impair by any legislative ac tion, and that the statute compelling the company to sell thousand-mile tickets at the rate of two cents a mile was an impairment of the contract, and was therefore void as in violation of the Constitution of the United States. It also alleged that the act was in violation of the Fourteenth Amendment of the Constitution of the United States, in that it deprived the company of its property and liberty of contract without due process of law, and also deprived it of the equal protection of the laws. The act was also alleged to be in violation of the Constitution of the state of Michigan on several grounds.

The supreme court of the state decided that there was no contract in relation to the rates which the company might charge for the transportation of passengers, and that the statute violated no provision either of the Federal or the state Constitution, but was a valid enactment of the legislature, and therefore the court affirmed the order for mandamus, the ticket to be good upon and limited to the railway lines of the defendant railroad company within the state of Michigan. ([114 Mich. 460] 72 N. W. 328.) The company sued out a writ of er ror from this court.

. Provided, further, That one
thousand-mile tickets shall be kept for sale
at the principal ticket offices of all railroad
companies in this state or carrying on busi-
ress partly within and partly without the
limits of the state, at a price not exceeding
twenty dollars in the Lower Peninsula and
twenty-five dollars in the Upper Peninsula.
Such one-thousand-mile tickets may be made
nontransferable, but whenever required by
the purchaser they shall be issued in the
Dames of the purchaser, his wife and chil-Pond, for plaintiff in error:
uren, designating the name of each on such
ticket, and in case such ticket is presented by
any other than the person or persons named
thereon, the conductor may take it up and
collect fare, and thereupon such one-thou-
gand-mile ticket shall be forfeited to the
railroad company. Each one-thousand-mile
ticket shall be valid for two years only after
date of purchase, and in case it is not wholly
used within the time, the company issuing
the same shall redeem the unused portion
thereof, if presented by the purchaser for re-
demption within thirty days after the ex-
piration of such time, and shall on such re-
demption be entitled to charge three cents
per mile for the portion thereof used."

Messrs. George C. Greene and Ashley

The statute sought to be enforced is in violation of the 14th Amendment of the Constitution of the United States, which declares that no state shall deprive any person of liberty or property without due process of law.

Allgeyer v. Louisiana, 165 U. S. 578, 41 L. ed. 832; People v. Marx, 99 N. Y. 386, 52 Am. Rep. 34; State v. Campbell, 32 N. J. L. 309; Boston & L. R. Co. v. Proctor, 1 Allen, 267, 79 Am. Dec. 729; Rawitzky v. Louisville & N. R. Co. 40 La. Ann. 50; Dietrich v. Pennsylvania R. Co. 71 Pa. 432, 10 Am. Rep. 711.

The power here sought to be exercised is not legislative in its nature, nor within the scope of the legislative authority.

Com. v. Maxwell, 27 Pa. 444; Hanson v. Vernon, 27 Iowa, 28, 1 Am. Rep. 215; Tay lor v. Porter, 4 Hill, 140, 40 Am. Dec. 274; Clark v. Mitchell, 64 Mo. 564; Com. v. Perry, 155 Mass. 117, 14 L. R. A. 325; WheelBridge & Terminal R. Co. v. Gilmore, 8 Ohio C. Č. 658.

On April 19, 1893, and again on October 17, 1893, the defendant in error demanded of the ticket agent of the plaintiff in error, in the city of Adrian, Michigan, a thousandmile ticket, pursuant to the provisions of the above section, in the names of himself and his wife, Emma Watts Smith, which demanding was refused. The defendant in error then applied for a mandamus to the circuit court to compel the railway company to issue such ticket upon the payment of the amount of $20, and after a hearing the motion was granted. Upon certiorari the supreme court 686] of Michigan affirmed that order and held that the statute applied only to the railway lines of the plaintiff in error operated within the state of Michigan.

The defense set up by the railway company was that, under the charter from the state to one of the predecessors of the company to whose rights it had succeeded, it had the right to charge three cents a mile for the. transportation of all passengers, and that such charter constituted a contract between

The act of 1891 in question is in violation of art. 1, § 10, of the Constitution of the United States, which declares that no state shall pass any law impairing the obligation of contracts.

Tomlinson v. Branch, 15 Wall. 460, 21 L. ed. 189; Central R. & Bkg. Co. v. Georgia, 92 U. S. 665, 23 L. ed. 757; Citizens' Street R. Co. v. Memphis, 53 Fed. Rep. 715; Nashua & L. R. Corp. v. Boston & L. R. Corp. 136 U. S. 356, 34 L. ed. 363; Green County v. Conness, 109 U. S. 104, 27 L. ed. 872; Tennessee v. Whitworth, 117 U. S. 139, 29 L. ed. 833; Charleston v. Branch, 15 Wall. 470, 21 L. ed. 193; Peik v. Chicago & N. W. R. Co. 94 U. S. 164, 24 L. ed. 97.