First National Bank of Mendota v. Smith.

where the omission by the assessors to assess property subject to taxation was set up as a defense to the application for judgment against delinquent lands, it was held by this court that such omission afforded no sufficient ground for declaring the taxes void.

But whatever ground of complaint there might be on the part of the owners of assessed property because other property liable to taxation had been omitted from the assessment, and thus increasing their burdens, we are entirely unable to comprehend how tax payers can complain because property not liable to taxation had been included. The result to them is simply that their taxes are thereby lessened; which is certainly a very novel reason for asking an injunction.

The case in the United States Circuit Court to which we have been cited, was a bill brought by the bank to restrain the collection of city taxes from any of the shareholders, whether resident or non-resident in the city of Chicago. The shares of the residents were, even in the view of the court, properly taxable there. The shares of the non-residents were, in the view of the court, not within the city, but attached to the persons of their owners, at the domicile of the latter, and were, therefore, not taxable there. For aught that appeared there, all the property in the city subject to taxation was assessed. The addition to that assessment of property belonging to non-residents, and not within the city, according to the view of the court, may have been, if that view were correct, a wrong to the non-resident owners, but certainly was none to the resident tax payers, and did not destroy either equality or uniformity of taxation as between them.

We have commented at such length on this position of the Federal court because the same position is taken by counsel in the case before us, on the authority of that decision, and the same relief is asked for the resident stockholders that was granted there.

As is apparent in the extract from the opinion already given, the decision rests upon two propositions: First, that a tax cannot be assessed where there is no jurisdiction of either the person or the property. Second, that personal property has no situs of its own, but follows the person of its owner, and if this is not always true of tangible personal property, it is of incorporeal personal property like shares of bank stock.

The correctness of the first proposition is not questioned. It is undoubtedly true that the Legislature could not constitutionally

First National Bank of Mendota v. Smith.

authorize Cook county to levy a tax upon lands or other property having a fixed situs in La Salle county.

The second proposition is correct as a general rule of the common law. It is one of obvious convenience in determining what law shall govern in the distribution of estates of deceased persons. But while it is a rule of the common law, that is all that can be said of it. The fallacy of the reasoning of the Federal court referred to, and of the counsel for the appellant, seems to be in assuming that this rule of the common law cannot be changed by statute. The Legislature, by the act of 1867, certainly intended to change it in regard to bank shares; and to fix their situs, for all purposes of taxation, in the county where the bank is situated. The language employed is broad enough to effect the change, and it has been made, if the Legislature had the constitutional power to make it. Where is the constitutional provision which prohibits the change? We have been referred to none; and in what provision lurks the prohibition we confess ourselves at a loss to conjecture. That the decision of the Federal court assumes and is based upon the theory that the situs of the shares is inseparable, even by statute, from the person of the owner, is undeniable. Yet we are pointed to no provision of the Constitution prohibiting what would seem to be an exercise of one of the plainest and simplest of legislative powers. That the Legislature can change the rule of the common law in this respect, seems to us a proposition too plain for argument; and if the power had not been practically denied by a court of such respectability we should deem it one so palpably clear as not to admit of controversy.

Story, in his Conflict of Laws, section 550, speaking of this question of situs, says:

"The general doctrine is not controverted that although movables are for many purposes to be deemed to have no situs except that of the domicile of the owner, yet this being but a legal fiction, it yields whenever it is necessary for the purposes of justice that the actual situs of the thing should be examined."

The separation of the situs of personal property from the domicile of the owner for the purposes of taxation is familiar doctrine in the courts of this country, and has been sanctioned by this court in various cases. In Wilkey v. The City of Pekin, 19 Ill. 160, it was held that a resident of that city could not, under the charter, be taxed on personal property not having its actual situs within

First National Bank of Mendota v. Smith.

the city. The situs of the property was held, under the charter, not to attach to the person of the owner. In Mills v. Thornton, 26 Ill. 300, a like severance of the situs from the person, for the purposes of taxation, was again recognized. In the City of Dunleith v. Reynolds, 53 Ill. 45, the court held certain personal property within the city subject to taxation, though the owners resided elsewhere. These, it is true, were cases of tangible property. But in the Board of Supervisors v. Davenport, 40 Ill. 198, the same principle was applied to property not tangible. It was there held that money belonging to a resident of New York, and sent to an agent in Tazewell county to be loaned, was taxable by the county. The property was a mere chose in action, but its situs was, by the terms of the Revenue Law, severed from the owner and attached to the agent in this State who loaned the money. It might be said in reference to the latter case that the possession of the agent was that of the principal. If this be conceded, it may also be said that the bank files this bill as trustee of the stockholders; and as such possesses the lawful control over the rights and interests of the cestuis que trust, much greater than that of a mere agent for the loan of money.

Shares in joint-stock companies are not, however, strictly speaking, chattels, and it has been considered that they bear a closer resemblance to choses in action, or, in other words, they are merely evidence of property. They are, it is held, mere demands for dividends as they become due, and differ from movable property, which is capable of possession and manual apprehension. “If,” says C. J, SHAW, "a share in a bank is not a chose in action, it is in the nature of a chose in action, and, what is more to the purpose, it is personal property." Ang. & Ames on Corp. (9th ed.), § 560; Hutchins v. State Bank, 12 Metc. 421.

"Certificates of stock," says COMSTOCK, J., in Mechanics' Bank v. New York R. R. Co., 3 Kern. 627, "are not securities for money in any sense, much less are they negotiable securities. They are simply the muniments and evidence of the holder's title to a given share in the property and franchises of the corporation of which he is a member."

Under this view of the law it would seem to be eminently proper for the Legislature to fix the situs of property so anomalous in nature, for the purposes of taxation. The question, however, is not whether the act of 1867, under which these taxes were levied,

First National Bank of Mendota v. Smith.

was just or reasonable, but simply whether it was within the limits of legislative power. If it was not, then there is no power in our Legislature to change any artificial rule of the common law, and many of the acts within our statute books are void for the same

reason.

But in our opinion the act of 1867 was not only constitutional, but was also a very proper and even necessary exercise of legislative power. It prescribes no unreasonable rule. It places the situs of bank shares where, from the very nature of the property, it ought to be placed for the purposes of taxation. The act of Congress itself contemplates a severance of the situs of such shares from the person of their owner, by providing that they should not be taxed except in the State where the bank is established. But apart from this, it is really much more reasonable to fix the situs of shares at the place where the bank is located, and where it must continue to do its business or wind up its affairs, than to separate by legislation tangible personal property from the person of its owner. The latter may be in one county to-day, and in another to-morrow. Its actual situs is liable to constant change, and the title may be transferred by the owner wherever he may be. But not so with bank shares. The banking corporation has a fixed locality, where it must transact its business, and there wind up its affairs when it ceases to exist. It is the trustee of the stockholders, who must come to its counter for their annual dividends and their share of assets on final liquidation. Its debts are payable at its counter, and credits receivable there. No transfer of stock can be completed unless shown upon the books of the bank. A list of the names and residence of all the stockholders must be there kept. The property, in its own nature, possesses much more of the immobility of real estate than any other personal property which we can now call to mind. The Legislature, then, did no violence to the nature of this property when it fixed the situs of the shares at the locality of the bank.

We have seen that the exercise of the power by the Legislature was both proper and legitimate. We have shown why it was proper and legitimate. It was necessary, because if this act had not been passed much of the bank stock in the State would have soon escaped taxation by modes so obvious as to need no specification. As it is, this is impossible. The assessor of each county knows every bank in the county, and has but to go to the books to ascer

First National Bank of Mendota v. Smith.

tain the ownership of these shares. The act, instead of defeating uniformity and equality of taxation, which is the theory upon which its invalidity is asserted, does, in our judgment, tend to secure these results more effectually than any other method that could have been adopted.

This question has been before the highest courts of New York and New Jersey, and they have decided as we do. National Bank v. Cook, 3 Vroom, 347; The People v. Commissioners of Taxes, 35 N. Y. 423.

We know of no authority that can be cited in support of the ruling of the Circuit Court of the United States, for the Northern District of Illinois, to which we have already sufficiently adverted. The case just cited from 35th New York, in which this point was expressly ruled, was afterward carried to the Supreme Court of the United States; this point was not deemed of sufficient importance to be raised before that court; and the judgment of the Court of Appeals of New York was affirmed there without reference by the court to the question. 4 Wall. 244.

We cannot regard the attempt of the National banks to shield their stockholders from all State taxation as at all meritorious. They offer no grounds for the alleged exemption which we can regard as even plausible.

Although their franchises are conferred by act of Congress, still, all their business, so far as conducted with reference to profit, is done under our State laws, the same as corporations created by the laws of this State. It is by the laws of the State that their business transactions are governed, and by the same laws that their property is protected. So that they are under the same duty to contribute to the support of the State and municipal governments as any natural person or State corporation may be. Unless exempted by some plain rule of law, they should not ask a court of equity to relieve their stockholders from that duty.

Decree affirmed.