People ex rel. Cagger v. Dolan.

peculiar to itself, and independent of the general system of taxation in existence in the State. The act of April, 1863, chapter 240, is also strongly indicative of the same intention.

By that act, the Legislature evidently intended to tax the whole available interest in the bank or in its shares. They there provided that a tax should be laid upon "a valuation" equal to the amount of their capital stock paid in and the surplus earnings, less ten per cent, without any deduction. This act was declared void by the Supreme Court of the United States, as laying a tax on the property of the bank, which property, in whole or in part, consisted of stocks of the Federal government. Immediately after this act was declared invalid, the acts of 1865 and of 1866, already cited, were passed by the Legislature.

It is argued in behalf of the respondents that, inasmuch as the statute directs the assessment of the bank shares to be included in "the valuation of the personal property of such stockholder," it subjects it to the operation of the general law in regard to assessments. It is to be observed, however, that this valuation is directed to be thus made in the ward where the bank is located and not elsewhere, whether the stockholder reside in said ward or not. It was the case with this relator, as it must be with many others, that he did not reside in the ward where the bank was located. It thus, by its terms, becomes at once distinguished from the general tax law, which requires this valuation to be made in all cases at the residence of the stockholder, and the indication is given that this valuation was intended to be a part of the special system, which I have already discussed. I have endeavered to show that such was the intention, and this provision is not in conflict with that idea, but forms a convenient portion of the machinery to accomplish it. It is said that the expression "but not at a greater rate than is assessed upon other moneyed capital in the hands of individuals in this State," aids the argument of the respondent. It is argued that an individual owning a bond and mortgage for $1,000, and being indebted $500 could, by the general law, claim to have the $500 deducted from the value of his bond and mortgage, and that his assessment and taxation should be upon the remaining $500 only; and that the refusal of a like deduction in favor of the shareholder of $1,000 would subject him to taxation upon twice as large an amount as was imposed upon the individual. This, it is said, would be imposing a greater rate of taxation upon the share

People ex rel. Cagger v. Dolan.

holder. The "rate," or "ratio," is the percentage merely; the "proportion," the "degree." (Webster; Worcester.) If the State imposes a tax of five mills upon the dollar on all the real and personal property of the State, five mills on the dollar is the "rate," the degree, the proportion, the percentage of taxation. This is distinct from the question of exemption. Almshouses and institutions of learning, and the estates of clergymen, to a limited extent, are exempt from taxation. This exemption may compel the payment of a larger amount by the remaining tax payers, in an indirect manner, for the reason that so large a sum does not come into the treasury of the State as if there were no exemptions. If so, it is not because the rate is altered, but because there is less material upon which the tax may attach itself. Rate and exemptions are in no way connected. In their nature, they have no necessary relation to each other. The one directs how much shall be raised upon certain valuations, while the other directs what property shall be subject to taxation and what shall be exempt. The possession of United States securities by a State bank exempts so much of its capital, as is thus invested, from State taxation, but the possession by a National bank of the like securities does not relieve its shareholders to the like amount. Both of these propositions were decided by this court in The City of Utica v. Churchill 33 N. Y. 161, and Van Allen v. The Assessors, before cited, 3 Wall. 200 (ante, p. 1); Bank Tax Case, 2 Black, 620. The same question was decided by this court, in October last. The People ex rel. Kennedy V. The Commissioners of New York. The fact, therefore, that the same percentage will not produce the same amount of tax when imposed upon a State bank, with a capital of $100,000, that it does when imposed upon National shareholders to that amount, does not affect the legality of the tax, and as a corollary, does not impose a different rate of taxation. If it imposed a different rate, the tax would be invalid. The case of The People ex rel. v. The Commissioners of New York, I understand to be decisive against the argument now under consideration. See opinion of DAVIES, Ch. J., pp. 15, 19, 20.

In Van Allen v. The Assessors, supra, the Supreme Court of the United States say "upon the whole, after the maturest consideration we have been able to give that case, we are satisfied that the States possess the power to tax the whole of the interest of the shareholder, in the shares held by him in these associations, within

Conklin v. The Second National Bank.

the limit prescribed by the act authorizing their organization." This proposition was asserted in denial of a claim that the interest of shareholders should be subject to taxation so far only as the capital of the bank was not invested in United States securities, exempt by law from taxation. I think it is correct in its application to the present case. The assessors did right in refusing to make the deduction claimed, and the order appealed from should be reversed with costs.

All the judges concurred in the foregoing opinion, except PORTER and BOCKES, JJ., who dissented.

PARKER, J., delivered a concurring opinion.

Order reversed.

CONKLIN V. THE SECOND NATIONAL BANK.

(45 New York, 655.)

National banks have no lien on shares for debts.

A National bank can acquire an interest in its own stock only by a purchase to prevent a loss upon a debt previously contracted in good faith; and a provision in certificates of stock in such bank that they shall not be trans ferred until all the liabilities of the stockholder to the bank are paid is void and of no effect. *

A

CTION to recover shares of stock in defendant's bank which were assigned by one Chandler to the plaintiff. The certificates of shares provided (as did also the by laws of defendant's bank), "that this stock is not transferable until all liabilities of the stockholder to this bank are paid."

*The Supreme Court of New York, in Rosenback v. The Salt Springs National Bank, 53 Barb. 495, held that a National bank could not by a by-law create a lien on its own stock in its favor, but thought that such lien might be valid if provided for in the "articles of association." The Supreme Court of the United States has, since that case, settled the question by holding that neither by its articles of association, by its by-laws, nor by any agreement in the certificates of shares, can a National bank acquire a lien on its stock. Bullard v. Bank, ante, p. 93. See also Evansville National Bank v. Metropolitan National Bank, ante, p. 189; Johnson v. L1flin, ante, p. 331.

The Court of Chancery of New Jersey held that a National bank could acquire a lien under a by-law to that effect. Young v. Vough, 8 C. E. Green, 325, affirmed by the Court of Errors and Appeals, 9 id. 535; but such is not the law since Bullard v. Bank.-REP.

Conklin v. The Second National Bank.

At the time Chandler transferred the stock to plaintiff, he was indebted to the bank in the sum of $4,000 for moneys which he had collected for the bank, but had not paid over. The defendant claimed to have a lien on the stock for such indebtedness.

The plaintiff had a judgment which was affirmed by the Supreme Court, at General Term (53 Barb. 512), and defendant appealed.

John C. Churchill, for appellant.

Amasa J. Parker, for respondent.

GROVER, J. The defendant, as appears by the case, was incorporated under the National Currency Act of 1863. Section 25 of that act provides that the banks shall have a lien upon the stock of each stockholder for all debts and liabilities from him to the bank unpaid, and no transfer of the stock of the bank shall be valid until all debts and liabilities of the stockholder making the transfer are paid, and this provision shall be inserted in substance in the certificates of stock issued by the bank. Section 21 provides that certificates of stock signed by the president and cashier may be issued to stockholders, and the certificates shall state on the face thereof that the stock is transferable only upon the books of the bank, and that, when the stock is transferred, the certificate thereof shall be returned to the bank and canceled, and new certificates issued. The certificates for stock issued by the defendant to the plaintiff's assignor, pursuant to the requirement of the 25th section, expressed on their face that the stock was not transferable until all liabilities of the stockholders to the bank were paid. It is entirely clear that, by the Currency Act of 1863, a lien was given, to all banks organized under it, upon the stock of each stockholder for all debts and liabilities to the banks. This lien did not arise from any by-law of the banks, but was given expressly by the statute authorizing the incorporation of this class of institutions. But the act of 1863 was repealed by the 62d section of the Currency Act of 1864, passed June 3d of that year. 13 U. S. Stat. at Large, 99. That section provides that the act entitled an act to provide a National currency, etc., approved February 25th, 1863, is hereby repealed; provided that such repeal shall not affect any appointments made, acts done, or proceedings had, or the organization, acts or proceedings of any association organized or in the process of organization under the act aforesaid, and provided also that all

Conklin v. The Second National Bank.

such associations, organized or in process of organization, shall enjoy all the rights and privileges granted, and be subject to all the duties, liabilities and restrictions imposed by this act, and provided, further, that the circulation issued or to be issued by such association shall be considered as a part of the circulation provided for in this act. The intention of this section was to continue in existence all banks organized under the act of 1863, with the same powers and privileges, and subject to all the restrictions conferred and imposed upon those thereafter organized under the act of 1864. The provisions giving a lien to a bank upon the stock of its stockholders or any debt or liability of a stockholder to the banks and for expressing such liability upon the face of the certificates issued to holders of stock contained in the act of 1863, were not re-enacted by the act of 1864. The defendant cannot, therefore, sustain the lien claimed upon the act of Congress under which it is incorporated. Were there no restrictions imposed by the act of 1864, upon banks acquiring liens upon its stocks for the debts and liabilities of its stockholders to it, the only question in the case would be, whether a lien in its favor was created by the by-law enacted by its directors, declaring that its stock should be subject to such lien. But the act of 1864 does impose restrictions upon banks in this respect. Section 35, 13th U. S. Statutes at Large, 110, provides that no association shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously coutracted in good faith, and stocks so purchased or acquired shall, within six months from the time of its purchase, be sold or disposed of at public or private sale, in default of which a receiver may be appointed to close up the business of the association according to the provisions of the act. It was held by the United States Supreme Court in The First National Bank of South Bend v. Lanier, (ante, p. 70), that a pledge of his stock to the bank as a security for such money as the bank might deposit with a banking firm of which the stockholder was a member, was prohibited by the above section, and therefore void. Justice DAVIS in giving the opinion of the court says: "These institutions were created to subserve public purposes, and not the mere private interests of their stockholders, and in no better way could this object be attained, than by placing shareholders in their pecuniary dealings with the