Citizens' Bank of Louisiana v. Parker/Dissent Brewer
Mr. Justice Brewer, with whom the Chief Justice concurs, dissenting:

I dissent from the opinion and judgment in this case, and will state briefly my reasons therefor: Where it is contended that a state, having once entered into a contract, has, by subsequent legislation, impaired its obligations, this court, while exercising its independent judgment in respect to the terms of the contract and the fact of impairment, will lean to the views announced by the courts of that state. In Wilson v. Standefer, 184 U.S. 399, 412, 46 L. ed. 612, 618, 22 Sup. Ct. Rep. 384, 389, we said: 'But as the general rule is that the interpretation put on a state constitution or laws by the supreme court of such state is binding upon this court, and as our right to review and revise decisions of the state courts in cases where the question is of an impairment by legislation of contract rights is an exception, perhaps the sole exception, to the rule, it will be the duty of this court, even in such a case, to follow the decision of the state court when the question is one of doubt and uncertainty. Especial respect should be had to such decisions when the dispute arises out of general laws of a state, regulating its exercise of the taxing power, or relating to the state's disposition of its public lands. In such cases it is frequently necessary to recur to the history and situation of the country in order to ascertain the reason as well as the meaning of the laws, and knowledge of such particulars will most likely be found in the tribunals whose special function is to expound and interpret the state enactments.'

Where it is contended that exemption from taxation has been granted by contract with the state, the exemption, if any be found to exist, will not be extended by construction, but will be confined to that which is clearly within the terms of the contract. Charles River Bridge v. Warren Bridge, 11 Pet. 420, 544, 9 L. ed. 773, 822; Ohio Life Ins. & T. Co. v. Debolt, 16 How. 416, 435, 14 L. ed. 997, 1005; Dubuque & P. R. Co. v. Litchfield, 23 How. 66, 88, 16 L. ed. 500, 509; St. Louis, I. M. & S. R. Co. v. Loftin, 98 U.S. 559-564, 25 L. ed. 222-224; Yazoo and M. Valley R. Co. v. Thomas, 132 U.S. 174-185, 33 L. ed. 302-306, 10 Sup. Ct. Rep. 68; Wilmington & W. R. Co. v. Alsbrook, 146 U.S. 279-295, 36 L. ed. 972-978, 13 Sup. Ct. Rep. 72; Illinois C. R. Co. v. Decatur, 147 U.S. 190, 37 L. ed. 132, 13 Sup. Ct. Rep. 293; New York ex rel. Schurz v. Cook, 148 U.S. 397, 409, 37 L. ed. 498, 502, 13 Sup. Ct. Rep. 645; Bank of Commerce v. Tennessee, 161 U.S. 134, 146; 40 L. ed. 645, 649, 16 Sup. Ct. Rep. 456; Phoenix F. & M. Ins. Co. v. Tennessee, 161 U.S. 174-177, 40 L. ed. 660, 661, 16 Sup. Ct. Rep. 471.

In the last of these cases, on page 177, L. ed. p. 661, Sup. Ct. Rep. p. 472, we said:

'It must always be borne in mind in construing language of this nature that the claim for exemption must be made out wholly beyond doubt; for, as stated by Mr. Justice Harlan, in Chicago, B. & K. C. R. Co. v. Guffey, 120 U.S. 569, 575, 30 L. ed. 732, 734, 7 Sup. Ct. Rep. 693, 696, 'It is the settled doctrine of this court that an immunity from taxation by a state will not be recognized unless granted in terms too plain to be mistaken." And in next to the last, on page 146, L. ed. p. 649, Sup. Ct. Rep. p. 460, we also said:

'These cases show the principle upon which is founded the rule that a claim for exemption from taxation must be clearly made out. Taxes being the sole means by which sovereignties can maintain their existence, any claim on the part of any one to be exempt from the full payment of his share of taxes on any portion of his property must, on that account, be clearly defined and founded upon plain language. There must be no doubt or ambiguity in the language used upon which the claim to the exemption is founded. It has been said that a well founded doubt is fatal to the claim; no implication will be indulged in for the purpose of construing the language used as giving the claim for exemption, where such claim is not founded upon the plain and clearly expressed intention of the taxing power.'

Only last term the same doctrine was reaffirmed in Chicago Theological Seminary v. Illinois, 188 U.S. 662, 672, 47 L. ed. 641, 648, 23 Sup. Ct. Rep. 386, 387, in these words:

'The rule is that, in claims for exemption from taxation under legislative authority, the exemption must be plainly and unmistakably granted; it cannot exist by implication only; a doubt is fatal to the claim.'

I make these quotations, which are in harmony with the many other decisions of this court, for even the most casual examination of them makes it apparent that the rule therein stated is plainly ignored in this case, and that a term whose meaning is well understood is stretched beyond its ordinary significance and to its utmost limits in order to include the alleged exemption.

The supreme court of Louisiana in this case held that a license tax was not within the exemption of the bank from any tax upon its capital, the one being a charge for the privilege of carrying on the business, and the other an exemption of a part of the property of the bank from taxation. In the course of its opinion it said, after referring to a prior case:

'There the tax resisted, like those resisted in the cases relied on, was at least a tax of the same character; that is, a tax upon 'property,' while the tax involved in this litigation is one essentially different; it is a tax, it is true, but one upon callings or occupations, and it is controlled and governed by rules and principles entirely different from those which bear upon property taxation. New Orleans v. Louisiana Sav. Bank & S. D. Co. 31 La. Ann. 638; Walters v. Duke, 31 La. Ann. 671; Morehouse v. Brigham, 41 La. Ann. 667, 6 So. 257; Articles 203, 206, 207, and 209 of the constitution of 1879 also disclose this very fully and clearly. (See New Orleans v. Ernst, 35 La. Ann. 746, and State ex rel. Ernst v. State & City Board, 36 La. Ann. 347.)

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'The defendant urges that the license tax is substantially one upon its capital. The views expressed by us above indicate our opinion upon this point. The mere reference in the license acts to the declared or nominal capital or surplus from business or banking institutions is not a tax upon the capital or surplus itself of the different banks, but a mere method of classifying the banks and establishing a graduation of licenses, as required by article 206 of the Constitution. State v. Liverpool, L. & G. Ins. Co. 40 La. Ann. 463, 4 So. 504; Morehouse v. Brigham, 41 La. Ann. 666, 6 So. 257.

'This court, in New Orleans v. State Nat. Bank, 34 La. Ann. 892, said: 'A provision in the charter of a corporation exempting its stock and real estate from taxation does not cover an exemption from license taxation. The grant of a charter to a bank, authorizing it to carry on a certain business during the term of its charter, does not import permission to do so without contributing to the support of the government in like manner with natural persons pursuing the same business.'

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'The extent of the exemption granted originally from taxation was from 'taxation upon its capital.' It could never have claimed greater or other exemption than that. The law of 1890, the unconstitutionality of which is pleaded, does not pretend to impose, nor does it impose any tax upon the 'bank's capital,' and therefore there could by no possibility be, nor is there, any violation of any contract obligation through that act, even should there really be any existing obligation at all between the state and the defendant as to taxation.'

That there is a clear distinction between a property tax on the capital of a corporation and a license tax for the privilege of carrying on the business of the corporation has been so often decided by this and other courts, and is so clear, that it seems almost a waste of words to refer to decisions. And yet it may be well to refer to a few that it may be apparent how strongly, emphatically, and for how long a time the distinction has been affirmed. As a preliminary thereto let it be borne in mind that the franchise of a corporation is the privilege granted to it to do the business named in its charter, and a license tax for the privilege of doing business is simply a tax upon the franchise. In Gordon v. Appeal Tax Ct. 3 How. 133, 150, 11 L. ed. 529, 537, decided in 1844, it was said:

'A franchise for banking is in every state of the Union, recognized as property. The banking capital attached to the franchise is another property, owned in its parts by persons, corporate or natural, for which they are liable to be taxed, as they are for all other property, for the support of government.'

In Hamilton Mfg. Co. v. Massachusetts, 6 Wall. 632, 640, 18 L. ed. 904, 907:

'Property taxation and excise taxation, as authorized in the Constitution of the state, are perfectly distinct.'

'In Farrington v. Tennessee, 95 U.S. 679, 24 L. ed. 558, Mr. Justice Swayne, after referring to taxation of bank capital and shares of stock, added (p. 687, L. ed. p. 560):

'There are other objects in this connection liable to taxation. It may be well to advert to some of them.

'1. The franchise to be a corporation and exercise its powers in the prosecution of its business.'

In Tennessee v. Whitworth, 117 U.S. 129, 136, 29 L. ed. 830, 832, 6 Sup. Ct. Rep. 645, 647, Chief Justice Waite declared: 'In corporations four elements of taxable value are sometimes found; 1, franchises; 2, capital stock in the hands of the corporation; 3, corporate property; and, 4, shares of the capital stock in the hands of the individual stockholders. Each of these is, under some circumstances, an appropriate subject of taxation; and it is no doubt within the power of a state, when not restrained by constitutional limitations, to assess taxes upon them in a way to subject the corporation or the stockholders to double taxation.'

Both of these last cases were cited with approval in Bank of Commerce v. Tennessee, 161 U.S. 134, 146, 40 L. ed. 645, 649, 16 Sup. Ct. Rep. 456. Many more cases might be cited to the same effect, but these will serve as illustrations. It is conceded that this distinction was recognized in Louisiana, though it is contended that it was not always held sufficient to uphold, in the case of a contract exemption of the capital, the retention of a power to impose license taxes, and some early decisions of the supreme court of that state are cited. But what does this argument amount to? Because the distinction between the two taxes has not always been recognized in Louisiana it must now be repudiated. The legislature must be held to have not recognized the distinction in this case, because the courts have sometimes in other cases failed to recognize it. It is not pretended that there has been a uniform ruling on the part of the supreme court of Louisiana ignoring the distinction. On the contrary, this very case (and this is only one of several) recognizes it. It seems to me this is a plain overturning of the hitherto settled rule of this court, that a doubt is to be resolved in favor of a state, for the alleged doubt in this particular case is resolved in favor of the corporation.

But upon what ground is it claimed that a doubt exists? Why should not the legislature be credited with recognizing the distinction recognized elsewhere through the country and sometimes at least, if not always, in Louisiana? It is said that there is something peculiar in the organization of this bank; that its purpose was to aid the agricultural interests of the state, and that the state assisted by a loan of its credit, and retained partial control through directors appointed by it. But is it not the rule that an exemption from taxation is not given as a gratuity, but by reason of some supposed benefit to the state as a whole or some particular interest therein? Does the fact that some interest in the state is specially benefited change the rule as to the construction of an exemption? It seems to me that that is a doctrine as novel as it is dangerous. It is true that the state loaned its credit, and retained a partial control through directors appointed by it, but we have in the legislation of Congress and in the decisions of this court a very suggestive analogy. The Union Pacific Railroad Company was a corporation chartered by Congress. It was given a large amount of public lands and the credit of the United States was loaned to it to the extent of $16,000 and over a mile. A partial control was retained through directors appointed by the government. In these respects it presents a close similarity to the Citizens' Bank. It was held by this court that while the franchise given by Congress to this and other transcontinental railroads was exempt from state taxation, yet the property belonging to those corporations was not. California v. Central P. R. Co. 127 U.S. 1, 32 L. ed. 150, 2 Inters. Com. Rep. 153, 8 Sup. Ct. Rep. 1073; Thomson v. Union P. R. Co. 9 Wall. 579, 19 L. ed. 792; Union P. R. Co. v. Peniston, 18 Wall. 5, 21 L. ed. 787. It was not doubted that Congress could in its discretion have provided for such exemption, but as it failed to prescribe it, the court held that it did not exist. If from the fact that the corporation was aided by bonds of the United States, was engaged in doing the work of the nation in interstate transportation, and a partial control retained by Congress, that its property as well as its franchise was exempt from state taxation, why should there be an inference from the fact that Louisiana aided by its bonds this particular corporation and retained a partial control thereof, that it intended to grant any other exception than was expressly stated?

Again, it is contended that contemporaneous construction determines that the exemption of the capital included the exemption of the franchise. It seems to me a sufficient answer is that in 1853 the supreme court held that a provision exempting the capital stock of a bank from taxation, except at a particular rate, exempted the bank from a license tax. New Orleans v. Southern Bank, 11 La. Ann. 41. It is not strange that thereafter there was no effort to impose a license tax on this bank and that the administrative officers respected the opinion of the supreme court, and did not until of late seek a reconsideration of that ruling. It also appears that there was no specific statute providing for a license tax upon banks until 1869, and that was after the decision of the supreme court referred to.

It is also said that if a license tax on the franchise is enforced it must be paid out of the capital, and so, in effect, be a tax upon the capital. That argument would make in every case an exemption of the capital a relief from all taxation, for every tax must in the last analysis come out of the capital. But what, under those circumstances, becomes of the doctrine of a strict construction of a contract exemption of taxes?

Further, it must be remembered that objects and means of taxation were not in the years past sought for with the same avidity as at present. The demand for revenue was not so great, and there was much inattention to the matter of securing objects and devising modes of taxation. So the mere fact that a particular kind of tax was not sought to be enforced upon any institution is not conclusive of the fact that it was necessarily exempt therefrom. It may simply mean that other objects seemed to the taxing authorities more accessible and more conveniently reached for taxation. At any rate, we are not justified in holding that the mere fact of an omission to press such a taxation upon the bank establishes that such a tax was included within the exemption in the face of a ruling of the highest court of the state that it was not.

For these reasons I am constrained to dissent from the opinion of the court.

Mr. Justice Harlan also dissents. 

Notes