Charleston v. People's National Bank.

ton, or those who hold taxable property within the same, for the safety, convenience, benefit and advantage of the said city, as shall appear to them expedient."

day of

2. That an ordinance to raise supplies for the year 1872, ratified on the 1872, by said city council imposed a tax of two per cent upon the taxable property within said city. in the hands of tax payers, on 1st January, 1872.

3. That the People's National Bank, a banking association within the limits of the city of Charleston, organized under the laws of the United States, on the 12th day of February, 1872, returned seven thousand five hundred shares, valued at one hundred dollars each, as in the hands of its stockholders, subject to taxation, upon which, after deducting value of real estate and city stock, at $23,440, a tax of two per cent was duly assessed by the city appraiser, and the same has been duly paid by said bank for its stockholders, pursuant to section 28 of ordinance of February 10, 1870.

4. That, on the 1st day of July, A. D. 1871, said banking assooiation voted to increase the number of shares of capital stock in said bank to one thousand, subject to the approval of the comptroller of currency. Between 1st July, 1871, and 1st January, 1872, said two thousand five hundred additional shares were duly subscribed, and the amount thereof, two hundred and fifty thousand dollars, was secured to be paid to said banking association, and the securities were held by the cashier in trust for it. The said banking association declared and paid a semi-annual dividend upon all of its said stock, including said increase of two thousand five hundred shares, on the 7th day of January, A. D. 1872, for the half year ending January 1, 1872.

5. That the subscribers to said additional shares of stock did receive certificates of stock representing the same after the 2d January, 1872.

6. That on the 15th day of June, A. D. 1872, said banking association having failed to return said additional shares for taxation to the city council, the city appraiser, pursuant to sections 29 and 38 of the ordinance of the city, of February 10th, 1872, proceeded to list said two thousand five hundred shares of stock for taxation, and fixed the value thereof at one hundred dollars per share, amounting in all to two hundred and fifty thousand dollars, and levied pursuant to ordinance of city council, of the day of A. D. 1872, a tax of two per cent thereon, which tax amounted to

Charleston v. People's National Bank.

the sum of five thousand dollars, which, not having been paid at the times required by ordinance, is subject to a penalty of twenty per cent for non-payment, pursuant to section 48 of the ordinance of February 10th, 1872, amounting to one thousand dollars. There has been a school tax assessed by the Charleston city board of school commissioners, of three hundred and twelve dollars and fifty cents ($312.50), to be collected by the city council of Charleston, and if said stock is taxable the same is now due to plaintiff.

7. The said banking association did not obtain leave of the United States comptroller of currency to increase its capital stock till after the 1st day of January, 1872; and the comptroller of currency refused to recognize any increase of the capital stock of the bank until the 5th day of January, 1872; and, the 3d day of January, 1872, said banking association returned to the comptroller of currency, at Washington, only seven thousand five hundred shares as the amount of its capital stock, subject to taxation by the general government, paid the tax thereon, and the said return and payment were accepted by the said comptroller.

The question submitted to the court is: Had the city council a right to levy the tax on the two thousand five hundred shares of stock, under the facts stated?

The court below ordered, that judgment be entered against the defendant in the sum of six thousand three hundred and twelve dollars and fifty cents, with costs, and that the plaintiff have execution thereof.

The defendant appealed.

Simonton, for appellant.

Minot, city attorney, Corbin & Stone, for respondent.

MOSES, C. J. The single question presented by the case agreed upon in a controversy submitted without action between these parties is, whether the city council of Charleston had a right to levy the tax on the twenty-five hundred shares of the stock referred to in the brief.

It is not necessary to repeat the facts on which our judgment is to be pronounced, for they are recited in the agreement which precedes this opinion.

The ordinance of the city council imposed the tax "on the shares in the hands of its shareholders, respectively " (§ 22, p. 96,

Charleston v. People's National Bank.

city ordinances, 1859-70), and if the shares upon which it is claimed the proposed tax is to operate can be comprehended within its terms, the judgment of the Circuit Court must be affirmed.

The institution in question was established and organized as one of the national banks, under the act of Congress of 3d June, 1864, "to provide a national currency secured," etc. (13 U. S. Statutes, 99). For its formation it was necessary that a certificate should be prepared and filed with the comptroller of the currency at Washington, which should contain, among other things, a specification of the amount of its capital stock, and the number of shares into which it was to be divided. This is the evidence of the amount of such capital stock and its distribution into shares, and these last are then fixed, designated and known at the bureau of currency by the record preserved in the proper office thereof. The act further provides by its 13th section, page 103, "for an increase of the capital from time to time, provided that the maximum of such increase shall be determined by the comptroller of the currency; and no increase shall be valid until the whole amount of such increase shall be paid in, and notice thereof transmitted to the comptroller, and his certificate obtained, specifying the amount of such increase of capital stock, with his approval thereof, and that it has been duly paid in as a part of the capital of such association."

The argument, on the part of the respondent, proceeds upon the ground that the proposed increase of the capital by the said twentyfive hundred shares was effected by the subscription to that extent, and the acceptance of certain securities therefor, held by the cashier in trust for the association. If this is well founded, then the increase does not depend on a compliance with the conditions expressed in the act of Congress, but on arrangements with the shareholders, originally organized under it, may make with third persons, in the face of the very law to which they owe the existence of their association, and under which, it is to be assumed, they are at least to carry out the obligations which it imposes. The error is in the attempt to give force to these shares as valid and properly constituted shares of the association, before the approval of the comp. troller, when, in point of fact, the increase of the capital depended upon it. The resolution on the 1st day of July, 1871, to increase the number of the shares, by its very terms, made it dependent on such approval. Until obtained, the capital remained as originally fixed. The act of the stockholders to that end was no more than

Charleston v. People's National Bank.

a proposition among themselves, the effect of which was subject to the assent of the higher authority designated by the act of Congress. A solution of the proposition may be tested by the inquiry, whether, if before the 7th January, 1872, any one of the so-called stockholders could have required the association to issue a certificate for the shares so agreed to be taken by him. Only one answer could be given to it, and that, it appears to us, would conclude the respondent from imposing the tax, which must be upon shares of the capital stock, which, before the 7th January, 1872, was limited to the amount originally allowed by the certificate of organization.

It is supposed that these additional shares are subject to the tax because the $250,000 which they represented was actually paid before the 1st January, 1872, and a semi-annual dividend declared and paid on them for the half year then ending. The ordinance in question "imposed the tax on taxable property within the said city in the hands of tax payers on 1st January, 1872.”

The proposed increase of the capital was required by the act of Congress to be paid in as a precedent condition, on the performance of which the approval of the comptroller depended. If he had withheld it, the very requisite which was necessary to make the money deposited the medium through which the certificates of the additional shares could of right be demanded, was wanting.

That the money thus subscribed remained in possession of the bank, and that those who had advanced it, received on 7th January, 1872, a dividend for the half year ending on the first day of the said month, in common with the original stockholders, cannot affect the question. The original stockholders could apply the profits of the bank at their own pleasure, and if those who were interested in restricting the application of the dividends to the original stock do not complain, their want of objection cannot convert what must be considered as mere proposals for stock into valid and legal shares. The tax is not on the dividend, but on the share. The view which the comptroller of the currency took of the liability of the said twenty-five hundred shares to the tax of the government is clear, from the fact that although the said banking association, on 3d January, 1872, returned to him, subject to taxation by the govern. ment, only seven thousand five hundred shares, he imposed no tax beyond them, and accepted the said return and payment as a compliance with the law.

While we are in no way bound by his decision, it cannot preju

Dudley v. Odom.

dice our conclusion, that the public officer charged by Congress with the duty of estimating the capital of these associations, on which the United States tax was to be laid, on the same facts before him, with the knowledge of the further extension of the capital of this bank, did not exact any tax on the said twenty-five hundred shares.

The answer of the court is, that the city council of Charleston did not have the right to levy the tax on the twenty-five hundred shares under the facts stated.

The judgment of the Circuit Court is, therefore, reversed.

Judgment reversed.

Illegal contract

DUDLEY V. ODOM.

(5 8. C. 181.)

agreement not to bid at assignee's sale.

▲ contract between two creditors interested in a public sale about to be made by an assignee in bankruptcy, that one will not bid against the other, and in consideration thereof, that the latter will pay to the former a certain sum of money, is against public policy, and, therefore, null and void.

A

CTION by Dudley against Odom to recover $700 alleged to be due on contract.

The case was this: The plaintiff held a judgment by confession for $2,112.98, entered 22d August, 1866, against John Odom, the father of defendant; and J. H. Hudson also held an older judgment against John Odom, which amounted, at the time of the sale herein mentioned, to about $1,500. In 1868, John Odom was adjudged a bankrupt on his own petition, and on November 1st of the same year his real estate, consisting of 600 acres of land of the value of $10 per acre, was sold by his assignee and purchased by the defendant at the price of $1,500. The plaintiff and defendant met at the time and place of the sale, and just before the property was offered by the assignee, it was agreed between them that the defendant should bid $1,500, a sum sufficient to satisfy Hudson's judg ment; that the plaintiff should not bid, and in consideration thereof, that defendant would pay to the plaintiff $700 whenever the Supreme Court of the United States should decide that obliga