was had upon a single item, and upon the basis of its amount having been agreed to, such an effect of the language complained of does not seem to be established.

[5] 5. A final complaint relates to the admission of evidence. While the plaintiff was on the stand he was asked by his attorney to state what was said in a conversation between himself and the defendant on September 7th. It is contended that the answer was incompetent. It does not appear to be very material, but in any event the question was not improper, since it did not necessarily call for anything that was not competent evidence. Nothing is preserved for review in this connection, since the defendant did not ask to have the question made more specific, and did not in any way attack the answer. Stone v. Bird, 16 Kan. 488.

TAX ON SHARE OF • STOCK - DEDUCTION OF REALTY LOCATION OF STATUTE. No deduction may be made for real estate in other states owned by state banks, national banks, or loan or investment companies.

5. TAXATION 386(2) — STATE BANKS-DE

DUCTION ON ACCOUNT OF REAL ESTATE
STATUTE.

In the case of state banks, the deduction on account of real estate necessary for the convenand fixtures, may not exceed the value of the ient transaction of business, including furniture real estate which the bank has capacity to hold for that purpose.

A day or two after the signing of the contract its draftsman, with whom it had been left, and who at the time was the defendant's attorney, had his stenographer make a copy of it (or what was supposed to be a copy), which he certified as correct and filed with the register of deeds. This purported copy was not a literal transcript of the instrument produced in court, the language being different in a number of instances, al- The limitation stated in No. 5 does not apply though none of these differences affected the to national banks or loan or investment compaessential meaning of the contract. The plain-nies.

6. TAXATION 386(2)-TAXATION OF STOCK -DEDUCTION OF VALUE OF REALTY-LIMITA

TION.

OF BANKS DEDUCTION ON ACCOUNT OF
REAL ESTATE-STATUTE.

No deduction from the assessed value of
shares of stock of banks can be made on account
of real estate acquired in the ordinary transac-
tion of business which is retained beyond the
holding such real estate.
periods limited by the state and federal laws for
8. TAXATION

tiff was permitted to introduce this copy in 7. TAXATION 286(2)—VALUATION OF STOCK evidence, over the objection of the defendant. As the copy was declared to be accurate and made public by the attorney of the defendant, acting apparently in his behalf, and as it did not conform strictly to the instrument asserted by him to be the original contract, the genuineness of which was attacked by the plaintiff, we think the court was justified in admitting it for whatever bearing it might be thought to have upon the question whether a substitution for the first sheet had been ef

fected.

The judgment is affirmed. All the Justices concurring.

(102 Kan. 334)

40(5) ASSESSMENT - UNIFORM AND EQUAL RATE-CLASSIFICATION OF BANKS.

The classification of loan or investment companies with state and national banks for purposes of taxation is a reasonable classification, which does not infringe the constitutional requirement that taxes shall be assessed and levied at a uniform and equal rate.

TAXA

9. CONSTITUTIONAL LAW 284(1)
TION 37-CAPITAL STOCK-DEDUCTION OF
REALTY IN FOREIGN STATE-DUE PROCESS OF
LAW.

FIRST NAT. BANK OF JUNCTION CITY v. value of shares of stock of state banks and loan The prohibition upon deducting from the

MOON et al.

or investment companies the value of real estate INTERSTATE MORTGAGE TRUST CO. v. Fourteenth Amendment to the Constitution of situated in a foreign state does not infringe the

BARNES, County Clerk, et al.
(Nos. 21603, 21218.)

(Supreme Court of Kansas. Jan. 12, 1918.)

(Syllabus by the Court.)

NATIONAL BANKS

1. TAXATION 128
TAX ON STOCK-STATUTES.
The tax contemplated by section 11236 of
the General Statutes of 1915, relating to taxa-
tion of national banks, state banks, and loan
or investment companies, is a tax on shares of
stock in the hands of stockholders, and not a the courts.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes
170 P.-3

(Additional Syllabus by Editorial Staff.) this opinion. For convenience in reference, 12. TAXATION 127-STATE BANKS "CAPI- numbers in brackets have been prefixed to TAL STOCK." each subdivision of section 11236 of the Gen

The "capital stock" of a state bank is the fund contributed by the stockholders to start the bank.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Capital Stock.]

eral Statutes of 1915, which relates to a distinct subject. This section will be designated for brevity, the tax law.

The first question to be determined is. What is the precise subject of taxation reach

13. TAXATION 129-STATE BANKS-"SUB-ed by the tax law?

PLUS."

The "surplus" of a state bank is the fund created by a reservation of part of the profits to meet unforeseen contingencies and unusual losses.

[Ed Note.-For other definitions, see Words and Phrases, First and Second Series, Surplus.] 14. TAXATION 129-STATE BANKS "UNDIVIDED PROFITS."

The "undivided profits" of a state bank are profits not set aside as surplus or distributed in dividends.

[Ed. Note.-For other definitions, see Words and Phrases, Second Series, Undivided Profits.] Labette

Appeal from District Court, County.

The first subdivision of the tax law provides that "stockholders" of state and national banks and of loan or investment companies shall be assessed and taxed "on the true value of their shares of stock." The second subdivision requires a return to be made, by a designated officer of the corpora tion, of "the amount and value of stock" held by each stockholder, together with "the value of any undivided profit or surplus." The third subdivision requires the corporation to pay the tax "assessed upon said stock and undivided profits or surplus," and gives the bank a "lien thereon," but reserves a Original mandamus by the First National remedy against the stockholder. The fourth Bank of Junction City against Rodger Moon subdivision authorizes a deduction, on acand others, as officials of Geary county; Sam- count of "capital stock" invested in real uel T. Howe and others, as Tax Commission- estate, to be made "from the original assessers of the state of Kansas, and certain ment of the paid-up capital stock." The national banks and a state bank. Writ with- fifth subdivision provides that bank stock held. Action for injunction by the Inter- and investment or loan company "stock or state Mortgage Trust Company against Fair- capital" shall not be assessed at a higher fax Barnes as County Clerk, and Nina Wood-rate than other property. The sixth subdiford as County Treasurer. From an order vision makes the act applicable to certain sustaining a demurrer to its petition, plaintiff appeals. No. 21603:

Affirmed.

J. V. Humphrey and A. S. Humphrey, both of Junction City, and McCune, Caldwell & Downing, of Kansas City, Mo., for plaintiff. W. E. Ziegler, of Coffeyville, Banks & O'Brien, of Independence, S. M. Brewster, Atty. Gen., and John L. Hunt and S. N. Hawkes, both of Topeka, for defendants.

No. 21218:

Burton & Burton and W. A. Disch, all of Parsons, for appellant. L. E. Goodrich and C. E. Pile, both of Parsons, for appellees.

BURCH, J. These actions involve controversies between state banks, national banks, and a loan company on one side and taxing officials on the other. The controversies relate to the assessment of shares of stock of the institutions named, and the deductions to be made from such assessments on account of investments in real estate in Kansas and

mutual insurance companies. The seventh subdivision provides that the assets, moneys, and credits of mutual insurance companies shall be subject to assessment and taxation. The first five subdivisions refer to state banks, national banks, and loan companies. The sixth and seventh subdivisions refer to mutual insurance companies, and in what follows the sixth and seventh subdivisions will be omitted from consideration, unless specifically mentioned.

It is not strange that this Joseph's coat piece of legislation should be confusing to taxing officers, especially those to whom the invisible, intangible entity called a corporation is still an enigma, and should be confusing to corporate officers and stockholders. It affords fine opportunity for legal dialectics and discursion. The fact is, the statute was the product of necessity, which limited the subject of taxation to shares of stock as the property of stockholders.

[12-14] In the case of state banks, capital other states. With the exception of some stock is the fund contributed by the stockminor matters, the questions presented must holders to start the bank. It must not be be solved by an interpretation of the tax less than a prescribed sum. It must be fully laws of the state, considered in connection subscribed before a charter can be taken out, with other laws, including statutes of the and the subscriptions must be paid in cash United States. The questions are of such before a certificate authorizing the bank to character that they may be apprehended engage in business can be obtained from the without a résumé of the pleadings. An ab- bank commissioner. The fund is divided instract of the pertinent laws is appended to to shares of $100 each. Each stockholder's

a fund to meet unforeseen contingencies and unusual losses, the bank does not distribute all the profits among the stockholders, but retains some of them. The fund so created is designated surplus. Profits not set aside as surplus or distributed in dividends are undivided profits. Surplus and undivided profits are the property of the bank. As the names indicate, they are not capital stock, but are something besides capital stock. After paying for the number of shares of capital stock which he has subscribed, the stockholder's right to claim money or property from the bank and its business is limited to sharing in such dividends as may be The result of the congressional legislation declared by the board of directors out of was to prevent application to national banks profits, and to sharing in the distribution of state legislation taxing bank property othof the assets of the bank when it winds up er than real estate. In New York, state its affairs, after depositors and all other banks were taxed on their capital. An act

was passed taxing shares of national bank, purpose to conform the tax law to the restock to the stockholders. The act did not, quirements of the federal law. A specious however, tax the shares of state banks to the argument frequently advanced is that the stockholders. The act was held void because shares of stock represent the capital stock, it discriminated in favor of stockholders of which in turn represents the property of the state banks, notwithstanding the fact that corporation, so that a tax return of shares state banks were taxed on their capital. In the opinion the Supreme Court of the United States said:

by the stockholders, or the corporation for them, and a return of capital stock or property by the corporation, accomplish the same end, but by different methods. The fallacy of this argument is exposed by the decision in the case of People v. Commissioners, 4 Wall. 244, 18 L. Ed. 344. The capital of a national bank consisted of $100,000, which was all invested in United States securities, exempt from taxation. In assessing the shares of stock to stockholders the assessor valued them at par, and made no deduction on account of the exempt character of the

If the bank Van Allen v. Assessors, supra. itself had been taxed the exemption would have been allowed.

"The tax on the shares is not a tax on the capital of the bank. 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 pur- securities in which the bank had invested all poses for which it was created, can deal with the its capital. A stockholder contested the ascorporate property as absolutely as a private sessment. The assessment was sustained on individual can deal with his own. This is fa- the authority of the decision in the case of miliar law, and will be found in every work that may be opened on the subject of corporations. A striking exemplification may be seen in the case of Queen v. Arnoud [9 Adolphus & Ellis, New Series, 806]. The question related to the registry of a ship owned by a corporation. Lord! Denman observed: 'It appears to me that the British corporation is, as such, the sole owner of the ship. The individual members of the corporation are no doubt interested in one sense in the property of the corporation, as they may derive individual benefits from its increase, or loss from its decrease; but in no legal sense are the individual members the owners.'

"The interest 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 share holder like any other property that may belong to him. Now, it is this interest which the act of Congress has left subject to taxation by the states, under the limitations prescribed." Van Allen v. Assessors, 3 Wall, 573, 581, 583, 584, 18 L. Ed. 229.

In the case of Bank of Commerce v. Tennnessee, 161 U. S. 134, 16 Sup. Ct. 456, 40 L Ed. 645, the ownership of surplus was considered. The charter of a state bank provided for a tax on each share of capital stock, in lieu of all other taxes. A subsequent statute undertook to tax the bank's surplus. It was contended the statute violated the obligation of the contract expressed in the charter. In the opinion it was said:

"In Tennessee v. Whitworth, 117 U. S. 129, at page 136 [6 Sup. Ct. 645, at page 647, 29 L. Ed. 830], Mr. Chief Justice Waite, in delivering the opinion of the court, says: "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 Leg-stock in the hands of the corporation. property in that which is described as capital Recognizing, as we do, that there is a different stock from that which is described as corporate property other than capital stock, and rememDering the necessity there is for a clear expression of the intention to exempt before the exemption will be granted, we must hold that the surplus has not been granted exemption by the clause contained in the charter under discussion. There is capital stock, and there is a surplus The very name of surplus implies a difference. over, above, and beyond the capital stock, which surplus is the property of the bank until it is divided among stockholders." Bank of ComCt. 456, 461 [40 L. Ed. 645]. merce v. Tennessee, 161 U. S. 134, 147, 16 Sup.

[1] The result in Kansas was that the islature was obliged to conform the bank tax law to the federal law, in order to avoid taxing the state's own banks out of existence. They could not compete with national banks, if stockholders were taxed on the full value of their shares, and, in addition, the bank were taxed on all its property. Full equality between state and national banks was finally accomplished by the tax-law revision of 1876 (Laws 1876, c. 34, § 22). The law was given its present form by the inclusion of loan companies and certain mutual insurance companies in 1891 (Laws 1891, c. 84, § 1).

The distinction between the class of prop- Considered in the light of its origin, and erty owned by stockholders known as shares of its clear purpose to place state banks and of stock and the class of property owned by loan companies on the same basis for taxathe corporation called capital stock, and tion as national banks, the tax law becomes sometimes called capital, has always been easy of interpretation, notwithstanding the recognized and enforced by the Supreme loose phraseology employed. It would not Court of the United States. Its decisions be possible to levy a valid tax on the capital

other property of a national bank, because that standard, "the true value." The presiof the restrictions contained in the federal dent, cashier, or managing officer of the corlaw. Consequently an intention to tax prop- poration submits a list of the stockholders. erty of that character to state banks or loan | Annexed to the names is a statement of the companies cannot be imputed to the Legislature. Neither may stockholders be taxed on property which belongs to the bank and not to them, and the result is, the subject of taxation stated in the first subdivision of the tax law is, shares of stock belonging to stockholders.

one which Congress itself has adopted in col-fee-simple title. This means full and unconlecting its tax on dividends, and on the income arising from bonds of corporations. It is the only mode which, certainly and without loss, secures the payment of the tax on all the shares, resident or nonresident; and, as we have already stated, it is the mode which experience has justified in the New England states as the most convenient and proper, in regard to the numerous wealthy corporations of those states. It is not to be readily inferred, therefore, that Congress intended to prohibit this mode of collecting a tax which they expressly permitted the states to levy." 9 Wall. page 363, 19 L.

The first subdivision of the tax law states fee simple.