The bank act (sections 514 and 568 of the The People's State Bank of Coffeyville, General Statutes of 1915, with their amend- joined as a defendant in case No. 21,603, ments) limits the value of the banking house, but in fact interested on the side of the plainfurniture, and fixtures which a state bank tiff, claims the right to a deduction on acmay own to not more than one-third of its count of real estate not located in Kansas. capital stock, now one-third of its capital | The statute does not provide for such a destock and surplus. The purpose of the limi- duction. The object of the law is to provide tation was to put a stop to the expenditure of bank funds in the erection and extravagant furnishing of Grecian temples for the housing of state banks. The court is of the opinion the tax law should be construed in connection with this limitation on the capacity of state banks to hold real estate, and that no deduction should be made on account of banking house, furniture, and fixtures in excess of the limited value. The federal statute (Revised Statutes, § 5137 [U. S. Comp. St. 1916, § 9674]) contains no such limitation on the capacity of national banks, and the corporation law contains no such limitation on the capacity of loan companies. The disability imposed on state banks does not affect them and they are at liberty to deduct the full value of real estate of the character under consideration. The state and federal bank acts limit the length of time that real estate acquired in the ordinary transaction of business may be held. No deduction can be made on account of real estate held beyond the prescribed period. At the expiration of such period real estate should have been either converted into assets which may not be deducted, or else charged off. revenue to meet the needs of the state government. The command of the law is that real estate, the value of which is deducted from the value of stockholders' shares, "shall be assessed as other lands or lots." This can apply to no real estate except that subject to the tax laws of the state. If the value of real estate outside the state were to be deducted, shares of stock would be taxed at less than their true value, without opportunity to recoup the abatement by taxation of real estate. The value of real estate in another state owned by a national bank may not be deducted from the value of shares of stock, unless the deduction be permitted to state banks. In a case which arose in Utah, it appeared that a deduction was allowed on account of real estate situated in that state, but not on account of real estate situated in other states. The Supreme Court of the United States, in disposing of the complaint of a national bank, said: "While real estate of a bank situated outside of the state of domicile is taxed in the state of its situs, yet the value of such real estate necessarily enters into and is considered in estimating the value of the shares of stock, and to deduct the value of the real estate would, to the extent of such deduction, reduce the real value of the shares, without a compensatory equivalent." Commercial Bank v. Chambers, 182 U. S. 556, 561, 21 Sup. Ct. 863, 865 [45 L. Ed. 1227]. It is insisted that the state bank should be accorded the same privileges as those corporations which are embraced within the provisions of section 11164 of the General Statutes of 1915. Under that section capital stock is regarded as the equivalent of all the shares of capital stock issued and out An ingenious argument is made to the effect that under the provisions of subdivision 4 of the tax law the value of no real estate may be deducted except that into which the original fund derived from payments of subscriptions to capital stock has gone. The argument assumes that the term "capital stock" was used by the Legislature according to its true signification. It has already been shown that the same term used in the concluding portion of the same sentence cannot bear that sig-standing (Building Co. v. Saline County, 98 nification. Since the term was not used with technical accuracy in one part of the sentence, it is not likely the strict meaning was intended in another part. Building Co. v. Saline County, 98 Kan. 732, 734, 160 Pac. 971. There are two general classes of property reached by taxation, personalty and real estate. These classes are recognized by the tax law. An essentially different system of procedure is employed in the assessment and collection of taxes on each. In valuing the personal property taxed to the stockholder, that is his shares of stock, the value of all real estate, from whatever funds derived, would necessarily be included. Preferring to tax real estate as real estate, to its owner, the corporation, according to the appropriate method of procedure, and not desiring to tax the same value twice, provision was made for deducting from the value of the personal Kan. 732, 160 Pac. 971), and is valued just as shares of stock in banks are valued. Capital stock value is considered as representative of all value-producing elements attending the corporate enterprise. Gas Co. V. Spaeth, 83 Kan. 191, 109 Pac. 785. The value necessarily includes real estate and chattels which, if the property of an individual, would be listed and taxed in the usual way. If, when the corporation lists its capital stock, it specifies particularly the real estate and the chattels which it owns, and returns such property for taxation in the usual way, the value of such property may be deducted from the value of capital stock, except that real estate mortgages and chattel mortgages may not be deducted. If it be shown that real estate and personal property situated in another state have been duly listed for taxation there, such property may be deducted. stock, for purposes of taxation. Stockhold- in which it stated that its sole and exclusive ers are not taxed on their shares, and capital stock, valued in the manner described, is taxed as personal property to its owner, the corporation. It has already been shown that this method of taxation is not possible in the case of state banks, because of the necessity to conform the taxation of state banks to the taxation of national banks, and banks and loan or investment companies are expressly excluded from the operation of the section by the provision, "except such companies and corporations as are specially provided for by the statute." [8] The Interstate Mortgage Trust Company, the appellant in case No. 21,218, also claims the benefit of the privileges conferred by section 11,164 of the General Statutes of 1915. The appeal is from an order of the district court of Labette county, in which the company has its principal office, sustaining a demurrer to its petition praying for an injunction against the enforcement of an order of the county board of equalization which was approved by the tax commission. In its petition the company described itself as a loan company, so that it is embraced within the provision of the tax law placing state banks, national banks, and loan or investment companies in the same class. The provision of the state Constitution, requiring a uniform and equal rate of assessment and taxation, does not forbid the employment of different methods of assessment and taxation for different classes of property. The method of assessing and collecting railroad taxes is radically different from the methods employed in assessing and collecting taxes on every other species of property in the state. Gulf Railroad Co. v. Morris, 7 Kan. 210. Shares of stock in domestic corporations are taxed in one way, and shares of stock in foreign corporations in another. Hunt v. Allen County, 82 Kan. 824, 109 Pac. In the opinion in the case last cited it was said: 106. "The inequality in this case grows out of the different method provided by the statute for listing and assessing shares in the two kinds of corporations. Of necessity the Legislature has adopted several different methods for the assessment of property of different classes and used in different kinds of business. The same rate of taxation was levied upon the plaintiff's property, and the same method of assessment was applied thereto, as is applied to the property of all other citizens similarly situated. So far no Solon has appeared in this or any other state of the Union who could devise a method, or any number of methods, of assessment and taxation for all the various kinds of property which would result in equal taxation in every individual case. As has been said, if absolute equality of taxation is required, there can be no taxation." 82 Kan. page 828, 109 Pac. page 108. This being true, the claim under consideration reduces to this: Is the classification of loan companies with state and national banks a reasonable classification? The question is answered by the company's petition, business is that of making loans on real estate securities, selling the same, issuing bonds and depositing real estate securities as collateral therefor, and receiving moneys and securities on deposit for the purchase of real estate mortgages. It is therefore purely a financial institution, dealing in money, obligations for the payment of money, and securities for such obligations, and as such is clearly in affinity with banks. Although not material to the decision, presumably the institution is withn the jurisdiction of the banking department of the state, because of the use of the word "trust" as a part of its corporate name. Gen. Stat. 1915, § 2403. [9, 10] The loan company asserts that double taxation will result unless the value of its real estate situated in the state of Oklahoma be deducted from the value of its shares of stock. The assertion is predicated on a misconception of the tax law. It is said that the tax law provides for the assessment of the capital stock of banks and loan companies. It has been demonstrated above that the tax is not on capital stock, but on shares of stock in the hands of stockholders, and that the two classes of property are distinct in fact, and dissimilar for purposes of taxation. In the opinion in the case of Bank of Commerce v. Tennessee, 161 U. S. 134, 16 Sup. Ct. 456, 40 L. Ed. 645, it was said: "The capital stock of a corporation and the shares into which such stock may be divided and held by individual shareholders are two distinct pieces of property. The capital stock and the shares of stock in the hands of the shareholders may both be taxed, and it is not double taxation. * reiterated many times in various decisions by * This statement has been this court, and is not now disputed by any one." 161 U. S. 146, 16 Sup. Ct. 460 [40 L. Ed. 645]. It is said that taxation of the Oklahoma real estate and taxation of the shares is double taxation. The statute does not tax the Ok lahoma real estate. The shares of stock are property of the individual stockholder, which the law requires shall be taxed at their true value. This value includes the value of whatever real estate the corporation owns, the situs of which is wholly im material. The loan company is in the situation of a Maryland corporation which desired to deduct the value of New Jersey real estate from the value of the shares of capital stock assessed and taxed to its stockholders. The Court of Appeals of Maryland disposed of the subject in an opinion which has received universal approval, and from which the following extracts are taken: "The separate shares of the capital stock of the corporation are authorized to be issued by the charter derived from the state, and are subject to its control in respect to the right of taxation; and every person taking such shares, whether resident or nonresident of the state, must take them subject to such state power and jurisdiction over them. Hence the state may give the shares of stock, held by individual stockholders, a special or particular situs for purposes of taxation, and may provide special, stitute a potential source of dividends to modes for the collection of the tax levied there- stockholders, and in that sense such taxes are on. State v. Mayhew, 2 Gill [Md.] 487: National Bank v. Commonwealth, 9 Wall. 353 (19 an indirect burden on the stockholders. The L. Ed. 701]. And while it is true that the burden, however, is not imposed by the laws shares of the capital stock of the corporation of the state of Kansas, and is an incidental represent the capital stock, and everything of which the capital stock is composed, whether consequence of the voluntary election of the invested in real estate or other kind of property, corporate managers to extend the business the situs of the investment (other than the real of the company beyond the jurisdiction of the estate of the company situated in this state) is state. This corporation derives its life and wholly immaterial. * *The true criterion, as fixed by the statute, is the true value of the all its capacities and powers, including its stock, without reference to the question where, capacity to employ capital stock, from the or in what manner or nature of property or se- state of Kansas. Its shares of stock are curity, the capital stock may be invested. valuable personal property, having a lawful Whether that be invested in real estate, or other property, beyond the jurisdiction of this state, situs within the borders of the state, and the latter having control over the shares and there is no more occasion for the state to their true value, the peculiar nature and value forego taxes on such property than there is of the investment of the capital stock of the for the state of Oklahoma to forego taxes on corporation, beyond the limits of the state, can form no proper subject for specific deduction property situated within its borders. or abatement from the true value of the shares of stock, when presented to be assessed for purposes of taxation. * * Nor is there any; thing novel in the principle of such taxation." American Coal Co. v. County Com'rs of Allegany County, 59 Md. 185, 193. once. The loan company misconceives the meaning and application of the expression, “double taxation." It is not double taxation to tax taxable property within the state Shares of stock are taxable property. Real estate in Kansas is taxable property. Real estate in Oklahoma is not taxable property, and is not taxed. Shares of the loan company's stock, reduced in value by the value of the Kansas real estate, are taxed, and the Kansas real estate is taxed. That covers the taxable property within the state just once, and covers nothing more. The loan company argues that if the tax law does not permit deduction of the Oklahoma real estate, it infringes the Fourteenth Amendment to the Constitution of the United States. The argument is predicated on the decision of the Supreme Court of the United States in the case of Delaware, L., etc., R. R. Co. v. Pennsylvania, 198 U. S. 341, 25 Sup. Ct. 669, 49 L. Ed. 1077. The state of Pennsylvania taxed corporations on the value of their capital stock, and the question was whether or not the value of coal, having its situs in another state, could be included in the taxable value of the capital stock of a Pennsylvania corporation. It was held that the value of the coal should be excluded. The Supreme Court of Pennsylvania recognizes the distinction between property in "We say that the state in taxing stock may shares of stock owned by stockholders, and take into account the fact that the property property in capital stock, owned by the corpoand franchises of the corporation are untaxed, ration and representing its assets, but dewhereas in other cases they are taxed, and weclares the Legislature of Pennsylvania has say untaxed because they are not taxed by the state in question. The real grievance in a case like the present is that, more than probably, they are taxed elsewhere. But with that the state of Alabama is not concerned." Kidd v. Alabama, 188 U. S. 730, 732, 23 Sup. Ct. 401, 402 [47 L. Ed. 669]. Ве made no such distinction. Before the case arose the Supreme Court of Pennsylvania had held that a tax on the value of capital stock is simply a tax on the property of the cor poration. Some of the decisions to that effect are cited in the opinion of the Supreme Court of the United States, and there are many oth was bound by the interpretation which the state court had given the state law, and the question was simply one of situs. The tax being a tax laid directly on property, it could not lawfully extend to tangible property outside the jurisdiction of the taxing state. The Supreme Court of the United States took care to guard its decision from misapplication to cases of the kind presented by the loan company's appeal by inserting the following discriminatory observation in its opin If the value of the untaxed Oklahoma property were deducted from the value of the shares of stock, a portion of this state's tax-ers. The Supreme Court of the United States able property would escape taxation. sides this, in this instance all taxable value not derived from tangible property would be wiped out. The loan company listed its capital stock, surplus, and undivided profits at par, $135,015.42. From this sum it deducted the value of its real estate in Kansas, $48,980, and claimed the right to deduct, to the extent necessary to cancel capital stock, surplus, and undivided profits, the value of its Oklahoma real estate, $206,882. With all its faults, the tax law is not so paradoxical. Because the property taxed by the state of Kansas and the property taxed by the state of Oklahoma are of different kinds and belong to different owners, there is no double taxation, in the invidious sense. It is true that taxes on the corporate property in Okla ion: "Of course, the distinction between the capital stock of a corporation, and the shares into which it may be divided and held by individual shareholders, is borne in mind and recognized, and nothing herein affects that distinction. The question here is simply as to the value of the capital stock with reference to the assessment and taxation upon the corporation itself which vidual shareholder. Van Allen v. Assessors, 3 Wall. 573 [18 L. Ed. 229]; Bank of Commerce v. Tennessee, 161 U. S. 134, 146 [16 Sup. Ct. 456, 40 L. Ed. 645]." Delaware L., etc., R. R. Co. v. Pennsylvania, 198 U. S. 341, 354, 25 Sup. Ct. 669, 673 [49 L. Ed. 1077]. The Legislature of this state has recognized the distinction here made. The tax law was framed to comply with the decision in the Van Allen Case and others of like character, and the tax is not a tax levied against the corporation on account of property which it owns. [11] Questions are presented by the Dear ing State Bank and the Citizens' National Bank of Independence with reference to the course pursued in arriving at the sums on which their shares of stock should be taxed. No fraud, or conduct so arbitrary or capricious as to amount to fraud, is made to appear, and the result of the conduct criticized may not be disturbed. In case No. 21603 the writ is allowed in part and denied in part. Issuance of the writ will be withheld. In case No. 21218 the judgment of the district court is affirmed. All the Justices concurring. Abstract of Laws. Sections 1 and 2 of article 11 of the state Constitution read as follows: "Section 1. The Legislature shall provide for a uniform and equal rate of assessment and taxation; but all property used exclusively for state, county, municipal, literary, educational, scientific, religious, benevolent and charitable purposes, and personal property to the amount of at least two hundred dollars for each family, shall be exempted from taxation. "Sec. 2. The Legislature shall provide for taxing the notes and bills discounted or purchased, moneys loaned, and other property, effects, or dues of every description [without deduction], of all banks now existing, or hereafter to be created, and of all bankers; so that all property employed in banking shall always bear a burden of taxation equal to that imposed upon the property of individuals." Section 11149 of the General Statutes of 1915 reads as follows: "That all property in this state, real and personal, not expressly exempt therefrom, shall be subject to taxation in the manner prescribed by this act." Section 11236 of the General Statutes of 1915 reads as follows: "(1) Stockholders in banks and banking associations and loan and investment companies organized under the laws of this state or the United States shall be assessed and taxed on the true value of their shares of stock in the city or township where such banks, banking associations, loan or investment companies are located; "(2) And the president, cashier or other managing officer thereof shall under oath return to the assessor on demand a list of the names of the stockholders and amount and value of stock held by each, together with the value of any undivided profit or surplus; "(3) And said banks, banking associations, loan or investment companies shall pay the tax assessed upon said stock and undivided profits or surplus, and shall have a lien thereon until the same is satisfied: Provided, that if from any causes the taxes levied upon the stock of any banking association, loan or investment company shall not be paid by said corporation, the prop erty of the individual stockholders shall be held liable therefor; "(4) Provided further, that if any portion of the capital stock of any bank or banking association or loan or investment company shall be invested in real estate and said corporation shall hold a title in fee simple thereto, the assessed value of said real estate shall be deducted from the original assessment of the paid-up capital stock of said corporation, and said real estate shall be assessed as other lands or lots: "(5) And provided further, that banking stock or loan and investment company stock or capital shall not be assessed at any higher rate than other property: "(6) And provided further, that the provisions of this act shall apply to all mutual fire and life insurance companies or associations having assets, accumulations, money or credits, and doing business under the laws of this state; "(7) And provided further, that such assets, money. and credits held and under the control of such mutual fire and life insurance companies and taxation." or associations shall be subject to assessment Section 514 of the General Statutes of 1915 reads as follows: selves into a banking corporation, and shall be "Any five or more persons may organize thempermitted to carry on the business of receiving money on deposit and to allow interest thereon, giving to the person depositing credit therefor; and of buying and selling exchange, gold, silver, foreign coin, bullion, uncurrent money, bonds of the United States and of the state of Kansas, and bonds and warrants of cities, counties, and school districts in the state of Kansas; of loaning money on real estate, chattel and personal security, at a rate of interest not to exceed the legal rate allowed by law; of discounting negotiable notes and of notes not negotiable, and to own a suitable building, furniture and fixtures for the transaction of its business, of the value not to exceed one-third of the capital [stock] of such bank: Provided, that nothing in this section shall prohibit such bank from holding and disposing of such real estate as it may acquire through the collection of debts due to it.' This section was amended by chapter 79 of the Laws of 1917, in particulars not material here. Section 568 of the General Statutes of 1915 reads as follows: "Any bank may purchase, hold and convey real estate for the following purposes, but no other: First, such as shall be necessary for the convenient transaction of its business, including its furniture and fixtures, but which shall not exceed one-third of the paid-in capital; second, such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its business; third, such as it shall purchase at sale under judgment, decrees or mortgage foreclosure under securities held by it; but a bank shall not bid, at any such sale, a larger amount than to satisfy its debts and costs. Real estate shall be conveyed under the corporate seal of the bank and the hand of its president or vice president, and cashier or treasurer. No real estate acquired in the cases contemplated in the second and third sub-section above shall be held for a longer time than five years. If not sold before the expiration of said five years, it must be sold at private or public sale within thirty days thereafter, or charged off out of the earnings or surplus of said bank." By chapter 76 of the Laws of 1917 the first subdivision of this section was amended to read: "First, such as shall be necessary for the convenient transaction of its business, including its furniture and fixtures, but which shall not exceed one-third of the paid-in capital and surplus." Section 569 of the General Statutes of 1915, which went into effect March 11, 1897, reads as follows: (23 N. M. 578) STATE v. ROSENWALD BROS. CO. (No. 2100.) "Any bank now doing business in this state which owns real estate in excess of fifty per cent. of its capital shall reduce its holdings by (Supreme Court of New Mexico. Jan. 8, 1918.) converting same into cash or other good assets, to an amount not exceeding fifty per cent. of its paid-up capital, within one year after the passage of this act." Section 11164 of the General Statutes of 1915 reads as follows: "That no person shall be required to include in the list of personal property any portion of the capital stock of any company or corporation which is required to be listed by such company or corporation; but all incorporated companies, except such companies and corporations as are specially provided for by statute, shall be required to list by their designated agent in the township or state [city] where the principal office of said company is kept, the full amount of stock paid in and remaining as capital stock, at its true value in money, and such stock shall be taxed as other personal property: Provided, that such amount of stock of such companies as may be invested in real or personal property which, at the time of listing said capital stock, shall be particularly specified and given to the assessors for taxation, shall be deducted from the amount of said capital stock: Provided, that mortgages owned by any such company on property, real or personal, in any other state, shall not be deducted: Provided further, that real or personal property in any other state, or county in this state shall be deducted if it be made to appear that the same has been duly listed for taxation in such other state or county in this state." Section 5219 of the Revised Statutes of the United States reads as follows: "Nothing herein shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the state within which the association is located; but the Legislature of each state may determine and direct the manner and place of taxing all the shares of national banking associations located within the state, subject only to the two restrictions, that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state, and that the shares of any national banking associa tion owned by nonresidents of any state shall be taxed in the city or town where the bank is located and not elsewhere. Nothing herein shall be construed to exempt the real property of associations from either state, county, or municipal taxes, to the same extent, according to its value, as other real property is taxed." Section 5137 of the Revised Statutes of the United States reads as follows: "A national banking association may purchase, hold, and convey real estate for the following purposes, and for no others: "First. Such as shall be necessary for its immediate accommodation in the transaction of its business. "Second. Such as shall be mortgaged to it in good faith by way of security for debts previously contracted. "Third. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings. "Fourth. Such as it shall purchase at sales under judgments, decrees, or mortgages held by the association, or shall purchase to secure debts due to it. "But no such associations shall hold the possession of any real estate under mortgage, or the title and possession of any real estate purchased to secure any debts due to it, for a longer period than five years." (Syllabus by the Court.) ACTION 20-APPEAL AND ERROR 41(1) STATUTE Code 1915, are of a special statutory nature, The proceedings had under section 5475, and no right of appeal from the order of the district court is granted the state or the petitioner under that section, not by section 1, c. 77. Laws 1915. "Special proceedings" defined (citing Words and Phrases, Special Proceeding). Appeal from District Court, Bernalillo County; Raynolds, Judge. Proceeding by Rosenwald Bros. Company, a corporation, for the correction of assessment books. From a judgment for plaintiff, the State of New Mexico appeals. Dismissed. H. L. Patton, Atty. Gen., for the State. J. R. Moore, of Los Angeles, Cal., for appellee. PARKER, J. This case comes to us by appeal from the order and judgment of the district court for Bernalillo county. The proceedings below are initiated under section 5475, Code 1915, by the filing of a petition with the district attorney, by appellee, Rosenwald Bros., a corporation, wherein it was alleged that the assessment books of said county should be corrected so as to avoid a 40 per cent. increase in the assessed valuation of certain property of appellee. The district attorney presented the petition to the court, and the relief prayed for was granted, from which order the state appealed. The appellee has moved to dismiss the appeal principally on the ground that no appeal lies to this court in such cases. Appellee contends that the proceedings below were of a special statutory nature, and that the statute grants no right of appeal from the action of the trial court, whereas, appellant contends that the latter part of section 2, art. 6, of the state Constitution grants the state the right of appeal, said portion of said section being self-executing, and also that the Legislature intended, by the use of the words "Supreme Court" in section 5475, supra, to grant such right of appeal. Section 5475, Code 1915, provides: * "The assessment book, when delivered to the county treasurer, ** shall constitute his authority to collect the taxes therein set forth, and he shall not be held liable for any irregularity or illegality in any of the proceedings prior to his receiving said assessment book; and the amounts to be paid as taxes, as shown by said assessment book, shall not be altered, reduced or in any manner changed, except by direction of the district or Supreme Court; but this prohibition shall not extend to the correction of obvious clerical errors in names, description of property or computation of amount of taxes. |