Hepburn v. School Directors

by Morrison Waite

United States Supreme Court

90 U.S. 480

Hepburn  v.  School Directors

ERROR to the Supreme Court of Pennsylvania. The case was thus:

An act of Congress of February 10th, 1868, relating to the taxation by States of shares in the National banks, thus enacts: ^[1]

'The leg slature of each State may determine and direct the manner and place of taxing all the shares of National banks located within said State, subject to the restriction 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.'

An act of Assembly of Pennsylvania, of March 31st, 1870, with a view of giving effect to this act of Congress, further enacts: ^[2]

'All the shares of National banks, located within this State, shall be taxable for State purposes at the rate of three mills per annum, upon the assessed value thereof, and for county, school, municipal, and local purposes, at the same rate as now is or may hereafter be assessed and imposed upon other moneyed capital in the hands of individual citizens of this State.'

This act gives an appeal to the Auditor-General, who is authorized by the act to correct any errors in the assessment.

Another act of Assembly of Pennsylvania, one of April 4th, 1868, ^[3] enacts that Cumberland County, in which county the town of Carlisle is situated, enacts additionally: 'All mortgages, judgments, recognizances, and moneys owing upon articles of agreement for the sale of real estate, shall be exempt from taxation except for State purposes,' &c.

In this state of legislation, Federal and State, Hepburn, a citizen of Pennsylvania, residing at the borough of Carlisle, in Cumberland County, in the said State, owned four hundred and sixty shares of stock in the First National Bank of Carlisle, the par value of which was $100 a share.

This stock was assessed for county, school, and borough tax by the bank assessor, appointed under an act of Assembly of Pennsylvania, approved April 12th, 1840 at the value of $150 per share.

On amicalbe suit brought by the school directors to test their right to collect the school tax, the Supreme Court of Pennsylvania adjudged that they had such a right; and, to reverse that judgment, Hepburn brought this writ of error.

Mr. Joseph Casey, for the plaintiff in error:

1. There does not seem to be room for doubt that 'moneyed capital in the hands of individual citizens'-the term used in the act of Congress of 1868 and in the act of Pennsylvania of 1870 means private investments other than in stocks or securities. It refers doubtless to loans upon bond and mortgage; loand upon collaterals whether real or personal, and to other loans made in the various modes in which individuals invest their capital upon interest other than in corporation stocks and public securities.

But by the act of Pennsylvania of April 4th, 1868, this 'other moneyed capital in the hands of individuals' residing in Cumberland County (in which is the borough of Carlisle), where this bank whose shares are taxed is located and where Hepburn resides, was not subject to taxation for school purposes. Does not, then, this National bank stock come directly within the express restriction of the act of Congress of February 10th, 1868? Did not the taxation made in this case unfairly and unjustly discriminate against it?

2. But if we are mistaken in this, we say next that the assessment should have valued the stock at its par value, and not at a value above it.

The tax assessed upon 'other moneyed capital in the hands of individuals' by the State of Pennsylvania is upon the par or nominal value of such capital. If money be at interest on bond or mortgage, at three, four, five, or six per cent. interest per annum, the tax of three mills on the dollar is the same in each case.

Yet the securities would have quite different market values. Caeteris paribus, the first three would be below par, the last at or perhaps above it. So, too, when the rate of interest is full, it is the same, too, whether the security be a first mortgage of the highest class-such as would sell in the market above par-or a second mortgage of inferior grade, which could not be sold but at a lar e discount. There is, in short, no provision in the laws of the State for any assessment of the market value of such securities. They are taken at the value indicated on their face and taxed accordingly.

In valuing these shares at fifty per cent. above par the tax is made fifty per cent. greater than on 'other moneyed capital in the hands of individuals.' ^[4]

Messrs. J. M. Carlisle and J. D. McPherson, contra.

The CHIEF JUSTICE delivered the opinion of the court.

Notes

1. 15 Stat. at Large, 34.
2. Pamphlet Laws. 1870, p. 42.
3. Ib. 1868, p. 61.
4. People v. The Commissioners, 4 Wallace, 244; Bradley v. The People, Ib. 459; Opinion of Miller, National Bank v. Commonwealth, 9 Id. 360.