States and any waters, territory, or other | for the recovery of a license tax, based upon place now subject to the jurisdiction there- a claim of a contract exemption from taxa. of." § 33. The definition indicates the tion. Reversed and remanded for further view of Congress on the general subject. proceedings. Gonzales was not a passenger from a foreign port, and was a passenger "from territory or other place" subject to the jurisIdiction of the United States.

CITIZENS' BANK OF LOUISIANA, Plff. carrying on a bank, banking company, asso

IN ERROR to the Supreme Court of the asmuch as it does not appear that the 18State of Louisiana to review a judg-sue of exemption from a license tax has been ment which reversed a judgment of the Civ- presented in any of the cases and judgments il District Court for the Parish of Orleans relied on to support the plea." sustaining the defense of a bank to a suit

2. See Banks and Banking, vol. 6, Cent. Dig. § 10.

"In my view, it is unnecessary for this court to go into any discussion of the constitutional questions raised and adverted to in the opinion of the majority, for the reason that, on the face of the charter exemp-claimed modifies or changes it. The motion tion, which the bank pleads, its liability is apparent.

"It is my view, also, that the better course of decision is, and one more in har-leans v. Citizens' Bank, 167 U. S. 371, 42 mony with the general jurisprudence of this court, to avoid discussion of Federal questions which only arise incidentally, and are unnecessary to the decision of the principal question at issue.

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only apply and extend the reasoning of that | cense tax to either the state of Louisiana or case to decide this. the city of New Orleans."

The decree was affirmed as to the objects of taxation embraced in the 1st subdivision, and reversed as to those embraced in the 2d, 3d, and 4th subdivisions. Of the objects in the 4th subdivision it was said:

"We are at a loss to understand by what process of reasoning the decree was made to cover the question of the nonliability of the bank for license. It was not presented by the pleadings, and was entirely dehors the issue in the case."

It came here from the circuit court of the United States. It was brought in that court by a bill in equity to enjoin the taxing officers of the state and of the city of New Orleans from taxing the bank under certain provisions of a statute of the state for the assessment of the capital of banks. Under the statute the capital stock of banks which were represented by shares were not assessed by that name, but the shares were required to be assessed to the stockholders at their actual valuation as shown by the In sustaining the decree of the circuit books of the bank, and the taxes assessed court as to the objects in the first subdiviwere required to be paid by the bank, which sion, necessarily there was involved the dewas given the power to collect the amount cision that the charter of the bank, both as from the shareholders or their transferees. originally granted and as extended, exThe real estate owned by the bank was di-empted the capital of the bank from taxarected to be assessed directly to it and the tax "proportioned to each share of capital stock" and deducted from the amount of taxes of that share under the statute. The statute also contained provisions for its administration, and required property which had been omitted from the assessment rolls to be assessed for the current year and for three years back. The court adjudged the bank to be exempt from the taxation, and granted an injunction against the collection of the taxes for the designated years by the state of Louisiana, and the city of New Orleans, "upon the capital, property, or shares of stock of the shareholders of said bank, whether assessed against the bank or its shareholders."

The writ also enjoined the demanding or collecting from the bank of any state or city license tax. Commenting on the decree, this court said:

tion, and the exemption was not taken away by the constitutions of 1868 and 1879 by the acceptance of the act of 1874 by the bank, nor by the act of 1880. Many considerations were referred to which might have justified this as an independent conclusion, but the decision was mainly rested upon the judgments of the courts of Louisiana which had been pleaded as res judicata, and which judgments, it was decided, had concluded the controversies. There was a clear adju dication, therefore, of the right of exemption of the bank from a tax on its capital.

The ruling in New Orleans v. Citizens' Bank has been followed by the supreme court of Louisiana. In Penrose v. Chaffrais, 106 La. 250, 256, 30 So. 718, 720, the same questions were raised on the statutes of 1874 and 1880 and the constitutions of 1868 and 1879, as are raised in the case at bar. The court, replying to them, said:

"Both these contentions were passed upon and negatived in New Orleans v. Citizens' Bank, 167 U. S. 371, 42 L. ed. 202, 17 Sup. Ct. Rep. 905, and the effect of that decision of the Supreme Court of the United States is*to maintain and carry the exemption into the extended period of the bank's charter."

"The exemptions to which the decree below held the bank to be entitled related, therefore, to distinct objects of taxation, one not necessarily connected with or dependent upon the other, and may be sum marized as follows: First. That the bank was not subject to taxation on its capital shares of stock or real estate, and furniture actually used for the carrying on of its banking business, and that the bank could not be lawfully obliged to pay the sum of any tax assessed on its shareholders. Second. That the stockholders of the bank were not liable for assessment on their shares of stock. Third. That the bank was also not subject to taxation on any real estate held by it which had been mortgaged to secure stock subscriptions and had become the But if it can be contended that there is property of the bank under foreclosure pro- conflict between the state cases, New Orleans ceedings, because property so acquired be- v. Citizens' Bank is, nevertheless, decisive of eame, by virtue of the purchase, a part of the questions adjudged by it. Deposit Bank its capital stock. Fourth. That the nonlia-v. Frankfort, 191 U. S. 499, ante, 154, 24 Sup. bility of the bank to taxation embraced Ct. Rep. 154. And all the questions in the also immunity from the payment of a li- case at bar were adjudged by it except the

It is true that in a subsequent case (State v. American Sugar Ref. Co. 108 La. 603, 32 So. 965) New Orleans v. Citizens' Bank is criticized and its views are not concurred in as to what constitutes the thing adjudged and an estoppel in tax cases. But the thing claimed to have been adjudged was not a right claimed under the Constitution of the United States, and there was no intimation of disapproval of Penrose v. Chaffraix.

or distinction. It declares the exemption without limitation. And why should there have been limitation? What purpose was there to serve by making a distinction between the forms of taxation? The state did not intend to so limit its aid. It did not mean to help the bank to do business and then tax the business when done,-relieve

the right to impose as an occupation tax that which it gave up as a right to impose as a property tax.

question of the exemption of the bank from any tax." The word any excludes selection the payment of license taxes. That question is now presented, and we think the exemption exists. We deduce this not only from the words of the charter, but from the purpose of its enactment and of its extension. The bank was made an agency of the state. To have fostered it with aid and to have burdened it with taxation of any kind would have been inconsistent, considering the pro-it and burden it at the same time. Retain visions of the act incorporating it, and it was immaterial whether it was constituted a quasi public corporation or entirely a private one. It was created to accomplish purposes in which the state took an interest, and the expectations which were entertained of it may be regarded in the interpretation of its charter. With the wisdom or folly of the charter we have nothing to do. Our sole function is to interpret it. It may seem, in 1903, to have been imprudent legis lation. But how did it appear in 1833 and 1836 We must contemplate it as of that time. States act through men, and, of course, cannot have a greater appreciation administrative officers of the state; that or prophecy of things than men. Events may disappoint or baffle their purposes, but they cannot, for that reason, be relieved from their obligations. Nor can they necessarily be accused of folly. There are limits to the power of government, and the wisest provisions may be frustrated or turned to detriment by causes which no prescience can foresee. It is, therefore, to 1833 and 1836 we must turn, to the conditions and purposes of then.

This view is sustained by contemporaneous construction of the bank's charter. It was not only the immediate sense of the officers of the state, but their continued sense through a number of years, that the bank was exempt from all taxation, and when the right of taxation was asserted a license tax was not included. And we have authority for saying that a license tax was not demanded during a period of fifty-eight years, notwithstanding the many changes in the

during all that time, "even from and inclu sive of the very first revenue act (that of 1813), adopted after the admission of the state into the Union, license taxation as a means of revenue was provided for and enforced," and for a portion of the time (from 1869) license taxes were imposed upon banks.

the application of the constitution of 1868 or 1879, or special circumstances not appli cable to the charter of the Citizens' Bank. And those cases did not embarrass the court in defining the scope of the charter of the Citizens' Bank in the decisions presently to be considered.

Stress is put in the argument at bar upon the distinction between taxes on property and taxes on occupations. The distinction The chief industry of Louisiana was agri- exists and counsel have cited Louisiana deciculture, and it seemed to the state a wise sions in which that distinction has been held policy to encourage and expand that indus- to justify license taxes, notwithstanding try, and the means selected was a bank clauses in charters exempting capital stock which could make loans to the planters upon from taxation. A review of thoses cases is the security of their lands. Capital was not necessary. They were all rendered subnecessary. Private persons were to be insequently to 1836, and they depended upon duced to subscribe, and the state aided by an issue and pledge of its bonds. It was careful to make provision for control. No act of administration could be undertaken without its consent. It was represented by six members on a board of twelve directors. It, besides, contemplated the probability of profits, and made provision to share them. The scheme was large and hazardous. Private capital had to be tempted to it, and the state, besides contributing its credit, offered the inducement of a relief from burdens. There is no doubt of this, and the dispute is only as to the degree, and, on an ambiguity which may be asserted upon a distinction in the form of taxation, a limitation is attempted to be put upon the comprehensive and expressive words of the bank's charter. This seems to us not justified. The words of the charter are "the capital of the bank shall be exempt from

That the distinction between property taxes and license taxes was recognized in Louisiana in 1833 or 1836 is not very clear, but subsequently the distinction was certainly not always considered as justifying a power to impose license taxes. In New Or leans v. Southern Bank, 11 La. Ann. 41, the general law of the state, approved April 30, 1853, called the Free Banking Law, was considered. The law provided "that bankers and banking companies, doing business under this act, shall be taxed upon their capital stock (italics ours) at the same rate as other personal property under the laws of

18.

the state." It was held that the provision | bank, however it could be imposed upon the was a contract with the individual corpora- stockholders. tions formed under the act, and a license tax imposed by the common council of the city under an act passed in 1842 (Session Acts of 1842, p. 17), which empowered the city to levy a license tax on certain enumerated occupations and "all other callings, profes-emption was asserted under the clause of the sions, or business," was illegal.

We may recur to Penrose v. Chaffraix. It was a proceeding to recover the payment of a tax for the year 1899, imposed upon a certain number of shares of the capital stock of the Citizens' Bank held by Chaffraix. Ex

bank's charter which we have quoted. This The same question was presented again in was one of the questions left open by this State v. Southern Bank, 23 La. Ann. 271, court in New Orleans v. Citizens Bank, and upon a license tax imposed by the revenue left open in the Bouny Case. The exemp laws of 1889. The court was urged to over- tion, nevertheless, was sustained. It was rule New Orleans v. Southern Bank. The recognized that in some jurisdictions, “incourt refused to do so and affirmed the doc- cluding the Supreme Court of the United trine of that case, and held the act "viola- States," it was held that the exemption of tive of 10, article 1, of the Constitution the capital of a corporation from taxation of the United States." The supreme court does not of necessity include the exemption of Louisiana, therefore, as early as 1853, of the shareholders on their shares of stock. construed a provision exempting the capital But the court considered that it was not stock of a bank from taxation except at a necessary to approve or disapprove the docparticular rate as exempting the bank from trine, and rejected it as inapplicable to a license tax. In other words, it was held shares in the Citizens' Bank, because the inthat a license tax was virtually a tax on the tent of the legislature was otherwise. And capital of the banks, and, we think, that that intent was deduced "not only from the must be held of the tax in the case at bar. words of the charter," but from the purWhatever the tax may be called,-one on poses for which the bank was instituted, and property or one on occupations,-if its final they were vividly described. Because of incidence is on the capital, it is compre them, it was in effect said, and of the bank's hended in the exemption contained in the relation to them and the state's relation to charter. As we have already pointed out, the bank, the state "granted the clause the language of the charter is universal; quoted above, exempting from taxation." and it was said in Citizens' Bank v. Bouny, And it was observed, "at that time the re32 La. Ann. 239, "That language is broad fined distinction between the capital and enough to cover everything which, during its the capital stock of a corporation had not existence, should enter into and make part been made by the courts, or was at least of the capital of said bank." If the lan- unrecognized as yet in Louisiana." We see, guage is broad enough to preclude a tax therefore, that in the Bouny Case it was upon that which may become part of the held that a tax on that which might become capital of the bank, it is broad enough to capital, or a tax which the bank would have preclude a tax which may become a burden to pay, is illegal. In the Chaffraix Case it upon the capital. Whatever diminishes the is held that a tax which falls on the stockincome of a bank diminishes its capital un-holders of the bank is illegal. In other der the provisions of the charter of 1833. It was said in the Bouny Case: "By the 29th section of the original charter, 'all the profits made by said corporation shall be added to and made a part of its capital,' except a certain fraction of any excess of prof- It is urged, however, that neither the its over what was necessary to pay the Bouny Case nor the Chaffraix Case can be bonds issued by the bank." And the sum of adduced as authoritative. The argument is $159,238.62 accumulated profits were held that a judgment in the case at bar has benot to be liable to taxation. And fully as come the law of the case, and that it cannot significant was the exemption declared of be affected by what was or has been decided the sum of $636,450, assessed to the share-in some other case, and that the judgment holders of the bank as "value of capital in the case at bar rested on non-Federal stock." It was said: "Even if the share- grounds which were sufficient to sustain it, holders be liable to taxation on their shares to wit, the construction and application of (upon which we express no opinion), under the constitutions and statutes of that state. the peculiar and exceptionable nature of the The argument is the same as that directed charter of the Citizens' Bank, we think it against our jurisdiction, and has been ancannot be forced to pay the taxes assessed swered. When a contract is asserted, and to its shareholders." In other words, the the Constitution of the United States inburden of tax could not be put upon the 'voked to protect it, all of the elements which

words, the*effect of the two cases is that a tax which falls upon the capital or is to be paid by the bank or its stockholders, is prohibited. A license tax has surely some one of those effects.

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