ADDENDA.

NATIONAL BANK V. UNITED STATES.

(101 U. S. 1.)

Taxation of circulating medium-constitutionality.

The provision of the National Bank Act that National banks, and State banks, bankers and associations shall be taxed on the amount of town, city or municipal corporation notes paid out by them is constitutional.

ARROR to the Circuit Court of the United States for the

ERROR

eastern district of Arkansas. Suit by the United States to recover from the Merchants' National Bank of Little Rock, Arkansas, ten per cent on notes of the city of Little Rock, paid out by the bank as part of its circulation. The plaintiff had judgment below.

B. C. Brown, for plaintiff in error.

Solicitor-General, contra.

WAITE, C. J. The only question presented is as to the constitutionality of section 3413 of the Revised Statutes, the objection being that the tax is virtually laid upon an instrumentality of the State of Arkansas.

We think this case comes strictly within the principles settled in Veazie Bank v. Fenno, 8 Wall. 533; Thomp. N. B. Cas. 22, where it was distinctly held that the tax imposed by that section on National and State banks for paying out the notes of individuals or State banks used for circulation was not unconstitutional. The reason is thus stated by Mr. Chief Justice CHASE: “Having thus, in the exercise of undisputed constitutional powers, undertaken to provide a currency for the whole country, it cannot be questioned that Congress may constitutionally secure the benefit

National Commercial Bank of Mobile v. Mayor, etc., of Mobile.

of it to the people by appropriate legislation. To this end Congress has denied the quality of legal tender to foreign coins, and has provided by law against the imposition of counterfeit and base coin on the community. To the same end, Congress may restrain, by suitable enactments, the circulation as money any notes not issued under its authority. Without this power, indeed, its attempts to secure a sound and uniform currency for the country must be futile," p. 549.

of

The tax thus laid is not on the obligation, but on its use in a particular way. As against the United States, a State municipality has no right to put its notes in circulation as money. It may execute its obligations, but cannot, against the will of Congress, make them money. The tax is on the notes paid out, that is, made use of as a circulating medium. Such a use is against the policy of the United States. Therefore the banker who helps to keep up the use by paying them out, that is, employing them as the equivalent of money in discharging his obligations, is taxed for what he does. The taxation is no doubt intended to destroy the use; but that, as has just been seen, Congress has the power to do.

Judgment affirmed.

NATIONAL COMMERCIAL BANK OF MOBILE V. MAYOR, ETC.,

MOBILE.

(62 Ala. 284.)

Taxation-remedy for illegal.

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The assessment by a municipal corporation of a tax upon the shares of a Na tional bank in gross, or upon its capital stock, is void, but the remedy is at law, and not by injunction, although the municipal corporation is insol

vent.

BILL

ILL to enjoin the collection of a tax by the city of Mobile. It was alleged that the city was insolvent. The opinion states other facts. The chancellor dismissed the bill.

*See Sumter Co. v. National Bank of Gainsville, post.

National Commercial Bank of Mobile v. Mayor, etc., of Mobile.

J. Little Smith and John F. Taylor, for appellant.

William G. Jones, contra.

MANNING, J. The main question-one that has been ably and strenuously argued in this case-concerns the validity of a taxation by the city of Mobile against appellant, the National Commercial Bank of Mobile, of a certain per centum upon the amount ($350,000) of its capital; appellant being a "National banking association," under the act of Congress "authorizing, providing for the establishment of, and regulating such institutions."

It is through them, called generally "National banks," that the "National currency," payment of which is guaranteed by the general government, is emitted and kept in circulation. The notes of which this currency consists, designed, engraved, stamped and numbered with the purpose of preventing them from being counterfeited, are obtained from the government by the National banks, upon their depositing, in exchange for them and as security for their payment, interest-bearing bonds of the United States, to an amount exceeding by ten per centum that of the notes received. The amount of the bonds thus used and deposited by any bank must not be less than one-third of its capital, and is generally a much larger proportion, often the whole of it; and those bonds being securities of the United States for money borrowed are not subject to State or municipal taxation.

The statutes relating to these banks, after enacting that "in lieu of taxes to the United States, every association shall pay to the treasurer, * * * * a duty of one-half of one per

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centum each half year upon the average amount of its notes in circulation, and a duty of one-quarter of one per centum each half year upon the average amount of its deposits, and a duty of onequarter of one per centum each half year on the average amount of its capital stock beyond the amount invested in United States bonds," further provide, that "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 the authority of the State within which the association is located; but the legislature in any State may VOL. II-56

National Commercial Bank of Mobile v. Mayor, etc., of Mobile. 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 association owned by non-residents 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." Rev. Stat. U. S., §§ 5214, 5219.

Upon a careful reading of this law, it will be observed that these associations, the National banks, are themselves, in their corporate capacity, expressly declared to be subject to impositions for the public revenue, in two cases only: first, in favor of the United States, by the duties to be paid to the Treasurer, from which it seems intended that the amount they have invested in United States bonds shall be exempt; and secondly, in favor of each State upon their real property therein, according to its value. Their liability to this tax upon their real estate was probably conceded in deference to the opinion hereinafter cited, of the Supreme Court, delivered by Chief Justice MARSHALL, concerning the sovereign rights remaining in the States over the property within their jurisdiction.

The statute does not, in words, inhibit a State from imposing a tax against the National banks within its borders, on their capital, or any thing else belonging to them; but by expressly recognizing the right of State taxation against them, upon their real estate only, and by providing for such tax against the shareholders of the banks upon the value of the shares they may respectively own, it seems to be implied that this is as far as a State may lawfully go in subjecting these associations to such burdens, and the only manner in which they can be imposed. Is this a correct conclusion?

The answer to that question, it seems to me, begins in the great case of McCulloch v. Maryland, decided sixty years ago, 4 Wheat. 316-437. An act of that State made it highly penal for