Louisville v. Bank of Louisville, 174 U.S. 439 (1899)

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Louisville v. Bank of Louisville=

Nos. 358-359

Argued February 28, March 2, 1899
Decided May 15, 1899
174 U.S. 439

APPEALS FROM THE CIRCUIT COURT OF THE

UNITED STATES FOR THE DISTRICT OF KENTUCKY

Syllabus

Stone v. Bank of Commerce, 174 U.S. 412, affirmed and applied to the point that the agreement of the commissioners of the sinking fund of Louisville and the attorney of the city with certain banks, trust companies, etc., including the Bank of Louisville, that the rights of those institutions should abide the result of test suits to be brought, was dehors the power of the commissioners of the sinking fund and the city attorney, and that the decree in the test suit in question did not constitute res judicata as to those not actually parties to the record.

Citizens’ Savings Bank of 0wensboro v. Owensboro, 173 U.S. 636, also affirmed and applied.

On questions of exemption from taxation or limitations on the taxing power, asserted to arise from statutory contracts, doubts arising must be resolved against the claim of exemption.

The Bank of Louisville in these two cases filed its bills to enjoin the collection of certain taxes. The matters to which the bill in the first case (No. 359) related were certain franchise taxes for the years 1893 and 1894, the assessment and certification of valuation whereof had been made prior to the filing of the bill. Those covered by the bill in the second case (No. 358) were, generally speaking, like those embraced in the preceding suit, but were for different years -- that is, for 1895, 1896, and 1897 -- and by an amendment the taxes of 1898 were also included. These taxes, however, had not been certified at the time the bill was filed, and the relief contemplated was the enjoining of the valuation of the franchise, and the certification of the same for the purposes of taxation, as well as the subsequent collection of the taxes to be levied thereon. Omitting reference to the averments distinctly relating to the jurisdiction in equity, the case made by the bills was this:

It was alleged that the bank was chartered on February 2, 1833, to endure until January 1, 1853; that pursuant to an act approved February 16, 1838, the provisions of which had been complied with, the charter existence was extended for nine years; that, by an act of February 15, 1858, duly accepted by the bank, its charter privileges were continued in full force for twenty years from the 1st of January, 1863, and finally that, by an Act of May 1, 1880, which the bank had duly accepted, its charter was extended for twenty years from January 1, 1883. It was alleged that, by the sixth section of the original charter, it was provided, among other things, that the cashier of the bank

shall on the first day of July, 1834, and on the same day annually thereafter, pay unto the treasurer of the state twenty-five cents on each share held by the stockholders in said bank, which shall be in full of all tax or bonus on said bank; provided, that the legislature may increase or reduce the same; but at no time shall the tax imposed on said stock exceed fifty cents on each share held in said bank.

The tax, the bills admitted, by an Act approved February 12, 1836, and been increased to fifty cents a share.

In general language, it was averred that, by certain decisions rendered by the courts of Kentucky in the years 1838, 1869, and 1888, it was held that similar language to that contained in the charter of complainant constituted a contract preventing a higher rate of taxation than that provided for in the charter, and that from all or some of these decisions it resulted that the extension of an original charter, under the law of Kentucky, carried with it all the rights and privileges, including the limit of taxation, contained in the original charter. No decision, however, prior to 1880, by the Kentucky Court of Appeals was referred to holding that the mere grant of a charter, or an extension thereof, was not subject to repeal, alteration, or amendment if such power was reserved by a general law in force when the charter was enacted or the extension was granted. There was no averment that the complainant was either a party or a privy to the suits in which the decisions referred to had been rendered.

In both bills it was averred at length that the General Assembly of the State of Kentucky had enacted the statute known as the "Hewitt Act," and that the bank had accepted its provisions. This act and its acceptance, it was asserted, constituted an irrevocable contract, protected from impairment by the Constitution of the United States, thus securing the bank against any form of taxation other than that provided in the Hewitt Act. It was in both bills then declared that, in 1894, the City of Louisville asserting a right to collect taxes from the bank in violation of the contract embodied in the Hewitt Act for the purpose of testing the right of the city to do so, an agreement was entered into between the commissioners of the sinking fund, the City of Louisville, through the city attorney, and the attorneys of the complainant and of other banks and trust companies by which representative suits were to be brought, and it was agreed that the liability of the complainant to any other taxation than that imposed by the Hewitt Act should abide the result of the test suits in question; that, in compliance with this agreement, a suit was brought by the Bank of Kentucky, which, like the complainant, had been originally chartered before 1856, in which last-named year an act had been passed in Kentucky reserving the right to repeal, alter, or amend all charters subsequently granted, subject to certain exceptions provided expressly in the act of 1856, and that this suit had culminated in a final decree by the Court of Appeals of Kentucky holding that the Hewitt Act was an irrevocable contract, and that the banks which had accepted it were not liable to any other taxation than that therein specified. Averring that the suit brought by the Bank of Kentucky was the test suit contemplated by the agreement, as determining the liability of the complainant to other taxation than that imposed by the Hewitt Act, the decree in the suit of the Bank of Kentucky was pleaded as res judicata. In addition, the bills asserted that if the Hewitt Act was held by this Court not to constitute an irrevocable contract, then the complainant was entitled to be restored to its rights under its charter as extended, and was consequently not subject to the particular taxes the assessing and collection of which it was the object of the bills to prevent.

The court below held that the complainant, by virtue of the agreement referred to, was a privy to the decree rendered by the Court of Appeals of the State of Kentucky in favor of the Bank of Kentucky in the test case in question, and hence decided that the plea of res judicata was well taken. From its decrees enforcing these conclusions the appeals in both these cases were taken.

H.L. Stone, for City of Louisville.