Mayor of Mobile v. Stonewall Insurance , 53 Ala. 570 ( 1875 )

BRICKELL, C. J.

This cause was tried and determined in the court below, without the intervention of a jury, on an agreed state of facts. The material facts are, that the appellee is a corporation, created under the laws of this State, located and doing business in the city of Mobile, having, in the year 1875, a capital stock, employed in its business, exceeding in Amine one hundred thousand dollars. On this, as on other property subject to taxation Avithin the city, the appellants regularly assessed a tax for the year 1875, of one and a half per centum on the value thereof. The appellee paid sixty cents of this tax, and refusing to pay the remainder, for its recovery this sriit Avas commenced. The circuit court adjudged the appellants Avere not entitled to recover, and from that judgment this appeal is taken.

The city of Mobile is one of the most ancient of the municipalities of the State. It Avas first incorporated by an act of the territorial legislature of the “ Mississippi Territory,” on the 20th January, 1814, by the name and style of “President and Commissioners of the Toavji of Mobile,” and clothed in general terms Avith the power of taxation. LaAA'S of Ala. 780. It has existed since as a municipal corporation, its corporate poAvers and duties being from time to time enlarged, as its groAvth in population and commerce demanded. At no time has the power to levy and collect taxes for municipal purposes, originally conferred, been diminished by legislative enactment; but it has been extended so as to embrace the different subjects of property, or from which profit could be derived, introduced within its ate limits, in its growth from a town to a city. The act of incorporation under which it now exists is entitled “ an act to incorporate the city of Mobile,” and was approved February 2d, 1866. Pamph. Acts, 1865-6, p. 202. The 37th section of this act empowers the corporation “to levy taxes on the real and personal estate, auction sales, and sales of merchandise, capital employed in business, and income within said city, and a head tax upon all the male inhabitants over the age of twenty-one and under sixty.” The rate of taxation which the corporate authorities could assess and collect was not prescribed. Until the constitution of 1868, municipal corporations, created by special enactment, were but seldom confined to any particular rate of taxation. The officers charged with the power and duty of levying and collecting municipal taxes were elective by the inhabitants on whom the taxes were to be imposed, and the official term was of brief duration; thereby affording, as was supposed, ample security against other taxation than such as the municipal necessities required. The 21st paragraph of the 5th section of the general revenue law of the State, approved March 19,1875, fixes the rate of State taxation on the market value of the capital, stock of private corporations, and contains this clause: “No municipal corporation shall levy on any such corporation or the shares of its stock, for any purpose, or under any name, any tax, taxes or imposts, greater than sixty cents on the one hundred dollars — except a license tax, when such is allowed by law.” On the 23rd February, 1875, an act was approved, entitled “an act to restrict the power of taxation as required by section 16, of article 12, of the constitution of this State,” which reads as follows : “Section 1. Be it enacted by the general assembly of Alabama, that the several cities and incorporated towns of this State may respectively levy and collect from banks, and banking insurance companies, associations and corporations chartered or organized under the laws of this State, located and doing business within their respective limits, a tax upon the market value of the capital stock of each of such banks, and banking and insurance companies, associations and corporations, at the same rate, per hundred dollars, as may be levied and collected by the State for State revenue, and no more, to be paid by the said banks, and banking and insurance companies, associations and corporations, in full of all taxes, imposts or assessments for municipal purposes, upon the said capital and business, and upon the shares of their capital stock : provided, said tax shall not exceed sixty cents on the hundred dollars value on such capital stock; and said municipal corporations, and each of them, are hereby restrained from levying on, or collecting from, said companies, associations or corporations, their capital, business, or shares, any larger or greater tax than hereinbefore named, under any name or pretense of tax upon capital, profits or income, or business whatever: promded, that any real estate owned by said banks, banking and insurance companies, associations or corporations, shall be subject to the same rate of taxation as similar property, otherwise owned or subject to taxation for municipal purposes; and provided, said municipal corporations may demand and receive from each of said companies, associations or corporations, a license tax not exceeding one hundred dollars.

“Section 2. Be it further enacted, that all laws and parts of laws in conflict with the provisions of this act be, and the same are hereby repealed.”

The 13th article of the constitution of 1868, referred to in the title of this act, is entitled “ corporations, ” and the 16th section is: “It shall be the duty of the general assembly to provide for the organization of cities and incorporated towns, and to restrict their power of taxation, assessment and contracting of debt.” The 4th section is: “The property of corporations now existing, or hereafter created, shall forever be subject to taxation, the same as property of individuals, except corporations for educational and charitable purposes.” Immunity from any greater municipal taxation than sixty cents on the one hundred dollars of the market value of its stock, is claimed by the appellees to have been granted by the acts to which we have referred. The appellant affirms these acts are in conflict with the section of the constitution last quoted.

The constitution has separated the powers of the government it ordains, classifying them, according to their differing and distinguishing characters and properties; and declares each class “shall be confided to a separate body of magistracy. Those whjch are legislative to one; those which are executive to another; those which are judicial to another.” The legislative power is vested in the general assembly, and comprehends the full and complete law-making power residing in the people of the State, subject to the limitations and restrictions imposed by the constitution. It does not comprehend the exercise of power violative of the limitations and restrictions of the constitution of the United States — no such power resided in the people from whom the constitution emanates, and of consequence could not be by them conferred. The judicial power — the power of determining, interpreting, and administering the existing law — is committed to the courts established by the constitution, or which it authorizes the general assembly to establish. The constitution of the State, not encroaching on the powers delegated to the government, or the limitations on State authority imposed by the constitution of the United States, is the paramount, supreme law, of primary obligation. All legislative enactments are subservient to it, and if they conflict with it, are without validity. When such enactments affect public or private right, and become the subject of judicial controversy, judicial power arises. On the court clothed with the jurisdiction to hear and determine the controversy, to declare the right, interpret and administer the existing law, rests, of necessity, the responsibility of adjudicating the constitutionality of the enactment. It is the gravest and most delicate duty the judiciary are commanded to perform. It is a duty peculiar to the institutions of our country ; elsewhere the judicial is subordinate to the legislative power, and owes to it implicit obedience.

The preservation of the constitution in its integrity, obedience to its mandates, is exacted alike from the legislative and the judicial departments of the government. Each are co-ordinate, not subordinate departments; each, in its constitutional sphere, is separate and distinct from the other. The obligation resting on each is common; the duty resting on the judicial department cannot arise until the legislative has exercised its power, and mindful of its obligations, has declared that without invading constitutional limitations, a law shall exist. When the judicial department is invited to declare the legislative has invaded the constitution it was under obligation to preserve, though it cannot shrink from the inquiry, it will approach it with caution, examine the question in every possible aspect, standing as an impartial arbiter between the co-ordinate departments of the government, subject to the obligation from which its duty arises, and the party complaining of wrong, bound to accord to the legislative department the presumption that it has not transcended its powers — will not, unless it is clear that the enactment and the constitution cannot co-exist, pronounce a sentence of nullity.

The constitutional provision supposed to have been offended by the enactments under which the appellee claims immunity from the taxation the appellant seeks to recover, has a history which must be consulted, in determining its just interpretation. A provision akin to it is found in the same article of the constitution : “ Corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes. All general laws and special laws passed pursuant to this section, may be altered, amended or repealed.” These provisions were for the first time, by the constitution of 1868, introduced into the fundamental law of the State. That constitution was merely the successor of the constitutions preceding it. Its purpose was not an adaptation only of the organic law to the changed political condition of the people, and to conform it to the new relations spi'inging from the amendments of cthe federal constitution, and the conditions imposed by congressional enactment. It was intended also to cure defects time had developed in former constitutions — to narrow and restrain legislative power in the instances experience had shown it most liable to abuse. Under former constitutions the taxing power was not defined, qualified, or restrained by any other provision than the simple declaration : “All lands liable to taxation in this State shall be taxed in proportion to their value.” On personal property, taxes, either specific or ad valorem, could be imposed as the legislature deemed best. Slaves, formerly the chief subject of taxable personal property, were uniformly taxed, not according to value, but a specific tax was levied, graduated by the age of the slave. On other articles of personal property, such as watches, clocks, &c., a specific, not an ad valorem tax, was imposed. The inequalities of this mode of taxation were the cause of complaint, and we find in the constitution of 1868 the provision, which has been generally introduced into the later constitutions of our sister States: “All taxes levied on property in this State shall be assessed in exact proportion to the value of such property.” The general assembly could confer on municipal corporations, for municipal purposes, the power of taxation it could exercise without the agency of such corporations. No governmental power is more easily abused, or more often perverted, than the taxing power. Possessing it without limitation, municipalities resorted to it too often without a just regard to the interests of the tax payer. To prevent the abuse of the power, to protect the citizen subject to it, the framers of the constitution were not satisfied with the mandate addressed to the general assembly, found in the 16th section of the 13th article, to which we have referred, but they expressly provided: “The general assembly shall not have power to authorize any municipal corporation to pass any laws contrary to the general laws of the State, nor to levy a tax on real and personal prop&riy to a greater ex-> tent than two per centum of the assessed value of such proper - ty.” Art. 4, § 36. The mandate to the general assembly was to restrict power. A limitation beyond which the corporation could not pass, and within which it must be restrained, the extent of corporate power, was defined by the clause last quoted. There cannot be a just interpretation— an interpretation which will consummate the intent of the people in the adoption of these, and other constitutional provisions — which is not deduced, not only from their language, but from their history — from the causes to which they owe origin — the mischief they were intended to remedy. In respect to the constitution of the United States, it is said “ the safest rule of interpretation is to look to the nature and objects of the particular powers, duties and rights, with* all the lights and aid of cotemporary history, and to give to the words of each just such operation and force, consistent with their legitimate meaning, as may fairly secure and attain the ends proposed.” 1 Story’s Const. § 405 A. In its construction statesmen and jurists are accustomed to consider the evils for which no remedy was found in the articles of confederation, and against which the constitution intends to guard, The construction uniformly adopted, if permitted by the words, is that which will avoid such evils. A state constitution is always interpreted in the light of the common law, and if it be not the first constitution, in the light of its predecessors. The guaranties for the security of property and of personal liberty, found in the bill of rights, are borrowed chiefly from magna eharta, and for their interpretation we look to the common law. New provisions, having their origin in larger experience, introduced into an amended or revised constitution, are to be construed and allowed such operation as will secure the purposes for which they were introduced; and these purposes are to be ascertained from a just consideration of the causes in which they originate.

The decision of the supreme court of the United States in Dartmouth College v. Woodward, 4 Wheat. 518, established the legislative inviolability of the charters of private corporations. “ Those charters of incorporation,” says Mr. Cooley, “ which are granted, not as a part of the machinery of the government, but for the private benefit or purposes of the corporators, stand upon a different footing, and are held to be contracts between the legislature and the corpora-tors, having for their consideration the liabilities and duties which the corporators assume by accepting them ; and the grant of the franchise can no more be resumed by the legislature, or its benefits diminishéd or impaired without the consent of the grantees, than any other grant of property or valuable thing, unless the right to do so is reserved in the charter itself. Const. Lim. 279. In “ The Delaware Railroad Tax,” 18 "Wall. 225, Judge Field says “thatthe charter of a private corporation is a contract between the state and the corporators, and within the provision of the constitution prohibiting legislation impairing the obligation of contracts, has been the settled law of this court since the decision in the Dartmouth College case. Nor does it make any difference that the uses of the corporation are public, if the corporation itself be private. The contract is equally protected from legislative interferences, whether the public be interested in its franchise, or the charter be granted for the sole benefit of its corporators.” The consequence of this doctrine, settled beyond controversy, by judicial decision, is forcibly expressed by Mr. Cooley : “It is under the protection of the decision of the Dartmouth College case that the most enormous and threatening powers in our country have been created; some of the great and wealthy corporations actually having greater influence in the country at large, and upon the legislation of the country, than the State to which they owe their corporate existence. Every privilege granted or right conferred — no matter by what means or on what pretense — being made inviolable by the constitution, the govorment is frequently found stripped of its authority in very important particulars, by unwise, careless, or corrupt legislation ; and a clause of the federal constitution, whose purpose was to preclude the repudiation of debts and contracts, protects and perpetuates the evil. To guard against such calamities in the future, it is customary now for the people, in framing their constitutions, to forbid the granting of corporate powers, except subject to amendment and repeal; but the improvident grants of an early day are beyond their reach.” Const. Lim. (Note 2), 279. The object and scope of the 1st section of the 13th article of the constitution, so far as it is now involved, is clearly stated in the last sentence of this paragraph — the prohibition of the grant of the corporate power to private corporations, except subject to repeal or amendment at the legislative will. Municipal corporations, mere governmental agencies, were completely subject to legislative control. Whenever they failed to accomplish the purposes for which they were instituted, or, when the exercise of the powers conferred on them became unnecessary, or, when the exercise of the power was embarrassing to the general power of the government, the legislative power that created, was plenary to destroy, or alter or modify. Subjection of private corporations to tbe same extent to legislative power, as if the power was expressly reserved in each charter of incorporation, was the purpose of the constitutional provision.

The inviolability of charters of private corporations was not the only evil against which it was necessary to guard. The whole matter of taxation rested in the power of the legislature. Exemptions from, commutations of, or discriminations in taxatioh, if not inhibited by constitutional provision, resided within the power of the legislature. The power to tax private corporations was sometimes relinquished, in consideration of the public benefits anticipated from their creation. In the creation of. the greater part, if not all, of the private moneyed or commercial corporations which were created prior to 1861, a commutation of taxation was a prominent feature of the charter. Referring only to the charters of banks incorporated after the winding up of the State banks, we find the “ Southern Bank of Alabama,” incorporated February 12th, 1850, with a provision in its charter that it should pay annually to the State twice the tax assessed on lands, on each hundred dollars of its capital stock, “in lieu and composition of all taxation whatever, by the State, county, city or other authority.” Precisely a similar provision is found in the charter of the “Northern Bank of Alabama,” and in the charter of the “Central Bank of Alabama.” The “Alabama Life Insurance and Trust Company ” was incorporated under a charter providing for the payment of a specific sum, as a full commutation for all taxes, impositions or assessments on the capital stock. The provision was sustained by this court. Daughdrill v. Ala. Life Ins. & Trust Co. 31 Ala. 91.” Entire or partial exemption from taxation temporarily has been frequently granted corporations formed to pursue branches of industry, the encouragement of which it was believed a wise public policy required. All exemptions from taxation necessarily increase the burdens imposed on the property not exempt, and are directly injurious to the tax payer. The incidental benefits which it is supposed may result to him, in common with the community at large, are speculative, and not often a compensation for the immediate injury sustained. Invidious exemptions or discriminations, by which the property of an individual, or of a corporation, is relieved from bearing a just proportion of the common burden taxation is intended to discharge, are violative of the equality of right of the citizen, which is a fundamental principle of our institutions. To prevent any exemption or discrimination in favor of corporations, to subject their property to the same rate of taxation to which the property of individuals of the same kind is subject, is the purpose of the constitutional provision, clearly expressed: “The property of corporations now existing, or hereafter created, shall forever be subject to taxation, the same as property of individuals,” &c. The argument of the appellee, that it was intended only to reserve to the legislature the power of subjecting corporate property to the taxation imposed on individuals, and to avoid the introduction into charters of irrepealable exemptions or discriminations, cannot be supported. That purpose was fully accomplished by the 1st section of this article of the constitution. That section is of itself a full reservation of legislative power, and an ample guaranty against irrepealable exemptions or discriminations, or the introduction into charters of any feature not under the control of legislative power. It did not remedy the entire evil to which the community had been subjected by legislative improvidence in the creation of corporations. Temporary exemptions or discriminations in taxation in favor of corporations, to the prejudice of the individual citizen, with that section, was within the province of legislative power. These exemptions or discriminations could have been granted, and would have continued, until the inequality and injustice became so grievous that the people compelled the legislature to remove them. Temporary as the injury to the individual may have been, the framers of the constitution did not intend it should ever exist. The 4th section was therefore added, in itself self-executing, without the aid, in fact in restraint, of legislative power, subjecting corporate property to the taxation imposed on individuals. If this is not the effect of that section, it has no office to perform, and is without significance. All that it can accomplish would have been accomplished by the 1st section. Reading these constitutional provisions in the light of their history, and with a due regard to the words in which they are expressed, it is impossible for us to doubt that it was not competent for the general assembly, in the imposition of taxes, to distinguish or discriminate in favor of corporate property subject to taxation. If property of a particular kind is subjected to taxation, and owned by a corporation, it must bear the rate of taxation imposed on individuals. While the constitution inhibits the exemption or discrimination in favor of corporations, it equally inhibits a discrimination against them. Equality in bearing a common burthen, which is natural right and equity, is secured alike to the corporation and to the citizen.

The constitution of Iowa contains a provision identical in meaning, if not in words, with the provision of the constitution of 1868, under consideration. It reads: “The property of all corporations for pecuniary profit shall be subject to taxation, the same as that of individuals.” In The City of Davenport v. C. R. J. & P. R. R. Co. 38 Iowa, 633, it was the subject of construction, and was declared mandatory, requiring the legislature to provide for taxation of the property of corporations for pecuniary profit, the same &s that of individuals. A statute releasing railroad companies from certain taxation to which individuals were subject, was declared violative of it. The court say : “What are we to understand to be intended by the language ‘the same as that of individuals ’ ? We need not determine whether this language requires that corporate property shall be taxed in the same manner as that of natural persons. It seems, however, quite clear that it was intended by this language to require the legislature to impose the burdens of taxation upon the property of corporations for pecuniary profit, the same as, or equally with, that of individuals; that each shall be taxed for the same objects, and in the same degree, so that individuals shall not be required to pay any taxes on their property which have not also been assessed and laid upon the property of corporations of the class named, nor in any greater proportion. When the legislature provides for taxing the property of individuals, this clause of the constitution requires it to tax the property of corporations for pecuniary profit to the same extent and for the same purposes. If the property of individuals be taxed for State, county, school and municipal purposes, the property of this class of corporations must be subjected to the same taxes, and at the same rates. The one cannot be exempt, and the other liable.”

A more palpable infraction of the constitution than this case presents, could hardly occur. The capital of individuals, of the same kind, of no greater value, employed in the same or a like business with that of the corporation, if the legislative acts are valid, is subjected to ninety per cent, greater taxation than that the corporation bears. A donation from the tax paid by individuals is in effect made to the corporation. It participates with the individual in all the reciprocal benefits taxation secures; the burden apportioned to it does not correspond to the benefits. This is the favoritism, the inequality, and injustice, against which the constitutional provision is directed, If capital employed in the business appellee is pursuing, or if moneyed capital, and that is its real character, without regard to the manner in which it may be employed, when not invested in visible, tangible property, its representative, and a subjeet of taxation, will not bear a greater rate of municipal taxation than six-tenths of one per cent., it is competent for the legislature so to declare. It is not within its competency to declare that corporate capital can bear only that rate of taxation, Avhile individual capital is subject to the rate of taxation the municipality may assess, so long as it does not exceed two per centum, the maximum prescribed by that constitution.

It is observable the immunity claimed is found in a clause of the general revenue laAv of the State, subjecting corporations to the same rate of State taxation imposed on individuals, and in a proviso to another statute first purporting to subject corporations only to the rate of municipal taxation imposed for the State. We suppose this was on the hypothesis, now pressed on the court, that the constitutional subjection of corporations to the same taxation imposed on individuals applied only to State, and avas not applicable to municipal taxation. A- municipal corporation is a mere governmental agency, organized by legislative enactment, “to share in the civil government of the country, but chiefly to regulate and administer the local or internal affairs of the city, tOAvn or district Avhich is incorporated.” 1 Dill. Munic. Cor. § 10. It is said by Lord Holt to be, “ an investing the people of a place with the local government thereof.” 1 Salk. 183. Whatever of power is delegated to them, whether it be of the poAver to tax, or of the other poAvers of the legislative department, is the poAver of the State. Its nature is not changed by its delegation to the corporation. Before its delegation it resided in the legislature, and was capable of exercise by it, through any instrumentality it should appoint. In Knowlton v. Supervisors of Rock County, 9 Wisc. 410, constitutional provisions requiring uniformity of taxation were examined as to their bearing on municipal taxation, and among other propositions affirmed, is : “The levying of taxes by the authorities of a county, city, or toAvn, for their support, is as much an exercise of the taxing power as when levied directly by the State for its support. The State acts by the municipal governments, and their acts in levying taxes are as much the act of the State as if the State acted by its oavii officers.” A discrimination in municipal taxation, in favor of personal and against real property, was declared violative of the constitution. The same question was presented to the supreme court of the United States, in Gilman v. City of Sheboygan, 2 Black. 510. Following the decision of the supreme court of Wisconsin, these propositions were affirmed : (1) “The levying of taxes by a public corporation, under the authority of State law, is the exercise of the taxing power, as much as the taxation of the citizens directly for the support of the State government;” (2) “The constitution of Wisconsin requires the rule of taxation to be uniform ; and this means that all kinds of property not absolutely exempt must be taxed alike, by the same standard of valuation, equally with other taxable property, and co-extensive with the territory to which it applies. ” The constitution of Ohio provides : “ Laws shall be passed taxing, by a uniform rule, all moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise; also all real and personal property, according to its true value in money.” The supreme court of Ohio say: “Without express authority of law, no tax, either for State, county, township, or corporation purposes, can be levied, and we see no reason to doubt that this section of the constitution is equally applicable to, and furnishes the governing principle for, all laws authorizing taxes to be levied for either purpose. The great object of the provision was to secure equality and uniformity in the imposition of these public burdens. The convention was very well aware that much the largest part would be required to answer the purposes of these local subdivisions; and equally well, that it could only be levied as the general assembly should provide.” Zanesville v. Auditor, 5 Ohio St. 592. In Mayor, &c. v. Dargan, 45 Ala. 318, a municipal tax not levied according to the value of the property on which it was imposed, was held violative of the 1st section of article 9 of the constitution, requiring all taxes to be assessed in exact proportion to the value of the property on which they may be levied.

The constitutional provision is broad enough in its letter to comprehend all taxation the legislative power can impose. It is not material whether the imposition is by the legislature, through its own independent action, or by its agencies exercising power it has conferred. It is the taxing power of the State, and discriminations in favor of corporations, and against individuals, in the exercise of this power, are inhibited. The heaviest taxation in the State prior to, at the time of, and since the adoption of the constitution of 1868, was, and is, that imposed by municipalities. The evils of discrimination, of partiality in the imposition of such taxation, are of consequence more perceptible and acute than those resulting from taxation for the general purposes of the State. Restraints and limitations of municipal taxation were, as we have seen, carefully introduced into the constitution, when it was intended to distinguish it from the general taxation of the State. In the provision under consideration no such distinction is made, and the language, in its ordinary signification comprehends all taxation. The evil against which the constitutional provision is directed would be but partially remedied, if, by construction, the provision is limited to State as distinguished from municipal taxation. Invidious exemptions, inequality, injustice in the imposition of taxes, in the most odious form, and in that to which the people are most sensitive, would remain within the legislative power. Exemption from municipal taxation, by the payment of a bonus to the State, in the words of the bank charters to which we have referred, “in lieu and composition of all taxation whatever, by the State, county, city, or other authority,” was the immunity most often sought, and most often accorded to private corporations. The prohibition of such immunity in the future, and the subjection of corporations to a community and equality of burthen with the citizen, in the matter of taxation, is the constitutional mandate, obedience to which is not to be avoided. The manifest purpose of the statutes under consideration is to‘restrain municipal taxation within narrow limits, whén imposed on corporate property, leaving it unrestrained, except by the constitututional limitation, when imposed on individual property. The result, and the inevitable result, the case illustrates. If these statutes are valid, the individual citizen of Mobile must pay a tax of one and a half per centum on the capital he has employed in business; while the appellee and other moneyed corporations pay but six-tenths of one per centum on their capital. The constitutional mandate that “ the property of corporations shall forever be subject to taxation, the same as property of individuals” is vain, if these statutes do not offend it.

We are constrained to declare the statutes violative'of the constitution, and that the appellee is liable to the tax imposed by the appellants.

Whether the capital employed by the appellee is deemed capital employed in business, or personal property, the power to tax it is conferred on the city, by the 37th section of the act incorporating it. The title to, and the possession and use of, the capital, resides in the appellee, and its taxation to the appellee was the rightful' method of imposing the tax. Cooley on Taxation, 273.

The judgment of the circuit court is reversed, and the cause remanded.