Pullen v. . Corporation Commission , 152 N.C. 548 ( 1910 )

CLARK, C. J., and HOKE, J., dissenting. Omitting the merely formal parts of the submission, the facts agreed to as determining this controversy are thus stated:

1. That the Corporation Commission is a department of the State Government, created by law and charged with certain duties, among which duties is exercising the powers and duties of State Tax Commissioners; that their office is in the city of Raleigh, Wake County, N.C.

2. That the Raleigh Savings Bank and Trust Company is a bank and savings institution, duly created by law, having a capital and a surplus, whose office and place of business is in the city of Raleigh, and that John T. Pullen is a stockholder therein, as shown by the books of the company, and is a citizen of Wake County.

2 (a). That the asylum or 1949 bonds, herein referred to, were sold by the State of North Carolina at a price of 103, the same bearing 4 per cent interest per annum, payable semiannually, and not due until 1 July, 1949, as expressed in said bonds, and that said bonds were sold upon the faith of the State, as pledged in the act authorizing their issue. That at the time of such sale the legal rate of interest for money loaned in North Carolina was 6 per cent per annum, all banking institutions being authorized to take interest in advance, and that at the time of such sale the outstanding bonds of the State of North Carolina bearing 4 per cent interest were sold on the financial markets at 102, such sales being below the price brought by the bonds above referred to.

3. That John T. Pullen is interested directly in the assessment of the stock, as the failure to deduct these asylum or 1949 bonds from the surplus in arriving at the assessment of the stock will directly affect to his injury and loss that amount of State, county and city taxes paid by him on said stock.

4. That on 5 March, A.D. 1909, the General Assembly of North Carolina enacted "An act to issue bonds to carry out the act of 1907, for the care of the insane of the State," which act is known as ch. 510, Laws 1909, a copy of which act is hereto attached and (550) marked "Exhibit A," said act reading in section 4 as follows:

"SEC. 4. The said bonds and coupons shall be exempt from all State, county or municipal taxation or assessment, direct or indirect, general or special, whether imposed for purposes of general revenue or otherwise, and the interest paid thereon shall not be subject to taxation as for income, nor shall said bonds and coupons be subject to taxation when constituting a part of the surplus of any bank, trust company or other corporation."

5. That on or about 1 July, 1909, the State of North Carolina, acting through its Governor and State Treasurer, issued five hundred thousand dollars ($500,000) of asylum bonds, now known as 1949 bonds, authorized by the act just above referred to, and sold the same to various parties, both within and without the State of North Carolina.

6. That at the session of the Legislature of 1909, the General Assembly passed the Revenue and Machinery acts, known respectively as chapters 438 and 440, the same regulating the listing and collection of taxes levied and imposed for raising revenue for the State of North Carolina; the said chapter 440, among other things, providing in section 33 (in part), relative to taxation of banks, banking associations or saving institutions, as follows:

"The value of such shares shall be determined as is hereinafter in this section provided. Every bank, banking association or saving institution (whether State or National) shall list its real estate in the county, city or town in which such real estate is located, for the purpose of State, county and municipal taxation. Every such bank, banking association or savings institution shall, during the month of June, list annually with the Corporation Commission, in the name and for its shareholders, all the shares of its capital stock, whether held by residents, or nonresidents, at its market value on the first day of June, or, if it have no market value, then at its actual value on that day, from which market or actual value shall be deducted the assessed value of the real and personal property which such bank, banking association or savings institution shall have listed for taxation in the county or counties where such real and personal estate is located. The actual value of such shares, where such shares have no market value, shall be ascertained by adding together the capital stock, surplus and undivided profits and deducting therefrom the amount of real and personal property owned by said institution on which it pays tax, and dividing the net amount by the number of shares in such institution. Insolvent (551) debts due said institution may be deducted from the items of undivided profits or surplus, if itemized and sworn to, and forwarded to the Corporation Commission by the cashier of such institution. If the Corporation Commission shall have reason to believe that the market or actual value as given in is not its true value, it shall ascertain such true value by such examination and investigations as to it seems proper, and change the value as given in to such amount as it ascertains the true value to be, which action on the part of the Corporation Commission may be reviewed by the Superior Court, by an action brought against the Corporation Commission in its official capacity by the party aggrieved."

7. That the Raleigh Savings Bank and Trust Company is a bank and savings institution, having a capital and a surplus, and that a part of said surplus is invested in the bonds issued under Laws 1909, ch. 510, commonly known as the asylum bonds or 1949 bonds, and that it bought the same upon the faith of the State of North Carolina, as pledged in chapter 510 of the Public Laws of 1909, paying for the same out of its surplus.

8. That the said Raleigh Savings Bank and Trust Company has made return to the Corporation Commission, as is required in section 33 of the Machinery Act of 1909 (Laws 1909, ch. 440), for the assessing of the shares of stock held by the stockholders in said corporation, in accordance with law, which said assessment the Corporation Commission is directed to make and certify to the several counties where the stockholders reside, as the value of said stock for taxation.

9. That the Corporation Commission, in accordance with the statute providing for the assessment of capital stock of banks, have assessed and appraised the value of the shares of stock of the Raleigh Savings Bank and Trust Company by adding together the capital stock, surplus and undivided profits, and deducting therefrom the real and personal property owned by said institution, on which it pays tax, and dividing the net amount by the number of shares in said institution. That the said Corporation Commission did not deduct from the surplus the asylum or 1949 bonds (those authorized by chapter 510 of the Public Laws of 1909) owned by the said Raleigh Savings Bank and Trust Company, they holding that the same was not deductible, as a matter of law, in arriving at this assessment; to which assessment the said Raleigh Savings Bank and Trust Company and John T. Pullen, a stockholder of said company, have excepted and announced their intention of bringing an action against the Corporation Commission in the Superior Court of Wake County in its official capacity, to review the action (552) of the said Corporation Commission.

10. That a tender of all taxes, admitted by the aggrieved parties to be due, has been made before the submission of this controversy without action.

11. With a view of facilitating the arriving at a determination of the rights of the parties, it has been agreed to present the submission of this case, containing the facts upon which the controversy depends, to the Superior Court of Wake County for its determination and rendition of judgment thereon, as if the action were pending.

The judgment rendered by his Honor, upon the above facts is as follows:

NORTH CAROLINA — Superior Court.

(Title of Cause.)

The court, by consent of parties, having heard argument in this case agreed, is of opinion, and so adjudges, that the ruling of the Corporation Commission herein be and the same is hereby affirmed, and it is adjudged that the $55,000 of surplus invested in these bonds should not be and shall not be deducted in arriving at the value of each share of stock for the purpose of taxation. The plaintiff will pay the cost hereof. Plaintiffs except. Appeal by the plaintiffs. Bond of $50 adjudged sufficient, on appeal, and the case agreed on, the entire papers in this controversy without action, and this judgment will, by consent, constitute the case on appeal. 19 April, 1910.

The plaintiffs appealed. The General Assembly of this State, at its session in 1909, authorized (ch. 510, Public Laws 1909) the issue of $500,000 of bonds of the State to pay the expenditure of that sum, authorized by the General Assembly of 1907, for the enlargement of the State institutions for the care of its mental defectives. Section 4 of that act provides: "The said bonds and coupons shall be exempt from all State, county or municipal taxation or assessment, direct or indirect, general or special, whether imposed for purposes of general revenue or otherwise, and the interest paid thereon shall not be subject to taxation as for income, nor shall said bonds or coupons be subject to taxation (553) when constituting a part of the surplus of any bank, trust company or other corporation."

The uniform and well-settled policy of the State, certainly since 1852 — and its power to do so seems never to have been doubted or questioned — has been to exempt its own bonds and certificates of debt from taxation. Laws 1852, ch. 10, sec. 4; Rev. Code, ch. 90, sec. 5; Laws 1879, ch. 98, sec. 3; Code, sec. 3573; Laws 1905, ch. 543, sec. 4; Rev. 1905, secs. 5022, 5031. In the act herein quoted (sec. 4, Laws 1909, ch. 510) this purpose and intent is expressed in language so clear and unambiguous that it can admit of no uncertainty.

The particular inhibition of this section, which is presented for our interpretation, and which is not found in any preceding act authorizing theissue of State bonds, is the last clause, in these words: "Nor shall said bonds and coupons be subject to taxation when constituting a part of the surplus of any bank, trust company or other corporation." Omitting these words from the section, it is clear that the bonds and coupons and interest paid thereon are exempted from all State, county or municipal taxation or assessment, direct or indirect, general or special, whether imposed for general revenue or otherwise; and this is true regardless of their ownership, whether by individuals, partnerships, joint-stock associations or corporations, and whether constituting a part of the capital, surplus or undivided profits of the corporation. In the hands of the owner, and however held, and regardless of what part of his money is invested in them, the State bonds issued under this act are clearly exempted from all taxation, general or special, direct or indirect. This being the clear intent and policy of the State speaking through the legislative department, and exercising a power uniformly recognized and conceded, it is our plain duty to uphold the will of the State and not to be astute to search for ways to evade it.

It is likewise well settled by the language of our State Constitution, by many decisions of this Court, and of the Supreme Court of the United States, and now generally accepted law, that the property of a shareholder of a corporation in its shares of stock is a separate and distinct species of property from the property, whether real, personal or mixed, held and owned by the corporation itself as a legal entity. It would be useless to cite authority to support a proposition so well established and generally accepted. The Constitution, Art. V, sec. 3, commands that: "Laws shall be passed taxing, by a uniform rule, all moneys, credits, investments in bonds, stocks, joint-stock companies, or otherwise; and also all real and personal property according (554) to its true value in money." It is apparent from an examination of the taxing laws of the State, that the legislative department has attempted to observe and enforce the mandate of the Constitution.

In Comrs. v. Tobacco Co., 116 N.C. 441, in discussing the several forms of taxation to which corporations were subject under the Constitution, this Court said: "As to corporations, by all the authorities, it is in the power of the Legislature to lay the following taxes two or more of them in its discretion at the same time: (1) To tax the franchise (including in this the power to tax, also, the corporate dividends); (2) the capital stock; (3) the real and personal property of the corporation. This tax is imperative and not discretionary under the ad valorem feature of the Constitution; (4) the shares of stock in the hands of the stockholder. This is also imperative and not discretionary."

In that case the Court also held that it was competent for the Legislature, in the method adopted by it, to tax the shares of stock in the hands of shareholders, to require the corporation by its proper officer to file a list of the shareholders and the corporation to pay the taxes assessed against the shares of stock, and "this does not affect the liability of the shares to tax as the property of the shareholders, but is simply for the convenience of the State in collecting the tax. The effect is merely to change the situs of the shares for taxation from the residence of the owner to the locality where the chief office of the corporation is situated, as held in Wiley v. Commissioners, 111 N.C. 399." In Bank v. DesMoines, 205, U.S., 503, the Court, speaking through Justice McKenna, said: "It, however, is not an uncommon, and is an entirely legitimate method of collecting taxes, to require a corporation, as the agent of the shareholders, to pay in the first instance the taxes upon shares, as the property of the owners, and look to the shareholders for reimbursement." The tax in such cases would be a tax upon the shares of stock, and not a tax upon the corporation. It would be a mere method of collecting the tax, and not a change of the subject-matter of taxation.

It is, likewise, within the power of the Legislature under the Constitution, to prescribe the method by which the value of all property subject to taxation is to be ascertained and determined: and the method prescribed by the Legislature, and which has been prescribed for many years, for fixing the value for taxation of bank shares, is found in ch. 440, sec. 33, Laws 1909, and is as follows: "Every bank, banking (555) association or savings institution (whether State or National) shall list its real estate in the county, city or town in which such real estate is located, for the purpose of State, county and municipal taxation. Every such bank, banking association or savings institution shall, during the month of June, list annually with the Corporation Commission, in the name and for its shareholders, all the shares of its capital stock, whether held by residents or nonresidents, at its market value on the first day of June, or, if it have no market value, then at its actual value on that day, from which market or actual value shall be deducted the assessed value of the real and personal property which such bank, banking association or saving institution shall have listed for taxation in the county or counties wherein such real estate is located. The actual value of such shares, where such shares have no market value, shall be ascertained by adding together the capital stock, surplus and undivided profits, and deducting therefrom the amount of real and personal property owned by said institution on which it pays tax, and dividing the net amount by the number of shares in said institution. Insolvent debts due said institution may be deducted from the items of undivided profits or surplus, if itemized and sworn to, and forwarded to the Corporation Commission by the cashier of such institution." It is further provided that the Commission may, if it desire, make such examination and investigation as it may believe to be advisable to ascertain the market or actual value, and its action may be reviewed by an action, such as the present case is, in the Superior Court.

This has been for many years substantially the method prescribed by the Legislature of the State for ascertaining the taxable value of the shares of stock in banking institutions, whether State or National, and the only change of note was made by the Laws of 1909, in changing the authorities to appraise the stock from the Auditor of the State to the Corporation Commission. In speaking of this section, this Court, inLumber Co. v. Smith, 151 N.C. 70, through Mr. JusticeHoke, said: "In the case of banks, their realty is listed in the county, and, on report made as required by this section, the value of the shares is appraised and determined by the Commission, and this, with the sworn list of stockholders, is certified by the commissioners to the county authorities, to the end that the proper amount may be assessed against the individual holders of the same. This is done in order to conform the taxation of all banks to the method permissible in the case of National banks, and in order to make the taxation equal and uniform throughout the State on all institutions of that class. There is much to be said (556) in support of the scheme of taxation contained in these statutes, tending, as it does, to uniformity and consistency of rulings on the various and important questions presented, and under an intelligent and conservative administration the law is proving itself to be a satisfactory and workable system. These are matters, however, more properly for legislative consideration, and are not dwelt upon, the only question for us being the power of the Legislature to enact the law, and its correct interpretation."

It will be observed that, in the section of the Machinery Act under consideration, it is made the duty of the defendant commission to deduct from both the market and the actual value of the shares of stock, as ascertained by it, before fixing the taxable value of such shares, the aggregate of the real and personal property listed by the banking institution. The principle of deduction is further recognized in the cases of individuals and corporations, when they come to list their solvent credits, in that from their solvent credits they are authorized to deduct their obligations or debts due by them, and the balance is to be listed as taxable solvent credits. This principle is recognized by the Supreme Court of Illinois as constitutional, in Loan Assn. v. Keith, 153 Ill. 609. The Legislature has for many years recognized this as an equitable system of taxation; it has been incorporated for more than twenty-five years in our system of taxation, and this notwithstanding that it has been well settled by repeated decisions of this and other courts that shares of stock are, in the hands of the shareholder, separate and distinct property from the property of the corporation.

The fairness and justness of the principle of deductions in the method of ascertaining the taxable value of the subjects of taxation, in order to avoid the essential harshness and inequity of double taxation, was, we think, distinctly sanctioned as long ago as 1882, in R. R. v.Comrs., 87 N.C. 414. That case was presented to this Court on appeal by both parties from the judgment of the Superior Court, and in delivering the unanimous opinion of the Court, Chief Justice Smith, as pertinent to the present matter, said: "The commissioners object further that the assessed value of the proffered stock should be reduced by the value of the real estate and franchise as taxed separately in the several counties traversed by the road. The ruling of the Court in directing the reduction is obviously made to avoid the imposition of a double tax, since the value of all property owned by a corporation, in whatever consisting, and including the franchise, is the true and fair measure of the value of all its stock, and hence the General Assembly permits (557) stockholders, in valuing their shares, to ``deduct their ratable proportion of tax paid by the corporation upon its property as such in this State.' Sec. 8, par. 6. The section leaves it somewhat uncertain whether the value of stock is to be reduced by the value of corporate property taxed, and the tax levied upon the difference, or the tax upon the former is to be abated to the extent of the tax upon the latter; but we interpret the latter to be the meaning. The effect of the ruling of the Court is to deprive the counties through which the road passes of assessments of the corporate property in each, and transfer them to the county of Wake, while it is, in our opinion, the purpose of the statute to allow the taxpaying shareholder to deduct from the tax on his shares a ratable part of the tax paid upon the corporate property elsewhere by the corporation itself, but not to withdraw from taxation in other counties such property of the corporation therein as is liable to assessment and taxation."

Again, in R. R. v. Comrs., 91 N.C. 454, this Court said, speaking through the Chief Justice, interpreting chapter 117, Laws 1881, sec. 8: "In the concluding clause, amended by the act of 1883, ch. 363, sec. 8, to remove the obscurity pointed out in R. R. v. Comrs., 87 N.C. 426, it is provided that ``stockholders in valuing their shares may deduct their ratable proportion of the value of taxable property, the tax whereof is paid by the corporation.'"

The power of the Legislature to authorize deductions to be made by the taxpayer in the method it has prescribed for ascertaining the taxable value of some of the subjects of taxations has been continuously exercised under the interpretation of the Constitution by this Court in the cases cited above.

If the reason moving the Legislature to concede a deduction was based upon a desire to avoid apparently double taxation, and this was a legitimate exercise of its discretion, we cannot see why it could not be moved to exercise a similar discretion in favor of a species of property which the fixed policy of the State, for more than half a century, has been to exempt from taxation, which the Legislature by its act in 1909 has, in the most unequivocal terms, forbidden to be taxed by the State, county, city or town, generally or specially, directly or indirectly. This inhibition of taxation can only be of advantage to the State's own citizens and corporations; to the stranger it can be of no advantage, as living beyony [beyond] the territorial limits of the State, he is beyond the reach of its taxing power.

The State and its taxpayers are not without compensating advantage for this exemption from taxation conferred upon the bonds issued by the State, because it is thereby enabled to sell its bonds, (558) bearing interest at only 4 per cent, not only at their par value, but at a premium, and thus if residents and citizens of the State — those liable to pay it tribute in taxes — own the bonds of the State, what the State and its taxing subdivisions, created by it, may lose in revenue by permitting the bonds to be taxed, is saved by the State and its taxpayers in having to pay a much reduced rate of interest on the bonds.

The only remaining question, presented by the argument and arising upon the record, to be determined by us, is: Does the act authorize the deduction of these bonds to be made when constituting a part of the surplus of any bank, trust company or other corporation? Does this plainly appear to be the meaning of the act and the legislative intent?

The settled rule of statutory construction is that a statute should be construed with reference to the intended scope and purpose of the Legislature, and in order to ascertain the purpose, the courts must give effect to all of its clauses and provisions unless to do so would violate the provisions of the fundamental law or produce irreconcilable conflicts in the statute itself; nor will the use of inapt, inaccurate or improper terms or phrases invalidate a statute, when the real meaning of the Legislature can be gathered from the context or from the general purpose and tenor of the enactment. Spencer v. R. R., 137 N.C. 119; Fortune v.Commissioners, 140 N.C. 322; Board of Education v. Commissioners,137 N.C. 63; Black on Interpretation of Laws, 56. It is also said in Mordecai's Law Lectures, p. 22: "The construction given to a statute by the executive officers of the Government contemporaneously with its passage is entitled to great weight with the courts."

It appears from the public records of the State that for many years prior to 1909, and while the Auditor of the State was the authority authorized to ascertain and appraise the value of stock in banking institutions, he deducted, under the advice of the law officer of the State, the State bonds held by the banks from their total assets. Some doubt was suggested as to the validity of this uniform practice of the Auditor's office. The Legislature, in enacting the act now under consideration, added to section 4 these words: "Nor shall said bonds and coupons be subject to taxation when constituting a part of the surplus of any bank, trust company or other corporation." This same language will also be found in sec. 4, ch. 399, Laws 1909, being the act "to authorize the issue of State bonds to pay off the State bonds which fall due on the first day of July, 1910." These words will be found in no other act authorizing the issue of State bonds. We must assume that (559) these acts of such public importance, affecting the credit of the State and authorizing the issue of its bonds, received the careful examination and scrutiny of the General Assembly; and that provisions incorporated in them not found in other similar acts could not pass unobserved and would not have been adopted unless they expressed some new and distinct legislative intent. The acts were required by the Constitution and were passed with distinct formality. The bills had to be read on three several days in each branch of the General Assembly and on the second and third readings the ayes and noes were recorded, as required, on the journals of each house.

In Laws 1905, ch. 543, sec. 5, in the legislation authorizing the issue of bonds in settlement of the South Dakota judgment and the Schafer bonds, the only language used is, "Said bonds shall be exempt from all taxation, including income tax." The language used in other acts authorizing the issue of State bonds will be found in sections 5022 and 5031, Rev. 1905. In using the language in the act now under consideration there must have been, as hereinbefore observed, some distinct legislative intent, and we think this will be found in the Machinery Act. The fact that the property exempt from taxation is made exempt by another act different from the Machinery Act does not support the argument that it is not exempt from taxation; nor does the fact that the Machinery Act in terms does not authorize the bonds to be deducted, support the argument that it was not the legislative intent to have them deducted; for in section 32, ch. 440, Laws 1909, that section which specifies what property the taxpayer shall list for taxation, and calls specifically for the listing of the amount of credits, there is no reference whatever to State bonds or other bonds of the State's subdivisions that are legally exempt from taxation. To ascertain this exemption the taxpayer and the tax lister must each look elsewhere, to other acts whose provisions will be considered in pari materia. Wilson v.Jordan, 124 N.C. 683, and cases cited in Anno. Ed.

Looking to and examining the Machinery Act, we find that the only connection in which the word "surplus" is used is in ascertaining the taxable value of shares of stock in a corporation, whether the entire tax is to be paid by the corporation for its shareholder or in part by the shareholder himself. This is true not only of the act of 1909, but of all previous acts extending over a period of many years, since the Legislature adopted the present method of ascertaining and appraising the shares of stock for taxation. So, then, it seems to us in our scheme of taxation the word "surplus" has a distinct legal signification, and it must have been used with that signification in the act now (560) under review by the legislative branch of the Government, which has created and established our taxing system, and which alone has the power to do so. Unless we so interpret the statute, we shall fail to give any force and effect to this language. This we cannot do, under a well-settled rule of statutory interpretation. These words were not needed in addition to the other clear and unambiguous language of the section to exempt these bonds from taxation as the property of a bank, whether consisting of a part of its capital, surplus or undivided profits; the other words of the section were plenary for this purpose. But it is objected that the Supreme Court of the United States has held in Bankv. Tennessee, 161 U.S. 134, that the surplus of a bank may be taxed as a distinct species of property; but that decision does not hold that when that surplus consists of nontaxable bonds, it may be taxed. We do not think that case decisive of the present question. The facts presented in it are substantially these: The State of Tennessee in granting a charter to the Bank of Commerce stipulated that "said institution shall have a lien on the stock for debts due it by the stockholders before and in preference to other creditors, except the State for taxes, and shall pay to the State an annual tax of one-half of one per cent on each share of capital stock, which shall be in lieu of all other taxes." Subsequently the State passed an act providing that "the surplus and undivided profits in such bank, banking association, or other corporation shall be assessable to said bank or other corporation, and the same shall not be considered in the assessment of the stock therein." Previous to this act the State had attempted to tax the shareholders upon their shares of stock in addition to the amount provided in the charter above quoted, and in a suit brought to test the validity of this tax, and which suit finally reached the supreme Court of the United States, as Farringtonv. Tennessee, 95 U.S. 679, it was held that "the exemption was a contract between the State and the bank limiting the amount of tax on each share of stock, and that a subsequent revenue law of the State which imposed additional taxes on the shares in the hands of the shareholders impaired the obligation of the contract, and was void." In the Bank of Commerce case, supra, the Court, in referring to the Farrington case, said: "We do not think under the circumstances that we ought to come to a different conclusion upon the question of exemption from that which was arrived at by this Court in the Farrington case." And the Court held that the provision of the bank charter having been (561) construed to be a contract limitation of the power to tax the shares of stock as the property of the shareholder, it would not extend its benefits to exempt the corporate property from taxation, and as the revenue act only taxed the surplus and undivided profits of the corporation, such tax did not impair the obligation of a contract and was within the power of the State; and therefore the State could tax the entire capital, surplus and undivided profits of the bank. We do not think that case authority against our interpretation of the act now under consideration.

The primary purpose of a bank surplus is the accumulation of a sum against which bad debts may be charged, so that at all times the capital may be kept unimpaired. This is required by the National Banking Act. The only connection in which, as we have observed, the word surplus is used in our taxing system, now established for more than a quarter of a century, is that it appears in the method prescribed for ascertaining the taxable value of shares of stock. We think, therefore, that it was within the power of the Legislature to authorize a deduction of the bonds issued under the provisions of this particular act of the General Assembly when they constituted a part of the surplus of a banking institution, in ascertaining the taxable value of the shares of stock, and that the legislative intent to have such deduction made is expressed with sufficient clearness for this Court to discover such intent, especially, when this act is construed in connection with section 33, chapter 440, Laws 1909, known as the Machinery Act. By such interpretation we give effect to the legislative intent without disregarding any clause of the act, which we could not do by any other interpretation; and at the same thing we give effect to the well-settled policy of our plan of taxation, to tax the shares of stock in banking institutions as a separate and distinct species of property. The deduction of investment in these bonds by a bank can be made only when the bonds constitute a part of the surplus of such institution. If a part or all of the capital stock or undivided profits are invested in these bonds, the claim of the shareholder for a deduction cannot be sustained, as the language of the fact comprehends only the surplus. If all the surplus is invested in these particular bonds, and there are no undivided profits, then the shares of stock would be appraised at not over their par value, subject to the deduction of the value of the real estate and personal property owned by the bank and already taxed. As to the validity of the deduction of the real estate and personal property, no question seems to be raised. If a less amount than the entire surplus is invested in these bonds, then the appraisement of the shares of stock for taxation would (562) be correspondingly increased. We do not think that this interpretation of the act in anywise impairs the right of the State, under the consent of Congress given in section 5219 of the Revised Statutes of the United States, to tax the shares of stock in National banking associations; for our interpretation in no way violates either of the two restrictions imposed by that section of the Revised Statutes. We say this much in reference to the effect upon the taxation of the shares in National banks, because the question was suggested on the argument and on the brief of counsel for the defendant.

We conclude, therefore, that the judgment of the Superior Court sustaining the ruling of the Corporation Commission in appraising the stock of the plaintiff Pullen in the Raleigh Savings Bank and Trust Company is erroneous, in that the investment of a part of the surplus by the said bank and trust company in these bonds, known as the asylum bonds, should have been deducted from the aggregate value of the assets of the said bank and trust company in ascertaining and appraising the value of the shares of stock in said corporation for taxation. The judgment is reversed and the cause remanded for further proceeding in accordance with this opinion.

Reversed.