Board of Equalization of Oklahoma Co. v. First State Bank

The First State Bank of Oklahoma City filed its assessment list for the purpose of taxation for the year 1918, showing a capital, surplus, and undivided profits of $67,100. It appears that $20,000 of the capital was invested in public building bonds and guaranty fund warrants and a deduction of $20,000 was allowed under the judgment of the district court.

To reverse the judgment it is urged that the assessment should have been on the value of the shares of stock, not on the capital, and no deduction allowed for the amount of the capital invested in the public building bonds and the guaranty fund warrants.

Under the provisions of section 7318, Rev. Laws 1910, banks were assessed upon their capital, surplus, and undivided profits. This section was amended by chapter 107, sec. 4, Sess. Laws 1915, by providing for assessment on the value of the shares of stock. This amendment appears as a separate paragraph, added after a re-enactment of section 7318. Some confusion has arisen as to whether banks should be assessed upon the net value of their moneyed capital, as provided in the original section and re-enacted, or upon the shares of stock as provided in the amendment.

The amended statute must be construed so as to give full force and effect, if possible, to the entire section, rendering every word, phrase, and clause operative. State ex rel. Owen v. Carter, State Auditor, 77 Okla. 27, 186 P. 454; Mathews v. Rucker, 67 Oklahoma, 170 P. 492; Bohart v. Anderson,24 Okla. 82, 103 P. 742, 20 Ann. Cas. 142; Trapp, Auditor, v. Wells Fargo Express Co, 22 Okla. 377, 97 P. 1003; Marbury v. Madison, 1 Cranch. 137, 2 L. Ed. 60; Holmes v. Jennison, 14 Pet. 540, 10 L. Ed. 579.

The legislative intention to assess banks on the value of their shares of stock more clearly appears from chapter 203, Sess. Laws 1919, where section 7318, as amended by the 1915 act, was re-enacted with the express provision that banks should not be included with other corporations organized for profit, which are to be assessed on the net value of their moneyed capital, surplus, and undivided profits. Subsequent legislative enactments may be considered as an aid to the interpretation of prior legislation upon the same subject. Grayson v. Thompson, 77 Oklahoma, 186 P. 236; Board of County Com'rs of Creek County v. Alexander, 58 Okla. 128,159 P. 311; Tiger v. Western Invest Co., 221 U.S. 286, 55 L. Ed. 738.

It is quite generally held that in assessing corporations on their moneyed capital a deduction should be made of the amount of such capital invested in securities and other property owned by the corporation that is exempt from taxation. But where the tax is upon the shares in the hands of stockholders, or is assessed against the corporation as the agent of the shareholder, no such deduction is to be made. The distinction is based upon the doctrine that capital stock, property of the corporation, and the shares of stock in the hands of individual stockholders are separate properties for the purpose of taxation. The Legislature recognized this distinction between the property of the corporation, represented by its capital stock, and the property of the shareholders, represented by their shares, and changed the method of taxation from the moneyed capital of the bank to the shares which belong to the shareholders. In the case of Oklahoma Nat. Life Ins. Co., 68 Oklahoma, 173 P. 376, in an opinion by Mr. Justice Miley, it was said:

"The general rule, which seems to be supported by the overwhelming weight of authority, is that where the tax is upon the shares of stock in the hands of the stockholders as their property, or is assessed against the corporation as agent of the shareholder, to be deducted from the dividends, as is provided in our statutes for the assessment of shares of stock in the banks, no deduction should be made from the value of the shares on account of the capital or assets of the corporation invested in property which is exempt from taxation. * * *"

In the case of First Nat. Bank of Ossining v. Board of Assessors, 182 N.Y. 460, 75 N.E. 306, it was held, in the absence of a statute authorizing the deduction, the amount of capital of the corporation invested in real estate should not be deducted in taxing the shares of stock of the bank. It has been held repeatedly by the Supreme Court of the United States that in fixing the value of shares of stock in a national bank for the purpose of taxation, no deduction is to be made on account of the capital of the corporation invested in securities which are exempt from taxation. This proposition is sustained by cases cited in 45 L. R. A. (note) 757, and cases cited in 55 L. R. A. (N. S.) (note) 389. In Home Ins. Co. v. New York, 134 U.S. 594, 33 L. Ed. 1025, it was said:

"Such tax cannot be affected in any way by the character of the property in which its capital stock is invested."

In Palmer v. McMahon, 133 U.S. 662, 33 L. Ed. 772, it was said:

"The capital of national and state banks invested in United States securities cannot be subjected to state taxation; but shares of bank stock may be taxed in the hands of their individual owners at their actual instead of their par value, without regard for the fact that part or whole of the capital of the corporation might be so invested."

In Cleveland Trust Co. v. Lander, 184 U.S. 112, 46 L. Ed. 456, it was said:

"A tax on the shares of stock in a trust company is not equivalent to a tax on the property of the corporation, and therefore shareholders are not entitled to have a deduction from the value of the shares of the amount of the capital stock of the company which is invested in United States bonds."

In the case of Van Allen v. The Assessors, 3 Wall. 573, 18 L. Ed. 229, it was said:

"The tax on the shares is not a tax on the capital of the bank, but upon a distinct independent interest or property held by the shareholder."

The assessment here should have been on the value of the stock, not on the capital. The tax on shares is not a tax on the capital of the corporation, but upon the property owned and held by the shareholder, and from that valuation no deduction should have been made for the amount of the capital invested in public building bonds and guaranty fund warrants. It is immaterial for taxation purposes whether the capital of the corporation is invested in property exempt from taxation. The statute does not authorize a deduction on such account, and, without such provision, no such deduction can be allowed. The case of Assessment of First Nat. Bank of Chickasha,58 Okla. 508, 160 P. 469, in so far as it is in conflict with the views here expressed, is overruled. This is not to hold that these public building bonds and guaranty fund warrants are taxable; that question is not presented in this case and is not passed upon.

It is not necessary, however, to reverse the judgment of the trial court, for the reason the assessment list filed by the bank gives the name and address of each shareholder, the number of shares, and the value of each share as required by the statute. From this it appears that the value of the shares was $47,106, the amount which the trial court ordered should be assessed against the bank. No evidence was offered to contradict this value. Therefore, it appears the trial court arrived at the correct conclusion, although giving a wrong reason for the conclusion. It is a settled rule that a judgment of the lower court will be affirmed, although a wrong reason was given for such judgment. Nance v. Fouts, 68 Oklahoma,173 P. 1038; Kibby v. Binion, 70 Oklahoma, 172 P. 1091; McKee v. Title Ins. Trust Co., 159 Cal. 206, 113 P. 140; Scattergood v. Johns, 57 Kan. 450, 46 P. 935.

The judgment of the trial court ordering the assessment on a valuation of $47,106 is affirmed.

KANE, RAINEY, JOHNSON, HIGGINS, and BAILEY, JJ., concur; PITCHFORD, J., dissents.