rality. The city might have compelled the restoration of the bonds, or had a suit for damages, or the like; but it could not em orce fair dealing in this behalf by a penalty of abandonment of all occupation of West Court street. To say the very least, the act appears equiv ocal and indecisive in this view. Again, the contract gave two years for its completion, and did not contain any limitation that the time should be shortened by the occurrence of any demand for the collateral bonds. It was the business of the city to keep the bonds for two years, until the contract was fully performed; and the act of the city in their surrender cannot be made to operate as evidence of abandonment by the company. The company's acceptance of the bonds, which all men do readily, could not be converted into an act of abandonment of the streets not completed in their occupation. It is not a fitting deduction from the act, unaccompanied by any express purpose of that kind, or inquiry as to West Court street by the city. The city should, in fairness, have asked the question if West Court street had been abandoned before surrendering the bonds, and not taken it for granted upon an implication based upon a demand for them by the company. Not doing this, it cannot predicate of the act a clear, unequivocal, and decisive abandonment by the company, understandingly made, of the right to use that street under its charter, for that is the source of the right, and not the grace or favor of the city; and this question is not to be determined as if it were by such grace or favor that the streets are used by this company, however it may be as to others.

Altogether, I think there is no evidence of abandonment, and the injunction will be granted, but upon a bond of $25,000, with the usual condition to pay such damages as the city may sustain by the wrong. ful suing out of this injunction, and an additional condition that it wi surrender the street, if this suit be finally decided against the plaintiff, and the injunction dissolved, in the same condition as it was at the beginning of the occupation, free of all cost or expense to the city. Injunction granted.

STATE OF TENNESSEE et al. v. BANK OF COMMERCE et al.

(Circuit Court, W. D. Tennessee. March, 1892.)

1. TAXATION-EXEMPTION IN CHARTER OF BANK-TAX ON BANK SHARES. The charter granted in 1856 by the state of Tennessee to the Bank of Commerce, which provides that the bank "shall have a lien on the stock for debts due it by the stockholders, * 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," exempts from taxation the property of the bank as well as the individual property of the shareholders in the corporate stock and its shares.

2. SAME.

Such construction of the charter is not affected by the fact that decisions of the supreme court of the state, holding the charter tax to be a tax on the corporate property, and only an exemption of the corporation itself, were overruled by the United States supreme court, which decided that the charter tax was a tax on the shareholder only, and an exemption, therefore, of the shareholder, since such decision does not exclude from the exemption the corporation and its property.

3. SAME-INCREASE OF CAPITAL STOCK.

The exemption extends to the increase of the capital stock, subsequent to the original charter, authorized by law, and not restricted by the charter, notwithstanding such special privileges were forbidden by the state constitution of 1870, since a limitation of the exemption to the previously existing stock would be invalid, as impairing a contract obligation; the right to increase the stock being a charter privilege.

In Equity. Bill by the state of Tennessee and others against the Bank of Commerce and others, filed in the chancery court of the state, to collect taxes assessed on the capital stock of the bank. The cause was removed to the United States circuit court as involving a federal question. Heard on bill and demurrer. Demurrer sustained, and bill dismissed.

Metcalf & Walker and F. T. Edmondson, for plaintiffs.
Taylor & Carroll, for defendants.

HAMMOND, J. The charter of the defendant bank contains this

clause:

"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."

This bill is filed to collect taxes for the years 1887 to 1891, inclusive, amounting in the aggregate to $46,068.75. The taxes are assessed under acts of the legislature, which provide, among other things, as follows:

"And in cases in which, by the terms or legal effect of the charter, the shares of stock in any corporation are wholly or partially exempt from taxation, or in which a rate of taxation on the shares of stock is fixed and prescribed and declared to be in lieu of all other taxes, taxes for state, county, and municipal purposes shall be assessed and levied at a rate uniform with the rate levied upon other taxable property upon the capital stock of said corporation, the value of which capital stock shall be fixed and returned by the assessor as being equal to the aggregate market value of all the shares of stock in said corporation, including the net surplus."

The bill sets out historically the legislation concerning the taxation of the bank, previous attempts to collect taxes thereunder, certain litigation arising concerning those attempts, and generally so states the facts that by the demurrer which the defendant has filed the question is presented whether or not the assessment sought to be enforced is valid in relation to the claim made by the bank that the legislation violates the obligation of the charter contract, and is void under the constitution of the United States. A federal question being thus at issue, the case was removed to this court from the state chancery court, wherein the bill was originally filed.

Apart from any embarrassments arising out of the adjudications that have concerned this charter, and others precisely like it, in respect of the subject of taxation, I conceive that the ordinary use of the phrase, "in lieu of all other taxes," as distinguished from any technicalities whatsoever, always imports that none other than the tax specified, however described, can be demanded. Nor, so apart, should I conceive that it was at all material by what designation

the sum to be paid "in lieu" of other sums might be called, whether a tax, a bonus, a price paid for the privilege or a debt or obligation of any designation whatsoever; nor whether the sum, however called, should be absolutely fixed, should be ascertainable by some self-adjusting standard, or some scheme or method so devised that the amount could be readily known; nor whether the second parties to the contract should have the sum to pay individually, or in some aggregate capacity, or that it should be paid by some one else, or in any way designated in the contract. If this were an ordinary contract between individuals, all these varying conditions would be absolutely open to any arrangements the parties might choose to make. So they were to the state of Tennessee and Samuel R. McCamy, James Whitesides, John L. M. French, Edwin Marsh, and James C. Warner, "their associates and successors," when they set about the business of constructing "an institution," which has developed into the Bank of Commerce. It is altogether true that in and about that business, and in drawing up the "contract" in the form of a "charter" to manifest the agreement of the parties, the state will not be presumed to have curtailed its powers of taxation further than the words of the instrument shall plainly express, or by necessary implication shall be plainly indicated, but otherwise all the conditions above suggested were open to those parties absolutely. The same rule of plain expression or necessary implication applies in the construction of all contracts, not more to charters than to others, except that the courts, perhaps, are more careful in dealing with such cases than others for obvious reasons of public benefit, though in strictness the courts should not less carefully deal with any contract whatever.

It is an exaggeration of this carefulness, however, to suppose that the words of a contract about the taxation of a bank are to be differently construed than the same words about any other subject to which they would fitly apply, merely because they are applied to a matter of taxation of a corporation with an irrepealable contract of exemption. The same carefulness of construction about any other subject would produce the same result. If, for example, these citizens had made a contract with the state to build the capitol, and it had been provided that they should pay to the state from time to time a tax of one half of 1 per cent. on each installment of the money paid out by them for the work, "which shall be in lieu of all other taxes," could it be said that these words would receive any other construction than they do when they are applied to the taxation of a corporation or its stock? Or that, because the power of the state was supreme in the premises, and it might, in addition to this tax, have levied a tax upon these citizens individually, each for himself, or upon the whole in the aggregate, a further sum for the privilege of having had the contract awarded to them, or a further tax upon the property used in the construction of the capitol,-so much for the stone, so much for the iron, and so on, if you please,-can it be that these circumstances would change, in any respect, the meaning of the words? A habit of doing business in this regard by the state, and of levying the tax in a particular manner, would aid a court in v.53F.no.8-47

arriving at the meaning of the contract undoubtedly; but, after all, the words would stand out as expressing that intention to have been just what they import to a fair intelligence, unobscured by any subtleties of meaning developed to accomplish a particular purpose of evading their force and mitigating the unpleasant or undesirable results of their use. It were better that the courts should boldly overrule the decisions which have shackled the sovereign power of the state over taxation than to resort to mere subtleties of construction that shall break down the plain meaning of plain words to the plain people who invest their money upon the understanding that plain people have of such words.

Another fact to be remembered while reading this statutory contract is that it is not a revenue law; it is not a statute concerned with the exercise of a taxing power, except incidentally, as it were. The power of the state in the matter of selecting the subjects of taxation,' and in dividing and subdividing those subjects at pleasure, is quite absolute, whether in relation to banks or other corporations and their corporate property, or to the property of citizens. Naturally, corporate property, by its very character, suggests a somewhat uniform classification or subdivision for taxing purposes, but, as will be presently shown, there is no fixed or always uniform classification from which so much can be implied as has been urged in argument here. Ordinarily we say that there is-First, the franchise; second, the capital stock; third, the shares of stock, which, in the strictest sense, however, are not corporate property at all, but the property of the individual holder, unless there be confusion in the use of the term; and, fourth, the other property, not included in any of the other three. But this natural and convenient subdivision is not always adhered to, and is often still further subdivided, and might be subject to almost innumerable subdivisions, just as other property may be. Even the franchises may be separated into different subjects of taxation by taxing each that is granted separately. The capital stock, in the very beginning, might be subdivided into gold and silver money and legal tender paper money, if there be such paid in; afterwards into bonds, bills receivable, mortgages, exchange, etc.; then profits or income or surplus might be separately taxed,-and often is; and the ordinary subdivisions of real and personal property might be carried on, as they often are, in revenue laws, almost ad infinitum.

But, as before remarked, this is not a revenue law engaged with such subdivisions, and, it seems to me, rather too much stress has been laid upon the separable subjects of taxation in relation to corporate property as an element in the construction of this charter. It is true that the cases look to it very closely, and it has been seized upon as a very convenient pathway out of the difficulty of maintaining restrictions upon the sovereign power of taxation, which seem disastrous to that power. Yet I do not think the cases have broken down the ordinary rules of statutory construction, and established a special rule, based upon these arbitrary subdivisions, to be applied to corporate charters for the purpose of saving the state from the improvidence of those who have fettered this power. The rule of strict construction has been established beyond question, but the cardinal

rule remains that the intention of the parties must fairly be ascer tained; and it has not been established that an unfair advantage shall be given one of them because it is a state, which has not made a wise bargain, and has granted that which should have been withheld. The strictest adherence to the cases does not require of the court anything more than a rigid observance of the rule that the state shall not, by anything short of express words or necessary implication, be held to have surrendered one iota of its taxing power. But it is a perversion of this principle to hold that if, by any possible narrowness of construction, any subtlety of reasoning, or any nicety of verbal interpretation, the taxing power may be saved, the courts shall save it at the sacrifice of the other parties to the contract, who have put their money on the faith of the state to stand by that which it has fairly granted in the way of exemption from taxation.

Another consideration, before we take up the language of the act, is pertinent here. Next to this rule of strict construction the state most insists upon treating this charter tax as one strictly levied upon the shares of stock in the hands of the individual shareholders, and consequently claims that the exemption is one belonging to the shareholder alone, applicable only to him and his property interest, and not at all to the bank. But, if it be granted that the tax is of that precise nature, does the conclusion follow, necessarily, in logical sequence? Concede that a tax upon the shareholder is not a tax upon the bank directly or indirectly, and grant the other premise also that the surrender of the taxing power shall never be presumed, and does the conclusion follow inevitably that an exemption of their bank and its property may not be granted to these shareholders in consideration of a charter tax upon them individually or their individual property? Why may not the legislature, with all conditions open to it, as they were, exempt the bank from all taxation in consideration that the shareholders shall pay a tax, fixed, no matter how, by agreement between them, either upon their shares in that bank or any other prop erty the shareholder might own? Why could not they agree that such an exemption should be granted to the bank if each stockholder should pay his share of the tax, and secure it by a lien, say upon his land, for an example? Or why might the tax not be fixed at so much per acre of the land held by each shareholder, or in any other way that may be suggested, and, when fixed, however agreed upon, form the basis of an exemption of the bank and all its property? These circumstances would require close scrutiny, to be sure, and would shed their own light upon the question of the intention of the legislature; but if, in any light, the intention was plain, the exemption would stand. The basis for the logical conclusion under consideration would be an affirmance that no exemption of a bank and its property can inure to its benefit unless it be predicated of a tax on the bank itself or its property, which is obviously unsound. In thus presenting what seems to me a fallacy of that contention which would limit this exemption to one of any further tax upon the shareholder in respect of his property in the share, because, forsooth, the tax levied and demanded by the charter in consideration of the exemption is upon his property, and not that of the corporation, I do not overlook the