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The Mechanics Bank v. The City of Kansas

Supreme Court of Missouri1881-04
73 Mo. 555

Summary

Holding. The judgment is reversed and the cause remanded with directions for the circuit court to enter a decree granting the bank full injunctive relief against the tax sale of all the property at issue, as the statutory tax exemption created a binding contract protecting the bank from municipal taxation.

The Mechanics Bank operated a branch in Kansas City from 1859 until 1873, when the parent bank ceased active operations at that location while retaining the building for liquidation purposes. The City of Kansas assessed property taxes on the branch building and on real estate the bank had acquired through mortgage foreclosures for the years 1867 through 1875. The bank sought to enjoin the city from selling the property to satisfy these tax assessments, arguing that state law granted it a tax exemption in exchange for paying an annual one percent fee on its paid-in capital stock.

The trial court partially granted relief by permanently enjoining the sale for taxes from 1873 and earlier years, but dissolved the injunction for taxes from 1874 and 1875. Both parties appealed. The court determined that the statutory provisions created a binding contract between the state and the bank exempting it from all taxes except the one percent payment, and that this contract prohibition applied equally to taxes levied by municipalities. The court further held that injunctive relief was proper in this case because the threatened sale of real property would cloud the bank's title, distinguishing situations involving only personal property.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether state statutory provisions created a binding tax exemption contract for an incorporated bank
  • Whether municipalities could levy taxes in violation of a state-granted tax exemption
  • Whether injunctive relief is available to prevent sale of real property for a void tax assessment

Procedural posture

The trial court granted partial injunctive relief and dissolved it as to certain years; both the plaintiff bank and defendant city appealed.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Norton, J.

This is a suit in chancery, the purpose of which was to enjoin and restrain defendant from selling certain real estate of plaintiff for the payment of taxes assessed ,and levied thereon by the City of Kansas for the years 1867, 1868, 1869, 1870, 1871, 1872, 1873, 1874 and 1875. Upon the hearing of the cause the court made the injunction perpetual as to all taxes for the year 1873 and years prior thereto, and dissolved the same as to the taxes of 1874 and 1875. From this judgment and decree both parties have appealed to this court.

It appears from the record before us that in 1859 a branch of the Mechanics’ Bank was established at Kansas City, and that plaintiff, through it, as well as through the parent bank, which was located in St. Louis, did business till 1873, when the parent bank alone continued in business, and the active business at said branch ceased, although the building used by the branch bank when in active business was still used, up to the time this cause was tried, in liquidating the business of the branch and winding up its affairs. The taxes in question were levied upon the land in Kansas City on which plaintiff’s branch bank building was situated, and also upon land in said city which had been acquired by the bank on foreclosure of mortgages upon th¿ same, which had been given for the security of debts contracted with the bank for advancements of money in the regular course of its banking business. The evidence showed that plaintiff had put on the market and endeavored to sell said real estate, but were unable to sell.

It is claimed, as the ground of the relief prayed for by plaintiff, that the levy of the above taxes was void by reason ^ following statutory provisions, viz: u jn consideration of the privileges granted by this act to the banks incorporated in this State, each banking company agrees to pay to the State annually, one per cent on the capital stock paid in by the stockholders other than the State, which shall be in full of all bonus and taxes to be paid to the State by the respective banks,” * * § 32, art. 1, Acts 1856-7, p. 22. “The one per cent required to be paid by section 82, of article 1 of said (first mentioned) act shall be received as full compensation for all taxes of every kind whatever, and it shall not be lawful for any county, city or town corporation to levy or collect any tax of any kind upon or from any of the banks organized under said law.” § 12, Acts 1861, p. 13. The language of the above provisions is perfectly free from ambiguity, and constitutes and creates a contract between the State and plaintiff bank, in effect exempting plaintiff from all liability to pay any other tax than one per cent on its capital stock, and prohibiting any county, city or town corporation from levying or collecting any tax upon or from plaintiff. That such contracts are binding, and that neither the law-making power, except when the right is reserved to modify, change or repeal, nor the courts, have the power to vary or impair them, is abundantly and clearly shown by the following authorities : State Bank of Ohio v. Knoop, 16 How. 369; Lionberger v. Rowse, 43 Mo. 67, 82; Home of the Friendless v. Rouse, 8 Wall. 437; Pacific R. R. Co. v. Maguire, 20 Wall. 36; Wilmington R. R. Co. v. Reid, 13 Wall. 266. In the last of the above cited cases Justice Davis observed: “That it has been so oftendecided by this court that a charter of incorporation granted by a a state creates a contract between the state and corporators which the state cannot violate, that it would be a work of supererogation to repeat the reasons on which the argument is founded. * * If the contract (one exempting a corporation from taxation) is plain and unambiguous, and the meaning of the parties to it can be clearly ascertained, it is the duty of the court to give effect to it, the same as if it were a contract between private persons, without regard to its supposed injurious effects upon the public interests.” Applying this principle to the present case, we think it clear, that instead of the partial relief granted to plaintiff by the trial court, it should have been full and complete as prayed for in the bill, and that error was committed by the court in refusing so to decree.

It is insisted by counsel for defendant that, conceding-the levy of the taxes in question was void, no relief can be afforded by injunction, and to sustain this . _ _ . view we have been cited to the case of Sayre v. Tompkins, 23 Mo. 443, and other cases following it. These cases have no application to the case before us. In all of them the proceeding was to enjoin the sale of personal property for a void tax, and the court denied the relief on the ground thafffhe remedy in such cases was adequate and complete at law. In the case in hand the sale of real property, whereby a cloud, if the sale were made, would be cast on the title, is sought to be forbidden, and in all such we have uniformly held that relief would be granted by injunction. Lockwood v. St. Louis, 24 Mo. 20; Fowler v. St. Joseph, 37 Mo. 228; Leslie v. St. Louis, 47 Mo. 474. The other objections made by counsel for defendant may be disposed of by saying that they are as groundless as the one we have just noted. The judgment will^ be reversed and cause remanded, with directions to- the circuit court to enter up a decree in conformity herewith, and in accordance with the prayer of the petition.

All concur.