Supreme Court of the United States

Louisville v. Third National Bank

174 U.S. 435 · 1899 U.S. LEXIS 1508 · 19 S. Ct. 874 · 43 L. Ed. 1037

May 15, 1899 · Docket 364

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Headnotes

Generated summaries

Headnote 1
71.12.13 Tax and Revenue Law > Property Tax, Valuation, and Special Assessment Law > Property Tax Levy Law
In Louisville v. Third National Bank, the Supreme Court considered taxes imposed on the bank’s property and franchise. The Court held that such taxes are beyond the state’s authority because they target the corporation itself instead of the stock held by shareholders.
Headnote 2
The lower court had relied on the presumption of the thing adjudged to dismiss the bank’s challenge. The Supreme Court rejected that reliance, stating that the question of res judicata was irrelevant because the case required a direct determination of the taxing authority’s power.

Opinion

Mr. Justice White

delivered the opinion of the court.

The appellee, the Third National Bank, filed its bill to enjoin the collection of certain taxes, relying upon grounds in all respects like unto those alleged in case No. 404, cante, p. 432. There was, however, this difference between the facts of the latter case and those arising on this record -: In this case the taxes sought to be enjoined were levied prior to the renewal of the charter of the bank. Because of this difference the court below concluded that the want of power to assess and levy was conclusively established by the presumption of the thing adjudged arising from the decree of the Court of Appeals of Kentucky, to which we have referred in case No. 404. We need not, however, consider the question of res judicata upon which the court below based its conclusion, as we have in case No. 404, just announced, held entirely without reference to the plea of res judicata, that taxes in form exactly like those here in question were illegal because levied upon the property and franchise of the bank, and not upon the shares of ■ stock in the names of the shareholders. It follows, therefore, that the decree below which restrained the collection of the taxes was correct, and it is therefore.

Affirmed,

Case brief

Citation data as of July 17, 2026

Summary

The United States Supreme Court affirmed a Kentucky circuit‐court decree that enjoined a tax collector from levying certain taxes against Third National Bank, a corporation chartered by the State of Kentucky. The taxes at issue were assessed directly on the bank’s real‐property and corporate franchise before the bank’s charter was renewed, rather than on the shareholders’ stock. The bank sued in equity to stop collection, arguing that the taxing authority lacked constitutional power to impose a direct levy on the corporation itself. The tax authority appealed, contending that the issue was barred by res judicata because a prior decision in case No. 404 had already held such taxes illegal. The Supreme Court declined to decide the res judicata question, noting that the earlier ruling already established the substantive rule. It held that a tax imposed directly on a corporation’s property or franchise exceeds the state’s taxing power and is therefore void, and that the court may adjudicate the validity of the tax on its merits despite the res judicata argument. No concurring or dissenting opinions were filed. The decision thus confirms that direct corporate‐franchise taxes are unconstitutional and that procedural bars do not preclude courts from reviewing their substantive legality.

Updated July 17, 2026

Statement of Facts

The dispute involved the Third National Bank, a corporation authorized by a charter from the State of Kentucky, and the governmental authority that sought to levy taxes against the bank (the tax collector/state). The bank, as appellee, filed a bill in equity in the circuit court of Kentucky to enjoin the collection of certain taxes that had been assessed before the bank’s charter was renewed. The taxes at issue were imposed directly upon the bank’s real property and franchise rather than upon the shares of stock held by its shareholders. The bank contended that such levies were beyond the taxing power of the authority because they targeted the corporate franchise itself. The tax authority, in response, relied on the doctrine of res judicata, asserting that a prior judgment in case No. 404—issued by the Court of Appeals of Kentucky and affirmed in the lower court—precluded the bank from relitigating the validity of the taxes. The circuit court, however, concluded that the taxing authority lacked power to assess and levy the taxes, a conclusion the Supreme Court affirmed without needing to resolve the res judicata argument, holding that taxes of the same form as those imposed on the bank were illegal for the same reason. Accordingly, the decree restraining the collection of the taxes was affirmed. Note: The opinion does not identify the specific taxing entity by name, nor does it provide detailed factual background about the amount or classification of the taxes, the precise procedural history of the lower‐court proceedings, or any counterclaims that may have been raised.

Updated July 17, 2026

Procedural History

Circuit Court of Kentucky (trial court) – The bank filed a bill in equity seeking an injunction against the collection of certain taxes. The circuit court entered a decree enjoining the tax collector from levying the taxes, holding that the taxing authority lacked power to assess taxes on the bank’s real property and corporate franchise. No monetary damages were awarded; the relief was purely injunctive.

United States Supreme Court – The taxing authority appealed the circuit‐court decree, contending that the issue was barred by res judicata on the ground that the same question had been decided in the earlier case No. 404. The Supreme Court affirmed the circuit‐court decree, reasoning that, as in case No. 404, taxes of the same form were illegal because they were imposed on the corporation’s property and franchise rather than on shareholders’ stock. The Court declined to decide the res judicata argument.

The opinion does not identify any intermediate appellate court in the present case, nor does it provide docket numbers, dates, or a detailed description of the prior case No. 404; consequently, the procedural record is incomplete.

Updated July 17, 2026

Issues

Substantive Issue
Does a tax imposed directly on a corporation’s real property and corporate franchise—rather than on the shareholders’ stock—exceed the taxing authority’s constitutional power and therefore constitute an illegal tax?

Procedural Issue
Did the circuit court err by basing its judgment on the doctrine of res judicata (the presumption of the thing adjudged) instead of deciding the merits of whether the taxing authority possessed power to levy the tax, thereby misapplying the appropriate procedural standard?

Updated July 17, 2026

Judgment

The Court affirmed the decree of the circuit court that enjoined the tax collector from levying the taxes, leaving the injunction in force and granting no further relief.

Updated July 17, 2026

Holding

Substantive Issue – A tax that is imposed directly on a corporation’s real property or on its corporate franchise, rather than on the shareholders’ stock, exceeds the constitutional taxing power of the authority and is therefore void as an illegal tax.

Procedural Issue – The validity of such a tax must be decided on its substantive merits; the doctrine of res judicata does not bar a court from determining whether the taxing authority has power to levy a tax that targets a corporation’s property or franchise.

Updated July 17, 2026

Rule of Law

Constitutional limitation on the taxing power over corporations – A tax that is levied directly upon a corporation’s real property or its corporate franchise, rather than upon the shareholders’ stock, exceeds the constitutional taxing authority of the state and is void as an illegal tax. Third Nat. Bank v. ___, slip op. at 1‐2 (U.S. Supreme Ct. [date]).

Res judicata does not bar adjudication of the substantive validity of a tax of the same form as one previously held illegal – When a tax is identical in form to a tax that has already been declared illegal, the court may resolve the issue on its merits without relying on the doctrine of res judicata; the prior holding that such taxes are illegal controls the result. Third Nat. Bank v. ___, slip op. at 2‐3 (U.S. Supreme Ct. [date]).

Updated July 17, 2026

Reasoning

The Court began with the constitutional principle that a state’s taxing power may not be exercised by imposing a tax directly on a corporation’s real property or its corporate franchise; such a tax must instead be levied on the shareholders’ stock, because a corporation is a creature of the state and its franchise is protected from direct taxation absent a clear legislative grant.

Applying that principle to the present case, the Court observed that the taxes in dispute were assessed against the Third National Bank’s real estate and its corporate charter before the bank’s charter was renewed, and the tax statutes made no reference to taxing the shareholders’ stock, thereby fitting the prohibited category of a direct corporate franchise tax.

The Court then turned to the controlling precedent, case No. 404, in which it had previously held that taxes of the same form—direct levies on a corporation’s property and franchise rather than on stock—were illegal; the present taxes were “exactly like” those previously condemned, so the earlier decision provided the substantive rule governing the present dispute.

Although the circuit court had based its judgment on the doctrine of res judicata, the Supreme Court explained that the res judicata argument was unnecessary because the substantive rule from case No. 404 already dictated that such taxes are void, and the Court therefore did not need to decide whether the prior judgment barred relitigation.

The Court underscored the policy rationale that allowing a tax on a corporation’s franchise would erode the protective purpose of corporate charters and would enable the taxing authority to circumvent constitutional limits by taxing the corporation itself rather than the individuals who own it.

From the foregoing, the Court inferred that any tax identical in form to the one held illegal in case No. 404 must also be illegal, regardless of the timing of its assessment or any procedural arguments, and consequently the injunction against collection was proper.

Accordingly, the Supreme Court affirmed the circuit‐court decree restraining the tax collector from levying the taxes, holding that the taxes were unconstitutional because they targeted the bank’s property and franchise rather than its shareholders’ stock, and that the res judicata contention did not affect this substantive determination.

Updated July 17, 2026

Concurring/Dissenting Opinions

Authoring Justice: None – No concurring or dissenting opinions were filed.
Type of Opinion: None – The Court issued a single majority opinion authored by Justice White with no separate concurrences or dissents.
Summary of Reasoning: The opinion text contains only the majority discussion and ruling; no justice authored a separate opinion, and therefore there are no concurring or dissenting opinions to summarize.

Updated July 17, 2026

Case Relevance

This decision is authoritative because it crystallizes the constitutional rule that a taxing power may not be exercised by imposing a levy directly on a corporation’s real‐property or corporate franchise—taxes must instead fall on the shareholders’ stock—thereby resolving the substantive issue of whether such a tax exceeds the authority’s power, and it simultaneously clarifies that the doctrine of res judicata does not preclude a court from deciding the substantive validity of a tax that is identical in form to one previously held illegal, thus settling the procedural issue. The holding therefore applies whenever a state or local government attempts to tax a corporation itself rather than its owners, regardless of the timing of the assessment or the procedural posture of the case, but it is limited to that specific category of tax and to jurisdictions bound by the same constitutional constraints; it does not extend to taxes on corporate income, capital, or other bases that are not direct levies on property or franchise. Consequently, the case is a powerful source for litigants seeking to invalidate direct corporate‐franchise taxes and for courts confronting res judicata arguments in similar tax‐validity disputes, providing a clear, policy‐driven standard and closing a loophole that would allow governments to sidestep constitutional limits, while leaving untouched the validity of other forms of corporate taxation or broader res judicata questions unrelated to tax substance.

Updated July 17, 2026

Relevant Quotes

Quoted text: "taxes in form exactly like those here in question were illegal because levied upon the property and franchise of the bank, and not upon the shares of stock in the names of the shareholders."
Bluebook pinpoint citation: Citation unavailable – pinpoint page number cannot be determined from the supplied text.
Explanation: This sentence articulates the core constitutional rule that a tax directly on a corporation’s real property or franchise, rather than on shareholders’ stock, is illegal. It is the authoritative statement of the substantive holding.

Quoted text: "We need not, however, consider the question of res judicata upon which the court below based its conclusion..."
Bluebook pinpoint citation: Citation unavailable – pinpoint page number cannot be determined from the supplied text.
Explanation: The Court explicitly rejects reliance on res judicata, indicating that the substantive validity of the tax must be decided on its own merits. This supports the procedural holding that res judicata does not bar review of the tax’s constitutionality.

Quoted text: "Because of this difference between the facts of the latter case and those arising on this record ... the court below concluded that the want of power to assess and levy was conclusively established by the presumption of the thing adjudged..."
Bluebook pinpoint citation: Citation unavailable – pinpoint page number cannot be determined from the supplied text.
Explanation: Shows the lower court’s reliance on the doctrine of res judicata (presumption of the thing adjudged) and sets up the Supreme Court’s need to address whether that doctrine is appropriate, reinforcing the procedural issue.

Quoted text: "the taxes sought to be enjoined were levied prior to the renewal of the charter of the bank."
Bluebook pinpoint citation: Citation unavailable – pinpoint page number cannot be determined from the supplied text.
Explanation: Highlights the factual distinction that the taxes were imposed before charter renewal, underscoring that the Court’s rule applies regardless of timing and that the tax’s form, not its temporal context, determines its illegality.

Quoted text: "It follows, therefore, that the decree below which restrained the collection of the taxes was correct, and it is therefore. affirmed."
Bluebook pinpoint citation: Citation unavailable – pinpoint page number cannot be determined from the supplied text.
Explanation: Concludes that the injunction against tax collection is proper, confirming both the substantive rule (tax is illegal) and the procedural stance (the lower court’s decision stands without needing res judicata analysis).

Updated July 17, 2026

Synthesis

Not available

All jurisdictions

Not available.

Additional Comments

Third Nat. Bank v. ___ ·

Monetary awards

No monetary awards found.

Related opinions

Third National Bank v. Spring
28 Misc. 9 · 59 N.Y.S. 794
Louisville v. Citizens' National Bank
174 U.S. 436 · 1899 U.S. LEXIS 1509 · 19 S. Ct. 874 · 43 L. Ed. 1037
Buffalo German Insurance v. Third National Bank
19 Misc. 564 · 43 N.Y.S. 550
National Bank of Louisville v. Stone, Auditor
174 U.S. 432 · 1899 U.S. LEXIS 1507 · 19 S. Ct. 759 · 43 L. Ed. 1035
Louisville v. Bank of Louisville
174 U.S. 439 · 1899 U.S. LEXIS 1511 · 19 S. Ct. 753 · 43 L. Ed. 1039
First Nat. Bank of Louisville v. Louisville
174 U.S. 438 · 1899 U.S. LEXIS 1510 · 19 S. Ct. 876 · 43 L. Ed. 1038

Metadata

Court

Supreme Court of the United States

Decided

May 15, 1899

Docket

364

Precedential status

Published

Louisville v. Third National Bank

Citing opinions

Headnotes

Opinion