Source: https://supreme.justia.com/cases/federal/us/148/412/
Timestamp: 2019-04-23 02:36:11+00:00

Document:
"upon the average amount of the deposits of money, subject to payment by check or draft, or represented by certificates of deposit or otherwise, whether payable on demand or at some future day, with any person, bank, association, company or corporation, engaged in the business of banking,"
moneys deposited by the Treasurer of the State of New York in the bank of the Manhattan Company in the City of New York, intended to satisfy the interest or principal of stocks of that State and credited to said Treasurer and then drawn for by him by drafts payable to the order of the cashier of the bank, and then paid out by the bank for such interest or principal, are subject to such tax.
The bank received a salary from the State for rendering such services, and did not charge any of the tax to the State.
Such tax was not a tax on the revenues of the State in the hands of a disbursing agent.
Nor was a trust created in favor of each creditor of the State as to the deposit in the hands of the bank.
This is an action at law, brought January 31, 1883, by the president and directors of the Manhattan Company, a New York corporation possessing banking powers and carrying on the business of banking in the City of New York, against Marshall B. Blake, in the supreme court of the State of New York and removed by the defendant, by certiorari, into the Circuit Court of the United States for the Southern District of New York on the ground that the suit was brought against him on account of acts done by him under the revenue laws of the United States, and as Collector of Internal Revenue for the Second Collection District of the State of New York.
State of New York for the payment of debts of the state, and which were not "deposits" within the meaning of the statute of the United States, and because the remainder of such tax was assessed upon moneys deposited with the plaintiff by the United States Trust Company of New York on which the latter company had already paid to the United States a tax as upon deposits, but that the defendant, notwithstanding such protest, insisted upon the payment of the tax and required the plaintiff to pay it; (5) that said tax was in part unlawfully assessed against the plaintiff, and it was not legally liable to pay the same for the reason that $31,021.25 of said tax was assessed against it on account of moneys transmitted to it by the Treasurer of the State of New York, and received by the plaintiff as the agent of the state, to be applied by the plaintiff to the payment of the debts of the state, and the moneys were not "deposits" within the meaning of the revenue laws of the United States, and for the further reason that $64,518.73 of said tax was assessed against the plaintiff on account of moneys received by it from the United States Trust Company of New York, upon which the latter company paid to the United States a tax as deposits, and (6) that, before the commencement of the suit, the plaintiff appealed to the Commissioner of Internal Revenue of the United States and claimed that $95,539.98 of said tax was erroneously assessed and paid, for the reasons before mentioned, and that the plaintiff was entitled to have that sum refunded, and that said commissioner rejected said appeal and claim for the reason, as stated by him, that the amount was legally assessed and collected. The complaint prayed judgment for $95,539.98, with interest from December 31, 1881.
was justly due as such tax, and that he had long since covered the same into the Treasury of the United States.
"First. The first, second, third, fourth, and sixth articles of the complaint, the same being admitted by the answer."
"Second. That plaintiff has for more than forty years maintained a transfer office within its banking house in 40 Wall Street, in New York, as provided by a contract made by the commissioners of the canal fund and the canal board with the Manhattan Company, and pursuant to an act passed by the Legislature of the State of New York authorizing such contract, passed May 13, 1840. See Sess.Laws 1840, p. 229. Said agreement or contract is contained in document 5 of Assembly Reports of the State of New York for the year 1841, and said act and said contract as contained in said volumes may be referred to by either party herein, and are admitted to be in evidence for the purpose of this action. It has also during the period above mentioned, and long prior thereto, acted as a depositary of moneys of the State of New York committed to its keeping by the Treasurer of the State of New York under the authority vested in that officer by the statute of this state. Title 4, c. 8, part 1, of the Revised Statutes (1 Edm. 177), Exhibit B, post, and any and all acts in reference to the relations of the plaintiff to the state as a depositary of moneys of the state may be referred to by either party herein, and are admitted to be evidence for all the purposes of this action."
bounty loan, and also for the payment of the principal of the same as the same from time to time became due and payable, and gave receipts and vouchers for the same, as were required by the state, in accordance with the provisions of the act and agreement hereinbefore referred to; that such money so sent to bank, so far as the same was to be applied to the extinguishment of the canal loan or volunteer bounty loan debts, was to be applied to the extinguishment of debts incurred by the state in the exercise of its sovereign and reserved powers."
and their proceeds mixed with the general deposits of the plaintiff. Plaintiff had on hand at the close of each day's business sufficient deposits to meet all claims of the state. Upon the receipt by the Treasurer of the state of a notification from plaintiff that such drafts had been received by it, the Treasurer has drawn drafts upon the plaintiff to the order of the cashier of the plaintiff, enclosed and mailed in a letter addressed to the plaintiff, in which was indicated the purpose to which the funds were to be applied. The draft relating to canal loan, upon its receipt by plaintiff, was charged against the account entitled 'Treasurer of the State of New York, Account of Canal Fund,' and credited to a new account called 'Interest New York state Stocks, Canal Loan, July 2, 1881.' The draft relating to bounty loans was in like manner charged against the account entitled 'Treasurer of the State of New York,' and credited to a new account entitled 'Interest Loan for Payment of Bounties to Volunteers Due January 1, 1877.'"
"The mode in which the money was actually paid out by plaintiff was as follows: the book containing the names of the parties entitled to be paid, with receipts for them to sign, was placed in the hands of the transfer clerk of the plaintiff at its banking house, and to him the parties were directed, in the first instance, to apply. The transfer clerk, upon being satisfied of their identity and obtaining their signatures to the receipts, gave them each a paper in the following form signed by him:"
"No. ___ New York, _____ 18__"
"Charge interest New York state stock, _____ 18__, _____ dollars."
of stock and surrendered them and gave an assignment, and then they received from the transfer clerk a sort of a paper in this form:"
"State of New York, Transfer Office of the Manhattan Company"
" Pay to the order of _____ _____ _____ dollars."
" Reimbursement of loan to provide for deficiencies in the sinking fund of July 1st, 1881."
" Transfer office _____ _____"
"The papers, of which the above is a copy, were presented to the plaintiff's paying teller by the person entitled to receive the interest or principal, and the money was paid him by such teller. The amount paid upon each was charged either to the account 'Interest New York state Stock, Canal Loan, July 2, 1881' or to the account 'Interest Loan for Payment of Bounties to Volunteers, Due January 1st, 1877,' according to the fact in each case, until said accounts were balanced."
"Fifth. The claim of plaintiff in this action, so far as it relates to the sum of $64,518.73, being the sum assessed and collected on amounts upon which taxes have theretofore been paid by the United States Trust Company, is hereby waived and withdrawn."
of any stock authorized by the laws of the State of New York for any loans made in its behalf by the Comptroller or the commissioners of the canal fund, which office shall be continued and maintained in the said bank during the pleasure of the commissioners of the canal fund of the said state. . . ."
"For rendering the services contemplated by this agreement the party of the first part will pay to the said party of the second part, so long as the said transfer office shall be continued in the said bank, a compensation at the rate of twelve hundred and fifty dollars annually, and to be paid quarterly, in lieu of all expenses and charges of every description, except the expense of ledgers and transfer books."
"In consideration of the aforesaid agreements, the said party of the second part hereby agree and engage to maintain an office in their said bank for the issue and transfer of certificates of stock for any loan made in behalf of the people of the said state by the Comptroller or by the commissioners of the canal fund, which certificates shall be issued and which transfers shall be made as hereinbefore declared, and for all transfers made and certificates issued contrary to the provisions of this agreement hereinbefore contained, the said party of the second part shall be immediately liable to the said party of the first part for the nominal amount of all certificates so transferred or issued. . . ."
"And the said party of the second part further agree that they will pay and redeem such certificates of stock issued under the direction of the commissioners of the canal fund in behalf of the State of New York as shall from time to time be directed by the said commissioners, from the funds to be provided by them at such rates as they shall prescribe, and will also pay and redeem such certificates of stock issued under the directions of the Comptroller as he shall direct, out of funds to be provided by him at such rates as he shall prescribe, and in such payments will conform to such regulations as may be prescribed by the said commissioners or the Comptroller in regard to such certificates respectively, and will render accounts of such payments and vouchers for the same as shall be prescribed in such regulations. "
"And the said party of the second part further agree that they will from time to time pay the interest on all loans made by the commissioners of the canal fund in behalf of the State of New York, out of funds to be provided for that purpose, on such vouchers and proofs as the said commissioners shall prescribe, and will render accounts of such payments, with such vouchers, within such time and in such form as they shall direct, and in like manner will pay the interest on loans made by the Comptroller from funds to be provided by him at such times and on such vouchers as he shall prescribe, and will render an account to him of such payments, with the vouchers therefor, within such time and in such form as he shall direct."
"§ 7. The Treasurer shall deposit all moneys that shall come to his hands on account of this state, except such as belong to the canal fund, within three days after receiving the same, in such bank or banks in the City of Albany as in the opinion of the Comptroller and Treasurer shall be secure, and pay the highest rate of interest to the state for such deposit."
"§ 8. All moneys directed by law to be deposited in the Manhattan Bank, in the City of New York, to the credit of the Treasurer shall remain in said bank subject to be drawn for as the same may be required"
"§ 9. The Comptroller may transfer the deposits in the Manhattan Bank from time to time to the bank or banks in the City of Albany in which the moneys belonging to this state shall be deposited pursuant to the foregoing seventh section of this title, so often as it will be for the interest of the state to transfer such deposits, but the Comptroller may continue such deposits in the Manhattan Bank, if the said bank shall pay a rate of interest to the state for such deposits equal to that paid by the bank or banks in Albany in which the state deposits shall be made."
account of the Treasurer, and he shall keep a bank book, in which shall be entered his account of deposits in, and moneys drawn from, the banks in which such deposits shall be made."
"There shall be levied, collected, and paid, as hereinafter provided: First. A tax of one twenty-fourth of one percentum each month upon the average amount of the deposits of money, subject to payment by check or draft, or represented by certificates of deposit of otherwise, whether payable on demand or at some future day, with any person, bank, association, company, or corporation, engaged in the business of banking."
Although this tax on deposits in banks was repealed by the Act of Congress of March 3, 1883, c. 121, 22 Stat. 488, yet the latter act expressly excepted "such taxes as are now due and payable."
be included constitutionally in the term "deposits," as used in the statute of the United States.
The money in question was deposited with the plaintiff by the Treasurer of the State of New York, to be afterwards disbursed by the plaintiff, as agent of the state, for certain purposes designated in the statute of the state and in the contract of July 13, 1840. The money, when so deposited, became the property of the plaintiff, and was credited by it to the Treasurer of the state in account, and was thereafter drawn for by drafts made by the Treasurer of the state and sent to the plaintiff. If such money had been lost or stolen while in the hands of the plaintiff, the plaintiff, and not the state, would have borne the loss. The identical money received by the plaintiff from the Treasurer of the state was not to be returned to the Treasurer, or paid to his drawee, or kept distinct from the other funds of the plaintiff. It was not only a deposit of money, but was subject to payment by check or draft, and was payable either on demand or at some future day, all within the terms of the taxing statute of the United States. That statute covered general deposits, and not special deposits.
There is no foundation for the contention on the part of the plaintiff that a trust was created in its hands in favor of each creditor of the state intended to be paid through the plaintiff, as a consequence resulting from each deposit of money made by the Treasurer of the state with the plaintiff. The money so deposited was not placed, by the mere fact of the deposit, irrevocably beyond the control of the state. Neither the money credited to the account called "Interest New York state Stocks, Canal Loan" nor that credited to the account entitled "Interest Loan for Payment of Bounties to Volunteers" became, by such respective credits, the property of the holders of the securities for the respective loans so as to create a title in them to the money as interest money. If the money had been withdrawn by the state from the plaintiff, the latter could not have been liable therefor to the creditors holding such securities.
with it by the state sums of money in favor of the holders of the obligations of the state, to pay such holders the interest on such obligations. The plaintiff occupied two relations to the state, one that of debtor as a bank for the money deposited with it by the state and the other that of agent of the state to pay out from the money deposited, if it remained on deposit, money for certain specified purposes. The tax was assessed on deposits of money "subject to payment by check or draft, or represented by certificates of deposit or otherwise, whether payable on demand or at some future day," and the clear purpose of the statute was to tax deposits of money in the situation of those in question. There is nothing in the contract of July 13, 1840, to relieve the plaintiff from its liability as a bank for the money deposited with it by the state. The plaintiff did not hold the money as an agent of the state, but was such agent only to disburse the money. The theory that the plaintiff was a trustee of the money deposited, for certain cestuis que trustent, on the ground that the right to the money had become vested, by the mere fact of the deposit, in the creditors of the state would make it necessary that it should be impossible for the state to withdraw the deposit, which was not the fact.
We see nothing to affect these views in the cases cited by the plaintiff, of Mechanics' Bank v. Merchants' Bank, 6 Met. (Mass.) 13; Sharpless v. Welsh, 4 Dall. 279 [omitted]; Van Alen v. American Bank, 52 N.Y. 1; Martin v. Funk, 75 N.Y. 134; Locomotive Works v. Kelley, 88 N.Y. 234; People v. City Bank, 96 N.Y. 32; National Bank v. Insurance Co., 104 U. S. 54; Libby v. Hopkins, 104 U. S. 303; Pennell v. Deffell, 4 De G., M. & G. 372; Frith v. Cartland, 2 Hem. & Mill. 417.
"all moneys directed by law to be deposited in the Manhattan Bank, in the City of New York to the credit of the Treasurer shall remain in said bank subject to be drawn for as the same may be required."
there to the credit of the Treasurer of the state, and may be drawn at any time when required by the state. Section 9 also shows that the money so deposited is considered by the state as "deposits." It thus becomes "deposits of money subject to payment by check or draft" within the meaning of the statute of the United States imposing the tax.
the present case was not required to withhold, and did not withhold, from the state anything that would otherwise be due to the state.

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