Source: https://openjurist.org/321/us/583
Timestamp: 2019-04-25 10:22:03+00:00

Document:
Argued Feb. 7, 8, 1944.
Respondent initiated this suit to recover the amount of the documentary stamp tax, penalty and interest which had been exacted under the Revenue Act of 1926, as amended, in connection with a statutory consolidation of banks under Section 3 of the National Banking Act.1 The District Court entered judgment for respondent for the amount of the tax and interest, 44 F.Supp. 603.2 The Circuit Court of Appeals held that the case was governed by one of its former decisions3 and affirmed the judgment, 136 F.2d 676. We granted certiorari, 320 U.S. 723, 64 S.Ct. 67, because this judgment was alleged to conflict with decisions in other circuits4 and because of the desirability of a final settlement of the problems involved.
In 1935 the directors of the Spokane and Eastern Trust Company, state bank, entered into a written agreement of consolidation with the directors of the First National Bank of Seattle. The agreement provided that the banks were to be consolidated under the charter of the First National Bank of Seattle and under the new corporate title of Seattle-First National Bank, the respondent herein. The agreement was ratified and confirmed by the requisite number of stockholders of both banks and the Comptroller of the Currency issued the necessary certificate of approval, reciting that the directors and shareholders of both banks had complied with the provisions of the National Banking Act.
First. We conclude that, as to the securities to which the state bank held both legal and beneficial title, there was no taxable transfer under the stamp tax provisions in effect at the time the consolidation took place.
Section 800, Schedule A(3), of the Revenue Act of 1926, as amended,5 imposes a stamp tax on transfers of legal title to any shares of stock or certificates, 'whether made upon or shown by the books of the corporation or other organization, or by any assignment in blank, or by any delivery, or by any paper or agreement or memorandum or other evidence of transfer or sale (whether entitling the holder in any manner to the benefit of such share certificate * * * or not).' Schedule A(9)6 imposes a stamp tax on similar transfers of legal title to bonds.
Standing alone, these statutory provisions make no exceptions and clearly impose a tax on the transfer of title to the securities legally and beneficially owned by the state bank. But administrative regulations, which until recently have been left undisturbed by subsequently enacted legislation and are to be respected as settled administrative practice,7 have carved out certain exemptions germane to the transfer here involved. Thus Article 34(r) of Treasury Regulations 71 (1932 Ed.) provides that the transfer of stock owned by a corporation which is merged into another corporation is subject to the stamp tax, 'such a transfer being effected by the act of the parties and not wholly by operation of law.'8 Article 35(r) specifically exempts from the tax those transfers of shares or certificates of stock 'which result wholly by operation of law'; it further states that 'transfers of this character are those which the law itself will effect without any voluntary act of the parties, such as transfer of stock from decedent to executor.' Article 120 makes these same provisions applicable to sales or transfers of bonds. The problem thus resolves itself into a determination of whether the transfer of the state bank's securities to respondent occurred 'wholly by operation of law' so as to exempt the transfer from the stamp tax requirements.
Thus it is the National Banking Act that is the mechanism by which the transfer of securities is made effective. No voluntary act by the parties is necessary. If follows that the transfer occurred 'wholly by operation of law.' The mere fact that the parties here saw fit to include in their consolidation agreement a provision that all assets of each constituent bank 'shall pass to and vest in the consolidated association' does not make the transfer any less than one 'wholly by operation of law.' This was merely an agreement that the assets would be transferred in the future and did not purport to be a present, effective conveyance. The transfer of the securities to which the state bank held legal and beneficial title was therefore exempt from the stamp tax under Articles 34(r) and 35(r).
Section 800, Schedule A(8), of the Revenue Act of 1926, as amended,10 places a stamp tax on 'Conveyances: Deed, instrument, or writing, delivered * * * whereby any lands, tenements, or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers * * *.' It is clear, however, from Section 3 of the National Banking Act that the state bank's realty was not conveyed to or vested in respondent by means of any deed, instrument or writing. There was a complete absence of any of the formal instruments or writings upon which the stamp tax is laid. Nor can the realty be said to have been 'sold' or vested in a 'purchaser or purchasers' within the ordinary meanings of those terms. Only by straining the realities of the statutory consolidation process can respondent be said to have 'bought' or 'purchased' the real property. That we are unable to do.
Act of November 7, 1918, c. 209, 40 Stat. 1043, Sec. 3, as added by the Act of February 25, 1927, c. 191, 44 Stat. 1224, Sec. 1, and as amended by the Banking Act of 1933, c. 89, 48 Stat. 162, Sec. 24, and the Banking Act of 1935, c. 614, 49 Stat. 684, Sec. 331, 12 U.S.C. § 34a, 12 U.S.C.A. § 34a.
United States v. Merchants National Trust & Savings Bank, 9 Cir., 101 F.2d 399.
See City Bank Farmers Trust Co. v. Hoey, 2 Cir., 125 F.2d 577; State Street Trust Co. v. Hassett, 1 Cir., 134 F.2d 156.
C. 27, 44 Stat. 9, as amended by Section 723(a) of the Revenue Act of 1932, c. 209, 47 Stat. 169, 26 U.S.C.A. Int.Rev.Acts, p. 630.
C. 27, 44 Stat. 9, as added by Section 724(a) of the Revenue Act of 1932, c. 209, 47 Stat. 169, 26 U.S.C.A. Int.Rev.Acts, page 634, and as amended by Section 212 of the National Industrial Recovery Act, c. 90, 48 Stat. 195, 206, and as amended by Pub.Res.No. 36, c. 333, 49 Stat. 431, 39 U.S.C.A. § 280 note.
C. 27, 44 Stat. 9, as added by Section 725 of the Revenue Act of 1932, 26 U.S.C.A. Int.Rev.Acts, page 635, and as amended by Section 212 of the National Industrial Recovery Act, 48 Stat. 206, and as amended by Pub.Res.No. 36, c. 333, 49 Stat. 431, 39 U.S.C.A. § 280 note.

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