Source: https://supreme.justia.com/cases/federal/us/198/100/case.html
Timestamp: 2016-12-07 12:32:21
Document Index: 429941581

Matched Legal Cases: ['§ 5219', '§ 5219', '§ 5219', '§ 5219', '§ 5219', '§ 5219']

Covington v. First National Bank (full text) :: 198 U.S. 100 (1905) :: Justia U.S. Supreme Court Center Log In
U.S. Supreme CourtCovington v. First National Bank, 198 U.S. 100 (1905)Covington v. First National Bank of CovingtonNos. 113-114Argued January 5, 1905Decided April 17, 1905198 U.S. 100APPEALS FROM THE CIRCUIT COURT OF THE UNITED
"The only question remaining for decision is upon the plea of res judicata. The plea in this case avers that the subject matter of the Page 198 U. S. 108 former suit was identical with that involved in this action, and that the facts were the same in both actions, except that the former action attempted to collect a tax for the year 1893, and the present action was attempting to collect a tax for the year 1894. . . ."
It is unnecessary to cite the cases; they will be found in Judge Cochran's opinion. It is sufficient to say that, if this case had been decided in the state court in Kentucky, the adjudication pleaded herein, not involving taxes for the same years as those now in controversy, would not avail as an estoppel between the parties. It is true that a different rule prevails in the courts of the United States. The reasons therefor were stated in an opinion by MR. JUSTICE WHITE, speaking for the Court, in the case of New Orleans v. Citizens' Bank, 167 U. S. 371, and in cases arising in a federal jurisdiction the doctrine therein announced will doubtless be adhered to. The learned counsel for the plaintiff in error refer to the decision of this Court in Deposit Bank v. Frankfort, 191 U. S. 499, as authority for the doctrine that, where a contract right has been adjudicated which involves an exemption from all taxation, such adjudication will conclude the parties as to the right to legally tax for other years, although the particular year was not directly involved in the suit in which the adjudication was made. But in that case, the Court was dealing with the effect to be given to a judgment of a federal court in which such Page 198 U. S. 109 contract right had been adjudicated, when the federal judgment was set up in a state court, and in that case it was recognized, in the opinion of the court as well as in the dissenting opinion, that the courts of Kentucky, in giving effect to the judgments of their own courts, were guided by a different rule, and in that state an adjudication involving taxes for one year cannot be pleaded as an estoppel in suits involving taxes for other years. 191 U. S. 191 U.S. 514, 191 U. S. 524.
As to the taxes for the years prior to the passage of the Act of March 21, 1900, it is argued by the bank that to give this retroactive effect to the law will be to deprive it and its stockholders of their property without due process of law, and will be in violation of § 5219 of the Revised Statutes, prohibiting discrimination against national banks and their stockholders. The Act of March 21, 1900, as stated in the preamble, was passed because of a decision of this Court holding prior legislation of the state undertaking to tax the property of national banks unconstitutional. Owensboro National Bank v. Page 198 U. S. 110 Owensboro, 173 U. S. 664. In the Owensboro case, it was held that § 5219, Rev.Stat., was the measure of the power of the state to tax national banks, their property, or franchises, which power was confined to the taxing of the stock in the name of the shareholders and the assessment of the real estate of the banks, and that taxation under the laws of the State of Kentucky upon the franchise of the bank was not within the purview of the authority conferred by the act of Congress, and was therefore illegal. Section 5219 of the Revised Statutes of the United States is as follows:
Under the new taxing law, Act of March 21, 1900, it is declared to be the purpose to require the bank to return the shares of stock for the years prior to 1900, and since the adoption of the revenue law of 1892, with the privileges and deductions stated in section 3 of the act. Notwithstanding the prior revenue law had been held invalid, and there was no statute specifically taxing these shares of national bank stock on the statute books of Kentucky prior to the passage of the Act of March 21, 1900, the Supreme Court of Kentucky, in the case of Page 198 U. S. 111 Scobee v. Bean, 109 Ky. 526, has held that there was ample statute law in that state for the taxing of shares in national banks under the laws of that state providing for the taxation of real and personal property of every kind, and that the provision that the individual shareholder in a corporation shall not be required to list his property therein so long as the corporation pays the taxes on its property of every kind, impliedly requires the individual to list his shares and pay the tax in the absence of the return required by law of the corporation. In that case, the court held that there was nothing in its decisions running counter to § 5219. These views were further enforced in Commonwealth v. Citizens' National Bank, 25 Ky. 2100; London v. Hope, 26 Ky. 112; Citizens' National Bank v. Commonwealth, 25 Ky. 2254. Following the state court in the interpretation of its own statutes, it may be said that, as to shareholders residing in Kentucky and over whom the state has jurisdiction, the supreme court of that state has construed its statutes as requiring shareholders in national banks for the years 1893 to 1900, inclusive, to return their shares for taxation, and if they did not make the return the duty was required of the corporation. In this view of the law it may be that, as to local shareholders, the Act of March 21, 1900, as held by the Supreme Court of Kentucky, created no new right of taxation, but gave simply a new remedy, which by the law, is operative to enforce preexisting obligations. It may be admitted that § 5219 permits the state to require the bank to pay the tax for the shareholders. First National Bank v. Kentucky, 9 Wall. 353; Van Slyke v. Wisconsin, 154 U. S. 581; First National Bank v. Chehalis County, 166 U. S. 440.
But there is nothing in the general statutes of Kentucky before the Act of March 23, 1900, specifically requiring national banks to return shares of stock in the corporation when such shares are held by persons domiciled beyond the state. This situs of shares of foreign-held stock in an incorporated company, in the absence of legislation imposing a duty upon the Page 198 U. S. 112 company to return the stock within the state as the agent of the owner, is at the domicil of the owner. Cooley on Taxation 16. It is true that the state may require its own corporations to return the foreign-held shares for the owner for the purposes of taxation. Corry v. Baltimore, 196 U. S. 466. Section 5219, Rev.Stat., authorizes the state to tax all the shares of a national banking association, including those owned by nonresidents, as well as those owned in the state, in the city or town where the bank is located; but this section does not itself impose the tax; it is authority for state legislation to thus tax national bank shareholders. And this statute is express authority to the state by appropriate legislation to make the bank the agent of the shareholders for the purpose of returning the shares and paying the taxes thereon.
And the court further held the bank liable for the penalty imposed for not listing taxable property. The ground Page 198 U. S. 113 upon which this judgment rests is that shareholders were bound to return the shares in the years from 1893 to 1900 under the then existing state law, and the act of 1900 made the bank the agent of the shareholders, and did not require a new duty, but only imposed the duty upon the agent as a means of making effectual the former obligation of the shareholders. None of the Kentucky cases deals with the effect of the requirement under the act of 1900, that the bank return the shares of stock held by foreign stockholders, who clearly were not required, under the previous laws of that state, to return shares of stock when neither the shares nor the owners were within the state.
The statutes of the State of Kentucky, which have been construed by the Supreme Court of that state in the cases cited, to require the payment of taxes by the shareholders or by the bank for its shareholders can have reference only to shareholders within the jurisdiction of the state. Whether the system operates as a discrimination against national banks within the prohibition of § 5219, involving, as it does, a Page 198 U. S. 114 right of federal creation, must be ultimately determined in this Court. The Act of March 21, 1900, imposes upon the bank a liability for taxes assessed upon its shareholders, whether within or without the state. This liability did not exist before the passage of the act, and in Commonwealth v. Citizens' National Bank, supra, the Court of Appeals of Kentucky held that the statutes of the state made the bank liable for a penalty of twenty percent for the years 1893 to 1900, inclusive. It seems to us that to permit the statute to require the bank to return the shares of such foreign-held stock, and be subjected to a penalty in addition, is imposing upon national banks a burden not borne by other moneyed capital within the state. In support of the equivalency of taxation, which it is the purpose of § 5219 to require, this Court said, in Owensboro National Bank v. Owensboro, 173 U. S. 664, 173 U. S. 676:
As to the alleged discrimination against shareholders in Page 198 U. S. 115 national banks because the assessment of the property of state banks is upon the franchise, and not upon the shares of stock, there is nothing in the bill to show that this difference in method operates to discriminate against national bank shareholders by assessing their property at higher rates than are imposed upon capital invested in state banks. And, as to the deduction of the value of real estate and other deductions allowed to state banks, the Supreme Court of Kentucky has held that all deductions allowed to state banks must be allowed in like manner in assessing the property of shareholders in national banks. Commonwealth v. Citizens' National Bank, 80 S.W. 158. Nor does the allegation that in cities of the first, second, and third class state banks are assessed upon their shares for city taxation, but upon their franchises and property for state and county taxation, in the absence of averments of fact showing that thereby a heavier burden of taxation is imposed upon national than state banks in such cities, warrant judicial interference for the protection of shareholders in national banks. Davenport National Bank v. Davenport Board of Equalization, 123 U. S. 83.