Source: https://supreme.justia.com/cases/federal/us/231/373/case.html
Timestamp: 2017-06-23 19:01:42
Document Index: 500687241

Matched Legal Cases: ['§ 709', '§ 237', '§ 5219', '§ 13', '§ 24', '§ 24', '§ 13', '§ 13', '§ 24', '§ 5219', '§ 188', '§ 189', '§ 14', '§ 5219', '§ 5219', '§ 5219', '§ 5219', '§ 5219', '§ 5219']

Amoskeag Savings Bank v. Purdy (full text) :: 231 U.S. 373 (1913) :: Justia US Supreme Court Center Log In
U.S. Supreme CourtAmoskeag Savings Bank v. Purdy, 231 U.S. 373 (1913)Amoskeag Savings Bank v. PurdyNo. 6Argued December 4, 5, 1912Decided December 1, 1913231 U.S. 373ERROR TO THE SUPREME COURT
The question presented is the validity of certain taxes imposed in the year 1908 by the taxing officers of New York City upon some shares of stock in certain national banking associations located in that city, which shares were owned by the relator, a New Hampshire corporation doing business in its home state. The taxable value of the shares was ascertained by the Commissioners of Taxes and Assessments in accordance with the provisions of the law of the State of New York by adding together the capital, surplus, and undivided profits of each bank and dividing the amount by the number of outstanding shares. It is admitted that, at the time of the making of this assessment, the relator owed just debts exceeding the value of its gross personal estate, including its bank shares, after deducting therefrom the value of its property taxable elsewhere and the value of its property not taxable anywhere; that no portion of such debts had been deducted from the assessment of any of its personal property other than the bank shares, and that no portion of the indebtedness was contracted in the purchase of nontaxable property or securities, or for the purpose of evading taxation. Relator made application to the Commissioners of Taxes and Assessments for the cancellation of the assessment upon the ground that it was entitled to have its indebtedness deducted from the assessed valuation of the bank shares. This application was denied, a proceeding by certiorari taken to review the determination of the Commissioners was dismissed at the Special Term of the Supreme Court of New York; the appellate division affirmed the dismissal (134 App.Div. 966), upon the authority of People ex Rel. Bridgeport Sav. Bank v. Feitner, 191 N.Y. 88, and the Court of Appeals affirmed the order of the appellate division upon the same authority, 198 N.Y. 503. The case comes here by writ of error under § 709, Rev.Stat. Page 231 U. S. 377 (Judicial Code, § 237), upon the ground that the taxation imposed is in violation of the rights of the relator under § 5219, Rev.Stat. [Footnote 1]
The taxing laws in force at the time the assessment was made were, in the following year, consolidated and reenacted as the "Tax Law" (L., 1909, c. 62; in effect February 17, 1909, Cons.Laws, c. 60). Those sections that are deemed in any wise pertinent to the matter in issue are set forth in full in the margin. [Footnote 2] Page 231 U. S. 378
"4. In the fourth column, the full value of all the taxable personal property owned by Page 231 U. S. 379 each person respectively, after deducting the just debts owing by him."
This provision is held to apply equally to corporations and individuals (People ex Rel. Cornell Steamboat Co. v. Dederick, 161 N.Y.195), and has the effect of allowing a deduction of the amount of the debts of the Page 231 U. S. 380 taxpayer from the valuation of his general personal estate, not, however, including bank shares, which are dealt with in other sections. Section 23 requires the chief fiscal officer of every bank or banking association organized under the laws of the state or of the United States to furnish annually, Page 231 U. S. 381 on or before July first, to the assessors of the tax district in which its principal office is located, a sworn statement of the condition of the bank on the first day of June next preceding, stating the amount of its capital stock, surplus, and undivided profits, the number of shares, Page 231 U. S. 382 and the names and residences of the stockholders, with the number of shares held by each. Sections 13 and 24 relate to the taxation of these shares, stockholders in state and in national banks being treated alike. Section 13 takes the place of § 13 of the tax law of 1896 (L. 1896, c. 908, p. 802). Section 24 of the latter act was amended by L. 1901, c. 550, L. 1902, c. 126, L. 1903, c. 267, L. 1907, Page 231 U. S. 383 c. 739, and in its final form became § 24 of the Tax Law of 1909. In this form, § 24 is evidently a more recent enactment than § 13, and, so far as inconsistent, impliedly repeals it. The provision of § 13 for taxing bank shares in the district where the bank is located remains in force. It will be observed that § 24 declares (in obedience to Page 231 U. S. 384 § 5219, Rev.Stat.) that
Respecting other moneyed capital, trust companies, by § 188, are subjected to an annual franchise tax "equal to one percentum, on the amount of its capital stock, surplus, and undivided profits." The practical burden of such a tax (which, of course, falls eventually upon the stockholder) is presumably not materially different from the burden of a tax at the same rate, imposed upon the individual stockholder on a valuation of his shares, arrived at by taking into consideration the same elements of capital stock, surplus, and undivided profits. And, of course, the stockholder Page 231 U. S. 385 has no relief from such a franchise tax because of his individual debts. By § 189, savings banks are subjected to a franchise tax of one percentum on the par value of the surplus and undivided earnings. These institutions are thus apparently taxed upon the basis of what they possess over and above what they owe to their depositors. The individual banker, by §§ 14 and 25, is taxed at the place where his business is located upon he "amount of capital invested in his banking business."
Plaintiff in error relies chiefly upon the decision of this Court in People v. Weaver, 100 U. S. 539. That case was in effect a review of the decision of the Court of Appeals of New York in People v. Dolan, 36 N.Y. 59. The question was as to the validity of an assessment and taxation of national bank shares in the City of Albany under the state law of April 23, 1866 (N.Y.Laws 1866, p. 1647), without deduction because of the indebtedness of the taxpayer, in view of the fact that, under other laws, the owners of other kinds of personal property were entitled to have the amount of their debts deducted from the valuation for the purposes of taxation. The state court in the Dolan Page 231 U. S. 386 case had justified the method adopted in taxing the bank shares, upon reasoning that assumed
"that the effect of the state law is to permit a citizen of New York, who has money capital invested otherwise than in banks, to deduct from that capital the sum of all his debts, leaving the remainder alone subject to taxation, while he whose money is invested in shares of bank stocks can make Page 231 U. S. 387 no such deduction. Nor, inasmuch as nearly all the banks in that state and in all others are national banks, can it be denied that the owner of such shares who owes debts is subjected to a heavier tax on account of those shares than the owner of moneyed capital otherwise invested, who also is in debt, because the latter can diminish the amount of his tax by the amount of his indebtedness, while the former cannot. That this works a discrimination against the national bank shares as subjects of taxation, unfavorable to the owners of such shares, is also free from doubt."
Enough has been said to show that the decision in the Weaver case, which had to do with a tax assessed upon bank stock on the basis of the same method of valuation and the same rate of assessment as personal property in Page 231 U. S. 388 general, including other moneyed capital, but without allowance for the indebtedness of the taxpayer, although such allowance was made to the owners of personal property in general, including other moneyed capital, is not to be deemed conclusive upon the present controversy, in view of the differences in the taxing laws.
The contention was that the state had not complied with the condition contained in § 5219 of the Revised Statutes, because it had, by its legislation, expressly exempted from all taxes in the hands of individual citizens numerous species of moneyed capital, while subjecting national bank shares and state bank shares in the hands of individual holders to taxation upon their full actual value, less only a proportionate amount of the real estate owned by the bank. The Court (speaking by Mr. Justice Matthews), in examining and Page 231 U. S. 389 disposing of this contention, after reviewing the previous decisions of this Court bearing upon the subject, proceeded to expound the true intent and meaning of § 5219 of the Revised Statutes as follows (p. 121 U. S. 153):
"It follows, as a deduction from these decisions, that 'moneyed capital in the hands of individual citizens' does not necessarily embrace shares of stock held by them in all corporations whose capital is employed, according to their respective corporate powers and privileges, in business carried on for the pecuniary profit of shareholders, although shares in some corporations, according to the nature of their business, may be such moneyed capital. . . . The key to the proper interpretation of the Act of Congress is its policy and purpose. The object of the law was to establish a system of national banking institutions in order to provide a uniform and secure currency for the people and to facilitate the operations of the Treasury of the United States. The capital of each of the banks in this system was to be furnished entirely by private individuals, but, for the protection of the government and the people, it was required that this capital, so far as it was the security for its circulating notes, should be invested in the bonds of the United States. These bonds were not subjects of taxation, and neither the banks themselves nor their capital, however invested, nor the shares of stock therein held by individuals, could be taxed by the states in which they were located without the consent of Congress, being exempted from the power of the states in this respect, because these banks were means and agencies established by Congress in execution of the powers of the government of the United States. It was deemed consistent, however, with these national uses, and otherwise expedient, to grant to the states the authority to tax them within the limits of a rule prescribed by the law. In fixing those limits, it became necessary to prohibit the states from imposing such a burden as would prevent Page 231 U. S. 390 the capital of individuals from freely seeking investment in institutions which it was the express object of the law to establish and promote. The business of banking, including all the operations which distinguish it, might be carried on under state laws, either by corporations or private persons, and capital in the form of money might be invested and employed by individual citizens in many single and separate operations forming substantial parts of the business of banking. A tax upon the money of individuals, invested in the form of shares of stock in national banks, would diminish their value as an investment and drive the capital so invested from this employment if, at the same time, similar investments and similar employments under the authority of state laws were exempt from an equal burden. The main purpose, therefore, of Congress in fixing limits to state taxation on investments in the shares of national banks was to render it impossible for the state, in levying such a tax, to create and foster an unequal and unfriendly competition by favoring institutions or individuals carrying on a similar business and operations and investments of a like character. The language of the Act of Congress is to be read in the light of this policy."
"The terms of the Act of Congress therefore include shares of stock or other interests owned by individuals in all enterprises in which the capital employed in carrying on its business is money, where the object of the business is the making of profit by its use as money. The moneyed capital thus employed is invested for that purpose in securities by way of loan, discount, or otherwise, which are from time to time, according to the rules of the business, reduced again to money and reinvested. It includes money in the hands of individuals, employed in a similar way, invested in loans, or in securities for the payment of money, either as an investment of a permanent character, or temporarily, with a view to sale Page 231 U. S. 391 or repayment and reinvestment. In this way, the moneyed capital in the hands of individuals is distinguished from what is known generally as personal property. Accordingly, it was said in Evansville Nat. Bank v. Britton, 105 U. S. 322:"
According to this practical test, it seems to us that the scheme adopted by the State of New York for taxing shares in national banks cannot upon this record be denounced as violative of the limitations prescribed by § 5219, Rev.Stat. The holders of shares in state banks are subjected to precisely the same taxation, and with respect to other competitive institutions, such as trust companies, the franchise taxes imposed upon them apparently result in a substantially similar burden upon the Page 231 U. S. 392 shareholder. Nor is there any discrimination in favor of savings banks. With respect to individual bankers, there is a difference, they being apparently subject to the local rate of taxation, and entitled to the privilege of deduction for personal debts; but, as they are taxable upon the amount of the capital invested in the banking business, which is normally only such as remains after the deduction of debts, it is not plain that they possess any valuable privilege of reducing the tax assessment by deducting debts. Foreign bankers are separately treated, for reasons sufficiently obvious; but no criticism is made of this. If there be other forms of "moneyed capital in the hands of individual citizens" of the state employed in a banking or quasi-banking business in competition with the national banks, and which are subjected to a more favorable rule of taxation, our attention is not called to them. Moreover, we agree with what was said by the Court of Appeals of New York in the Feitner case, 191 N.Y. 88, that
The Court there took note of the fact that the flat rate of one percentum assessed upon national bank shares was more favorable to the relator than the general tax rate for the same year in the Borough of Manhattan, where the banks were located. That local rate (for the year 1901) was 2.31733 percentum. In the present case, it is stipulated that the general tax rate locally applicable for the year 1908 to personal property, not including bank shares, was 1.61407 percentum. There are other considerations to be weighed in determining the actual burden of the tax, one of which is the mode of valuing bank shares -- by adopting "book values" -- which may be more or less favorable than the method adopted in valuing other kinds of personal property. As against the owner of bank shares Page 231 U. S. 393 who, by alleging discrimination, assumes the burden of proving it, and who fails to show that the method of valuation is unfavorable to him, it may be assumed to be advantageous.
Nor can we say that the taxing scheme contravenes the limits prescribed by § 5219, Rev.Stat., merely because, in individual cases, it may result that an owner of shares of national bank stock who is indebted may sustain a heavier tax than another, likewise indebted, who has invested his money otherwise. Such is, in effect, the objection urged by plaintiff in error to the position taken by the Court of Appeals of New York. In other words, it is insisted that § 5219 deals with the burden of the tax upon the individual shareholder, rather than upon shareholders as a class. We think this argument is sufficiently answered by reference to the language of § 5219. The declaration is that "the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state." And this restriction is imposed upon a grant of authority to tax "all the shares of national banking associations located within the state." The language clearly prohibits discrimination against shareholders in national banks, and in favor of the shareholders Page 231 U. S. 394 of competing institutions, but it does not require that the scheme of taxation shall be so arranged that the burden shall fall upon each and every shareholder alike, without distinction arising from circumstances personal to the individual.