Case Name: BANK OF CALIFORNIA, NATIONAL ASSOCIATION, v. RICHARDSON, TREASURER OF THE STATE OF CALIFORNIA
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1919-01-27
Citations: 248 U.S. 476
Docket Number: No. 262
Parties: BANK OF CALIFORNIA, NATIONAL ASSOCIATION, v. RICHARDSON, TREASURER OF THE STATE OF CALIFORNIA.
Judges: Me. Justice Brandéis and Mr. Justice Clarke concur in this dissent.
Reporter: United States Reports
Volume: 248
Pages: 476–497

Head Matter:
BANK OF CALIFORNIA, NATIONAL ASSOCIATION, v. RICHARDSON, TREASURER OF THE STATE OF CALIFORNIA.
ERROR TO THE SUPREME COURT OF THE STATE OF CALIFORNIA.
No. 262.
Submitted October 14, 1918.
Decided January 27, 1919.
The extent to which the States may tax the property or the shares of national banks is determined exclusively by § 5219 of the Revised Statutes. P. 482.
The object of the section is to avoid withdrawing the financial resources of national banks from the reach of state taxation, and at the same time to protect the banks as federal agencies from state interference. It therefore, with certain restrictions, permits the shares of the bank to be taxed to the shareholders, and, in that aspect treats the ultimate beneficial interest of the bank and the shareholders as one, subject to but one taxation and by that method only. P. 483.
It follows, (1) that the interest represented by shares of a state bank, when held by a national bank, can be reached only by a tax upon the shares of the latter, and is not taxable to the national bank itself, and (2) that shares of a national bank, when "held by another national bank, are taxable only to the latter as shareholder, and are not to be included in valuing the shares of the latter when taxing its shareholders. Pp. 484, 486.
175 California, 813, reversed.
The case is stated in the opinion.
Mr. E. S. Pillsbury, Mr. F. D. Madison, Mr. Alfred Sutro and Mr. Oscar Sutro for plaintiff in error. Mr. A. D. Plaw was also on the brief.
The right to tax to the Bank of California the Mission State Bank shares is implied by the California Supreme Court solely upon the ground that its existence is essential to an exertion of the power to tax the Mills National Bank shares. The court does not deny that the shares of the state bank are personal property; nor does it find any express authority in the federal statute permitting the State to tax them to the Bank of California. But because shares in one national bank in the hands of another national bank may be taxed to the latter, Bank of Redemption v. Boston, 125 U. S. 60, the court below concludes that no different rule could be applied to the taxation of shares in a state bank owned by a national bank without violating the provision of § 5219 requiring other moneyed capital to be assessed- at a rate equal to that imposed upon shares in national banks. But such an implication cannot be indulged, because the effect of § 5219, in limiting the power of the States to the right to tax the real property of national banks and their shares, is to prohibit the taxation of the property of those banks in any other manner. Raleigh & Gaston B. R .Co. v. Reid, 13 Wall. 269, 270. The statute being unambiguous in its limitation, Owensboro National Bank v. Owensboro, 173 U. S. 664, 669, a power to tax the Bank of California for the state bank shares could only be implied if abso lutely essential to the exercise of the right to tax it upon the shares of the Mills National Bank. Belmont Bridge v. Wheeling Bridge, 138 U. S.-287, 292; Austin v. The Aider-men, 7 Wall. ,694, 699; Newton v. Commissioners, 100 U. S. 648, 561. But such an implied power is unnecessary. The value represented by the state bank shares might be taxed by the State, under the power conferred by § 5219, either by taxing the capital of the Mission Bank directly to the latter, (Crocker v. Scott, 149 California, 575.) which the present state constitution expressly forbids; or by including the value of those shares in the assessment of the assets of the Bank of California, and taxing the value of those assets to the latter’s shareholders, as is provided by the terms of the state constitution and statute, and as was done in the present case. But the State is without the power, under the federal statute, to tax their value directly to the Bank of California.
As the attempt to do this must fail, and as the state law does not permit any other taxation of their value except- by including that value in the assets of the Bank of California, which is assessed to the latter’s shareholders, the effect of that law is to tax the value of the .'shares of the Mission Bank, owned by the Bank of California, but once, while taxing the value of the Mills National Bunk shares twice, once directly to the Bank of California, as a shareholder, and again by including their value in the assets of the Bank of California; upon which a tax is assessed against the latter’s shareholders.
This method of taxation is in violation of the express provision of § 52Í9, forbidding discrimination against national bank shares. Mercantile Bank v. New York, 121 U. S. 138, 157.
Mr. V. S. Webb, Attorney General of the State of California, and Mr. Raymond Benjamin, Chief Deputy Attorney General of the State of California, for defendant in error:
It being conceded that the stock" of all of these banks is primarily taxable to the shareholders, there can be no question of double taxation in the case. The plaintiff in its capacity as a stockholder is liable for the tax upon the Mills and Mission shares, which are held in its treasury in lieu of a certain amount of its capital, surplus or undivided profit. The stockholders of plaintiff, as such, have no right or title to any portion of th:\ stock, their status being entirely distinct from the status of the corporation itself as stockholder. The tax paid by the plaintiff as a stockholder in no way concerns or affects the tax upon the value of the stock held by the plaintiff’s stockholders.
The tax on the Mission Bank shares did not violate Itev. Stats., § 5219. In Bank of Redemption v. Boston, 125 U. S. 60, the decision did not turn solely upon the ground that the shares taxed were shares of a national bank. The statute intends not only to permit a State to tax all the shares of a national bank, but also to compel it to tax all shares of its own banks, without regard to ownership, for this is one of the mandates of the law which must be first obeyed to enable the State to tax the shares of national banks at all. The fundamental purpose was the protection of national banks in the matter of state taxation, and to compel the administration of even-handed justice. People v. Weaver, 100 U. S. 539-543; Mercantile Bank v. New York, 121 TJ.'S. 154. The State must tax the moneyed capital in its state banks to the same extent as it taxes the shares of stock in national associations, and, in the enactment of the constitutional provision of California, a specific and uniform rule, applicable to both state and national bank stock, has been enacted.
If the shares of the Mission Bank owned by plaintiff are exempt from taxation, because they are personal property owned by a national bank, then, inasmuch as the moneyed capital of the Mission Bank cannot be taxed at the same rate as the tax levied upon the moneyed capital in national banks, it follows that the taxation of the shares of national banks, under the constitution of Califomia, will be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens, in violation of the federal act.
Whether a State has or has not complied with the requirement of Congress in this particular is not to be determined from the face of the statute, but from its practical application and the results thereof. Davenport Bank v. Davenport, 123 U. S. 23.
Crocker v. Scott, 149 California, 575, cited by opposing counsel, dealt with a scheme of taxation which was superseded by the present state constitution. '

Opinion:
Mr. Chief Justice White
delivered the opinion of the court.
Except as to real estate, which is taxed directly in the name of the owner, all the available resources of banks for the purposes of taxation are reached under the law of California, not by an immediate levy on the banks as the owner, but by annual assessment and tax thereon made by the State Board of Equalization against the stockholders of banks. The state law places the duty upon the banks to pay the tax assessed against their stockholders, with the obligation on the stockholders to. repay, sanctioned by a right conferred upon the banks to sell the stock of any stockholder failing to refund.
The Bank of California, organized under the National Banking Law and established in San Francisco, commenced this suit to recover the amount of a tax, levied against its stockholders in 1915 under the law previously stated, which it had paid under protest claiming- that the tax was not only unlawful under the state law but illegal under the law of the United States governing the right of a State to tax national banks and their stockholders. The case is here to review a judgmént denying the right to recover, on the ground that the tax -had been lawfully exacted under both the law of the State and that of the United States.
The' decision below, in so far as it rested upon the state law, is binding and we put that subject out of view. To understand the contentions as to the law of the United States requires a brief statement of the tax levied and the particulars in which it is complained of. The capital of the bank was $8,500,000, evidenced by 85,000 shares of the par value of $100 each. D. O. Mills & Company was a national bank established at Sacramento and the California Bank was a stockholder in that bank to the extent of 2,501 shares. The California Bank was also the owner of 1,001 shares of stock in the Mission Bank, a banking corporation organized under the state law and doing business in San Francisco. The Board of Equalization in 1915 fixed the value of all the assets of the California Bank at the sum of $15,775,252.67. The Board included in the assets making up this amount the stock standing in the name of the California Bank, both in the D. O. Mills National Bank and in the Mission State Bank; the first, the Mills National Bank stock, being computed as worth $625,546.30, and the second, the Mission State Bank stock, as worth $121,916.52.
Upon these valuations, the Board assessed the California Bank as a stockholder in the D. O. Mills National Bank and as a stockholder in the Mission State Bank for the shares-of stock which it held in those banks, valuing each at the sum previously stated. Besides, the stockholders of the California National were assessed for the value of the assets of that bank, including in the amount the full value of the shares of stock owned by the bank in the Mills National and Mission State Banks.
The controversy grows out of the asserted illegality of the two-fold tax levied on the assessments of the California Bank as a stockholder in the Mills National Bank and in the Mission State Bank. Its solution depends upon the effect of Rev. Stats., § 5219, the text of which is in the margin.
Without considering some modifications made by the Act of February 10, 1868, c. 7, 15. Stat; 34, which are negligible for the purposes of the. questions before us, the section is but the reproduction of a provision of § 41 of the Act of June 3, 1864, dealing with the organization of national banks. (13 Stat. 99, 112.) The forms of expression used in the section make it certain that in adopting it the legislative mind had in view the subject of how far the banking associations created were or should be made subject to state taxation, which presumably it was deemed necessary to deal with in view of the controversies growing out of the creation of the Bank of the United States and dealt with by decisions of this court. McCulloch v. Maryland, 4 Wheat. 316, 436; Osborn v. United States Bank, 9. Wheat. 738, 867; Weston v. Charleston, 2 Pet. 449.
There is also no doubt from the section that it was intended to comprehensively control the subject with which it dealt and thus to furnish the exclusive rule governing state taxation as to the federal agencies created as provided in the section. All possibility of dispute to the contrary is foreclosed by the decisions of this court. People v. Weaver, 100 U. S. 539; Mercantile Bank v. New York, 121 U. S. 138, 154; Owensboro National Bank v. Owensboro, 173 U. S. 664; Covington v. First National Bank, 198 U. S. 100.
Two provisions in apparent conflict were adopted. First, the absolute exclusion of power in the States to tax the banks, the national agencies created, so as to prevent all interference with their operations, the integrity of their assets, or the administrative governmental control over their affairs. Second, preservation of the taxing power of the several States so as to prevent' any impairment thereof from arising from the existence of the national agencies created, to the end that the financial resources engaged in their development might not be withdrawn from the reach of state taxation, but on the contrary that every resource possessed by the banks as national agencies might in substance and effect remain liable to state taxation.
The first aim was attained by the non-recognition of any power whatever in the States to tax the federal agencies, the banks, except as to real estate specially provided for, and, therefore, the exclusion of all such powers. The second was reached by a recognition of the fact that, considered from the point of view of ultimate and beneficial interest, every available asset possessed or enjoyed by the banks would be owned by their stockholders and would be, therefore, reached by taxation of the stockholders as such. Full and expresé power on that subject was given, accompanied with a limitation preventing its exercise in a discriminatory manner, a power which again from its very limitation was exclusive of other methods of taxation and left, therefore, no room for taxation of the federal agency or its instrumentalities or essential accessories, except as recognized by the provision in question.
Let us come to consider whether the taxation in question was sanctioned by the act of Congress as thus understood. We do so, first, from the point of view of the twofold tax which whs based on the ownership by the California Bank of stock in the D. O. Mills National Bank, and, second, as to the taxes which resulted from the ownership by the California Bank of stock in the Mission State Bank.
In Bank of Redemption v. Boston, 125 U. S. 60, it was determined that the stock held by one national bank in another is governed by the power to tax stockholders given by the statute. Hence, the circumstance of the ownership of the stock by the California Bank in the D. O. Mills National Bank in no way deflects the operation of the statute. This being the case, as the taxation of the California Bank as a stockholder in the Mills Bank conformed "to the grant of power to tax stockholders of national banks, it results that the assessment for taxation made upon that basis was within the state authority and was rightly decided so to be.
But the principle upon which this rests inevitably leads to. the further conclusion, that the inclusion of the stock ownership of the California Bank in the Mills Bank as an asset of the California Bank for the purpose of taxing the stockholders of the latter bank was a disregard of the provision as to taxing stockholders fixed by the statute.
Indeed, it is apparent that the use of the power conferred by the statute to tax the California Bank as a stockholder in the Mills National Bank, and in addition to avail of such stock ownership for the purpose of taxing the shareholders of the California Bank, was but to accept the statute on the one hand, and to exert on the other a power which could have no existence consistently with the statute. To say that the two taxes, the one levied on the bank as a stockholder in the Mills National Bank, and the other levied on the stockholders of the California Bank, were valid because a taxation of different persons, the California Bank on the one hand and the stockholders of the California Bank on the other, serves only to emphasize the plain disregard of the statute which would result from the enforcement of the taxes in question.
It is undoubted that the statute from the purely legal point of view, with the object of protecting the federal corporate agencies which it created from state burdens and securing the continued existence of such agencies despite the changing incidents of stock ownership, treated the banking corporations and their stockholders as different. But it is also Undoubted that the statute for the purpose of preserving-the state power of taxation, considering the subject from the point of view of ultimate beneficial interest, treated the stock interest, that is, the stockholder, and the bank as one and subject to one taxation by the methods which it provided.
Again, when the purposes of the statute are taken into view, the conclusion cannot be escaped that the transmutation of the stock interest of the California in the Mills Bank, into an asset of the California Bank subject to be taxed for the purpose of reaching its stockholders, is to overthrow the very fundamental ground upon which the taxation of stockholders must rest.
We do not stop to point out the double burden resulting from the taxation of the same value twice which the assessment manifested, as to do so could add no cogency to the violation of the one power to tax by the one prescribed method conferred by the statute and which was the sole measure of the state authority.
Coming to consider the tax on the California National Bank as a stockholder in the Mission State Bank, different considerations are controlling, since the provisions of the statute and the ruling in the Bank of Redemption Case, supra, both in letter and spirit apply only to stock ownership by a national bank in another national bank, It therefore follows that as the California National .Bank was subject to state taxation as a federal agency only to the extent authorized by the statute, the taxation of that bank as a stockholder 'in the Mission State Bank was without the scope of tlip statute and beyond the power which it conferred.
But while this is true, it also follows that as the stock in the Mission Bank belonged to the California Bank, and was part of its general assets embraced by the comprehensive power conferred to tax such assets in the absence of some provision of the statute to the contrary, which, as we have seen, was the case with regard to the stock held in the D. O. Mills National Bank, the assessment of the stock in the Mission Bank as an asset of the California Bank against its stockholders was within the scope of the grant given by the statute and was, therefore, valid.
From what we have said, it follows that the court below erred in refusing to order the refunding of the sum paid for the taxes levied on the assessment made against the stockholders of the California Bank for the value of the stock held by that bank in the D. O. Mills National Bank, and which had been assessed against the California Bank as a stockholder in the Mills Bank; and further erred in so far as it refused to decree a refund of the amount paid for the tax levied on the California Bank as the result of the assessment on that bank as a stockholder in the Mission State Bank. In these particulars, therefore, its decree must be, and is reversed. Our order, therefore, is
Reverse and remand for further proceedings not inconsistent with this opinion.
"Nothing herein shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the State within which the association is located; but the legislature of each State may determine and direct the manner and place of taxing all the shares of national banking associations located within the State, subject only to the two restrictions, 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 that the shares of any national banking association owned by non-residents of any State shall be taxed in the city or town where the bank is located, and not elsewhere. Nothing herein shall be construed to exempt the real property of associations from either State, county, or municipal taxes, to the same extent, according to its value, as other real property is taxed."