Case Name: Des Moines National Bank, and Arthur Reynolds in his own behalf and in behalf of all other stockholders of said Des Moines National Bank, who appeal in their own behalf and in behalf of all the stockholders of said bank, v. The City of Des Moines, and others, Appellants
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 1911-12-15
Citations: 153 Iowa 336
Docket Number: 
Parties: Des Moines National Bank, and Arthur Reynolds in his own behalf and in behalf of all other stockholders of said Des Moines National Bank, who appeal in their own behalf and in behalf of all the stockholders of said bank, v. The City of Des Moines, and others, Appellants.
Judges: 
Reporter: Iowa Reports
Volume: 153
Pages: 336–341

Head Matter:
Des Moines National Bank, and Arthur Reynolds in his own behalf and in behalf of all other stockholders of said Des Moines National Bank, who appeal in their own behalf and in behalf of all the stockholders of said bank, v. The City of Des Moines, and others, Appellants.
Taxation: national bank shares : value: deduction of government bonds. That portion of the capital of a national bank invested in government bonds should be deducted from the bank assets in determining the value of its shares of stock for the purpose of taxation.
Appeal from Polk District Court. — Hon. James A. Howe,Judge.
Friday, December 15, 1911.
The facts appear in the opinion.
Affirmed.
Robert O. Brennan, Fred W. Williams, and J. M. Parsons, for appellants.
Hager & Powell, for appellees.

Opinion:
Sherwin, C. J.
The Des Moines National Bank and Arthur Reynolds, in his own behalf and in behalf of all the other stockholders in the said bank, appealed from the action of the city council of the city of Des Moines acting as a board of review. The issue was whether the bank and its stockholders in arriving at the value of its shares of stock for taxation were entitled to deduct from its assets its bonds of the United States. The bank was shown to be a National Bank, organized and doing business under the laws of the United States with a capital of $300,000,. divided into 3,000 shares of $100 each. It owned in good faith, and not for the purpose of avoiding taxation $180,000 in par value of the bonds of the United States. This fact was made known to the assessor, and the claim was made that the bank and its stockholders had the right to deduct the amount of said bonds from its capital and surplus in determining the value of its shares for taxation to its shareholders. The claim was denied by the assessor, and thereafter the bank and the shareholders made the same claim before the board of review. The board also disallowed the claim, and an appeal was' then taken to the district court, where, upon a- trial, the court reduced the valuation of the shares of stock as found by the board of review from $100 per share to $38.75 per share by reason of the bank's ownership of the $180,000 of government bonds. The city alone appeals from the decision of the district court. It was conclusively shown, and the trial court so found, that at the time of tbe making of the assessment complained' of there were four national banks organized under tbe national banking law in tbe city of Des Moines, with an aggregate capitalization of $800,000 and a total surplus of $360,000, and that at tbe same time there were in tbe city ten savings banks, organized under tbe state laws with an aggregate capitalization of $1,100,000 and a total surplus of $386,971.58, and four state banks with a capitalization of $250,000 and a surplus of $76,818.39. It was further shown that all but two of tbe savings banks and all of tbe state banks were at tbe time engaged in commercial banking business in competition with tbe plaintiff bank. It was not claimed in the proceedings before tbe board of review and the district court that tbe assessment was wholly void, but tbe claim was that in fixing tbe value of tbe plaintiffs' shares of stock tbe value of tbe bonds held by tbe bank should be deducted from its assets, and that a failure to make such reduction was a discrimination against the bank and its stockholders, and in violation of section 5219 of tbe Revised Statutes of tbe Dnited States (TI. S. Comp. St. 1901, p. 3502). Tbe prayer of tbe petition was that tbe assessment against tbe several stockholders be modified and corrected by deducting from tbe value of tbe capital stock of tbe bank tbe amount of its government bonds.
Section 5219 of the Revised Statutes provides that shares of stock in national banks shall not be taxed at a "greater rate than is assessed upon other moneyed capital in tbe bands of individual citizens of such state." This statute, in effect, provides that shares of stock in national banks may be taxed by tbe state, provided no discrimination is made against such shares in favor of shares of stock of other banks in competition with national banks. Mercantile National Bank v. New York, 121 U. S. 138 (7 Sup. Ct. 826, 30 L. Ed. 895). In Home Savings Bank v. Des Moines, 205 U. S. 503 (27 Sup. Ct. 571, 51 L. Ed. 901), it was, in effect, held that, under the taxing law of this state as it then stood, no tax was placed upon the shares of stock of state and savings banks, but taxed the capital of such banks, and that government bonds held' by such banks must be deducted from their assets in making their assessments. The effect of that decision was to relieve the stock of state and savings banks from taxation, and to require the taxing power of the state to deduct from the assets of such banks the amount of government bonds held by them.. So that, from whatever point the subject be viewed, the government bonds held by state and savings banks must be deducted from the value of the property to be assessed. The power to tax shares of stock in national bardes is conferred by section 5219, Bev. St. IT. S., and it can only be done provided that such taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state. Other moneyed capital has been defined as capital in corporations carrying on the business of banking as defined by law and custom, and which is employed in competition with the business of national banks. Mercantile National Bank v. New York, supra; First National Bank v. Chapman, 173 U. S. 205 (19 Sup. Ct. 407, 43 L. Ed. 669) ; Jenkins v. Neff, 186 U. S. 230 (22 Sup. Ct. 905, 46 L. Ed. 1140) ; First National Bank v. City Council of Estherville, 150 Iowa, 95.
And the taxation of state and savings banks, which are in competition with national banks, upon their assets, while national banks are taxed on their shares of stock, has been held to create a discrimination against national banks. New York v. Tax Commissioners, 94 U. S. 415 (24 L. Ed. 164) ; Bradley v. Illinois, 4 Wall. 459 (18 L. Ed. 433). In Van Allen v. Assessors, 3 Wall. 573 (18 L. Ed. 229), it was held, in effect, that where a, state taxes its own banks on its capital, and thus permits a deduction of government bonds, a tax on national bank shares will not be upheld for the reason "that this tax of the capital is not an equivalent for a tax on the shares of the stockholders." It is manifest that under the rule of the authoritites cited the taxation of national bank shares of stock, without deducting therefrom the government bonds held by the bank issuing such stock, would create a discrimination against national banks in violation of section 5219 of the Eevised Statutes. Moreover, we held in First National Bank v. City Council of Estherville, 150 Iowa, 95, that shares of stock of national banks were not taxable under the then existing statutes as construed in the Home Savings Bank case, because to so tax' said shares would be a discrimination against capital invested in national bank stocks, and hence violative of section 5219 of the Eevised Statutes, as construed by the Supreme Court of the United States. In the instant ease the assessment was made under the law in force at the time involved in the Estherville case; and, if shares of national bank stock were not taxable at all at that time, because of an unjust discrimination between savings and state banks and national banks competing in business, it is manifest that the plaintiffs were entitled to have deducted from the value of their stock the government bonds owned by the bank at the time. A part of the bank's capital was then invested in and represented by these bonds, and in an assessment of the bank's property the bonds would have been deducted from the value thereof because they could not be taxed. Home Savings Bank v. Des Moines, supra. National -bank shares can not be taxed differently from state banks or from shares of stock therein as to the amount of the. tax. Van Slyke v. Wisconsin, 154 U. S. 581 (14 Sup. Ct. 1168, 20 L. Ed. 240) ; Bank v. Commonwealth, 9 Wall. 353 (19 L. Ed. 701).
The power of • this state to tax national banks or the shares of stock in such banks is derived from Congress, and the decisions of the United States Supreme Court on questions' touching the power of the state in this respect are controlling. We reach the conclusion, therefore, that the district court did not err in deducting from the value of plaintiffs' shares of stock the bonds held in good faith by the bank, and that the judgment should- be affirmed.