Title: SECURITY BANK v CONNORS COLBO
Citation: N/A
Docket Number: 13221
State: Montana
Issuer: Montana Supreme Court
Date: May 24, 1976

No. 1.3221 I N THE SUPREME C O U R T OF THE STATE OF MONTANA SLCURIcIY BANK AND TRUST C O M P A N Y e t a l . , P l a i n t i f f and Respondent, -vs - HOLLIS G. CONNORS, a s Montana S t a t e Treasurer, dnd KEITH L. COLBO, a s Director of Montana Uepartment of Revenue, Defendants and Appellants, ...................... FIRST NATIONAL BANK AND TRUST C O M P A N Y OF H E L E N A e t a l . , Intervenor, -vs - SbCUKLTY BANK AND TRUST C O M P A N Y , a Montana banking Corporation, Hollis G. Connors, a s Montana S t a t e Treasurer, (3nd Keith L. Colbo a s Director of Montana Department of Revenue, Defendants. &Ippeal from: D i s t r i c t Court of t h e F i r s t J u d i c i a l D i s t r i c t , Honorable Gordon R. Bennett, Judge presiding. Courlsel of Record: For Appellants : Hon. Robert L. Woodahl, Attorney General, Helena, Montana Joseph R. Massman argued, Helena, Montana cor Respondent: Cough, Booth, Shanahan and Johnson, Helena, Montana Ronald F. Waterman argued and Ward A. Shanahan appeared, Helena, Montana Morrow, Nash and Sedivy, Bozeman, Montana Rdmund P. Sedivy argued, Bozeman, Montana 'rowe, Neely and Ball, B i l l i n g s , Montana Submitted: April 21, 1976 Decided ? " F i l e d : M r . Justice Frank I. Haswell delivered the Opinion of the Court. Defendants appeal through the Department of Revenue from a summary judgment i n the d i s t r i c t court ordering the s t a t e treas- urer t o refund t o p l a i n t i f f Security Bank and Trust Company the corporation license tax f o r the year 1972 paid by p l a i n t i f f under protest. Appeal is a l s o taken from the d i s t r i c t court's decree on behalf of intervenor F i r s t National Bank and Trust Company of Helena, that t h e Department may not levy and c o l l e c t a corporation license tax against intervenor, a federally chartered national bank, f o r the year 1972. The controversy a r i s e s a s a r e s u l t of the passage by the United States Congress i n 1969 and l a t e r , of amendments t o the s t a t e taxation of national banks provision, United States Revised Statutes $5219, 12 U.S.C. $548, and c e r t a i n Montana l e g i s l a t i v e enactments pursuant thereto. The only issue i s whether the s t a t e of Montana i s permitted t o levy and c o l l e c t a corporation license tax from e i t h e r s t a t e chartered or federally chartered banks doing business i n Montana f o r the t a x year beginning January 1, 1972. The f a c t s upon which the d i s t r i c t court based i t s summary judgment were stipulated i n two separate documents between the p a r t i e s , and a r e summarized herein. Security Bank i s a Montana banking corporation duly authorized and licensed under Montana law t o engage i n commercial banking, with i t s principal o f f i c e i n Bozeman, Montana. Defendant and appellant Connors was the treasurer of Montana; defendant and appellant Colbo was the d i r e c t o r of the Department of Revenue. Security Bank paid i t s corporation license t a x f o r the year 1972, under protest, t o defendant s t a t e treasurer i n the sum of $31,752.38; the payment was received by the Department and deposited with defendant treasurer. Security Bank f i l e d a complaint t o recover the payment i n the d i s t r i c t court within the time prescribed by law. In the immediate bank trade t e r r i t o r y of Bozeman, there were a t the time of s u i t three named and several other national banks with banking charters from the United States government under the National Banking Act; a l l these banks were i n competition with Security Bank. The tax paid by Security Bank was a tax levied by the s t a t e of Montana on a l l nonexempt corporations licensed t o do busi- ness i n Montana under section 84-1501 e t , s e q . , R.C.M. 1947; and f o r the year 1972 t h e s t a t e of Montana did not require any national bank t o pay a tax based upon i t s net income a s required by section 84- 1501 e t - s e q . , R.C.M. 1947, o r any similar s t a t u t e , and no such tax was paid by any national bank. The t a x paid by Security Bank was computed on the basis of i t s n e t income and imposed on Security Bank under penalty of law. The power of the s t a t e of Montana t o t a x national banks - located i n Montana i s s e t f o r t h i n 12 U . 8 . C . $548, a s amended by Public Law 91-156. For the year 1972, t h e s t a t e of Montana did autho- r i z e the levy and assessment of a tax on national banks by assessing shares of stock of national banks under section 84-4601 et seq., R,C. M. 1947. I n the same year the s t a t e taxed s t a t e chartered banks by assessing shares of stock of s t a t e banks under the same s t a t u t o r y authority. The method of assessment of shares of stock and the r a t e of tax was i d e n t i c a l f o r national and s t a t e banks. The national banks i n the trade area of Bozeman provided substantially the same commercial banking services and functions a s provided by Security Bank and other s t a t e banks i n the Bozeman trade area. However, national banks a r e regulated by federal law while s t a t e banks a r e regulated by s t a t e law. The d i f f e r e n t sources of t h e i r charters do not a f f e c t t h e i r c l a s s i f i c a t i o n . Intervenor F i r s t National i s a national banking association i n commercial banking, located i n Helena, Montana. F i r s t National paid a tax on shares of stock f o r the years 1971 and 1972 a s required by Montana law; but F i r s t National was not required by the Department t o , nor did it pay, any corporation license t a x t o the treasurer of Montana f o r the same years, a s none had been levied. Before d e t a i l i n g t h e proceedings i n the d i s t r i c t court, a review of the sequence and substance of t h e pertinent s t a t u t o r y enactments i s i n order. Prior t o 1969, 12 U.S.C. 5548, provided i n pertinent part t o t h i s appeal: "5548. S t a t e Taxation h he l e g i s l a t u r e of each S t a t e may determine and d i r e c t , subject t o the provisions of t h i s section, the manner and place of taxing a l l t h e shares of t h e national banking associations located within i t s l i m i t s . The several States may (1) tax said shares, o r (2) include iividends derived therefrom i n the taxable income of an owner o r holder thereof, o r (3) t a x such associations on t h e i r net income, o r (4) according t o o r measured by t h e i r net income, provided the following conditions a r e complied with: "1. (a) The imposition @'i any State of any one of the above four forms of taxation s h a l l be i n l i e u of the others * * *." This section w i l l hereinafter be referred t o a s t h e "old 5548". Prior t o 1969 the s t a t e of Montana elected the a l t e r n a t i v e of taxing t h e shares of national banks i n Montana. The s t a t e a l s o taxed the shares of s t a t e banks and, u n t i l 1967, additionally imposed the corporation license tax on s t a t e banks only. Uniformity of taxation between s t a t e and national banks was established i n 1967 by the enactment of section 84-1501.4, R.C.M. ' "State banks organized under the Montana Bank Act s h a l l not be required t o pay the Montana corporation license t a x provided f o r under chapter 15 of t i t l e 84 of t h e Revised Codes of Montana, 1947, u n t i l and unless t h e . s a i d t a x i s required t o be paid by national banks organized under the laws of t h e United s t a t e s . " I ' I n 1969 Congress undertook the abolition of national bank s t a t e tax immunity. Public Law 91-156 added t h i s section t o old - $548, a s a temporary amendment: 5 (a) In addition t o the other methods of taxation authorized by the foregoing provisions of t h i s section and subject t o the limitations and r e s t r i c t i o n s speci- f i c a l l y s e t f o r t h i n such provisions, a State o r p o l i t i c a l subdivision thereof may impose any t a x which i s imposed generally on a non-discriminatory basis throughout the jurisdiction of such State o r p o l i t i c a l subdivision (other than a tax on in- tangible personal property) on a national bank M n g i t s principal o f f i c e within such S t a t e i n the same .manner and t o the same extent a s such t a x is imposed on a bank organized and existing under the laws of such State." This provision i s hereinafter referred t o as the "temporary amend- men t !':' Public Law 91-156 a l s o contained a "permanent amendment" t o take e f f e c t January 1, 1972, . - a t which time the e n t i r e old $548 and the temporary amendment were repealed automatically. The permanent amendment i n e f f e c t and hereinafter referred t o a s the "new $548", s t a t e s i n i t s e n t i r e t y : "For the purpose of any tax law enacted under authority of the United States o r any State, a . national bank s h a l l be treateil a s a bank organized and existing under the laws of the State o r other jurisdiction within which i t s principal o f f i c e i s located. I I Pursuant t o t h i s new taxing authority granted by Congress t o the s t a t e s under the temporary amendment and new $548, the Montana l e g i s l a t u r e i n 1971, enacted sections 84-1501.6 and 84.1501.7, R.C.M. "84-1501.6. S t a t e and national banks --. subject t o tax. -- Effective with taxable years beginning on o r a f t e r January 1, 1971, every bank organized under the laws of the s t a t e of Montana o r of any other s t a t e and every national bank organized under the laws of the United States a r e subject t o the Montana corporation license tax provided f o r under T i t l e 84, chapter 15, R.C.M. 1947. 11 "84-1501.7. Effective da tes. For the taxable year beginning on and a f t e r January 1, 1971, section 1 [84-1501.61 of t h i s a c t i s effecive i n accordance with Public Law 91-156, section 1 (12 U.S.C. 548(5).) For taxable years beginning on and a f t e r January 1, 1972, section 1 [84-1501.61 of t h i s a c t i s e f f e c t i v e i n accord- ance with Public Law 91-156, section 2 (12 U.S.C. 548)." A n additional section of t h i s 1971 a c t repealed section 84-1501.4, R.C.M. 1947, a s s t a t e bank immunity from t h e corporation license tax was no longer necessary when national banks were subject t o the same tax. Finally, about ten months a f t e r t h e enactment by t h e Montana l e g i s l a t u r e of the above a c t , t h e Congress amended Public Law 91-156 with Public Law 92-213 which extended the l i f e of the temporary amendment and old 5548, and delayed the e f f e c t i v e date of new 5548 f o r one year, u n t i l January 1, 1973. With the foregoing background i n mind, Security Bank sued f o r refund of its 1972 corporation license t a x on the ground it was an unconstitutional deprivation of property t o impose the t a x on s t a t e banks but not on national banks. Originally, t h e only p a r t i e s t o t h i s action were Security Bank, and t h e defendants represented by the Department. O n the f i r s t stipulation of f a c t s t h e d i s t r i c t court entered conclusions of law on November 19, 1974, which e s s e n t i a l l y held: (1) t h e Department was authorized by section 84- 1501.6, R.C.M. 1947, and old $548, 12 U,S.C. with t h e temporary amend- ment, t o subject national banks t o the corporation license t a x i n 1972, therefore the collection of a corporation license tax from s t a t e banks was not i n and of i t s e l f v i o l a t i v e of s t a t e o r federal constitutional r i g h t s of Security Bank; (2) however, i f the Department f a i l e d t o e i t h e r refund t o Security Bank i t s 1972 corporation license tax o r assess and c o l l e c t said t a x a s a deficiency from national banks, then the payment of the t a x by Security Bank would be a violation of i t s due process r i g h t s under A r t . 111, 5 5 3 and 27, 1889 Montana Constitution and the Fourteenth Amendment, United States Constitution. Shortly t h e r e a f t e r , F i r s t National was granted leave t o intervene. The d i s t r i c t court vacated i t s November 19 ruling. F i r s t ~ a t i o n a l ' s intervention was precipitated by the expressed intention of the Department t o comply with the November 19 ruling by collecting a deficiency corporation license tax f o r 1972 from national banks i n Montana. The issue was submitted on b r i e f s , and on September 22, 1975, the d i s t r i c t court entered summary judgment ordering defendant Montana treasurer t o refund t o Security Bank t h e 1972 corporation license tax paid under protest. I n i t s opinion the d i s t r i c t court held, contrary t o i t s November 19 conclusions, the Department could not levy and c o l l e c t a corporation license tax from e i t h e r s t a t e o r federally chartered banks i n 1972. O n October 14, 1975, the d i s t r i c t court entered judgment against defendants, ordered the Montana s t a t e treasurer t o refund t o Security Bank $31,752.38, and decreed t h a t defendants have no authority t o impose upon o r c o l l e c t a corporation license t a x from intervenor F i r s t National f o r any t a x year p r i o r t o January 1, 1973. The issues on appeal are: 1. Did the d i s t r i c t court e r r i n ruling t h a t the s t a t e , through the Department of Revenue, cannot levy and c o l l e c t a corporation license t a x from federally chartered banks doing business i n Montana f o r the t a x year 1972? 2. Did the d i s t r i c t court e r r i n ruling t h a t t h e s t a t e , through the Department of Revenue, cannot levy and c o l l e c t a corpora- tion license tax from s t a t e chartered banks f o r the t a x year 1972? Resolution of the f i r s t issue depends upon the precise meaning of old $548 a s amended by the temporary amendment and Public Law 92-213. The p a r t i e s properly stipulated t h a t s t a t e taxation of national banks i s controlled by Congressional authorization, i . e . , 12 U.S.C. 5548 i n i t s various forms. See: F i r s t Agricultural National Bank v. State Tax Commissioner, 392 U.S. 339, 88 S.Ct. 2173, 20 L ed 2d 1138. A t the outset, we note the r u l e s of s t a t u t o r y construction long adhered t o by t h i s Court. I n construing a s t a t u t e , the i n t e n t of the l e g i s l a t u r e i s controlling. Such intention must f i r s t be determined from the plain meaning of the words used, and i f interpretation of the s t a t u t e can be so determined, the courts may not go further and apply any other means of interpretation. Where the language of a s t a t u t e i s plain, unambiguous, d i r e c t and c e r t a i n , the s t a t u t e speaks f o r i t s e l f and there is nothing l e f t f o r the Court t o construe. The function of the Court is simply t o ascertain and declare what i n terms o r i n substance i s contained i n the s t a t u t e and not i n s e r t what has been omitted. Dunphy v. Anaconda Co., 151 Mont. 76, 438 P.2d 660, and cases c i t e d therein; Sections 93-401-15 and 93-401-16, R.C.M. 1947. The f i r s t paragraph and subparagraph l . ( a ) of old $548, i n e f f e c t during 1972, providH f o r four d i f f e r e n t methods of permitted taxation of national banks by the s t a t e s , and unequivocably s t a t e the 'I* * * imposition by any S t a t e of any one of the above four forms of taxation s h a l l be i n l i e u of the others * * *." (Emphasis supplied.) The temporary amendment reemphasized t h i s language by s t a t i n g t h a t the temporary amendment i s "subject t o the limitations and r e s t r i c t i o n s s p e c i f i c a l l y s e t forth" i n the existing sections. Thus, i n 1972, the s t a t e s could not impose on national banks any more that one of the four enumerated methods of taxation. This position was, i n f a c t , taken by the Department i t s e l f from 1971 u n t i l F i r s t National intervened i n t h i s l i t i g a t i o n i n November 1974. CCH State Tax Reporter -- - Montana, Paragraph 200-033, p. 10,035. It i s undisputed t h a t F i r s t National paid, and the Department collected, a tax upon shares of stock of F i r s t National f o r 1972. Such i s one of the four methods of taxation permitted by old $548. It i s a l s o plain t h e corporation license t a x i s a tax on n e t income (section 84-1501,R.C.M. 1947), another one of the four permitted methods of taxation. It follows t h a t having collected under one of t h e methods of taxation, the Department i s prohibited by old 5548 from imposing a corporation license t a x on national banks before 1973, when new $548 became effective. Therefore, we affirm the d i s t r i c t court on the f i r s t issue. The d i s t r i c t judge properly rejected the Department's attempt t o seek statutory construction through t h e use of e x t r i n s i x sources, a s the words of t h e s t a t u t e i n question and i t s amendments speak f o r them- selves. W e a r e a l s o not impressed with the Department's strained d i s t i n c t i o n between old 5548, subparagraph 1. (a) a s a "condition" I l and t h e remaining paragraphs a s limitations and restrictions". The second issue involves the corporation license tax paid by Security Bank under protest in 1972. It appears this dispute arises because of the fortuitous circumstance that Congress enacted Public Law 92-213 (making new 5548 effective January 1, 1973) after the Montana legislature enacted sections 84-1501.6 and 84-1501.7, R.C.M. 1947, in reliance on the timetable set out in the temporary amendment, Public Law 91-156 (making new 5548 effective January 1, 1 9 7 2 ) . In 1967, section 84-1501.4 was enacted to provide that state and national banks be taxed equally with respect to the corporation license tax. This was in recognition of the fact that state and national banks in Montana perform virtually the same func- tions and services and that dual taxation of state banks in the face of national bank immunity from such dual taxation placed state banks in an inferior competitive position. This parity provision was repealed by the 1971 enactment permitting corporation license taxa- tion of national banks because parity was thought to be provided by Congress. However, when Congress extended the life of the temporary amendment and old $548, the Department continued to levy the tax on shares of - all banks and felt it was not authorized to impose the corporation license tax on national banks. By imposing the corporation license tax on state banks only, the Department was doing what section 84-1501.4 prohibited from 1967 to its repeal. The question then is: Was the corporation license taxation of state banks in 1972 permissible? We hold that it was not. Security ~ank' s principal argument is that such taxation violates due process rights guaranteed under Art.111, $ 9 3 and 7, 1889 Montana Constitution, because the imposition of the tax on it in 1972 was not uniform, was discriminatory and was based upon an arbitrary classification. Security Bank relies on Garrett Freightlines, Inc. v. The Montana ~.~.Comm'n, 161 Mont. 482, 507 P.2d 1040. However, the issue can be decided on nonconstitutional grounds. Taylor v. Taylor, Mon t . -- , 537 P.2d 483, 32 St.Rep.575; Montana State University v. Ransier, M o n t . --, 536 P.2d 187, 32 St.Rep. 569, and cases c i t e d therein. The d i s t r i c t court held t h a t because the Department decided i n 1971 t h a t it could not enforce collection of a corporation license tax from national banks i n Montana during the l i f e of the temporary amendment, it had invalidated section 84-1501.6 insofar a s it applies t o national banks; and because section 84-1501.6 con- t a i n s no savings clause, the invalidation of one portion destroys the whole. I n l i g h t of the l e g i s l a t i v e policy expressed i n repealed section 84-1501.4, the basis of i t s repeal, the continued l e g i s l a t i v e policy of taxing s t a t e and national banks equally throughout the period of 1967 t o the present, and the unavoidable confusion which resulted from the Congressional postponement of the e f f e c t i v e date of new $548 t o 1973, we agree with the d i s t r i c t court t h a t when the s t a t e , through the Department, prohibited t h e corporation license taxation of national banks, it was similarly prohibited from collecting the tax from s t a t e chartered banks. I n other words, it i s obvious from the sequence of events t h a t the l e g i s l a t u r e did not intend t o authorize the Department t o exact the corporation license t a x from s t a t e banks and simultaneously return t o the policy of national bank immunity from t h e same tax. W e a r e mindful of the trend i n favor of implied separability a s pointed out by the Department. S t a t e ex r e l . Evans v. F i r e Department Relief Ass'n, 138 Mont. 172, 355 P.2d 670. However, the f a c t s of t h i s case compel the conclusion, i n the absence of a savings clause, the Department cannot t r e a t section 84-1501.6 a s p a r t i a l l y invalid and p a r t i a l l y valid. The statement of t h i s Court i n State v. Holmes, 100 Mont. 256, 291, 47 P.2d 624, p a r t i c u l a r l y applies: If* * * In the absence of such a [savings] provision the presumption is against the mutilation of a s t a t u t e , and t h a t the l e g i s l a t u r e would not have enacted it ex- cept i n i t s e n t i r e t y . * * +<." The judgment of the district court is affirmed. Z&,g - Justice We Concur* , . 4 -udge, itt'ng for-chief Justice dames ( - - H a & son.