Court Opinion

ID: 6585295
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:42:31.784836+00
Date Added: 2024-06-11T15:57:26.695982
License: Public Domain

Watson, J.
The defendant is a corporation with capital stock, organized under a special charter, Laws of 1898, No.' 220.
The corporation has the power, among other things, “To receive moneys on deposit or in trust at such rate of interest oir on such terms as may be agreed upon, the rate of interest to be allowed for the deposit not to exceed the legal rate.”
The defendant keeps deposits for savings and investment, for which it issues books of deposit containing certain rules and regulations touching such deposits. In addition thereto it keeps with business men commercial deposits, which are strictly business accounts, such as are kept by national banks. Such deposits are subject to be withdrawn at sight, and the depositor receives no interest thereon. Usually the defendant gives the depositor a pass book on which it enters the credit and debit sides of the account, and no more; and it usually renders him a monthly statement of his account, accompanied by the checks drawn against it during the month.
Every savings bank and trust company incorporated in this state and doing business herein is required to pay a tax to the state under the provisions of V. S. 583 and 584, as amended by Laws of 1896, No. 18, section 2. The law reads:
“Sec. 583. Every trust company or savings bank and trust company incorporated by this state, and doing business herein, shall pay a tax to the state treasurer, which is hereby assessed at the rate of seven-tenths, of one per cent annually, upon the average amount of its deposits, including money or securities received as trustee under order of court or otherwise, deducting therefrom the average amount, not exceeding ten per cent of its assets, invested in United States government bonds, and, also, the amount, if any, of individual deposits in excess of fifteen hundred dollars each, listed to the depositors in towns of this state where such depositors reside.
*254Sec. 584.. The taxes assessed by the two preceding sections shall be paid semi-annually, one-half in the month of February and one-half in the month of August, and shall be based upon the returns for the six months terminating with the last day of December and June next preceding. No other tax shall be assessed upon such deposits or accumulations in savings banks, or on such deposits in trust companies, and. savings banks and trust companies, nor against the depositors on account thereof, except individual deposits exceeding in the aggregate fifteen hundred dollars.”
The defendant made due return of the average amount of all its deposits for the six months ending the last day of june, 1901. This return includes $42,308.24 as the average amount of commercial deposits. The defendant has paid the-tax assessed on all its deposits, except the commercial, which it claims are taxable to the depositors. The tax on such deposits, with interest, is $151.40, and to collect the same this, suit is brought.
That the tax required to be paid by sections 583 and 584 is a franchise tax, was decided in the case of State v. Bradford Savings Bank and Trust Co., 71 Vt. 234, 44 Atl. 349.
Such a tax is uponl the privilege of conducting the business, under a corporate organization. Cooley on Taxation, 34.
The amount to be paid on franchises of any class may be-ascertained upon such basis as the legislature shall determine; but it was said by the Federal Supreme Court in Society for Savings v. Coite, 6 Wall. 594, speaking through Mr. Justice-Clifford, that experience show© that bo ascertain the amount in some mode by the amount of business which the corporation, shall transact within a specified period, is better calculated to effect justice among corporations required to contribute to the: public burdens, than any -other which has been devised.
*255It is contended in behalf of the defendant that its powers are so limited by the charter and the general statutory provisions applicable to savings banks and trust companies, that it is not authorized to receive commercial deposits, and therefore the word deposit as used in the provision of the charter before quoted does not have reference to such deposits, but refers solely to deposits for savings or such as are interest bearing; and that the word “deposits” as used in sections 583 and 584, does not include commercial deposits as a basis for taxation. In effect this is a contention by the defendant that its deposits, to the extent of over forty-two' thousand dollars, pertain to and are the result of a business ultra, vires the corporation, and therefore not a basis for such taxation within the law. If this contention were sound, the question whether the defendant could take advantage of its own wrong thus toi avoid taxation might properly arise.
But we doi not think the defendant’s powers are thus limited. .Under the provisions of the charter, the rate of interest and the terms on which the defendant may agree to- receive moneys on "deposit or in trust, are within its discretion, except that the rate of interest allowed on deposits shall not exceed the legal rate. The language used is broad enough to permit the receipt of money on deposit upon terms as to interest from the legal rate down to- without interest; and upon such terms regarding payment as the parties may expressly or impliedly agree. The interest may be at a special rate, and the deposit subject to drafts or checks drawn against it payable at sight; or the deposit may be without interest, and payable in drafts or checks in the same way. In fact, generally, when a bank receives ordinary deposits, it impliedly contracts with the depositor to discharge the indebtedness by honoring such checks as he may draw against it. Janin v. London etc. Bank, 92 Cal. 14, 27 *256Am. St. Rep. 82; Phoenix Bank v. Risley, 111 U. S. 125, 4 Sup. Ct. 322, 28 L. Ed. 374.
Mr. Morse defines a bank as “an institution, usually incorporated, with, power to- issue its promissory notes intended to circulate as money (known-as bank notes) ; or to- receive the money of others- on general deposit, to- form a joint fund that shall be used by the institution for -its own benefit, for one or more of the purposes of making temporary loans and discounts, of dealing in notes, foreign and domestic bills of exchange, coin, bullion, credits, and the remission of money; or with both these powers, and with the privileges, in addition to these basic powers, of receiving special deposits, and making collections for the holders of negotiable paper, if the institution sees fit to- engage in such business. * * * Generally the bank must hold itself ready at any time to- pay the amount of a deposit to- the depositor or his -order, but this may be varied by agreement (as. to give one or mo-re days’ notice, or not to draw for a certain time, or to leave always a certain sum to the depositor’s credit), and is not an essential to the definition.” 1 Morse on Banking, s. 2. See also Bouvier’s Dictionary, and Oulton v. Savings Institution, 17 Wall. 109, 21 L. Ed. 618.
By its charter, the defendant may receive deposits; may issue letters of credit; purchase and sell stocks, bonds, mortgages and other evidences of indebtedness; and in- section 16, the right to discount bills of exchange, business and commercial paper, is expressly recognized. In addition thereto, are the other powers explicitly granted by the charter and by the general statutory laws applicable to such institutions, and its implied powers.
Under the provisions o-f V. S. chapter 173, banks of .circulation, discount and deposit may be organized. Therein it is provided that all banking associations organized thereunder, shall be banks of discount and deposit, as well as circulation, *257and may carry on the business of banking by discounting bills, notes and other evidences of debt, receiving deposits, buying and selling gold and silver bullion, foreign coin, and bills of exchange, loaning money on real and personal security, and exercise such incidental1 powers as are necessary to carry on such business.
It will be noted that, as a bank of discount and deposit, its express powers are included within the powers of the defendant under its charter and the general statutory provisions, except in buying and selling gold and silver bullion, foreign coin, and bills of exchange, which exceptions are not essential to the character of the bank.
It is a matter of history, of which the court will take judicial notice, that prior to- the passage of the National Banking Act in February, 1863, banks of circulation, discount, and deposit, organized under the laws of this State, were here engaged in the business of banking; that savings banks were first chartered in this State in 1847, °f which seventeen had been chartered before the passage of the National Banking Law, and that such savings banks were organized and engaged in business within the powers of their grants, concurrently in time with the state banks of circulation, discount, and deposit for fifteen years before the initiation of the national banking system; that within a few years, at longest, after the passage of the National Banking Law, such last named state banks went out of existence, and concurrently therewith special charters were ganted to trust companies or savings banks and trust companies, one being granted in 1868, twelve in 1869, and seventeen in 1870. From the first one granted in 1868 as a trust company to the present time, whether trust companies or savings banks and trust companies, by name, the basic powers granted have been the same and nearly identical in *258terms with those in the defendant’s charter, which, as before seen, includes nearly all the basic powers of a state bank of circulation, discount, and deposit, save that of issuing notes of circulation, — a distinctive and fundamental feature of national banks..
Nor was. this, without manifest reasons on the part of the law makers of the state. In March, 1863, congress passed an act requiring all banks, associations, corporations, and individuals- issuing notes or bills for circulation as currency, to pay a tax thereon of one per cent semi-annually on the average amount of circulation exceeding a specified sum, and five per cent on the issue of notes, or bills as fractional currency. By an act of 1865, national banking associations, state banks, and state banking associations were required to pay a tax of ten per cent on the amount of notes, of state banks and state banking associations paid out by them after July 1, 1866; and by an act' passed in 1875, state banks and state banking associations were required to pay a tax of ten per cent on the amount of their own notes used for circulation and paid out by them. I'n-Hollister v. Mercantile Institution, 111 U. S. 62, 4 Sup. Ct. 263, 28 L. Ed. 352, after reviewing the different acts of congress in this behalf, the Court, speaking through Mr. Chief Justice Waite, said: “It was, no doubt, the purpose of congress, m imposing this tax, to provide against competition with the established', national currency for circulation as money.” See also Merchants’ National Bank v. United States, 101 U. S. 1, 25 L. Ed. 979, and Veazie Bank v. Fenno, 8 Wall. 533, 19 L. Ed. 482.
Under such taxation, state banks, of circulation ceased to exist in this State, as they undoubtedly did in others. In Jenkins v. Neff, 163 N. Y. 320, 57 N. E. 408, it is said: “It is-also to be borne in mind that the Federal government imposes- a tax of ten per cent on the bills issued by state *259banks, which practically prevents them from competing with national banks in putting out circulation, which is greatly to the advantage of the latter.”
This historical review shows that banking institutions like the defendant came into existence as successors to the state banks of circulation, discount and deposit, rather than as offshoots from savings banks as argued for the defendant.
The character of a bank is to be determined by the business which it is empowered to do> rather than by its name. A savings bank is an association without capital stock. The depositors constitute the bank, and their general relation thereto is like that of stockholders in banking associations having capital stock. They are the owners of the funds of the bank, share in its profits and losses pro rata, and in winding up the business, each depositor takes his share of the assets remaining after the payment of the debts. Such a bank is solely for the purpose of mutual savings, and its powers are very limited. At most it is a bank of deposit only, and the money deposited is for the use and benefit of the depositors. V. S. 4083.
In the light of the authorities there can be m> doubt that the defendant is a bank of discount and deposit. 1 Morse on Banks, s. 50; Bank for Savings v. Collector, 3 Wall. 495; National Bank v. Johnson, 104 U. S. 271.
Clearly, the receiving of commercial deposits, as well as deposits for savings and investment, is within the defendant’s corporate powers. The money received goes into the general funds of the bank, and the relation of debtor and creditor is created alike in both classes. The fact that one class is interest bearing and the other not, also the difference in time and method of payment, are because of the different terms upon which the moneys were received! In nature they are both general deposits.
*260The law regarding the basis of the tax of seven-tenths of one per cent required to be paid annually by such a bank, is very explicit in terms. It specifies that the tax shall be “upon the average amount of its deposits including money or securities received as trustee under order of court or otherwise,” with certain specified deductions therefrom. We discover nothing in any of the provisions of the law indicating that any particular class of general deposits was intended to be excluded therefrom. There is no ambiguity in the law in this regard. In Perkins v. Cummings, 66 Vt. 485, 29 Atl. 675, it is said that, “where a statute is plain and unambiguous, courts cannot supply supposed omissions nor correct supposed mistakes, but must administer it as the legislature has made it.”
The Society for Savings v. Coite, supra, arose under the laws of Connecticut by which a tax equal to three-fourths of one per cent on the total deposits in such banks should be paid annually to the State, and that the tax should be in lieu of all other taxes. The bank had invested over $500,000 of its deposits in securities of the United States which were exempt from taxation by state authority. The bank contended that the amount of its deposits thus invested should not have been included in the deposits taken as a basis for fixing the amount of the tax to be paid, and refused to pay so much of the tax as was equal to the prescribed percentage thereon. The court said: “Neither investment nor the value of the deposits being mentioned in the provisions, it seems clear that they are unimportant in this investigation, as the amount of the tax is the same whether the deposits, on the day named, have or have not been invested, and whether they are above the par value or of no value at all. Moneys received constitute deposits in the sense in which the word is used in that provision, and the total amouht of such deposits on that day furnishes the true basis of *261•computation, wholly irrespective of their market value or of the disposition made of the funds by the defendants.”
In Provident Institution v. Massachusetts, 6 Wall. 594; a statute of Massachusetts under consideration provided that every institution for saving's incorporated under the laws of that State should pay a tax of one-half of one per cent per annum on the amount of its deposits to> be assessed one-half on the average amount of its deposits for the six months preceding the first day of June, and the other half'on the average amount of its deposits for the six months preceding the first day of November. The institution had over a million dollars of its deposits invested in non-taxable securities and declined to pay the tax based thereon. The court said: “ ‘Deposits’ as the word is employed in that section are the sums received by the institution from depositors without regard to the nature of the funds. They are not capital stock in any sense, nor are they even ‘invesments,’ as the word is there used, which simply means the sums received, wholly irrespective of the disposition made of the same or their market value.” In State v. Bradford Savings Bank and Trust Co., supra, the statute now under consideration was involved. It was there said that the amount of the deposits shows the indebtedness to> the depositors, and does not necessarily bear any relation to¡ the actual value of the bank’s taxable property; and that the amount of the tax is determined solely by the extent of the business done by the corporation, as measured by the average amount of its deposits for the time for which the tax is assessed, after making the deductions specified.
We think the law is there properly stated, and that it makes no difference for the purposes of taxation whether the deposits are commercial or of the general class on interest.
It is argued on behalf of the defendant that such a construction will enable taxpayers in the State to avoid general tax*262ation by depositing in such banks any sum not exceeding fifteen hundred dollars just before the first day of April each year and withdrawing the same soon thereafter, and therefore that it is not in accordance with the general policy of the State regarding taxation. At first, such an argument seems to be of much force, but it weakens as we consider it. Assuming that taxes may be evaded in that way, why may they not be evaded if the deposit is made on interest in form, as well as when made without interest? The difficulty in making a deposit in the one case more than in the other with sqch a purpose is not apparent. Moreover, it would seem from the case of Shotwell v. Moore, 129 U. S. 590, that, if the deposit be made in either way to avoid taxation, the question might be made whether the money thus deposited'was not still taxable to the depositor.
It is urged that it is the policy of the State that all property therein be subjected to general taxation. It can with equal force be said that it is the policy of the State that a tax for the payment of state expenses shall be assessed upon the property, business, or corporate franchises of corporations, including savings banks, savings institutions, and trust companies. The greater the sum of individual deposits' up to fifteen hundred dollars, of depositors residing in the State, and without limit of depositors residing out of the State, the greater will be the tax received by the State for the payment of state expenses.
In no other way would the State realize a benefit from taxation on deposits of depositors residing out of the State; for they are not here subject to general taxation. The situs of a debt for the purpose of taxation, — with some exceptions which do not here apply, — is at the domicile of the creditor. Bullock v. Guilford, 59 Vt. 516, 9 Atl. 360; Liverpool etc. Ins. Co. v. Board of Assessors, 51 La. Ann. 1028, 72 Am. St. Rep. 483.
*263In Hadden v. Barney, 5 Wall. 107, in discussing public policy other than what appears from the law touching the subject under consideration or having a bearing thereon, the Court, speaking through Mr. Justice Field, said: “What is termed the policy of the government with reference to any particular legislation is generally a very uncertain thing, upon which all sorts of opinions, each.varient from the'other, may be formed by different persons. It is a ground much too unstable upon which to rest the judgment of the Court in the interpretation of statutes.” And in St. Paul, M. & M. R. Co. v. Phelps, 137 U. S. 528, it is said that, where a statute is clear and free from ambiguities, the letter of it is not to be disregarded in favor of a mere presumption as to what is termed the policy of the government.
It is a principle of construction that if the meaning of a statute is doubtful, the consequences are to be considered in its construction; but, where the meaning is plain no consequences are to be regarded in the construction for that would be assuming legislative authority. 9 Bac. Abr. 255.