Court Opinion

ID: 3593619
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:41:35.580896+00
Date Added: 2024-06-11T07:43:03.917101
License: Public Domain

If the holders of National bank shares were here opposing a State tax upon the ground that other moneyed capital coming in competition with the business of National banks had not been taxed, we would, I think, be obliged to hold that the State statute in question did tax such other capital in accordance with the provisions of section 5219 of the United States Revised Statutes, as amended in 1923. In other words, from the standpoint of the National banks it could not be claimed successfully that there was other moneyed capital coming into competition with them which was not taxed. That the State statute was so vague that other moneyed capital might escape taxation could not be pressed by the National banks.
I say this in view of my construction of the Revised Statutes as interpreted by the United States Supreme Court. The aim and purpose of Congress was to prevent an attempt upon the part of the States to give preference to State institutions and to legislate against the interests, welfare and development of National banks. In so far as the States did not make any such attempt, but honestly tried to treat all moneyed capital similarly employed in the same fashion, tax legislation of National banks was constitutional. This allowed for many inequalities. Taxation is a practical matter. Absolute equality can never be obtained. Inequalities arising because the deduction of debts was allowed in one instance and not in the other, or due to investment in exempt securities allowed in the one instance and not in the other, or from exemptions of certain capital investments due to a well-defined State policy to encourage certain classes of institutions have not brought the State taxing statutes within the condemnation of the United States Supreme Court. It seems to me as though the evil aimed at was an act which as a fact created a substantial preference for other moneyed capital, evidencing an intent to favor other persons or institutions in preference to National banks. *Page 309 
If this be true, then there will be many instances where in carrying out the State tax statute, other moneyed capital may in minor instances escape taxation. Or by the ruling of the tax officers acting in good faith, some minor part of other capital may be improperly considered as not competing when in fact it does. Such mistakes would not lead to declaring the entire tax upon National bank shares illegal. If, as a fact, the State has attempted to tax all other moneyed capital coming into competition with National banks, and there has been a substantial compliance with the act of Congress, the fact that in attempting to administer the law some immaterial portion may have escaped taxation will not relieve the banks.
Unless we adopt this view of the law we must admit that the provisions of the Revised Statute here in question can never be complied with. I do not see how it is possible for the Legislature to begin to itemize businesses and activities which would include all moneyed capital coming into competition with National banks. It could mention State banks, trust companies and individual bankers. But this would be insufficient, as there is other capital which may also come in competition with the banks. The State has recognized this, and attempted to comply with the rulings of the United States Supreme Court in this particular. It has, therefore, left it as a fact to be determined by the taxing commissioners whether from the business as carried on, the moneyed capital invested comes in competition with the activities of National banks.
And I do not agree that we have been left without a guide in this particular. The United States Supreme Court has defined the principal business of National banks and has stated what in its opinion constitutes other moneyed capital coming in competition with this business. When the Congress, therefore, in re-enacting and amending section 5219 used the words "other moneyed capital coming in competition with the business *Page 310 
of national banks," it is supposed to have adopted the meaning given to these words by the United States Supreme Court inMercantile Bank v. New York (121 U.S. 138, p. 156) for the reason that all subsequent decisions have repeated the explanation and meaning given in this case. It was there said: "The business of banking, as defined by law and custom, consists in the issue of notes payable on demand, intended to circulate as money where the banks are banks of issue; in receiving deposits payable on demand; in discounting commercial paper; making loans of money on collateral security; buying and selling bills of exchange; negotiating loans, and dealing in negotiable securities issued by the government, state and national, and municipal and other corporations. These are the operations in which the capital invested in national banks is employed, and it is the nature of that employment which constitutes it in the eye of this statute `moneyed capital.' Corporations and individuals carrying on these operations do come into competition with the business of national banks, and capital in the hands of individuals thus employed is what is intended to be described by the act of Congress." Here we have the principal business of National banks defined. Other moneyed capital which as a business is used to make money in any of these activities comes in competition with the National banks. That the National bank may subsequently in some places or under certain conditions be permitted to act as insurance broker, real estate agent, or loan money on bond and mortgage does not make the capital of every insurance broker or real estate agent or mortgage company come in competition with it within the meaning of this statute. As a fact, it may so compete in a minor degree, but it does not practically do so for the purpose of taxation. If this be not so, then Congress has done a futile thing in permitting the States to tax National bank shares as other moneyed capital is taxed. Given the privilege, it can never be *Page 311 
exercised because other moneyed capital is too uncertain of definition, and competition becomes too attenuated to take substantial form. Congress had something in mind of a practical nature. It meant that the bank shares could be taxed, provided that other moneyed capital used as a business in the way that National banks usually and customarily use their capital, is equally taxed. Provided there be a substantial compliance not an exact or a full and complete, but a substantial compliance, an honest endeavor to reach other moneyed capital so used, the tax of National bank shares is legal. (Amoskeag Savings Bank v.Purdy, 231 U.S. 373, 388; Merchants' National Bank v.Richmond, 256 U.S. 635; Des Moines Nat Bank v. Fairweather,263 U.S. 103, p. 116.)
I have reasoned from the standpoint of the National banks. We turn now to the position of the respondents in this case — the "other moneyed capital people" — who claim that the State Tax Law is unconstitutional, in that it is too vague for enforcement and that the Tax Commissioners have no proper guide by which to determine the other moneyed capital in competition with National banks. If the United States Supreme Court has furnished a sufficient plan and guide by which to determine whether other moneyed capital comes in competition with the principal business of National banks, thus declaring the National bank tax either legal or illegal, it seems to me as though the reverse of the proposition must be true, and that such plan and guide is sufficient for the States to use in determining what is other moneyed capital coming in competition, and, therefore, taxable under a like rate. A definition definite enough to avoid a tax on bank shares ought to be definite enough to impose a tax on moneyed capital. If the State Legislature in attempting to tax other moneyed capital had used the words of the decisions in stating what that other moneyed capital was, and when it came *Page 312 
in competition, would we then say that it was indefinite and unconstitutional? I think not. This in effect is what our State statute does, as section 5219 of the United States Revised Statutes must be read in the light of the decisions.
Now I recognize that the opinions of the United States Supreme Court bearing upon this matter are not hard and fast rules and that the language must be taken not only in the light of the times, but also in view of the facts presented in each particular case. My point, however, is that all these decisions seem to point to a practical and substantial endeavor to give force to the words of the Revised Statutes, that is, to permit the States to tax National bank shares, when the attempt is made in good faith, and in a substantial manner to take in all other moneyed capital in competition under a like tax. This gives room and place for some inequalities in the taxation of moneyed capital which must result in enforcement of all tax laws. So long as there be a fair and substantial compliance by the States and their officials with the Revised Statutes, these inequalities or difficulties of adjustment or misjudgments in administration cannot make the State Tax Law unconstitutional. We do well not to refine our law, whether Federal or State, to such a point that it cannot and will not work.
For these reasons I believe that the Tax Commission has the power and the right under the Constitution to determine within the definitions given by the United States Supreme Court as above stated what moneyed capital comes in competition with National banks and to tax it accordingly. There will always be questions of fact upon these matters, and perhaps questions of law which can and must be reviewed by the courts. In the main they will tax in the performance of their duties the substantial part of such capital, and the activities of National banks will not suffer from any substantial untaxed competition. On the other hand, other moneyed *Page 313 
capital will not escape its proper taxation by hiding under the skirts of National banks.
For these reasons I think all the orders appealed from should be affirmed.
CARDOZO, POUND and McLAUGHLIN, JJ., concur with HISCOCK, Ch. J.; CRANE, J., concurs in memorandum; ANDREWS and LEHMAN, JJ., dissent.
Order affirmed.