First Nat. Bank v. City of Covington

• Decision Date: 26 May 1903
• Docket Number: 2,195.
• Citation: 129 F. 792
• Parties: FIRST NAT. BANK OF COVINGTON v. CITY OF COVINGTON et al.
• Court: U.S. District Court — Eastern District of Kentucky

129 F. 792

FIRST NAT. BANK OF COVINGTON v. CITY OF COVINGTON et al.

No. 2,195.

United States Circuit Court, E.D. Kentucky.

May 26, 1903

S. D Royce, for First Nat. Bank.

F. J Hanlon, for City of Covington.

COCHRAN District Judge.

The Supreme Court of the United States, upon the appeal from the decree entered herein December 17, 1900 (103 F. 523), held that said degree was not final, but interlocutory, and hence not appealable (185 U.S. 270, 22 Sup.Ct. 645, 46 L.Ed. 906). It did so because the decree did not dispose of the entire controversy presented by the pleadings herein. That controversy involves the right of the defendants city of Covington, under the act of March 21, 1900 (Acts 1900, p.65 c. 23), to collect from complainant any taxes whatever; i.e taxes for the years after that date until the expiration of its charter, November 17, 1904, as well as taxes for the years prior thereto, since the adoption of the revenue law of 1892. A single ground is urged by complainant for nonliability on its part for taxes under said act for any period of time either before or after its passage. That ground is that in a former suit brought by it against said defendant in the circuit court of Kenton county, Ky., afterwards transferred to the circuit court of Campbell county, and appealed to the Court of Appeals of Kentucky, to enjoin the collection of city taxes from it for the year 1893 under said revenue law of 1892, it was adjudged by the two latter courts that it had an irrevocable contract with the state of Kentucky, under the Hewitt law of 1886, by which it was exempted until the expiration of its charter, November 17, 1904, from all other taxes than that provided by said law, and because thereof it was not liable for city taxes for said year 1893 under said revenue law of 1892. The opinion of the Court of Appeals rendered in said case is contained in 97 Ky. 590, 31 S.W. 1013. An additional ground is urged for nonliability on complainant's part to defendant for taxes under said act of March 21, 1900, prior to its passage, and that is that said act, in so far as it relates to taxes for that period of time, is discriminatory and repugnant to section 5219, Rev. St. U.S. (U.S. Comp. St. 1901, p. 3502). Judge Evans held that said portion of said act was invalid on this ground, and, because of this, enjoined and restrained the defendants from assessing complainant's property under said act for said years. 103 F. 523. This is as far as the decree goes. He did not determine whether complainant was liable for no taxes at all, on the ground relied on by it in support of its contention that it was not, and hence the decree leaves the controversy as to taxes after March 21, 1900, undisposed of.

The decree not being final, but interlocutory, for the reason stated, I have the power to set it aside if I think that it is wrong, and see fit to do so. But it is one thing for me to have such power, and another for it to be proper for me to exercise that power. The decree was entered by Judge Evans after due consideration of the questions involved. I am of equal rank with him, and have no appellate jurisdiction over his action. Comity requires, therefore, that I should permit it to stand, so far as it goes. In allowing it to stand on this ground, I do not mean to intimate any doubt as to the correctness of the position upon which he based it. I have simply refrained from any consideration of it, being under no necessity to do so. It is incumbent upon me, however, to dispose of so much of the controversy as relates to the taxes after March 21, 1900, which has been left undisposed of by Judge Evans. The liability of complainant for these taxes depends entirely upon the correctness of the position taken by it that it was not liable for any taxes under said act either before or after its passage, because of the adjudication hereinbefore referred to, and, if well taken, it affords an additional reason for permitting Judge Evans' action to stand.

It is certain that if I am free to determine the question whether complainant, by its acceptance of the Hewitt law in 1886, acquired an irrevocable contract from the state of Kentucky exempting it from all other taxation than that provided in said law until the expiration of its charter, on its merits I would have to hold that it did not thereby acquire such a contract. Bank Tax Cases, 102 Ky. 174, 39 S.W. 1030; Citizens Savings Bank v. Owensboro, 173 U.S. 636, 19 Sup.Ct. 530, 43 L.Ed. 840. And complainant so concedes. Its sole reliance is on the adjudication in the former suit. It claims that the question as to whether it so acquired such a contract is res judicata-- a thing adjudged-- and that it cannot now be claimed that it did not. It is certain that in said suit it was adjudged by the Campbell circuit court, and afterwards on appeal by the Court of Appeals, that such a contract had been made by the state of Kentucky with complainant, and that it was irrevocable. Both courts delivered written opinions, and both opinions are made part of complainant's bill. It is true that the Campbell circuit court also adjudged that the taxes levied by the revenue law of 1892 upon national banks were franchise taxes, and hence invalid, and that on this ground, as well as the existence of the contract, complainant was not liable for the taxes of 1893. But the latter was the main ground of its action, and such was the only ground upon which the Court of Appeals based the affirmation of its judgment.

The defendants urge several reasons why the former adjudication should not be accepted in this suit as conclusive of the existence of such an irrevocable contract in complainant's favor. They say that this suit is upon an entirely different cause of action. It is a suit to enjoin the collection of taxes for subsequent years authorized to be collected by another and subsequent act of the Legislature. This is undoubtedly true. But does this fact make any difference? I think not. It is well settled that a thing adjudged in a former suit cannot be questioned in a subsequent suit between the same parties, although the latter is upon an entirely different cause of action. In the case of Southern Pac. Ry. Co. v. U.S., 168 U.S. 48, 18 Sup.Ct. 27, 42 L.Ed. 355, Mr. Justice Harlan said:

'The general principle announced in numerous cases is that a right, question, or fact distinctly put in issue and directly determined by a court of competent jurisdiction as a ground of recovery cannot be disputed in a subsequent suit between the same parties or their privies; and, even if the second suit is for a different cause of action, the right, question, or fact once so determined must, as between the same parties or their privies, be taken as conclusively established, so long as the judgment in the first suit remains unmodified. This general rule is demanded by the very object for which civil courts have been established, which is to secure the peace and repose of society by the settlement of matters capable of judicial determination. Its enforcement is essential to the maintenance of social order, for the aid of judicial tribunals would not be invoked for the vindication of rights of persons and property if, as between parties and their privies, conclusiveness did not attend the judgment of such tribunals in respect of all matters properly put in issue and actually determined.'

This principle has been applied by the Supreme Court of the United States in cases where the two suits related to different years' taxes. City of New Orleans v. Citizens' Bank of La., 167 U.S. 371, 17 Sup.Ct. 905, 42 L.Ed. 202; Baldwin v. Maryland, 179 U.S. 220, 21 Sup.Ct. 105, 45 L.Ed. 160.

In the former case Mr. Justice White points out that:

'The argument that, because a tax of one year is a different cause of action from a tax of a subsequent year, therefore a demand for a tax of a subsequent year can never be concluded by the thing adjudged in the prior year, admits the relevancy of res adjudicata to demands for taxes, but contends that wherein there are different demands the thing adjudged has no application, although the last demand may depend upon a question which has previously been determined under the same facts and circumstances.'

To this argument he responds thus:

'The proposition that, because a suit for taxes of one year is a different demand from the suit for a tax for another, therefore res judicata cannot apply, whilst admitting in form the principle of the thing adjudged, in reality substantially denies and destroys it. The estoppel resulting from the thing adjudged does not depend upon whether there is the same demand in both cases, but exists even although there be different demands, when the question upon which the recovery of the second demand depends has, under identical circumstances and conditions, been previously concluded by a judgment between the parties or their privies. This is the elemental rule stated in the text-books, and enforced by many decisions of this court.'

To the argument that 'it would be intolerable to recognize that a judgment as to the tax of one year could be conclusive as to the tax of a subsequent year,' and that, 'as a matter of public policy and public necessity, the principles of the thing adjudged can never apply to taxation,' he responds thus:

'The argument that, as a matter of public policy, the principle of the thing adjudged should be held not to apply to controversies as to taxation, if there be merit in it, should be addressed to the lawmaking, and not to the judicial, department. But if the judicial mind could entertain the suggestion, it seems clear that it is not without real merit, In its ultimate aspect, it asserts that no question concerning government or public authority

...