First Nat Bank of Aberdeen v. County of Chehalis

Decision Date12 April 1897
Docket NumberNo. 38,38
Citation166 U.S. 440,41 L.Ed. 1069,17 S.Ct. 629
PartiesFIRST NAT. BANK OF ABERDEEN v. COUNTY OF CHEHALIS et al
CourtU.S. Supreme Court

The first National Bank of the city of Aberdeen, state of Washington, a banking corporation organized under the national banking laws of the United States, filed its complaint in the superior court of the said state for the county of Chehalis, May 16, 1892, against the county of Chehalis and J. M. Carter, as ex officio tax collector of the county, seeking to enjoin the defendants from levying upon the safes, time locks, and other personal property of the complainant for the purpose of collecting a tax upon the shares of its capital stock. The defendants demurred to the complaint, and, the demurrer having been sustained, and the complainant having refused to amend its complaint, judgment was entered in the said court September 13, 1892, in favor of the defendants. The complainant took the case upon writ of error to the supreme court of the state, where the judgment was affirmed. 6 Wash. 64, 32 Pac. 1051. The complainant then sued out a writ of error bringing the case here.

The essential allegations of the complaint were that the capital stock of the bank consisted of 500 shares of $100 each; that all of the stock was paid up, and was owned in part by citizens of the state of Washington, resident therein, and in part by citizens of the United States residing outside of the state; that the assessor of the said county was charged, under the provisions of an act of the legislature of the said state approved March 9, 1894, entitled 'An act to provide for the assessment and collection of taxes in the state of Washington and declaring an emergency,' with the duty of preparing an assessment roll of all the property subject to taxation in the said county, as owned and there subject to taxation on April 1, 1891; that thereupon the assessor proceeded to make out an assessment roll, wherein he listed to the complainant, as owner thereof, all of its capital stock, and, though informed by the complainant of the residence of each of the stockholders, and of the amount of stock held by each of them on April 1, 1891, assessed the capital stock in solido to the complainant as owner thereof, at a total valuation of $50,000; that upon the said assessment the defendant Carter, as treasurer, was officially directed to collect from the complainant a tax in the amount of $686.25; that, the tax not having been paid, the said defendant, as treasurer, on March 1, 1892, declared the same delinquent, and added thereto a certain sum by way of penalty for nonpayment, and a certain sum as interest, and was about to proceed to collect the total amount, being $787.22, by levying upon the safes, time locks, and other property used by the bank, and that, if he were permitted so to do, the complainant would suffer irreparable injury; that on April 1, 1891, there existed in the said county moneyed capital, other than that invested in shares of stock of national banks and banking business, owned by citizens of the state resident in that county, and there invested in loans and securities owing by other citizens of the state residing in the county, exceeding the sum of $237,400; that there existed in the state moneyed capital owned by citizens of the state who were residents of other counties thereof (aside from the capital invested in banks and banking business), invested in loans and securities owing by citizens of the state residing in counties other than the county aforesaid, exceeding the sum of $14,000,000; that the total capitalization of national banks located in the state was the sum of $7,000,000, and the total capitalization of banks there located, incorporated under the laws of the state, the sum of $4,000,000; that large amounts of moneyed capital were invested in the state, by residents thereof, in the stocks and bonds of insurance, wharf, and gas companies, which amounts, together with all the moneyed capital above mentioned, made an aggregate of at least $26,000,000; that these facts were well known to the several assessors and other taxing officers throughout the state, but that the moneyed capital referred to, other than the said capital of the national and state banks, was purposely omitted from assessment and taxation in pursuance of an agreement entered into before April 1, 1891, between the assessors of the several counties, based upon an opinion rendered by the attorney general of the state, advising such omission; that this omission necessarily operated as a discrimination in favor of the other moneyed capital in the hands of individual citizens of the state and against shares of stock of the national banking corporations located within the state, and necessarily resulted in the taxation of the shares of the national banks at a greater rate than other moneyed capital in the hands of the individual citizens of the state.

James B. Howe, for plaintiff in error.

James A. Haight, for defendants in error.

Mr. Justice SHIRAS, after stating the facts in the foregoing language, delivered the opinion of the court.

It is contended on behalf of the plaintiff in error that an assessment and taxation of all the shares of the stock of a national bank in solido to the bank direct, as owner thereof, constitutes a tax upon the bank, forbidden by section 5219 of the Revised Statutes of the United States.

The tax in question was assessed under section 21 of an act of the legislature of the state of Washington approved March 9, 1891 (Laws Wash. 1891, pp. 280-289), in the following terms:

'Every individual, firm, corporation or association of persons, carrying on a general banking business in this state, whether the same has been organized under the banking laws of this state or the United States, or conducted under the style of private bankers, shall be assessed and taxed in the county, town, city or village where such bank or banking association is located, and not elsewhere, in the following manner: Annually, at such times as provided for listing property for taxation, any such bank or banking association as contemplated in this section shall, by its accounting officer, furnish the county or city assessor a statement, verified by oath, giving the amount of paid-up capital stock, the amount of surplus or reserved fund and the amount of undivided profits of such bank or banking association. The aggregate amount of capital, surplus and undivided profits shall be assessed and taxed as other like property in the state is assessed and taxed: provided, at the time of listing the captial stock, the amount and description of its legally authorized investments in real estate shall be assessed and taxed as other real estate is assessed and taxed under this act, and the assessors shall deduct the amount of such investments in real estate from the aggregate amount of such capital, surplus and undivided profits, and the remainder then taxed as above provided.'

If this section stood alone, there might be ground for the contention that it contemplates taxation of the capital of the bank. But section 23 of the statute provides that 'each bank and banking association shall be liable to pay any taxes assessed against them as the agent of each of its shareholders, owners, or owner under the provisions of this act, and may pay the same out of their individual profit account or charge the same to their expense account, or to the accounts of such shareholders, owners or owner in proportion to their ownership.'

This supreme court of Washington held in this case that these two sections are to be read together, and that, so read, their provisions are not inconsistent with those of the federal statute.

That the two sections of the state law should be read together is obviously proper, and, at any rate, we are bound by the judgment of the supreme court of the state in the mere matter of the construction of that law.

In the holding that the state law, in the provisions under consideration, was not in contravention of the federal statute, the supreme court of Washington claimed to follow the case of National Bank v. Com., 9 Wall. 353; and we agree with that court in thinking that the case referred to is decisive of the contention now made. In that case it appeared that a statute of the state of Kentucky provided that a tax should be laid on 'the bank stock or stock in any moneyed corporation of loan or discount, fifty cents on each share thereof equal to one hundred dollars, or on each one hundred dollars of stock therein owned by individuals, corporations or societies'; and further provided that 'the cashier of a bank whose stock is taxed shall, on the first day of July in each year, pay into the treasury the amount of tax due. If such tax be not paid, the cashier and his sureties shall be liable for the same and twenty per cent. upon the amount.'

It was claimed by the bank that the shares of the stock were the property of the individual stockholders, and that the bank could not be made responsible for tax levied on those shares, and could not be compelled to collect and pay such tax to the state. In delivering the opinion of the court, Mr. Justice Miller said:

'It is stongly urged that it is to be deemed a tax on the capital of the bank, because the law requires the officers of the bank to pay this tax on the shares of its stockholders. Whether the state has the right to do this we will presently consider, but the fact that it has attempted to do it does not prove that the tax is anything else than a tax on these shares. It has been the practice of many of the states for a long time to require of their corporations thus to pay the tax levied on their shareholders. It is the common, if not the only, mode of doing this in all the New England states, and in several of them the portion of this tax which should properly go as the shareholder's contribution to local or municipal taxation is thus collected by the state of the bank, and paid...

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