231 U.S. 120 (1913), 29, Clement National Bank v. Vermont
|Docket Nº:||No. 29|
|Citation:||231 U.S. 120, 34 S.Ct. 31, 58 L.Ed. 147|
|Party Name:||Clement National Bank v. Vermont|
|Case Date:||November 10, 1913|
|Court:||United States Supreme Court|
Argued April 28, 29, 1913
ERROR TO THE SUPREME COURT
OF THE STATE OF VERMONT
A tax upon deposits in a national bank to be paid by the depositors held in this case not to be a tax upon the franchise of the bank.
An interpretation by the state court of a state statute is controlling on this Court, and this Court determines whether the statute as so delimited conflicts with federal law.
The National Bank Act does not withdraw credits of depositors in national banks from the taxing power of the state.
Under its broad powers of classification for taxation, a state may classify depositors in national banks so long as the tax is not essentially inimical to such banks in frustrating the purpose of the legislation or impairing their efficiency as federal agencies.
The object of § 5219, Rev.Stat., is to prevent hostile discrimination against national banks, and a state tax, to be in conflict therewith, must constitute such a discrimination.
A provision in a statute permitting a bank to stipulate with the state to pay the taxes on deposits and thereby relieve its depositors from making returns does not place the bank under duress.
This Court finds no basis for the charge of injurious discrimination against national banks in § 815 of Chapter 37 of the Public Statutes of Vermont.
While a national bank can only transact such business as the federal statutes permit, it may, under its incidental powers, make reasonable business agreements in regard to its deposits, including the payment
of state taxes thereon pursuant to the laws of the state in which it is located. Such an agreement is not ultra vires.
A state may provide for garnishment or trustee process to collect a valid tax, and may constitute a bank it agent to collect the tax from its depositors.
A state tax on interest-bearing deposits in national banks does not deny equal protection of the law on account of exemptions which it is within the power of the state to allow or on account of the exemption of noninterest-bearing accounts. The classification is reasonable.
A state tax of a specified percent on deposits in national banks paid by the bank under agreement with the state pursuant to statute and which is otherwise valid does not amount to denial of due process of law because the depositor had no notice in advance of the assessment where, as in this case, the tax was recoverable by suit in which the depositor would have full opportunity to resist any illegal demand.
A lawful state tax on deposits in bank is imposed in the exercise of a power subject to which deposits are made, and does not impair the contract obligation of the bank to the depositors by requiring the bank to act as agent in collecting it. North Missouri R. Co. v. Maguire, 20 Wall. 46.
84 Vt. 167 affirmed.
The facts, which involve the legality of a statute of Vermont imposing a tax on deposits in national banks, are stated in the opinion.
HUGHES, J., lead opinion
MR. JUSTICE HUGHES delivered the opinion of the Court.
The judgment under review awarded a recovery in favor of the State of Vermont against the plaintiff in error, the Clement National Bank, upon an agreement which the bank had made pursuant to § 815 of Chapter 37 of the Public Statutes of Vermont, entitled, "Taxation of National Bank Deposits," originally enacted as No. 41 of the Acts of 1906. The chapter is set forth [34 S.Ct. 32] in the margin.1 The federal questions relate to the validity of the
bank's stipulation in view of the scheme of taxation which induced the making of it.
The plaintiff in error was organized under the federal
statutes, and does business at Rutland, Vermont. For several years, it has maintained a "savings department," allowing depositors therein interest at a rate exceeding
two percent per annum, payable on the first days of January and July in each year on deposits remaining in bank on those days. Certain other depositors have received certificates of deposit with interest at the rate of three percent per annum for each calendar month that the deposit continued. Prior to the year 1906, depositors in national banks in Vermont, whether or not their deposits bore interest, were taxable at the local tax rate, in the districts in which they resided, in common with other owners of credits (or debts due from solvent debtors) under the general plan of local taxation. Pub.Stat. (Vt.) 1894 ed. §§ 374, 398, 399. Depositors in savings banks and trust companies organized under the laws of the state had long been exempt from all taxation upon their deposits to a specified extent (at first $1,500, and later $2,000 in any one institution), these organizations being subject to a state tax of seven-tenths of one percent
per annum, computed upon the average amount of deposits; in this computation, deposits in excess of the above-stated limit were deducted, and upon these the depositors were taxable locally. Pub.Stat. (Vt.) 1894 ed. §§ 582-584; Acts of 1902, No. 20, § 41; Acts of 1906, No. 28, § 1; Pub.Stat. 1906 ed. §§ 744-746.
This system being continued as to the [34 S.Ct. 33] state institutions and the depositors therein, the General Assembly passed the statute in question, which provides for a state tax on interest-bearing deposits in national banks (where the interest exceeds two percent per annum) of seven-twentieths of one percent semiannually. Persons having deposits of this sort, unless specially excepted (§ 819), are required to report them at specified periods (§§ 804-806) and to pay the tax without deduction on account of any exemption (§ 809). No other tax is to "be assessed on such deposits in national banks, nor against the depositors on account thereof" (§ 810).
It is further provided that, if a national bank so elects, it may pay to the state all the prescribed taxes, and deduct them from the interest or deposits of the persons from whom they became due (§ 814). On such election, the bank is, semiannually, to file with the state commissioner a stipulation to that effect; no depositor is required to make returns for the period covered by the stipulation (§ 815); the state commissioner is to issue to the bank a certificate showing that it has been filed (§ 816), and the statute provides that, upon such filing, the bank shall "become liable to the state for the amount of such tax of seven-twentieths of one percent of the average amount of such deposits" held by the bank during the six months to which the stipulation refers (§ 817).
This suit was brought by the state upon the following stipulation, which was filed by the plaintiff in error, on October 1, 1908, the returns and payment therein specified not having been made:
STATE OF VERMONT:
The Clement National Bank, whose banking [34 S.Ct. 34] house is located at Rutland, in the State of Vermont, for the consideration hereinafter named, hereby stipulates and agrees with the State of Vermont that, on or before the 30th day of April, 1909, it will make sworn returns to the state treasurer and commissioner of state taxes, showing the average amount of all deposits held by it during the six months beginning with the first day of October, 1908, whereon the rate of interest paid or allowed by said bank to the depositors thereof exceeds two percent per annum, and that, on or before the thirtieth day of April, 1909, it will pay to the state treasurer a tax of seven-twentieths of one percent of the average amount of all such deposits so held by it.
This stipulation is made and is to be filed with said commissioner in consideration and for the purpose of carrying out the provisions of the statutes of Vermont which provide that, upon the making and filing hereof, as aforesaid, no depositor having an interest-bearing deposit or deposits in said bank, whereon the rate of interest paid or allowed by said bank exceeds two percent per annum, shall be required, on or before the twentieth day of October, 1908, to make returns to the state treasurer and commissioner of state taxes, showing the amount of such deposit or deposits in said bank on the first day of October, 1908, and that no such depositor shall be required to pay to the state treasurer,
on or before the thirtieth day of November, 1908, a tax of seven-twentieths of one percent of the amount of such interest-bearing deposit or deposits so held by said bank on the first day of October, 1908.
This stipulation is also made and is to be filed as aforesaid for the purpose of obtaining from said commissioner, as the law provides, a certificate in duplicate, setting forth that the same has been filed, and of showing that said bank has elected to pay and will pay to the state treasurer on or before the thirtieth day of April, 1909, a tax of seven-twentieths of one percent of the average amount of all such deposits held by said bank during the six months beginning with the first day of October, 1908, on account of which the depositors thereof shall be by said bank paid or allowed interest exceeding the rate of two percent per annum.
In witness whereof said bank has, on this thirtieth day of September, 1908 at Rutland, in the State of Vermont, caused its corporate name to be hereunto affixed by its cashier, duly empowered so to do by vote of said bank.
CLEMENT NATIONAL BANK
by C. H. HARRISON, Cashier
Endorsed: Received October 1, 1908, J. E. Cushman, Commissioner of State Taxes.
The case was tried upon an agreed statement of facts. It appeared that the state commissioner issued to the bank his certificate, which was conspicuously posted in its banking room, that the stipulation had been filed, and that therefore depositors having deposits upon which the rate of interest exceeded two...
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