273 U.S. 548 (1927), 186, First National Bank of Hartford, Wisconsin v. City of Hartford

Docket Nº:No. 186
Citation:273 U.S. 548, 47 S.Ct. 462, 71 L.Ed. 767
Party Name:First National Bank of Hartford, Wisconsin v. City of Hartford
Case Date:March 21, 1927
Court:United States Supreme Court

Page 548

273 U.S. 548 (1927)

47 S.Ct. 462, 71 L.Ed. 767

First National Bank of Hartford, Wisconsin


City of Hartford

No. 186

United States Supreme Court

March 21, 1927

Argued December 13, 1926




1. Upon review of a judgment of a state court sustaining a discriminatory state tax on national bank shares upon the ground that the other moneyed capital, favored by the discrimination, was not employed in competition with the business of the national bank, this Court may review the evidence regarding such competition, and is not concluded by the finding of the state court. P. 552.

2. The validity, under Rev.Stats. § 5219, of a state tax on national bank shares at a greater rate than that assessed on other moneyed capital depends upon whether or not the moneyed capital thus favored is employed in such a manner as to bring it into substantial competition with the business of national banks. P. 552.

3. The requirement of approximate equality in taxation (R.S. § 5219) is not limited to moneyed capital invested in state banks or to competing capital employed in private banking; it applies wherever capital, substantial in amount compared with the capitalization of national banks, is employed in a business, or by private investors, in the same sort of transactions as those in which national banks engage and in the same locality in which they do business. Pp. 555-557.

Page 549

4. The amendment of § 5219, by Act of March 4, 1923, merely expressed what was previously implied, and, by its terms, excludes from "moneyed capital" only those personal investments which are not in competition with the business of national banks. P. 557.

5. Proof of competition by untaxed capital involves showing that it is employed in such investments as are open to national banks. P. 558.

6. In this case, the evidence shows substantial competition with national banks by untaxed capital in the business of making loans and selling credits and also by capital of private individuals who, as investors of surplus funds, were engaged in lending money at interest on real estate mortgages and other evidences of indebtedness normal to banking. P. 558.

7. To establish the fact of competition, it is not necessary to show that national banks and the other investors solicit the same customers for the. same loans or investments. It is enough if both engage in seeking and securing in the same locality investments of the class described which are substantial in amount. P. 559.

8. The sale of real estate mortgages and other evidences of debt acquired by way of loan or discount with a view to reinvestment is within the incidental powers of national banks. P. 559.

9. The fact that discrimination against national bank shares is not unfriendly or hostile, but is induced by the state policy of substituting income taxes for personal property taxes, does not render Rev.Stats. § 5219 inapplicable. P. 560.

187 Wis. 290 reversed.

Error to a judgment of the Supreme Court of Wisconsin in a suit brought by the bank to recover from the City of Hartford the amount of a tax assessed and collected upon shares of its stock. The court below reversed a judgment for the plaintiff and directed the trial court to enter a judgment dismissing the complaint.

Page 550

STONE, J., lead opinion

MR. JUSTICE STONE delivered the opinion of the Court.

Plaintiff in error, a national banking association doing business in Wisconsin, brought suit in the circuit court of Washington County, Wisconsin, to recover from the defendant in error, the City of Hartford, a tax assessed and paid for the year 1921 upon shares of stock [47 S.Ct. 463] in plaintiff bank on the ground that the assessment and tax were prohibited by § 5219 of the Revised Statutes of the United States (Act June 3, 1864, c. 106, 13 Stat. 99, 112; Act Feb. 10, 1868, c. 7, 15 Stat. 34). The tax having been paid under protest, a suit for its recovery, raising the legality of the assessment, is permitted by local statutes. Wis.Stat. 1923, § 74.43.

The trial court held the assessment illegal and gave judgment for the plaintiff. On appeal, the Supreme Court of Wisconsin reversed the judgment with a direction to the court below to enter judgment in favor of the defendant, dismissing the complaint. 187 Wis. 290. The case comes here on writ of error under § 237 of the Judicial Code. Merchants' National Bank v. Richmond, 256 U.S. 635, 637; First National Bank v. Anderson, 269 U.S. 341, 347.

The contention here is that the state supreme court erred in holding that these tax statutes are not repugnant to § 5219, Revised Statutes.

National banks are not merely private moneyed institutions, but agencies of the United States, created under its laws to promote its fiscal policies, and hence the banks, their property, and their shares cannot be taxed under state authority except as Congress consents, and then only in conformity with the restrictions attached to its consent.

First National Bank v. Anderson, supra, 347; Des Moines Bank v. Fairweather, 263 U.S. 103, 106. Congress,

Page 551

by appropriate legislation, has permitted the taxation of shares in national banks subject to certain restrictions. Section 5219 sanctions such taxation in the state where the bank is located, subject to the restriction that "the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state." By decisions of this Court construing this language, it is established that the phrase "other moneyed capital" does not embrace all moneyed capital not invested in bank shares, but "only that which is employed in such way as to bring it into substantial competition with the business of national banks." First National Bank v. Anderson, supra, 348. Hence, the question presented by this record is whether the tax imposed upon the shares of stock of plaintiff under the Wisconsin statutes is at a greater rate than that imposed upon other moneyed capital in the hands of individual citizens of Wisconsin employed in substantial competition with national banks.

By § 70.31 of the Wisconsin Statutes, an ad valorem tax is assessed upon all shares of banks, including national banking associations, as personal property within the assessment district in which the bank is located. Section 70.11 exempts from such taxation

all moneys or debts due or to become due to any person and all stocks and bonds, including bonds issued by any county, town, city village, school district, or other political subdivision of this state, not otherwise specially provided for.

Acting under these statutes, the taxing authorities imposed the tax now in question, but made no assessment and levied no tax upon credits or intangible property other than the shares of stock in banking corporations. The State of Wisconsin imposes a tax upon incomes including incomes derived from credits. The court below assumed, and it was not questioned upon the argument here, that this tax is not to be taken as an equivalent or

Page 552

substitute for the ad valorem tax levied upon bank shares, and no question of the possible equivalence of the two schemes of taxation is presented. From the section cited, it appears that the tax statutes of Wisconsin discriminate in favor of moneyed capital and capital investments within the state, represented by credits or intangibles, and against that invested in shares in banking corporations.

But it is not sufficient to show this discrimination alone. The validity of the tax complained of depends upon whether or not the moneyed capital in the state thus favored is employed in such a manner as to bring it into substantial competition with the business of national banks.

The question thus raised involves considerations both of fact and of law. To answer it, it is necessary to ascertain the nature and extent of the moneyed capital in the hands of individual citizens within the state and the relation of its employment, in point of competition, to the business of plaintiff and other national banks. It is necessary also to ascertain the precise meaning to be given the statute as applied to the facts in hand in order to determine whether the particular moneyed capital and the particular competition with which we are here concerned are moneyed capital and competition within the spirit and purpose of the statute. The question is thus a mixed one of law and fact, and in dealing with it we may review the facts in order correctly to apply the law. Truax v. Corrigan, 257 U.S. 312, 325; Kansas City Southern Ry. v. Albers Commission Co., 223 U.S. 573, 591; Northern P. Ry. v. North Dakota, 236 U.S. 585, 593; Jones National Bank v. Yates, 240 U.S. 541, 552-553. Cf. Merchants' National Bank v. Richmond, supra, 638. The opposite view expressed in Jenkins v. Neff, 186 U.S. 230, 235, must be considered discarded by the later cases. Also, as the case is brought here from a state court for review on the ground that a federal right there set up

Page 553

was denied, [47 S.Ct. 464] this Court is not concluded by a finding of the state court that the asserted right is without basis in fact. Aetna Life Ins. Co. v. Dunken, 266 U.S. 389, 394; Southern P. Co. v. Schuyler, 227 U.S. 601, 611.

The evidence shows that plaintiff, in...

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