First Nat Bank of Hartford, Wis v. City of Hartford, 186

• Decision Date: 21 March 1927
• Docket Number: No. 186,186
• Citation: 273 U.S. 548,59 A. L. R. 1,71 L.Ed. 767,47 S.Ct. 462
• Parties: FIRST NAT. BANK OF HARTFORD, WIS., v. CITY OF HARTFORD et al
• Court: U.S. Supreme Court

273 U.S. 548

47 S.Ct. 462

71 L.Ed. 767

FIRST NAT. BANK OF HARTFORD, WIS.,

v CITY OF HARTFORD et al.

No. 186.

Argued Dec. 13, 1926.

Decided March 21, 1927.

Messrs. A. W. Fairchild, George P. Miller, Edwin S. Mack, and J. Gilbert Hardgrove, all of Milwaukee, Wis., for plaintiff in error.

Messrs. E. J. Dempsey, of Oshkosh, Wis., Herman L. Ekern, of Madison, Wis., and Edward M. Smart, of Milwaukee,

[Argument of Counsel from page 549 intentionally omitted] for defendants in error.

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, Wis., to recover from the defendant in error, the city of Hartford, a tax assessed and paid for the year 1921 upon shares of stock in plaintiff bank, on the ground that the assessment and tax were prohibited by section 5219 of the Revised Statutes of the United States, being Comp. St. § 9784 (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. Stat. Wis. 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, 203 N. W. 721. The case comes here on writ of error under section 237 of the Judicial Code (Comp. St. § 1214). Marchants' National Bank v. Richmond, 256 U. S. 635, 637, 41 S. Ct. 619, 65 L. Ed. 1135; First National Bank v. Anderson, 269 U. S. 341, 347, 46 S. Ct. 135, 70 L. Ed. 295.

The contention here is that the state Supreme Court erred in holding that these tax statutes are not repugnant to section 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 (46 S. Ct. 138); Des Moines Bank v. Fairweather, 263 U. S. 103, 106, 44 S. Ct. 23, 68 L. Ed. 191. Con- gress, 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 (46 S. Ct. 138). 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 section 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 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, 42 S. Ct. 124, 66 L. Ed. 254, 27 A. L. R. 375; Kansas City Southern Ry. v. Albers Commission Co., 223 U. S. 573, 591, 32 S. Ct. 316, 56 L. Ed. 556; Northern Pac. Ry. v. North Dakota, 236 U. S. 585, 593, 35 S. Ct. 429, 59 L. Ed. 735, L. R. A. 1917F, 1148, Ann. Cas. 1916A, 1; Jones National Bank v. Yates, 240 U. S. 541, 552, 553, 36 S. Ct. 429, 60 L. Ed. 788. Cf. Merchants' National Bank v. Richmond, supra, 638 (41 S. Ct. 619). The opposite view expressed in Jenkins v. Neff, 186 U. S. 230, 235, 22 S. Ct. 905, 46 L. Ed. 1140, 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 was denied, 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, 45 S. Ct. 129, 69 L. Ed. 342; Southern Pac. Co. v. Schuyler, 227 U. S. 601, 611, 33 S. Ct. 277, 57 L. Ed. 662, 43 L. R. A. (N. S.) 901.

The evidence shows that plaintiff in the course of its business receives deposits, loans money, has a savings department, deals in exchange, buys and sells notes, government and other bonds, discounts commercial paper and acquires real estate mortgages by loan and purchase. On the trial, plaintiff called numerous witnesses, who gave testimony, uncontradicted by defendant, tending to show the nature and extent of various classes of moneyed capital in the hands of individuals in the state and the nature of its employment in competition with the business carried on by national banks. There are real estate firms engaged in lending money to individuals in the vicinity of plaintiff's banking house, the amount thus loaned amounting annually from $250,000 to $300,000. According to the testimony, the making of these loans affords the same competition to plaintiff as loans made by banks. And similar conditions obtain throughout the state. There are various individuals, copartnerships and corporations in the vicinity engaged in the business of acquiring and selling notes, bonds, mortgages and securities. Substantial capital is employed in their business. Others, having their place of business in Milwaukee and in Chicago, are engaged within the state in the business of buying and selling securities both in the vicinity of plaintiff's banking house and elsewhere, and employ capital for that purpose. Securities thus acquired and offered for sale include public utility and other forms of bonds, notes and farm mortgages. In 1921, one company alone, having its place of business in Milwaukee but doing business throughout the state, including the vicinity of plaintiff's bank, sold approximately $25,000,000 of bonds and other securities. This company is shown to be affiliated with and its stock held principally by stockholders of the First Wisconsin National Bank of Milwaukee, and to have been organized for the purpose of taking over the business of the bank in dealing in securities. Neither the capital employed in these various enterprises by individuals or corporations, so far as invested in the credits, nor the shares held by investors in such corporations are subjected to the ad valorem tax.

Upon this evidence, the trial court found that during 1921 moneyed capital in the hands individual citizens in the vicinity of plaintiff's banking house, amounting to many hundreds of thousands of dollars, which was not assessed for taxation nor taxed, was employed in a manner which brought it into competition with the business conducted by national banks, including that of plaintiff. It also found that moneyed capital to the extent of millions of dollars held by individual citizens throughout the state, and employed in a manner which brought it into competition with such banks, was similarly exempt from this taxation.

The state Supreme Court held that it was not concluded by these findings of mixed law and fact. Since the Wisconsin tax law is one of state-wide application, it took judicial notice of the general conditions within the state to which the law...