Montana Nat Bank of Billings v. Yellowstone County, Mont

Decision Date09 April 1928
Docket NumberNo. 207,207
PartiesMONTANA NAT. BANK OF BILLINGS v. YELLOWSTONE COUNTY, MONT. et al
CourtU.S. Supreme Court

Messrs. Horace S. Davis, of Billings, Mont., and M. S. Gunn, of Helena, Mont., for plaintiff in error.

Mr. L. A. Foot, of Helena, Mont.,

[Argument of Counsel from page 500 intentionally omitted] for defendants in error.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

Plaintiff in error, a banking corporation organized under the laws of the United States, is engaged in a general commercial banking business in Yellowstone county, Montana. For the year 1925, an assessment for taxes was made by the assessor of Yellowstone county upon the shareholders, based upon the value of their shares of stock in the bank. The bank owned no real estate. In pursuance of the assessment, taxes were levied in the aggregate sum of $3,897.84 and demand was made for the payment of 50 per cent. of that amount, as provided by the Montana statutes. The bank paid the sum demanded under protest, claiming that the assessment and levy and the statutes of Montana under which they were made were invalid as being in conflict with Rev. Stats. § 5219 (12 USCA § 548), with certain provisions of the Constitution of Montana, and with the due process and equal protection of law clauses of the Fourteenth Amendment to the Constitution of the United States. This action was then brought by the bank in behalf of its shareholders to recover the amount of the payment. The court of first instance sustained a general demurrer to the complaint and rendered final judgment against plaintiff in error, which, upon appeal to the state Supreme Court, was affirmed. 78 Mont. 62, 252 P. 876.

Here the argument is confined to the question whether there is a violation of the restriction upon the state power of taxation contained in Rev. Stats. § 5219, that the taxation of shares of national banking associations 'shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state.' The contention that the laws of Montana, under which the assessment and levy were made, contravenue this restriction, rests upon the fact that shares of national banks were valued for assessment purposes at an amount equivalent to the value of the corporate assets, including Liberty Loan bonds and similar securities of the United States, and were taxed accordingly, while shares of state banks were not assessed or taxed at all, and the banks themselves were taxed upon the value of their assets, after excluding such bonds and similar securities.

It is clear that the state statutes, as construed by the state Supreme Court in the present case, do not produce the discrimination asserted or any discrimination in favor of the moneyed capital employed by state banks in competition with national banks. That court now holds that the provisions of the state Constitution and statutes require the state to tax the property of every state bank and also the shares to the extent that they have a value beyond that of the taxable property of the bank. In assessing and imposing taxes upon the corporations, the value of the United States securities owned by the corporations is excluded, because such securities are exempted from state taxation by the laws of the United States. But in the taxation of shares of state as well as of national banks, the value of these securities, so far as it contributes to the value of the shares, is included, because the shares are the property of the shareholders distinct from the corporate assets, which are the property of the banks. See Home Savings Bank v. Des Moines, 205 U. S. 503, 518, 27 S. Ct. 571, 51 L. Ed. 901.

If this were all, there would be no discrimination within the meaning of the federal law. But it is not all. The assessment, as actually made, clearly violated the restriction in section 5219 here relied upon, and it was made in conformity with the state statutes as construed by the state Supreme Court in the earlier case of East Helena State Bank v. Rogers, 73 Mont. 210, 236 P. 1090. In that case the requirement of the statutes, so far as it applied to state banks, was stated by the court as follows (page 217 (236 P. 1092)):

'This state had the option to tax the shares of stock in state banks to the individual shareholders, or to tax the property of such banks to the banks themselves. It could not tax both at the same time. Section 17, art. 12, Constitution of Montana. If it had chosen the first alternative, it might then have assessed the shares at their full cash value without reference to the character of the securities in which the bank's funds were invested (Van Allen v. Assessors, 3 Wall. 573, 18 L. Ed. 229; see, also, Rose's U. S. Notes); but it chose to tax the property of the banks, and must abide the consequences.'

The taxing officials, conforming to this construction of the state law, as they were bound to do, while they assessed, levied and collected the tax now under review, laid no tax whatever upon shares of state banking corporations, although, as the record shows, these shares had a very large taxable value over and above the value of the taxable property of the banks, due to the ownership by the...

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