Gully v. First Nat. Bank in Meridian

• Citation: 81 F.2d 502
• Decision Date: 18 January 1936
• Docket Number: No. 7767.,7767.
• Parties: GULLY, Tax Collector, v. FIRST NAT. BANK IN MERIDIAN.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

81 F.2d 502 (1936)

GULLY, Tax Collector, v. FIRST NAT. BANK IN MERIDIAN.

No. 7767.

Circuit Court of Appeals, Fifth Circuit.

January 18, 1936.

COPYRIGHT MATERIAL OMITTED

J. C. Floyd, of Meridian, Miss., and Marshall W. Amis, of Jackson, Miss., for appellant.

Albert S. Bozeman and R. E. Wilbourn, both of Meridian, Miss., for appellee.

Before FOSTER, SIBLEY, and WALKER, Circuit Judges.

SIBLEY, Circuit Judge.

During 1930 the First National Bank of Meridian did business in Meridian, Miss. It suspended January 13, 1931, and was put into a receiver's hands. He transferred most of the assets to the newly organized First National Bank in Meridian on June 4, 1931. The state tax collector on August 1, 1933, sued the latter bank, which we will distinguish as the new bank, for state, county, and municipal taxes for 1930, assessed on returns made by the old bank; he asserting that the new bank had agreed to pay them in its purchase of the assets of the old bank. The suit, brought in a state court, was by the new bank removed to the federal court on two grounds: That the suit arose under the laws of the United States, and that it was one for winding up the affairs of a national bank. Remand was denied. The petition was dismissed as showing no cause of action after two amendments were refused. The state tax collector appeals, assigning as error the refusal to remand, the refusal of the amendments, and the dismissal of the suit.

Each assignment requires an understanding of the allegations of the original petition. In addition to the general facts above stated, it sets forth in great detail the laws of the state and the charter powers of the city and school district involved, but makes no special mention of any law of the United States. The petition asserts that the old bank was a national banking association organized under the laws of the United States and was subject to taxation by the state, county, city, and school district where it did business; that it made a return during 1930 in its own name for state and county taxes thus: "Bank's capital stock, surplus and undivided profits less book value of real estate $540,135. Total valuation of all personal property $540,135"; and that the proper tax officers included in the assessment roll in those words that valuation of the capital, surplus, and undivided profits of said bank, and that state and county taxes at rates fixed for the year were assessed in named amounts "against said capital stock, surplus and undivided profits of the First National Bank of Meridian." Similarly it is alleged that the old bank made a report to the city tax assessor of Meridian "of the number and amount of all the shares of its capital stock paid in and of the sum of all undivided profits, surplus and accumulation of every sort excluding its real estate" upon which there was entered upon the city assessment roll this: "First National Bank, 2600 shares capital stock, $260,000; surplus and undivided profits, $313,890; (total), $573,890; less real estate, $33,700, $540,190. Total value of all personal property $540,190; total tax on same $13,504.75." This figure included city and school taxes. The allegation is made that all these taxes were due by the bank's shareholders, but the bank was by law made liable to pay them as the shareholders' agent, and might charge them to the shareholders, and had in hand until January 13, 1931, available funds belonging to the shareholders to protect it in so doing, but had failed and neglected to make payment on December 1, 1930, when payment was due, and it became thereby directly and primarily liable for the taxes. It is alleged that on January 13, 1931, the old bank "became insolvent, suspended business and was thereafter duly liquidated by a receiver appointed by the Comptroller of the Currency." The contract of sale of the assets by the receiver to the new bank is exhibited. In a preliminary "whereas" clause it recites that the new bank as part of the consideration "will assume and pay in full, with interest, the claims of all other creditors against said suspended bank, whether said claims be known or unknown, which may be duly established according to law, and in addition will assume and pay in full all expenses of the receivership of said suspended bank both accrued and to accrue." In the formal agreement which follows the language is that the new bank will, besides surrendering numerous claims held by it under a creditors' agreement supposed to be over 90 per cent. of all claims, "pay $297,888.78, representing the amount necessary to pay all receivership expenses accrued and to accrue, and to enable the receiver to pay in full with interest to the date of payment the claims of all known creditors who have not executed the aforesaid creditors' agreement * * * and the said purchaser will pay the receiver such further sums from time to time during the period of active receivership as the receiver may deem necessary to meet receivership expenses and to provide for the payment of such unlisted or unknown claims as may be established during the period of active receivership." The final allegation is that the new bank thereby became liable for these taxes and the prayer is for a personal decree.

Is this a suit arising under the laws of the United States? Although the new bank is alleged to be liable because of its contract, yet the state tax collector must and does assert also a tax claim collectible from the old bank. This in turn necessarily involves a construction and application of the laws of the United States, because the old bank was a national bank. It is thoroughly settled that a national bank is an instrumentality of the federal government, and that a state and its subdivisions are wholly without any power solely by virtue of state law to levy any tax, direct or indirect, upon such banks, their property, their franchises, or the shares of their stock. The only authority to levy any such tax comes from the laws of Congress now expressed in 12 U.S.C.A. § 548. McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579; Owensboro National Bank v. Owensboro, 173 U.S. 664, 19 S.Ct. 537, 43 L.Ed. 850; First National Bank of Gulfport v. Adams, 258 U.S. 362, 42 S.Ct. 323, 66 L. Ed. 661; Des Moines National Bank v. Fairweather, 263 U.S. 103, 44 S.Ct. 23, 68 L.Ed. 191; First National Bank of Guthrie Center v. Anderson, 269 U.S. 341, 46 S.Ct. 135, 70 L.Ed. 295; and see Domenech v. National City Bank, 294 U.S. 199, 55 S.Ct. 366, 79 L.Ed. 857. We recognize the rule that for a suit to arise under the Constitution or laws of the United States it must so appear in the allegations of the petition, and that the rule thus stated touching the original jurisdiction of the District Court is to be applied also to a removal for this cause under the present removal statute, 28 U.S.C.A. § 71. State of Tennessee v. Union & Planters' Bank, 152 U.S. 454, 14 S.Ct. 654, 38 L.Ed. 511; State of Minnesota v. Northern Securities Co., 194 U.S. 48, 24 S.Ct. 598, 48 L.Ed. 870. We recognize also the rule that it is not enough that some defense is to be asserted which arises under such Constitution or laws. Taylor v. Anderson, 234 U.S. 74, 34 S.Ct. 724, 58 L.Ed. 1218. But section 548 is not a limitation placed by the federal laws upon an antecedent right of the state to tax national banks, so as to be considered only a weapon of defense against such taxation. Both in form and in substance it is a grant of authority to state legislatures to tax such banks, limiting them, however, to one of three forms of taxation: Either of the shares, or of the dividends from them included in the shareholder's taxable income, or of the income of the bank. The last form only is a tax against the bank. As to the first two forms of taxation, the section says that where nonresidents of the state own the shares or income, taxation of them shall be where the bank is located, and "such associations shall make return of such income and pay the tax thereon as agent of such nonresident shareholders." This very plainly indicates, both as to resident and nonresident shareholders, that the tax is on the shareholder and not on the bank, which in any case may, and in case of nonresident shareholders must, act as agent of the shareholders in making return and paying the tax. The law of Mississippi, Code of 1930, § 3138, adopts the plan of taxing the shares both in state and national banks on a return to be made by the president or cashier, adding: "Each said bank and banking association shall, nevertheless, be liable to pay any...