Bank of Arizona v. Howe

• Decision Date: 18 October 1923
• Docket Number: 58,60.
• Citation: 293 F. 600
• Parties: BANK OF ARIZONA et al. v. HOWE et al. (two cases).
• Court: U.S. District Court — District of Arizona

293 F. 600

BANK OF ARIZONA et al. v. HOWE et al. (two cases).

Nos. 58, 60.

United States District Court, D. Arizona.

October 18, 1923

Alpheus B. Favour and Arthur G. Baker, both of Prescott, Ariz., for complainants.

John W Murphy, Atty. Gen., of State of Arizona, Alexander B. Baker of Phoenix, Ariz., and Robert McMurchie, of Prescott, Ariz for defendants.

JACOBS District Judge.

The complainant, the Bank of Arizona, is a corporation organized under the laws of the state of Arizona, doing a banking business in the town of Prescott, in Yavapai county, Ariz and the defendants Charles R. Howe, Frank H. Luke, and E. A. Hughes are members of and constitute the tax commission and board of equalization of the state of Arizona, and the defendants C. E. Gentry, F. E. Smith, and John L. Sullivan were, at the time of the commencement of this suit, respectively, county assessor, county treasurer and ex officio tax collector, and the county attorney of Yavapai county, state of Arizona. Prior to the year 1921, it had been the custom of the county assessor of Yavapai county to levy an assessment of taxes against the property of the banking institutions of the county, including the complainant, for state, county, municipal, and school district purposes, on a valuation based upon the capital stock, surplus, and undivided profits on hand on the last day of the year preceding that for which the tax was levied.

On the 1st day of February, 1921, the complainant verified and returned to the assessor of Yavapai county its statement of taxable property, which showed capital stock $50,000, surplus $250,000, and undivided profits none, making a total of $300,000. Included in this surplus of $250,000 was a valuation on the real estate of plaintiff, fixed at $55,102.30. It also showed a fund reserved to cover possible losses carried in cashier's checks, amounting to $6,423.22. The county assessor increased the valuation of complainant's real estate $16,302.00, which raised the value of the real estate to $71,405.30, and which increased the valuation of complainant's property to the sum of $322,725.92 for the year 1921.

In the year 1922 the complainant caused to be verified and returned to the assessor of Yavapai county its statement of all taxable property for that year, showing capital $50,000, surplus $250,000 (which included a valuation of its real estate, furniture, and fixtures of $56,021.63), undivided profits none. It also showed a fund reserved to cover possible losses from bad loans carried in cashier's checks amounting to $19,203.08. The assessor raised the valuation on the real estate and personal property $15,383, and assessed plaintiff's property for the year 1922 at $315,383. The assessor did not fix the valuation of complainant's property for the year 1921, but fixed the valuation of its property in the year 1922 in accordance with complainant's return, after increasing the valuation on its real estate and personal property as above indicated, and after completing the assessment roll delivered the same to the clerk of the board of supervisors of said county, thereafter to be considered and passed upon by the board of supervisors, sitting as a county board of equalization, and the same was returned to the board of supervisors, and thereafter the clerk of said board made and filed with the state tax commission and board of equalization an abstract of said assessment roll, as required by law.

In Yavapai county there are seven banks-- the Prescott State Bank at Prescott, the Yavapai Savings Bank at Prescott, Campe Verde State Bank at Camp Verde, Mayer State Bank at Mayer, Commercial Trust & Savings Bank at Prescott, the Bank of Jerome at Jerome, and the Bank of Arizona, the complainant, at Prescott, Ariz. On March 18, 1921, defendant Arizona State Tax Commission issued a written order to the defendant C. E. Gentry, county assessor of Yavapai county, as follows:

'Dear Sir: After consideration of the annual bank statements, the commission has fixed the valuation of the following banks in your county by adding together capital stock, surplus and undivided profits:

Name. Address. Valuation.

Prescott State Bank .......... Prescott $391,208.92

Yavapai County Savings Bank .. Prescott 158,168.11

Camp Verde State Bank ........ Camp Verde 36,968.07

Mayer State Bank ............. Mayer 30,412.26 'In making the assessments on the above banks, you will bear in mind that you are to add to the above valuation the difference between the valuation of the real estate, improvements, and personal property as found by you and the valuations of these items as shown by the bank's statement, where such valuation is carried at less than the real market value. The commission has found the following valuations by capitalizing the average annual net income for a period of five years at 12 1/2 per cent.:

Name. Address. Valuation.

The Bank of Arizona .............. Prescott $452.506.61

Commercial Trust & Savings Bank .. Prescott 166,606.51

The Bank of Jerome ............... Jerome 113,662.54

'When your valuation, after deducting the valuation of real estate, improvements, and personal property at its real market value, exceeds the valuation as found by the commission, you will in every such case use your own valuation for the assessment of the banks in your county. Kindly advise your valuation covering real estate, improvements, and personal property of each bank in your county.

'Very truly yours, Clarence L. Standage, Secretary State Tax Commission.'

In accordance with these instructions, the assessor applied the method of fixing valuation as directed to the first four banks mentioned in the order by adding capital stock, surplus, and undivided profits, and applied the other or different method as directed, and assessed the three remaining banks, including complainant, at the valuation set out in said order, by capitalizing the average annual net income for a period of five years at 12 1/2 per cent., as follows: The Bank of Arizona, complainant, $452,505. The tax directed to be levied by the state board of equalization and as actually entered upon the tax books of the county by the county assessor for the year 1921 amounted to the sum of $12,372.60, and the tax levied against the complainant for the year 1922 amounted to the sum of $8,893.02 based upon a valuation of $396,742.

The complainant then protested and objected to the said pretended valuation of its property as being wrongful, excessive, unlawful, inequitable, unjust, arbitrary, illegal, fraudulent, discriminative, and unconstitutional, and protested and objected that the said pretended valuation was not the cash value, and was not the cash value determined by a uniform method followed in finding the cash value of other banks of the same class, and followed also by the said county assessor in determining the cash value of complainant's property, but that said valuation was wholly illegal and excessive, and determined not as cash value, but by applying and following a wholly different, illegal, unconstitutional, and discriminatory method of valuation, systematically applied to complainant, and not to other banks as a class, and resulting in an increased valuation far in excess of the full cash value. This protest was disregarded by the board and no evidence taken to determine actual cash value.

After said assessment for the year 1921 was made as aforesaid, complainant filed its bill in equity in this court, which appears upon the docket as E-58, in which complainant contends that the pretended valuation of its property as ordered and made by the board of equalization and extended on the county assessment roll was wrongful, unlawful, unconstitutional, excessive, discriminative, and arbitrarily made, and made in contravention and in violation of the requirements of the Constitution and laws of the state of Arizona, and that it deprived complainant of its property without due process of law and the equal protection of the laws, and was in violation and contravention of the Fifth and Fourteenth Amendments to the Constitution of the United States, and asked for an injunction restraining defendants from enforcing collection of the taxes. After assessment of complainant's property for the year 1922 in accordance with the order of the tax commission, complainant filed its bill in equity, which is entered on the docket as E-60, raising the same questions as to the taxes of 1922 as were set forth and contained in the bill of complaint in E-58, and asked for an injunction restraining the collection of the taxes.

Temporary restraining orders were issued in each of these cases, restraining the defendants, their successors, deputies, agents, assistants, etc., from in any way or manner listing or entering upon the delinquent tax lists or back-tax books of the county any taxes for said years 1921 and 1922 as assessed by said defendant, or from in any way or manner attempting to enforce or collect any of said taxes against complainant or its property. In case E-58, complainant made a tender of $8,822.90, and deposited this sum in this court to be paid to the county treasurer in full payment of its taxes for the year 1921, and tendered and deposited in this court the sum of $5,561.13 to be paid to the said county treasurer in full payment of its taxes for the year 1922.

In each of these cases, the defendants appeared and moved the court to dismiss the bill, on the grounds that the court had no jurisdiction of the subject-matter; that the jurisdictional amount of $3,000 was not involved; that there was no diversity of citizenship between the plaintiff and the defendants; that no federal question was involved; that complainant had adequate remedy at law; that there was an improper...