Brotherhood Co-Op. Nat. Bank v. Hurlburt

• Decision Date: 18 June 1928
• Docket Number: No. E-8911.,E-8911.
• Citation: 26 F.2d 957
• Parties: BROTHERHOOD CO-OP. NAT. BANK et al. v. HURLBURT, Sheriff and Tax Collector.
• Court: U.S. District Court — District of Oregon

26 F.2d 957 (1928)

BROTHERHOOD CO-OP. NAT. BANK et al. v. HURLBURT, Sheriff and Tax Collector.

No. E-8911.

District Court, D. Oregon.

June 18, 1928.

Sidney J. Graham and J. O. Stearns, Jr., both of Portland, Or., for plaintiffs.

George Mowry, Deputy Dist. Atty., of Portland, Or., for defendant.

BEAN, District Judge.

This suit is brought by various national banks located in Portland to enjoin the tax collector of Multnomah county from collecting taxes levied against shares of stock in their banks as of March 1, 1926, on the ground that such taxes are in violation of section 5219 of the federal statute (12 USCA § 548).

The applicable law has been clearly established. National banks are agencies of the general government, and neither their property nor their shares of stock can be taxed by a state without the consent of Congress, and then only in conformity to such restrictions as it may impose. Des Moines Nat. Bank v. Fairweather, 263 U. S. 103, 44 S. Ct. 23, 68 L. Ed. 191; Brotherhood Nat. Bank v. Hurlburt (D. C.) 21 F.(2d) 85.

Congress by appropriate legislation has permitted the taxation by the state of shares of national banks, subject to the restriction that "the tax imposed shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state coming into competition with the business of national banks: Provided, that bonds, notes, or other evidences of indebtedness in the hands of individual citizens not employed or engaged in the banking or investment business and representing merely personal investments not made in competition with such business, shall not be deemed moneyed capital within the meaning of this section." Section 5219, R. S. (12 USCA § 548).

The proviso in the section referred to has been held by the Supreme Court to be nothing more than a legislative declaration of a rule prevailing prior to its enactment (Bank v. Hartford, 273 U. S. 558, 47 S. Ct. 462, 71 L. Ed. 767), and while the restriction does not include moneyed capital representing mere personal investment of individual citizens not employed in substantial competition with the business of national banks, it does embrace that which "is employed, substantially as in the loan and investment features of banking, in making investments, by way of loan, discount, or otherwise, in notes, bonds, or other securities with a view to sale or repayment and reinvestment." Bank v. Anderson, 269 U. S. 348, 46 S. Ct. 138, 70 L. Ed. 295. Or, as said by the court in Bank v. Hartford, supra: "Section 5219 is violated wherever capital, substantial in amount when compared with the capitalization of national banks, is employed either 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." And in Minnesota v. Bank, 273 U. S. 567, 47 S. Ct. 470, 71 L. Ed. 774, it "may arise either from the employment of capital invested in a business, even though the competition be with some but not all phases of the business of national banks, or it may arise from the employment of capital invested by institutions or individuals in particular operations or investments like those of national banks."

The aggregate capital, surplus, and undivided profits of the plaintiff banks, March 1, 1926, was approximately $12,000,000. In compliance with the state law (section 4252, Oregon Laws) they each furnished the assessor of Multnomah county a verified statement showing as of that date the amount and number of shares of its capital stock, its surplus and undivided profits, and the amount of real estate owned by it. The assessor, as required by law (section 4253) deducted the value of such real estate from the capital, surplus, and undivided profits, and took the remainder as the valuation of the shares of stock, and assessed them accordingly.

At the time this assessment was made the plaintiff banks owned notes secured by recorded real estate mortgages amounting to approximately $1,000,000, and bonds and stocks and other securities, other than United States bonds and securities, of approximately $15,000,000. By a law of the state notes secured by recorded real estate mortgages and bonds issued for highway purposes are especially exempted from taxation. Laws 1925, p. 485; Laws 1921, p. 688. And by long-continued and systematic practice of the assessor of Multnomah county, and the other counties of the state, bonds of all kinds, although many of them are by law taxable (section 4234, Or. Laws), were intentionally and purposely omitted from the assessment roll. It thus appears that moneyed capital invested in notes secured by recorded real estate mortgages, and in bonds, is either exempt from taxation by law, or intentionally omitted from the assessment rolls and pays no taxes.

During the year ending March 1, 1926, there were recorded in Multnomah county real estate mortgages securing promissory notes amounting in the aggregate to approximately $60,000,000, and on March 1st of that year there was of record such mortgages securing at least $90,000,000 held by residents of Oregon, principally of Multnomah county. There had been issued by the state and were outstanding on March 1, 1926, approximately $34,000,000 highway bonds, which were owned largely by citizens of the county and state, and in addition at least from $75,000,000 to $100,000,000 in corporate and municipal bonds had been purchased and sold during the year by local concerns, a large portion of which were sold to and owned by citizens of the state and county. The moneyed capital invested in these securities was...