Buder v. First Nat. Bank in St. Louis

• Decision Date: 04 January 1927
• Docket Number: No. 7309.,7309.
• Parties: BUDER, Assessor, et al. v. FIRST NAT. BANK IN ST. LOUIS et al.
• Court: U.S. Court of Appeals — Eighth Circuit

16 F.2d 990 (1927)

BUDER, Assessor, et al. v. FIRST NAT. BANK IN ST. LOUIS et al.

No. 7309.

Circuit Court of Appeals, Eighth Circuit.

January 4, 1927.

James T. Blair and O. J. Mudd, both of St. Louis, Mo. (Edward W. Foristel and Foristel, Mudd, Hezel & Habenicht, all of St. Louis, Mo., on the brief), for appellants.

Charles P. Williams, of St. Louis, Mo. (Bates, Williams & Baron, of St. Louis, Mo., on the brief), as Special Counsel for St. Louis Board of Education, and for appellants.

Julius T. Muench, City Counselor, and Oliver Senti, First Associate City Counselor, both of St. Louis, Mo., for appellant Buder.

North T. Gentry, Atty. Gen., and James A. Potter, Asst. Atty. Gen., for appellants.

Rhodes E. Cave, of St. Louis, Mo. (T. S. McPheeters, P. Taylor Bryan, Frank Sullivan, Sam B. Jeffries, Bryan, Williams & Cave, and Jones, Hocker, Sullivan & Angert, all of St. Louis, Mo., on the brief), for appellees.

Before BOOTH, Circuit Judge, and PHILLIPS and SANBORN, District Judges.

JOHN B. SANBORN, District Judge.

This is a suit in equity, brought by the First National Bank in St. Louis and Joseph D. Bascom, one of its stockholders, as plaintiffs (appellees), against the defendants (appellants), the taxing officers of the city of St. Louis, Mo. Its purpose is to enjoin the enforcement of ad valorem taxes assessed against the shares of stock of the bank as of June 1, 1923, for the year 1924, pursuant to section 12775 of the Revised Statutes of Missouri 1919.

Prior to the Act of Congress of March 4, 1923 (chapter 267, 42 Stat. 1499 Comp. St. § 9784), amending section 5219 of the Revised Statutes of the United States, the statute of Missouri above referred to, which had been in force since 1889 and which provided for the taxation of national bank shares upon an ad valorem basis, was admittedly valid and operative. The act of 1923 enlarged the scope of the power of the state to tax national banks. It gave authority to the state to tax either the shares of stock — as it had been doing — to include dividends therefrom in taxable income of the shareholder, or to tax the income of the bank itself, and contained this provision:

"The imposition by said state of any one of the above three forms of taxation shall be in lieu of the others."

In 1917, Missouri had enacted an Income Tax Law (sections 13106 to 13136 of the Revised Statutes of Missouri 1919), which has been in force since that time. It did not, by its terms, except from its operation income derived from national bank shares. The question as to whether it applied to such income has not been determined by the Supreme Court of the state. Taxes upon dividends from such shares were levied and collected. After the amendment to section 5219 on March 4, 1923, the taxing authorities of the state took the usual steps to collect the ad valorem tax on the bank shares as theretofore, and also to collect the income tax.

The plaintiff Bascom had included in his return for each of the years 1922 and 1923 his income from his shares in the bank, and had paid the tax provided by the income tax law. When the taxing officers assessed the ad valorem taxes against the shares under section 12775 and delivered the tax bill to the collector, Bascom and the bank brought this suit. The court below entered its decree granting a permanent injunction against the enforcement and collection of such taxes (8 F.2d 883), from which this appeal is taken.

The court was of the opinion that, after the enactment of the amendment to section 5219, there were in effect in the state of Missouri two methods of taxing the shares of national banks, (1) the ad valorem tax, and (2) the income tax upon the dividends derived by the holders from those shares; that the Act of Congress of 1923 permitted either of those methods, but not both; that, inasmuch as both could not be valid, and there having been no election by the Legislature as to which should be operative, they mutually canceled each other; that therefore there was no law relating to the taxing of national banks in the state of Missouri from March 4, 1923, until the 18th day of April, 1925, when the state Legislature passed an act (page 372, Laws of Missouri 1925) adopting the method of taxing national banks provided by section 12775, ratifying the action of the state tax commission taken in 1924, which directed the omission from the returns of taxable income, of dividends on national bank shares, and the assessment of taxes under section 12775, and invalidating assessments of taxes upon national banks or their shares theretofore levied otherwise than in accordance with the provisions of that section.

The defendants give various reasons for upholding the assessment in question.

The urge the unconstitutionality of section 5219 and the amendment of 1923. We think it is now too late to attempt to overturn the well-settled doctrine that national banks are instrumentalities of the United States, subject to its paramount authority, and taxable by the states only to the extent and in the manner expressly permitted by Congress. McCulloch v. Maryland, 4 Wheat. 316, 4 L. Ed. 579; Osborn v. Bank of U. S., 9 Wheat. 738, 6 L. Ed. 204; Van Allen v. Assessors, 3 Wall. 573, 18 L. Ed. 229; Lionberger v. Rowse, 9 Wall. 468, 19 L. Ed. 721; People v. Weaver, 100 U. S. 539, 25 L. Ed. 705; Davis v. Elmira Savings Bank, 161 U. S. 283, 16 S. Ct. 502, 40 L. Ed. 700; Owensboro Nat. Bank v. Owensboro, 173 U. S. 664, 19 S. Ct. 537, 43 L. Ed. 850; First Nat. Bank of Gulfport v. Adams, 258 U. S. 362, 42 S. Ct. 323, 66 L. Ed. 661; Bank of California v. Richardson, 248 U. S. 476, 39 S. Ct. 165, 63 L. Ed. 372; Des Moines Nat. Bank v. Fairweather, 263 U. S. 103, 44 S. Ct. 23, 68 L. Ed. 191; First Nat. Bank of Guthrie Center v. Anderson, 46 S. Ct. 336, 70 L. Ed. 295.

It is also claimed that the taxing officers of Missouri made an election for the state, immediately after the amendment to section 5219, to assess taxes under section 12775. The facts do not bear out this contention. The officers proceeded as formerly and levied both kinds of taxes. The fact that the ad valorem tax was first assessed did not constitute an election, even if the officers were empowered to make one, which they clearly were not, having no legislative power.

It is also claimed that the Legislature of Missouri, by the act of 1925, making a choice of methods of taxation of national banks and attempting to confirm the assessment of the ad valorem tax for 1924, made that tax valid during the period in question. While the Legislature could and did make an effective choice for the future, it is obvious that, if there was no law providing for an ad valorem tax from March 4, 1923, to April 18, 1925, any attempt by the Legislature to enact a law or to validate a law which had passed out of existence or become ineffectual, for any reason, for that period, would be a nullity, because the Legislature had no power to pass a retroactive law. Section 15, art. 2, Constitution of Missouri of 1875.

It is further contended that national banks are public utilities, and therefore fall within the exemption of the Income Tax Law, which contains this provision:

"There shall not be taxed under this article any income derived from any public utility performing functions of national government or those incident to the state or any political subdivision thereof." Section 13113, R. S. Mo. 1919.

We think that a national bank is not a "public utility," and that there is no indication that the Legislature intended that term to include such banks. While it is difficult to define the term with exactness, the authorities indicate that it is synonymous with "public use" and refers to persons or corporations charged with a duty to supply to the public the use of the property or facilities owned or furnished by them. Valley City Salt Co. v. Brown, 7 W. Va. 191; Cawker v. Meyer, 147 Wis. 320, 133 N. W. 157, 37 L. R. A. (N. S.) 510; State ex rel. v. Wyandotte County Gas Co., 88 Kan. 165, 127 P. 639; Platt v. City & County of San Francisco, 158 Cal. 74, 110 P. 304; 6 Words and Phrases, First Series, 5829; Baldwin's Century Edition of Bouvier's Law Dictionary, 1003. We cannot find that it has ever been applied to corporations performing a public function or affected by a public interest, which may arbitrarily select their customers, such as banks, insurance companies, and the like. The state of Missouri has legislated with reference to "public utilities," has defined them in section 10411, R. S. Missouri 1919, and has not included either national or state banks.

The defendants also contend that there was available to the plaintiffs a remedy through the administrative tax boards of Missouri, and that, not having sought that remedy, they cannot maintain this suit. This upon the authority of Farncomb et al. v. City and County of Denver et al., 252 U. S. 7, 40 S. Ct. 271, 64 L. Ed. 424; Milheim v. Moffat Tunnel Dist., 262 U. S. 710, 43 S. Ct. 694, 67 L. Ed. 1194; McGregor v. Hogan, 263 U. S. 234, 44 S. Ct. 50, 68 L. Ed. 282; First Nat. Bank v. Weld County, 264 U. S. 450, 44 S. Ct. 385, 68 L. Ed. 784; Gorham Mfg. Co. v. Tax Comm., 266 U. S. 265, 45 S. Ct. 80, 69 L. Ed. 279. In those cases, however, the complaints were of invalid assessments under existing laws. Here the complaint is of an assessment under no law at all.

In Stanley v. Supervisors of Albany, 121 U. S. 535, 7 S. Ct. 1234, 30 L. Ed. 1000, in which it was held that a suit in equity would lie to enjoin the exaction of the illegal or unconstitutional excess of a tax, it was said, relative to administrative remedies:

"To these boards of revision, by whatever name they may be called, the citizen must apply for relief against excessive and irregular taxation, where the assessing officers had jurisdiction to assess the property."

Here, if there was no law, there was no jurisdiction to assess the shares of stock. There could be nothing more futile than an application for...