Charleston Nat. Bank v. Melton

• Court: U.S. Court of Appeals — Fourth Circuit
• Citation: Charleston Nat. Bank v. Melton, 171 F. 743 (4th Cir. 1909)
• Decision Date: 14 July 1909
• Docket Number: 389.
• Parties: CHARLESTON NAT. BANK v. MELTON, Ex-Sheriff.

171 F. 743

CHARLESTON NAT. BANK v. MELTON, Ex-Sheriff.

No. 389.

United States Circuit Court, S.D. West Virginia.

July 14, 1909

This bill was filed on the 24th day of March, 1909, by the plaintiff for and on behalf of its stockholders generally seeking, on several grounds, to restrain the collection of taxes assessed for the year 1908 against the shares of stock owned by all the stockholders of plaintiff bank.

The bill avers: That the defendant, Melton, was lately sheriff of Kanawha county, W. Va., and, although his term as such sheriff expired December 31, 1908, it is still his duty under the law to collect all taxes and assessments for the year 1908 still uncollected; that it has a capital stock of $500,000, divided into shares of $100 each, which stock is held by a large number of shareholders in West Virginia and in other states; that on the 1st day of January, 1908, it was the owner of bonds of the United States aggregating $500,900 in value; that by section 67, c. 80, p. 366, of the Acts of the Legislature of West Virginia for the year 1907 (Code Supp. 1907, Sec. 751), in listing money, credits, or investments, the person owning the same may have deducted therefrom the amount of the indebtedness which he owes to others as principal debtor; but that by section 79 of said chapter of said acts (Code Supp. 1907, Sec. 763) it was provided that the shares of stock in a national banking association should be assessed at their true and actual value to the several holders thereof, in the county, district, and town where such association is located, and 'no deductions shall be allowed from the valuation of such shares of stock on account of what is due another as principal debtor or otherwise, notwithstanding the provisions of any other section or sections of this chapter'; that said section further provides that the cashier of such bank shall pay the taxes assessed upon such shares, and in default of such payment such officer, as well as the bank, shall be liable for such taxes, and, in addition, for a sum equal to 10 per centum thereof, and any taxes so paid upon such shares may, with interest thereon, be recovered from the owners thereof, or may be deducted from the dividends accruing on such shares.

Plaintiff then pleads the provision of section 5219, Rev. St. U.S. (U.S. Comp. St. 1901, p. 3502), that the taxation of shares in a national banking association 'shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state,' and avers on information and belief that on the 1st day of January, 1908, there were large sums of money, amounting to many hundred thousands of dollars, of moneyed capital in the hands of individual citizens of said state of West Virginia, and used by them in making loans discounts, and investments, and periodically collected, or the interest thereon collected and reloaned, rediscounted and reinvested, and that such transactions come into competition with the business of plaintiff and other national banks, and that by the provisions of the two sections of the assessment laws of West Virginia before referred to (sections 67 and 79) a discrimination is created against the shareholders in national banks, in violation of said section 5219, Rev. St. U.S.

Plaintiff further avers that on the 1st day of January, 1908 (as of which date the assessment complained of was made) 'a large number of the shareholders of the said plaintiff were severally indebted to others as principal debtors to large amounts, and to amounts, as plaintiff is informed, believes and so charges, in excess of other money, credits and investments owned by them respectively, and from which their said indebtedness might be deducted, and plaintiff says and alleges that, after said shareholders, or many of them, had deducted the debts which they owed as principal debtors to others from the other money, credits, and investments owned by them, there remained large sums owed by them as such principal debtors, which, by reason of said statute and said instructions, they were prohibited from deducting from the value of their said bank shares for taxation.'

While the foregoing quotation violates the laws of subtraction, I think it may be clearly gathered that, as to certain unnamed stockholders, it is alleged that after they had set off, as against the amount of their debts due as principal debtors, all of their other money, credits, and investments, there still remained debts which they owed to others as principal debtor.

The plaintiff further avers: That when, in obedience to law, its proper officers gave to the assessor the list of its shareholders with the number of shares owned by each, the said assessor, in arriving at the value of the shares of stock for taxation, made or allowed no deduction for the value of the United States bonds owned by the bank; nor was any deduction provided for on account of any indebtedness of the individual shareholders. That the assessor was asked, on behalf of plaintiff and its shareholders, if he would allow the amounts owing by said shareholders as principal debtors to be deducted from the value of their respective shares, and he answered that he would not do so. That thereupon the return was made and delivered in the form prescribed, and a protest against the assessment was delivered to the assessor, a copy of which protest is exhibited with the bill, and shows that the ground thereof was the refusal of the assessor to deduct the value of the bonds owned by the bank in arriving at the value of the shares for taxation.

The plaintiff avers that the stockholders were assessed upon their shares of stock at a valuation of $152.34 per share, making a total valuation of $761,700, allowing no deductions on account of their indebtedness, upon which valuation taxes were assessed aggregating $6,471.65, now in the hands of the defendant for collection. The allegation is renewed that the laws under which these assessments were made are void, and the assessments illegal and void, and that, nevertheless, the defendant, unless restrained therefrom, will proceed to collect said levies, etc.

The prayer of the bill is that said section 79, and all laws under which said assessment was made, be declared null and void, and that the plaintiff and its cashier and officers, and its several stockholders, be relieved from the payment of said taxes so assessed against them severally, and all penalties and interest thereon, and for general relief.

When the demurrer was set for argument, the plaintiff presented an amendment to its bill setting up the invalidity of section 79, c. 80, Acts 1907, because of the requirement that the cashier of a national bank shall pay the taxes assessed against its shareholders, under penalty of being held (together with the bank) liable for such taxes, as well as a sum equal to 10 per centum thereof, regardless of the fact whether such cashier, or the bank, have in possession or control any money or funds of the respective shareholders; but it did not therein aver that, as to any of its shareholders, there were not any (or not sufficient) funds belonging to such shareholders in its hands or under its control to enable it to pay the taxes assessed against such shareholders or any of them.

Plaintiff in this amendment repeats the prayer of its original bill, and further prays that, if the court is of opinion that any taxes should be due from it, its officers or shareholders, then it refers this case to a master to ascertain what taxes may be due from whom, and what deductions should be allowed to any of its shareholders, respectively, by reason of any debts owed by them to others as principal debtors. Upon motion for a temporary injunction, and demurrer to the bill.

S. S. Green and Mollohan, McClintic & Mathews, for plaintiff.

W. G. Conley, Atty. Gen., W. M. O. Dawson, T. C. Townsend, Frank Lively, and W. R. Byrne, for defendant.

KELLER, District Judge (after stating the facts as above).

On March 22, 1909, a judge of the Circuit Court for the Southern District of West Virginia granted to the plaintiff a temporary restraining order 'restraining and enjoining the defendant, J. J. Melton, ex-sheriff of Kanawha county, W. Va., and his deputies, from collecting the taxes mentioned and described in said bill, or the interest or penalties thereon, or any part thereof, or any of them, from said plaintiff, its cashier, secretary, or accounting officer, or any of its stockholders, and from levying on or distraining and selling the property of the said plaintiff or any of its officers or shareholders for the satisfaction of said taxes, interest or penalties'; and the motion for injunction was set down for hearing at Charleston, and was considered in connection with the demurrer.

Various grounds presented in the written demurrer filed were argued by counsel, but I shall not consider them in order, and, indeed, shall not refer to some of them save incidentally.

The principal reliance in argument was placed upon the propositions that: (1) The plaintiff has a full and complete remedy provided by statute; (2) complainant is not entitled to the interposition of a court of equity because it has not done equity by paying or offering to pay any part of the taxes assessed against its shareholders, a large portion of which, it is averred, are, under all the decisions unquestionably due and owing and should be paid before relief is sought against the collection of the remainder, if any; and (3) no relief can be granted because the bill does not set out the names of shareholders of the bank whose debts the plaintiff alleges should have been deducted from the value of their respective shares of stock, nor show the amounts of such shareholders' respective...