Citizens National Bank v. Commonwealth of Kentucky, For the Use and Benefit of Boyle County

• Decision Date: 02 May 1910
• Docket Number: No. 135,135
• Citation: 54 L.Ed. 832,217 U.S. 443,30 S.Ct. 532
• Parties: CITIZENS NATIONAL BANK et al., Plffs. in Err., in Err., v. COMMONWEALTH OF KENTUCKY, FOR THE USE AND BENEFIT OF BOYLE COUNTY, et al
• Court: U.S. Supreme Court

217 U.S. 443

30 S.Ct. 532

54 L.Ed. 832

CITIZENS NATIONAL BANK et al., Plffs. in Err., in Err.,

v COMMONWEALTH OF KENTUCKY, FOR THE USE AND BENEFIT OF BOYLE COUNTY, et al.

No. 135.

Argued March 10, 1910.

Decided May 2, 1910.

Mr. Robert Taylor Quisenberry for plaintiffs in error.

[Argument of Counsel from pages 444-447 intentionally omitted] Mr. John W. Yerkes for defendants in error.

Mr. Justice Lurton delivered the opinion of the court:

This was a proceeding under the law of Kentucky to back assess the shares of stock in the Citizens National Bank as property omitted from the tax list. After much petitioning, pleading, and demurring, and two appeals to the court of appeals of the state of Kentucky, 1,473 shares were assessed for the taxes of 1896, 1897, and 1898, and 990 shares for the taxes of 1899, with a penalty of 20 per cent added to the tax each year. The proceeding under which this result has been reached was started in the county court of Boyle county, Kentucky, in March, 1901, by a petition filed by the sheriff of the county for the purpose of causing the shares of the bank to be assessed as property omitted by the assessor. The authority under which the petition was filed is found in § 4241, Kentucky Statutes, and the Kentucky act of March 21, 1900. As the validity of this later act is challenged, we set it out in the margin.

Whereas the Supreme Court of the United Sattes has lately decided that article three (3), CHAPTER 103, of the acts of 1891-1892-1893, is void and of no effect in so far as the same provides for taxation of the franchise of national banks, in consequence of which decision there is not now and has not been, since the adoption of said article in 1892, any adequate mode of taxing national banks, while state banks are now, and have been, ever since 1892, taxable for all purposes, state and local, therefore

Be it enacted by the general assembly of the commonwealth of Kentucky:

Sec. 1. That the shares of stock in each national bank of this state shall be subject to taxation for all state purposes, and shall be subject to taxation for the purposes of each county, city, town, and taxing district in which the bank is located.

Sec. 2. For the purposes of the taxation provided for by the next preceding section, it shall be the duty of the president and the cashier of the bank to list the said shares of stock with the assessing officers authorized to assess real estate for taxation, and the bank shall be and remain liable to the state, county, city, town, and district for the taxes upon said shares of stock.

Sec. 3. When any of said shares of stock have not been listed for taxation for any of said purposes, under levy or levies of any year since the adoption of the revenue law of 1892, it shall be the duty of the president and the cashier to list the same for taxation under said levy or levies: Provided, That where any national bank has heretofore, for any year or years, paid taxes upon its franchise, as provided in article three (3) of the revenue law of 1892, said bank shall be excepted from the operation of this section as to said year or years: And provided further, That where any national bank has heretofore, for any year or years, paid state taxes under the Hewitt bill in excess of the state taxes required by this act for the same year or years, said bank shall be entitled to credit by said excess upon its state taxes required by this act.

In the case of the Owensboro Nat. Bank v. Owensboro, 173 U. S. 664, 43 L. ed. 850, 19 Sup. Ct. Rep. 537, this court held invalid certain legislation of the state of Kentucky, providing for the taxation of national banks, as laying a tax, not upon shares, which was permissible, but upon the property and franchises of such banks, which was inadmissible under the restrictions of § 5219, Rev. Stat. (U. S. Comp. Stat. 1901, p. 3502). In consequence of this decision, this act of March 21, 1900, was passed, as shown both by its subject-matter and the recital in the preamble. The act is both prospective and retrospective. Of its prospective features, we need say nothing. The 3d section is retrospective, in that provides for the return of shares in national banks which, during the years of the operation of the legislation held invalid by this court, had not been returned for taxation, by making it the duty of certain officers of such banks to list for taxation for the years between 1892 and 1899, all shares in such banks which had not been returned, and by requiring all such banks to pay the tax and penalty upon all such omitted shares, subject, however, to certain deductions and credits on account of taxes paid by such banks under the act held invalid, as well as under the prior Hewitt act.

In Covington v. First Nat. Bank, 198 U. S. 100, 49 L. ed. 963, 25 Sup. Ct. Rep. 562, this court was required to consider the effect of the 3d section of the act in imposing upon national banks a liability for the taxes and penalties upon such omitted shares, which, during the years covered by this section, had been held by persons not domiciled within the state of Kentucky. The question arose under a bill filed in a circuit court of the United States to enjoin the imposition of liability upon a national bank for taxes and penalties upon shares held between 1892 and 1900 by persons who were not domiciled in Kentucky, it being alleged that the purpose of the proceeding against the bank was to charge the bank, without discrimination between domestic and foreign-held shares. Prior to this act of March 21, 1900, there was no law requiring a return for taxation of bank shares held by owners not domiciled within the state, either by such holder or by the bank in which such shares were held. For this reason we held in the case referred to that this act imposed, for the years prior to its passage, a liability upon national banks for taxes upon shareholders domiciled outside of the state, which was not borne by other incorporated moneyed institutions. Upon this subject, the court, speaking by Mr. Justice Day, said:

'Without considering the question of constitutional power to tax nonresident shareholders by means of this retroactive law, it seems to us that, in imposing upon the bank the liability for the past years, for taxes and penalty, upon stock held without the state, and which, before the taking effect of the act under consideration, it was not required to return, there has been imposed upon national banks in this retroactive feature of the law a burden not borne by other moneyed capital in the state. This law makes a bank liable for taxes upon property beyond the jurisdiction of the state, not required to be returned by the bank as agent for the shareholders, by a statute passed in pursuance of the authority delegated in § 5219, thus imposing a burden not borne by other moneyed capital within the state.'

In the case now before us for consideration, a liability has been imposed upon the Citizens Bank, the plaintiff in error, not for taxes and penalties upon shares of the bank held by shareholders domiciled beyond the state,—as was attempted in Covington v. First Nat. Bank, supra,—but exclusively upon shareholders domiciled within the state. The liability is limited to the tax and penalty upon shares owned by shareholders domiciled within the state, the name, residence, and amount due from each such shareholders being distinctly set down in the decree.

Neither is the act lacking in due process if, as we shall assume for the moment is the case, the procedure under the 3d section is but a new remedy for a tax liability imposed by prior law of the state upon resident holders of shares of the bank.

Sec. 5210, Rev. Stat., requires every such bank to keep a correct list of its shareholders accessible to taxing officers, and by § 5219, Rev. Stat., the legislature of each state may, for itself, determine the manner and method for taxing shares in such banks, subject only to the restrictions named therein. In making the bank the agent for its own shareholders in proceedings brought to compel a return and secure an assessment, and in imposing upon the bank a liability for the tax so assessed against the shareholders, the act only follows the wellsettled procedure sanctioned in First Nat. Bank v. Kentucky, 9 Wall. 353, 19 L. ed. 701; Van Slyke v. Wisconsin, 154 U. S. 581, and 20 L. ed. 240, 14 Sup. Ct. Rep. 1168; and First Nat. Bank v. Chehalis County, 166 U. S. 440, 41 L. ed. 1069, 17 Sup. Ct. Rep. 629.

That the 3d section does not impose a liability upon either the domestic shareholders or the bank which did not exist before, under the prior law of the state, was settled by the case of Scobee v. Bean,...