Colorado Nat Bank Denver v. Bedford 8212 1940
| Citation | 310 U.S. 41,60 S.Ct. 800,84 L.Ed. 1067 |
| Decision Date | 22 April 1940 |
| Docket Number | No. 719,719 |
| Parties | COLORADO NAT. BANK F DENVER v. BEDFORD, Treasurer of State of Colorado. Argued April 2—3, 1940 |
| Court | United States Supreme Court |
Messrs. Walter W. Blood and Frank N. Bancroft, both of Denver, Colo., for appellant.
[Argument of Counsel from page 42 intentionally omitted] Messrs. George K. Thomas, of Cripple Creek, Colo., and Henry E. Lutz and Byron G. Rogers, both of Denver, Colo., for appellee.
This appeal involves the validity of the Public Revenue Service Tax Act of Colorado.1 The act, section 5, imposes upon the services specified in the act, a percentage tax based upon the value of the services rendered or performed by any person subject to its provisions.
Section 5(c) imposes a tax equivalent to two per cent of the value of services rendered by 'banks, finance companies, trust companies and depositories * * *.' The person rendering the services 'shall be liable and responsible for the payment of the entire amount * * *.' Section 6. He is required to remit all taxes collected and due the state from him to the treasurer less three per cent to cover the expense of the service. Under section 6(b) persons rendering or performing the services are required 'as far as practicable, (to) add the tax imposed * * * to the value of services or charges showing such tax as a separate and distinct item and when added such tax shall constitute a part of such value of service or charge, shall be a debt from the user to the person rendering or performing service until paid, and shall be recoverable at law in the same manner as other debts.' By subsection (d) the person rendering the service is forbidden to hold out directly or indirectly that he will assume or absorb the tax. By section 7 the user may recover illegally collected taxes. Where services are rendered which become a part of an article subject to a sales tax, the services are exempt and the person performing the service recovers where they are illegally assessed. Section 3. By section 12, all sums paid by the user as taxes are public money and trust funds of the State of Colorado. It is made a misdemeanor, section 17, for any person rendering or performing services to refuse to make the returns required. The state treasurer is made administrator of the act and given authority to issue regulations. Section 19. The usual separability clause is contained in the act. Section 22.
The definitions of the act appear in section 2. By its subsection (c) the term 'services rendered or performed' is defined as those rendered for a valuable consideration by a person covered by the act for the ultimate user thereof. 'The term 'user' shall mean the person for whom or for whose benefit services are rendered or performed.' By subsection (e) taxpayer is defined as 'any person obligated to account to the state treasurer for taxes collected or to be collected or due the state under the terms of this act.' Subsection (h) provides for a credit on future taxes of a tax paid on accounts eventually found worthless.
Under the rules and regulations issued by the treasurer on the Public Revenue Service Tax Act, the service tax is construed as invalid as applied to so-called banking services.2
Under rule 27, however, such service as the furnishing of safety vaults by depositories or banks is held to come within the act, and the two per cent tax applies to the charges made for this service. These regulations were approved by the judgment and decree of the trial court and that judgment was affirmed in all particulars by the Supreme Court of Colorado. 98 P.2d 1120.
While section 4(a) makes it unlawful for any person to render the defined services without 'first having obtained a license therefor,' the treasurer demands no license fees from a national bank. Such exception was held proper by the lower court.3
The appellant here, the Colorado National Bank, was a national banking corporation duly organized and existing under the national banking act. The bank operated a safe-deposit service under its own name and in the building and vaults used for its other banking activities. The rentals received for the use of that portion of its vaults utilized for safe-deposit boxes were reported to the Comtroller of the Currency as income in the bank; the fixtures employed in the business are part of the assets of the bank and are supervised by the Comptroller of the Currency.
The appellee Bedford, as treasurer of the State of Colorado and administrator of the Service Tax Act, demanded payment from appellant bank of two per cent of the value of the services rendered by the bank to its safe deposit box customers. The bank refused payment and the treasurer brought this action under the Uniform Declaratory Judgments Act, Colorado Stat.Ann.1935, c. 93, §§ 78, 79, for a declaration of rights to the effect that the services performed by the bank are taxable pursuant to the Service Tax Act. The bank answered claiming the state statute as applied to it was repugnant to the Constitution and laws of the United States; setting up the immunity of national banks from state taxation except as permitted by R.S. section 5219;4 claiming that the safe-deposit business of national banks was authorized by Congress and therefore was part of its federally authorized business, immune from taxation whether the bank or the user of its services is the taxpayer. The bank further contended that even though it is not the taxpayer and the tax burden as such is not unlawful, the burden of collection, report and visitation materially interfere with the performance of its national banking functions. A general demurrer to the answer was filed.
The trial court sustained the bank. The supreme court first affirmed by an equally divided court and then on re- hearing reversed5 and remanded the case to the district court. The trial court entered a second judgment declaring as prayed by the treasurer, which judgment was affirmed by the supreme court on the authority of the former decision.
This appeal is here under section 237(a) of the Judicial Code, 28 U.S.C.A. § 344(a). The treasurer makes the point that as the federal question raised was the immunity to the exaction of the bank as a federal instrumentality withdrawn from state taxation by congressional action, the determination that the tax was on a non-banking activity foreign to its federal character and on the user of the services eliminated the necessity of a decision on the federal question. As the statute was held valid after the conclusion of the Supreme Court of Colorado that the manner of state taxation of national banks must accord with R.S. section 5219 and must not intefere with federal functions, 6 it seems clear the federal question as to the validity of the statute as tested by the Constitution and laws of the United States was necessarily involved and decided. This gives this Court jurisdiction of the appeal.7
Gully v. First National Bank,8 relied upon by the treasurer, dealt with the right to remove to a federal court9 because the cause of action arose under the federal laws,10 but the issue here is the right to appeal where a state statute is held valid against a defense of repugnancy to the same laws. 11 The difference is brought out in the Gully case, where it is said: 'If there were no federal law permitting the taxation of shares in national banks, a suit to recover such a tax would not be one arising under the Constitution of the United States, though the bank would have the aid of the Constitution when it came to its defense.'12
The genesis of the present system of national banks is the National Bank Act of June 3, 1864.13 It was called 'An Act to provide a National Currency, secured by a Pledge of United States Bonds, and to provide for the Circulation and Redemption thereof.' From this act, correlated with the Federal Reserve Act,14 there has developed the present nationwide banking facilities. R.S. section 5153, 12 U.S.C.A. § 90, makes these associations the depositories of public money. Though the national banks' usefulness as an agency to provide for currency has diminished markedly, their importance as general bankers shows a constant growth.15 We may assume that national banks possess only the powers conferred by Congress.16 These are set out in R.S., section 5136, as frequently amended, and include 'all such incidental powers as shall be necessary to carry on the business of banking,' with the proviso 'that in carrying on the business commonly known as the safe- deposit business the association shall not invest in the capital stock of a corporation organized under the law of any State to conduct a safe-deposit business in an amount in excess of 15 per centum of the capital stock of the association actually paid in and unimpaired and 15 per centum of its unimpaired surplus.' 17 We have recently found the authority to secure federal funds within these incidental powers, coupled with a long-continued practice recognized by the Comptroller of the Currency.18 The right to accept special deposits is recognized by the banking act.19 These are monies and other valuables the identical deposits of which are kept, preserved and returned in kind. It differs little if at all from a safe-deposit business. The language of the proviso of section 24, just quoted, is the language suitable to impose restrictions on a recognized power, not the language that would be used in creating a new power. As the limitation on the power to invest in real estate protected in a measure customers and stockholders from risky investments,20 the banks own investment in safety deposit facilities evidently did not seem to Congress to require the same regulation as the purchase of stock in a safedeposit corporation. A subsidiary safedeposit corporation would give priority to the creditors of the subsidiary over the depositors and other creditors of the bank itself. The obvious fact, known...
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