Comm'r of Corp. v. Woburn Nat. Bank

• Decision Date: 28 February 1944
• Parties: COMMISSIONER OF CORPORATIONS AND TAXATION v. WOBURN NAT. BANK (two cases).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

315 Mass. 505

53 N.E.2d 554

COMMISSIONER OF CORPORATIONS AND TAXATION

v.WOBURN NAT. BANK (two cases).

Supreme Judicial Court of Massachusetts, Suffolk.

Feb. 28, 1944.

Appeal from Decision of Appellate Tax Board.

Proceedings on the petitions of the Woburn National Bank against the Commissioner of Corporations and Taxation for an adjudication that taxes paid under protest were illegally exacted and to obtain repayment out of the treasury of the Commonwealth. The petitions were transferred to the Appellate Tax Board and, from a decision of the Appellate Tax Board abating the taxes, the Commissioner of Corporations and Taxation appeals.

Petitions dismissed.

Before FIELD, C. J., and DONAHUE, LUMMUS, QUA, DOLAN, and WILKINS, Jj.

O. V. Fortier, Asst. Atty. Gen., for the Commissioner.

K. L. Johnson, of Woburn, for taxpayer.

LUMMUS, Justice.

These are petitions, concerning taxes assessed in the years 1924 and 1925 respectively, brought under G.L. (1921) c. 63, §§ 77, 78, as amended (now repealed by St.1930, c. 416, § 2), by a national banking association, asking the Supreme Judicial Court to adjudge these taxes (assessed under statutes then existing and paid under written protest) illegally exacted, to the end that the amount thereof might be repaid out of the treasury of the Commonwealth. On May 20, 1938, a single justice transferred the petitions under St.1930, c. 416, § 33, to the Appellate Tax Board created by St.1937, c. 400, to take the place of the former Board of Tax Appeals. The powers of the Appellate Tax Board are found in G.L. (Ter.Ed.) c. 58A, as amended. On November 22, 1939, the Appellate Tax Board abated the taxes on the ground that they were illegally exacted. On December 8, 1939, the respondent commissioner appealed to this court, as provided by G.L. (Ter.Ed.) c. 58A, § 13, as last amended by St.1939, c. 366, § 1.

Without Congressional permission a State has no right to impose a tax directly upon an instrumentality or agency of the United States such as a national bank. Owensboro Nat. Bank v. City of 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;Penn Dairies, Inc., v. Milk Control Com'n of Pennsylvania, 318 U.S. 261, 269, 63 S.Ct. 617;Maricopa County v. Valley National Bank of Phoenix, 318 U.S. 357, 63 S.Ct. 587;Mayo v. United States, 319 U.S. 441, 63 S.Ct. 1137, 87 L.Ed. 1504. But ‘a national bank is subject to state law unless that law interferes with the purposes of its creation, or destroys its efficiency, or is in conflict with some paramount federal law.’ Lewis v. Fidelity & Deposit Co. of Maryland, 292 U.S. 559, 566, 54 S.Ct. 848, 851, 78 L.Ed. 1425, 92 A.L.R. 794;First Nat. Bank of Boston v. Commissioner of Corporations and Taxation, 279 Mass. 168, 172, 181 N.E. 205;Milk Control Board v. Gosselin's Dairy, Inc., 301 Mass. 174, 16 N.E.2d 641. Whether a State has a right to tax stockholders in national banks on their shares in the absence of Congressional prohibition (Flint v. Board of Aldermen of City of Boston, 99 Mass. 141, 145,96 Am.Dec. 713), or, as more commonly said, has no such right in the absence of Congressional permission (Des Moines Nat. Bank v. Fairweather, 263 U.S. 103, 106, 44 S.Ct. 23, 68 L.Ed. 191;Iowa-Des Moines Nat. Bank v. Bennett, 284 U.S. 239, 244, 52 S.Ct. 133, 76 L.Ed. 265;Union Bank & Trust Co. v. Phelps, 288 U.S. 181, 186, 187, 53 S.Ct. 321, 77 L.Ed. 687, 83 A.L.R. 1438;Central Nat. Bank v. City of Lynn, 259 Mass. 1, 13, 156 N.E. 42), is of merely academic interest, for Congress has long prohibited State taxation of national bank shares except under rigid restrictions which undoubtedly it had a constitutional right to impose. Bank of California v. Richardson, 248 U.S. 476, 483, 39 S.Ct. 165, 63 L.Ed. 372;First Nat. Bank v. City of Hartford, 273 U.S. 548, 550, 47 S.Ct. 462, 71 L.Ed. 767, 59 A.L.R. 1;Union Bank & Trust Co. v. Phelps, 288 U.S. 181, 186, 187, 53 S.Ct. 321, 77 L.Ed. 687, 83 A.L.R. 1438;Federal Land Bank v. Bismarck Lumber Co., 314 U.S. 95, 62 S.Ct. 1, 86 L.Ed. 65. As was said in First Nat. Bank v. Anderson, 269 U.S. 341, 347, 46 S.Ct. 135, 138, 70 L.Ed. 295, ‘National banks are not merely private moneyed institutions, but agencies of the United States created under its laws to promote its fiscal policies; and hence the banks, their property, and their shares cannot be taxed under state authority, except as Congress consents, and then only in conformity with the restrictions attached to its consent.’

Soon after the national banking system was established by the Act of February 25, 1863, c. 58, 12 U.S.Sts. at Large, 665,¹ which contained no provision for State taxation of shares (Van Allen v. Assessors, 3 Wall, 573, 582, 18 L.Ed. 229), Congress revised that act by the Act of June 3, 1864, c. 106, and by section 41 of the revised act, 13 U.S.Sts. at Large, 99, 112, the material part of which is reprinted in a footnote in Flint v. Board of Aldermen of City of Boston, 99 Mass. at page 142, 96 Am.Dec. 713, permitted certain State taxation of national bank shares. That section was amended by Act of February 10, 1868, c. 7, 15 U.S.Sts. at Large, 34, to make clear that the word ‘place’ in that section meant ‘State,’ as had been decided in Austin v. Board of Aldermen of City of Boston, 14 Allen 359. The text of the 1868 amendment appears in Providence Inst. for Savings v. City of Boston, 101 Mass. 575, 581,3 Am.Rep. 407. These two acts, with respect to section 41, were combined in U.S.Rev.Sts. 1873, § 5219, which read as follows: ‘Nothing herein shall prevent all the shares in any [national banking] association from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the State within which the association is located; but the legislature of each State may determine and direct the manner and place of taxing all the shares of national banking associations located within the State, subject only to the two restrictions, that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State, and that the shares of any national banking association owned by nonresidents of any State shall be taxed in the city or town where the bank is located, and not elsewhere. Nothing herein shall be construed to exempt the real property of associations from either State, county, or municipal taxes, to the same extent, according to its value, as other real property is taxed.’ This section remained without amendment until 1923, 12 U.S.C.A. § 548.

A summary of the decisions interpreting section 5219, found in First Nat. Bank v. Anderson, 269 U.S. 341, 347, 348, 46 S.Ct. 135, 138, 70 L.Ed. 295, is quoted in a footnote.² Under that section, a citizen of Massachusetts could not lawfully be taxed here upon his shares in a national bank located outside the Commonwealth. Flint v. Board of Aldermen of City of Boston, 99 Mass. 141, 96 Am.Dec. 713. But a nonresident could be taxed in Boston upon his shares in a Boston national bank. Providence Inst. for Savings v. City of Boston, 101 Mass. 575, 3 Am.Rep. 407. See also Schuylkill Trust Co. v. Commonwealth of Pennsylvania, 302 U.S. 506, 514 et seq., 58 S.Ct. 295, 82 L.Ed. 392. In Owensboro Nat. Bank v. City of Owensboro, 173 U.S. 664, 669, 19 S.Ct. 537, 539, 43 L.Ed. 850, in deciding that a State tax on the property, assets or franchises of national banks was invalid, the Supreme Court said, ‘This section [5219], then, of the Revised Statutes is the measure of the power of a State to tax national banks, their property or their franchises. By its unambiguous provisions the power is confined to a taxation of the shares of stock in the names of the shareholders and to an assessment of the real estate of the bank. Any state tax, therefore, which is in excess of, and not in conformity to, these requirements, is void.’

Prior to 1873 a statute of this Commonwealth purported to impose upon ‘every bank’ a tax of one half of one per cent of the amount of its paid-in stock. Gen.Sts. 1860, c. 57, §§ 89, 90. Those sections, if applied to national banks, were plainly in conflict with the Federal statutes already mentioned, and were omitted from the Public Statutes of 1882 on the ground that they were superseded by St.1873, c. 315. See Nichols, Taxation in Massachusetts (3d ed. 1938) 551 et seq.

In addition, shares in banks as well as in other corporations were originally assessed to the owner in the city or town where he lived. Gen.Sts. 1860, c. 11, § 12. Dwight v. Springfield Centre Fire Dist., 11 Met. 374;President, etc., of Tremont Bank v. City of Boston, 1 Cush. 142;Murray v. Berkshire Life Ins. Co., 104 Mass. 586;Goldsbury v. Inhabitants of Warwick, 112 Mass. 384;Rich v. Packard Nat. Bank, 138 Mass. 527, 530. The same practice was continued as to national bank shares by St.1865, c. 242. ³ The fact that the rate of taxation in different municipalities varied greatly was held not a violation of the Federal statute.⁴Providence Inst. for Savings v. City of Boston, 101 Mass. 575, 3 Am.Rep. 407. But after some vacillation (St.1871, c. 390; St.1872, c. 321) the policy of taxing both State and national bank shares to their owners in the city or town in which the bank was located was adopted for all cases by St.1873, c. 315, except that real estate was assessed to the bank wherever situated, and its value was deducted in reckoning the value of the shares. The rate of taxation was to be the same as that ‘at which other moneyed capital in the hands of citizens and subject to taxation is by law assessed.’ That rate was the general local rate of taxation. The bank was required to pay the taxes assessed upon its stockholders, as the statutory agent of the stockholders, ( A. J. Tower Co. v. Commonwealth, 223 Mass. 371, 373, 111 N.E. 966), and as such might petition for abatement or contest the validity of the taxes...