Des Moines Nat Bank v. Fairweather

• Decision Date: 12 November 1923
• Docket Number: No. 17,17
• Citation: 263 U.S. 103,44 S.Ct. 23,68 L.Ed. 191
• Parties: DES MOINES NAT. BANK v. FAIRWEATHER et al
• Court: U.S. Supreme Court

263 U.S. 103

44 S.Ct. 23

68 L.Ed. 191

DES MOINES NAT. BANK

v FAIRWEATHER et al.

No. 17.

Argued Oct. 3, 1923.

Decided Nov. 12, 1923.

Mr. J. G. Gamble, of Des Moines, Iowa, for plaintiff in error.

Messrs. Ben J. Gibson and John J. Halloran, both of Des Moines, Iowa, for defendants in error.

Mr. Justice VAN DE VANTER delivered the opinion of the Court.

This was a proceeding begun by a national bank in Iowa to secure a reduction in an assessment of the shares of its capital stock for taxing purposes, made in 1919.

The proceeding was in the nature of an appeal from the action of a board of equalization, and ultimately reached the Supreme Court of the state. The bank objected that the board had proceeded on a mistaken construction of the state statute respecting such assessments and that the statute, as construed and applied by the board, was invalid in that it was in conflict with the state Constitution and with laws of the United States. The objections were overruled and the assessment upheld. 191 Iowa, 1240, 181 N. W. 459, 184 N. W. 313. The bank then sued out this writ of error.

The facts may be shortly stated. No assessment was made against the bank, save of its real property. The shares of its capital stock were assessed to their several owners, the stockholders. The aggregate of the bank's capital, surplus and undivided earnings, was taken as the value of the shares, and from this the amount actually invested in real property was deducted. A proportionate part of the remaining sum was attributed to each share. Among the bank's assets were various securities of the United States, concededly exempted from state taxation by laws of the United States. There was also some stock in a federal reserve bank, claimed to be likewise exempted. The bank sought to have these securities and this stock excluded in making the assessment, that is, to have their value deducted from the total of the capital, surplus, and undivided earnings. The board declined to make the deduction, and pursued a like course in assessing shares in corporate state banks. Among the bank's competitors were some banks conducted by individuals—private banking being admissible in that state. In assessing the moneyed capital employed by these private bankers in their banking business, the board excluded so much thereof as was invested in nontaxable securities of the United States. Twenty per cent. of of each of the assessments here described, whether of bank shares or money employed in private banking, was set down or listed as the taxable value, as distinguished from the real value. The tax levy was to be at a uniform rate on such taxable value.

We are asked to go into the proper construction of the state statute and its validity under the state Constitution. But these are questions of local law, the decision of which by the Supreme Court of the state is controlling. First National Bank of Garnett v. Ayers, 160 U. S. 660, 664, 16 Sup. Ct. 412, 40 L. Ed. 573; Merchants' & Manufacturers' National Bank v. Pennsylvania, 167 U. S. 461, 17 Sup. Ct. 829, 42 L. Ed. 236; Lindsley v. Natural Car bonic Gas Co., 220 U. S. 61, 73, 31 Sup. Ct. 337, 55 L. Ed. 369, Ann. Cas. 1912C, 160; Price v. Illinois, 238 U. S. 446, 451, 35 Sup. Ct. 892, 59 L. Ed. 1400.

The only contentions made by the bank which we can consider are, first, that the state statute in substance commands an assessment of the property of the bank, rather than the shares of the stockholders, contrary to the terms of section 5219 of the Revised Statutes of the United States (Comp. St. § 9784); secondly, that the statute, even if commanding as assessment of the shares of the stockholders, subjects securities of the United States and stock in a federal reserve bank to state taxation in disregard of exemptions arising out of laws of the United States; and, thirdly, that, if the assessment be of the shares, the statute subjects them to a higher rate of taxation than is laid on other moneyed capital of individual citizens—meaning the private bankers—and thereby violates a restriction imposed by section 5219 of the Revised Statutes of the United States.

It is settled that the relation of the national banks to the United States and the purposes intended to be subserved by their creation are such that there can be no taxation, by or under state authority, of the banks, their property or the shares of their capital stock otherwise than in conformity with the terms and restrictions embodied in the assent given by Congress to such taxation. People v. Weaver, 100 U. S. 539, 543, 25 L. Ed. 705; Rosenblatt v. Johnston, 104 U. S. 462, 26 L. Ed. 832; Mercantile National Bank v. New York, 121 U. S. 138, 154, 7 Sup. Ct. 826, 30 L. Ed. 895; Talbott v. Silver Bow County, 139 U. S. 438, 440, 11 Sup. Ct. 594, 35 L. Ed. 210; Owensboro National Bank v. Owensboro, 173 U. S. 664, 669, 19 Sup. Ct. 537, 43 L. Ed. 850; First National Bank of Gulfport v. Adams, 258 U. S. 362, 42 Sup. Ct. 323, 66 L. Ed. 661.

The congressional assent and the terms and restrictions accompanying it as existing at the time of this assessment are found in Rev. Stat. § 5219, which reads as follows:¹- 'Nothing herein shall prevent all the shares in any 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 non-residents 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 shows, and the decisions under it hold, that what Congress intended was that national banks and their property should be free from taxation under state authority, other than taxes on their real property and on shares held by them in other national banks; and that all shares in such banks should be taxable to their owners, the stockholders, much as other personal property is taxable, but subject to the restriction that the shares be not taxed higher than other taxable moneyed capital employed in competition with such banks, and to the further restriction that the taxing of the shares of nonresidents of the state be at the place where the bank is located. People v. Commissioners, 4 Wall. 244, 18 L. Ed. 344; National Bank of Redemption v. Boston, 125 U. S. 60, 69, 8 Sup. Ct. 772, 31 L. Ed. 689; Mercantile National Bank v. New York, supra; Owensboro National Bank v. Owensboro, supra; Bank of California National Association v. Richardson, 248 U. S. 476, 39 Sup. Ct. 165, 63 L. Ed. 372; First National Bank of Gulfport v. Adams, supra.

With this understanding of the terms and restrictions of the congressional assent we proceed to an examination of the state statute and the particulars in which it is said to be in conflict with them and with tax-exempting laws of the United States. The main provisions of the statute are found in sections 1310, 1322, 1322-1a, and 1325 of the Code of Iowa,² which read as follows:

'Sec. 1310. * * * All moneyed capital within the meaning of section fifty-two hundred nineteen of the revised statutes of the United States shall be listed and assessed against the owner thereof at his place of business, and if a corporation at its principal place of business, at the same rate as state, savings, national bank and loan and trust company stock is taxed, in the same taxing district, and at the actual value of the moneyed capital so invested. The person or corporation using moneyed capital in competition with bank capital shall furnish the assessor upon demand a full and complete itemized sworn statement showing the amount of moneyed capital so used.'

'Sec. 1322. Shares of stock of national banks and state and savings banks, and loan and trust companies, located in this state, shall be assessed to the individual stockholders at the place where the bank or loan and trust company is located. At the time the assessment is made the officers of national banks and state and savings banks and loan and trust companies shall furnish the assessor with lists of all the stockholders and the number of shares owned by each, and the assessor shall list to each stockholder under the head of corporation stock the total value of such shares. To aid the assessor in fixing the value of such shares, the said corporation shall furnish him a verified statement of all the matter provided in section thirteen hundred twenty-one of the supplement to the Code, 1907, which shall also show separately the amount of the capital stock and the surplus and undivided earnings, and the assessor from such statement shall fix the value of such stock based upon the capital, surplus, and undivided earnings. In arriving at the total value of the shares of stock of such corporations, the amount of their capital actually invested in real estate owned by them and in the shares of stock of corporations owning only the real estate (inclusive of leasehold interest, if any,) on or in which the bank or trust company is located, shall be deducted from the real value of such shares, and such real estate shall be assessed as other real estate, and the property of such corporation shall not be otherwise assessed. A refusal to furnish the assessor with the list of stockholders and the information required under this section shall be deemed a misdemeanor and any bank or officer thereof so refusing shall be...