District of Columbia National Bank v. District of Columbia

• Decision Date: 12 July 1965
• Docket Number: No. 18999.,18999.
• Citation: 348 F.2d 808,121 US App. DC 196
• Parties: DISTRICT OF COLUMBIA NATIONAL BANK, Washington, Petitioner, v. DISTRICT OF COLUMBIA, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

121 US App. DC 196, 348 F.2d 808 (1965)

DISTRICT OF COLUMBIA NATIONAL BANK, Washington, Petitioner, v. DISTRICT OF COLUMBIA, Respondent.

No. 18999.

United States Court of Appeals District of Columbia Circuit.

Argued April 30, 1965.

Decided July 12, 1965.

Mr. Richard Schifter, Washington, D. C., with whom Mr. Alan L. Wurtzel, Washington, D. C., was on the brief, for petitioner.

Mr. Henry E. Wixon, Asst. Corp. Counsel for the District of Columbia, with whom Messrs. Chester H. Gray, Corp. Counsel, Milton D. Korman, Principal Asst. Corp. Counsel, and Peter H. Wolf, Asst. Corp. Counsel, were on the brief, for respondent.

Before WASHINGTON, BURGER and LEVENTHAL, Circuit Judges.

LEVENTHAL, Circuit Judge.

The issue in this case is whether a national bank doing business within the District of Columbia is subject to the gross earnings tax imposed by 47 D.C. Code sec. 1703.¹ The District of Columbia Tax Court held that it is, and we affirm. We reject the argument of appellant, a national bank organized in 1962, that national banks are subject not to said gross earnings tax, but instead are governed only by the District of Columbia corporation franchise tax measured by net income. The questions raised by appellant are substantial enough to merit attention, but we believe that in the last analysis the solution of the problem encountered by appellant must be provided by Congress, rather than this court.

1. Appellant contends that the provisions of the District of Columbia Code purporting to lay a gross earnings tax on national banks may not be accorded such application in view of 12 U.S.C. § 548, a section which derives from R.S. § 5219 and provides: "The legislature of each State may determine and direct, subject to the provisions of this section, the manner and place of taxing all the shares of national banking associations located within its limits." That section provides that the States may tax the shares, or include dividends thereon in taxable income of the recipient, or tax the banks on their net income or on a basis according to or measured by their net income. It does not provide for taxation on the basis of gross income.

In Hamilton National Bank v. District of Columbia, 81 U.S.App.D.C. 200, 156 F.2d 843 (1946), we upheld the taxation of national banks doing business within the District of Columbia upon the basis of a percentage of gross earnings. We disposed of R.S. § 5219 as follows: "But that statute is addressed to the legislature of the states, and the statutes with which we are concerned are acts of the Congress."

Appellant contends, however, that this 1946 decision cannot continue in view of the Act of September 8, 1959, 73 Stat. 458, which provides, 12 U.S.C. § 42: "The provisions of all Acts of Congress relating to national banks shall apply in the several States, the District of Columbia, the several Territories and possessions of the United States, and the Commonwealth of Puerto Rico."

The parties duel with canons of construction. Appellant thrusts with the oldest of them all, that a statute must be construed in accordance with the plain meaning of the language used. It contends that under 12 U.S.C. § 42, all provisions of the national banking acts are applicable within the District of Columbia, that "all" includes 12 U.S.C. § 548, and that this in turn excludes the District tax on gross earnings. Respondent parries and counters that repeals by implication are not favored.

We have a more realistic guide to interpretation in the legislative history of the 1959 law. The plain meaning of the words is generally the most persuasive evidence of the intent of the legislature. The plain meaning doctrine must be given application, however hard or unexpected the particular effect, where unambiguous language calls for a logical and sensible result. Chung Fook v. White, 264 U.S. 443, 44 S.Ct. 361, 68 L.Ed. 781 (1924). A contrary course constitutes judicial legislation. It is not the function of the courts to upset the balances among interests deliberately arrived at by the legislature, for that choice is a legislative and not a judicial function, in the absence of constitutional considerations. See Learned Hand, Contribution of an Independent Judiciary to Civilization.²

Yet the plain meaning rule has limitations. It has long been recognized that the literal meaning of a statute will not be followed when it produces absurd results. Sorrells v. United States, 287 U.S. 435, 446, 53 S.Ct. 210, 77 L.Ed. 413, 86 A.L.R. 249 (1932). And since the judicial function is to ascertain the legislative intention the Court may properly exercise that function with recourse to the legislative history, and may depart from the literal meaning of the words when at variance with the intention of the legislature as revealed by legislative history. See United States v. American Trucking Associations, 310 U.S. 534, 542-543, 60 S.Ct. 1059, 84 L.Ed. 1345 (1940).

The 1959 law was passed by the 86th Congress, after the failure of enactment of S. 1451, 85th Congress, which proposed the controversial Financial Institutions Act of 1957. That bill offered in Title I a National Banking Act, described as a "codification of the laws relating to national banks," see S.Rep. 121, 85th Cong. 1st Sess. (1957) p. 2. The bill contained a Section 70, Territorial applicability, the precursor of 12 U.S.C. § 42, as added in 1959. The Senate Report shows that the purpose of this provision was to make clear that the banking act applied in Guam and the Virgin Islands, and in all the Territories including the Commonwealth of Puerto Rico "as well sets forth the purpose of Section 14 as of Columbia."³

After the failure of the 1957 proposal Congress turned to a less comprehensive enactment which eventually became Public Law 86-230, section 14 of which became 12 U.S.C. § 42. The House Report (H.R.Rep. No. 694, 86th Cong., 1st Sess. (1959)), under the overall heading "Ambiguities Clarified or Eliminated" sets forth the purpose of Section 14 as follows (pp. 2-3):

"Section 14 sets forth the area in which the national banking laws apply. In conformity with sections 40 and 41 of title 12 of the United States Code it covers the Virgin Islands and Guam. It also covers all other Territories and possessions of the United States, expressly including the Commonwealth of Puerto Rico, as well as the several States and the District of Columbia. While it has always been assumed that the national banking laws extended throughout the United States and all of its possessions, enactment of this section will eliminate any doubt on this score."

The foregoing makes it reasonably clear that there was no intention that Section 14 would make any substantial changes in the law governing national banks in the District of Columbia. Section 14 was not one of the sections referred to in House debate as being substantive. 105 Cong.Rec. 14,776-77. There is nothing even remotely to suggest that any legislator would suppose that by voting for this bill he was voting to suspend the District of Columbia tax on the gross earnings of national banks.

Appellant suggests that a different clue is to be found on the Senate side, where the Committee report referred to Section 14 as a "new provision."⁴ It is certainly a new provision, since no similar provision previously appeared on the statute books. But that is not to say that it changed the previous law.

Appellant turns next to the doctrine that legislation will not be construed so as to constitute a mere nullity. But the fact that Section 14 of the 1959 act wrought no substantive change does not condemn it as a nullity. It was apparently conceived as a tidying up measure to avoid future doubts. That is not a meaningless purpose.

In this regard it is particularly noted that the primary concern of the draftsmen seems to have been to assure coverage in the territories and possessions, and the Commonwealth of Puerto Rico. The 1959 general coverage provisions filled a void which had led to cluttering the national banking laws with a spate of specific territorial coverage provisions.⁵ In general, it was often difficult to determine territorial coverage questions in the absence of specific statutory provisions and frequently this involved careful study of hearings, committee reports and debates.⁶ The desirability of avoiding future doubts may have been underscored by the evolution of new legal conceptions of areas — for example the Commonwealth of Puerto Rico, and the Trust Territories administered under the surveillance of the United Nations.

Finally it should be observed that 12 U.S.C. § 548 is basically not a restrictive but a permissive statute. It permits that "the legislature of each State may determine" to tax national banks, and the so-called restrictions are essentially limitations on the permission. The permission of Congress was considered a necessary prerequisite before a State legislature could tax a national bank, in view of McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579 (1819) invalidating such State taxation of a Federal instrumentality in the absence of Congressional permission. Similarly a territory or possession may not tax the instrumentality of its sovereign without the latter's consent, wherefore R.S. § 5219, later converted into 12 U.S.C. § 548, was necessary to permit territorial legislatures to tax national banks. Domenech v. National City Bank, 294 U.S. 199, 55 S.Ct. 366, 79 L.Ed. 857 (1935). But as the District of Columbia Tax Court noted, the District of Columbia is an agency or integral part of the United States, and there is no need to invoke any consent such as is provided by 12 U.S.C. § 548 in order for Congress, when enacting tax legislation for the District of Columbia, to lay a tax on national banks.

Our construction accords with the cardinal principle disfavoring repeals by implication, and seeking to harmonize simultaneous application of general legislation and District of Columbia legisla...