First Nat Bank of Guthrie Center v. Anderson

• Decision Date: 04 January 1926
• Docket Number: No. 26,26
• Citation: 70 L.Ed. 295,269 U.S. 341,46 S.Ct. 135
• Parties: FIRST NAT. BANK OF GUTHRIE CENTER v. ANDERSON, County Auditor, et al
• Court: U.S. Supreme Court

269 U.S. 341

46 S.Ct. 135

70 L.Ed. 295

FIRST NAT. BANK OF GUTHRIE CENTER

v ANDERSON, County Auditor, et al.

No. 26.

Argued Jan. 27, 1925.

Decided Jan. 4, 1926.

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

Messrs. Ben J. Gibson, of Des Moines, Iowa, and Earl W. Vincent, of Guthrie Center, Iowa, for defendants in error.

Mr. Justice VAN DEVANTER delivered the opinion of the Court.

This is a suit by a national bank on behalf of its shareholders to restrain the collection of a tax levied against the latter on their shares. The bank is located at Guthrie Center, in Guthrie county, Iowa. The defendants, who are county officers charged with the duty of collecting taxes, interposed a general demurrer to the petition. The demurrer was sustained, judgment against the plaintiff was entered, and the judgment was affirmed by the Supreme Court of the state. 196 Iowa, 587, 192 N. W. 6.

The petition assails the tax on several distinct grounds, only one of which is relied on here. The allegations displaying this ground are:

'The said tax as entered upon the tax list by the county auditor is void, because it is a discrimination between bank stock and moneyed capital invested in competition therewith, and in violation of section 5219, Revised Statutes of the United States. Plaintiff avers: That in the town of Guthrie Center, Iowa, the total levy for local, county and state tax purposes was 143 5/10 mills on the dollar for the year 1920, and said tax on plaintiff and its shareholders was estimated and charged at said rate. * * * That under the laws of Iowa a levy of only 5 mills on the dollar is imposed upon notes, mortgages, and other evidences of debt, and investments of individuals in securities, which represent money at interest, and other evidence of indebtedness such as normally enter into the business of banking, and the tax for the year 1920 upon moneyed capital of individual citizens of Guthrie county, Iowa, and of the town of Guthrie Center, engaged in competition with plaintiff, was so levied and computed. That the amount of notes, mortgages, and other evidences of money loaned and put out at interest by individual citizens in the county of Guthrie, Iowa, was a very large sum, which amount plaintiff is unable to state, but upon information and belief plaintiff charges said amount to be more than $5,000,000, which were included in the 1920 assessment, and upon which the tax levy was but 5 mills on the dollar; while the total of all bank stock, including state and national, in Guthrie county, Iowa, does not exceed the sum of $316,852. That approximately $5,000,000 of moneyed capital in the hands of individual citizens, consisting chiefly of notes, mortgages, and money loaned at interest, was taxed for the year 1920 in Guthrie county, Iowa, under the laws of Iowa, at 5 mills on the dollar.'

'That said assessment is erroneous, in that it is contrary to the provisions of section 5219 of the Revised Statutes of the United States, because by said assessment the shares of stock of the plaintiff are subjected to a greater assessment and tax than is imposed upon many capital in the hands of individual citizens in said state used and utilized in the same business.'

The Supreme Court of the state, in the fore part of its opinion, summarizes the several grounds on which the bank urged it to hold the tax invalid. The ground relied on here, as there summarized, is:

'That the (state) statute providing for a tax of five mills on the dollar of moneyed capital loaned and invested in competition with national banks discriminates against the same and is void under section 5219 of the Revised Statutes of the United States' (Comp. St. § 9784).

The record also shows that in that court the defendants recognized that the bank was contending 'its shares of stock are taxed at a greater rate under the Iowa law than is moneyed capital,' contrary to the restrictions of the federal statute, and that they made the counter contention that 'the law under which it is sought to hold appellant bank liable for the 1920 taxes does not violate section 5219 of the United States Revised Statutes.'

True, the Supreme Court in the latter part of its opinion says:

'It is not claimed that section 1310 of the statute (the state law) is invalid, or that ample provision is not made thereby for the assessment of 'other moneyed capital' in the hands of individuals or other owners at the same rate as national and state banks are taxed, when invested in competition therewith.'

At first this seems a contradiction of the court's earlier statement. But these statements are explained and the seeming conflict dispelled by what otherwise appears in the record, which is that the bank was making the alternative contentions that the state law, if construed and applied according to its words, does not permit any discrimination against national bank shares and is in accord with the federal statute, but, if construed and applied as sustaining what is alleged in the petition, it permits the discrimination which the federal statute forbids, and is in that respect invalid.

The case is here on writ of error, the substance of the assignment of errors being that the Supreme Court of the state, although holding that the state law permits the discrimination against national bank shares alleged in the petition, denied the bank's contention that, when so construed and applied, that law is in conflict with the federal statute.

A petition for review on writ of certiorari also was presented and its consideration was postponed to the hearing on the writ of error.

By a motion to dismiss, the jurisdiction of this court on the writ of error is challenged on the grounds, first, that the state court rested its judgment on the construction and sufficiency of the allegations of the petition and its decision of that question is conclusive here; and, secondly, that the judgment is right independently of any ruling on the asserted federal question, in that the suit is not one in which relief may be had in equity, because (a) an adequate remedy at law may be had under the local law by paying the tax and suing to recover the money, (b) the bank has not exercised the local statutory right of appealing from the action of the county officers in imposing the tax, and (c) there has been no payment or tender of so much of the tax as would be due if the five-mills levy were applied to the shares. Plainly, the first ground cannot be maintained. Whether a pleading sets up a sufficient right of action or defense, grounded on the Constitution or a law of the United States, is necessarily a question of federal law, and, where a case coming from a state court presents that question, this court must determine for itself the sufficiency of the allegations displaying the right or defense, and is not concluded by the view taken of them by the state court. Mitchell v. Clark, 110 U. S. 633, 645, 4 S. Ct. 170, 28 L. Ed. 279; Boyd v. Thayer, 143 U. S. 135, 180, 12 S. Ct. 375, 36 L. Ed. 103; Covington and Lexington Turnpike Co. v. Sandford, 164 U. S. 578, 595, 17 S. Ct. 198, 41 L. Ed. 560; Carter v. Texas, 177 U. S. 442, 447, 20 S. Ct. 687, 44 L. Ed. 839. The principle is general, and is a necessary element of this court's power to review judgments of state courts in cases involving the application and enforcement of federal laws. Davis v. Wechsler, 263 U. S. 228 24, 44 S. Ct. 13, 68 L. Ed. 143.

The second ground is not better. The Supreme Court of the State treated the case as cognizable in equity and perceived no obstacle to a consideration of the merits as displayed in the petition. In this that court was proceeding within limits where the state laws and practice were controlling, and its action is not open to revision here. In cases coming from state courts this court's power and concern are specially directed to rulings made or refused on federal questions. Murdock v. Memphis, 20 Wall. 590, 638, 22 L. Ed. 429; Bi-Metallic Investment Co. v. State Board of Equalization, 239 U. S. 441, 444, 36 S. Ct. 141, 60 L. Ed. 372.

With the objections just considered out of the way, it suffices to say this court's jurisdiction on the writ of error has full support in Dahnke-Walker Milling Co. v. Bondurant, 257 U. S. 282, 42 S. Ct. 106, 66 L. Ed. 239. The motion to dismiss is accordingly overruled, and the petition for certiorari is denied.

The state court holds that the state law authorizes the taxation shown in the petition, and, as this ruling on a purely state question must be accepted here, we turn to the question, chiefly pressed on our attention, whether the state law, so construed and applied, conflicts with the federal statute. In approaching its solution there is need for having in mind the occasion for the federal statute and the purpose and words of the restriction therein which is said to have been violated here.

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. Des Moines National Bank v. Fairweather, 263 U. S. 103, 106, 44 S. Ct. 23, 68 L. Ed. 191, and cases cited. The early legislation respecting these banks contained a restricted consent, which afterwards became section 5219 of the Revised Statutes. By it Congress assented to the taxation of the shares to their owners under the laws of the state where the bank was located, subject to the restriction 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 further assented to the taxation of the real property of the bank for state, county, and municipal purposes 'to the same extent, according to its value, as other real property is taxed.' This...