First Nat Bank of Wellingtion, Ohio v. Chapman

• Decision Date: 27 February 1899
• Docket Number: No. 137,137
• Citation: 173 U.S. 205,19 S.Ct. 407,43 L.Ed. 669
• Parties: FIRST NAT. BANK OF WELLINGTION, OHIO, v. CHAPMAN, Treasurer of Lorain County, Ohio
• Court: U.S. Supreme Court

173 U.S. 205

19 S.Ct. 407

43 L.Ed. 669

FIRST NAT. BANK OF WELLINGTION, OHIO,

v CHAPMAN, Treasurer of Lorain County, Ohio.

No. 137.

February 27, 1899.

This action was brought to restrain the collection of taxes, through or by means of the bank, by the defendant in error, levied under a statute of Ohio, upon certain individual shareholders in the bank, on the ground, as alleged, that the assessments upon such specified shareholders were illegal, as having been made without regard to the debts of such individual owners, contrary to the case of other moneyed capital in the hands of individual citizens whose debts were permitted to be deducted from the value of such capital before the assessment of taxes thereon.

The petition contained allegations intended to show a case for the interposition of a court of equity, and a tender was therein made of the amount of the taxes which the plaintiff admitted to be due on such shares after deducting the debts.

The answer, while not taking any objection that a case for equitable relief by injunction was not made, provided the contention of the petition as to the assessments being illegal was well founded, claimed, substantially, that, by the laws of the United States and of Ohio, the assessments were legal, and the petition should therefore be dismissed. Upon trial in the court of common pleas of Lorain county, the court found the following facts:

'First. Plaintiff is a national banking association, incorporated under and by virtue of an act of congress, entitled 'An act to provide for the national currency, secured by a pledge of United States bonds, and to provide for the circulation and rede ption thereof,' approved June 3, 1864, and the amendments thereof, and is established and doing business in the village of Wellington, county of Lorain, and state of Ohio.

'Second. The defendant is the duly elected and qualified treasurer of the county of Lorain and state of Ohio.

'Third. The plaintiff has a capital stock of $100,000, divided into 1,000 shares of $100 each, all of which are fully paid up, and certificates for the shares are outstanding and owned by a large number of persons.

'Fourth. That in accordance with section 2765 of the Revised Statutes of Ohio, then and now in force, the cashier of plaintiff duly reported in duplicate, to the auditor of said county, the resources and liabilities of said banking association, at the close of business on the Wednesday next preceding the second Monday of May, 1893, together with a full statement of the names and residences of the shareholders therein, with the number of shares held by each, and the par value thereof, as required by said section; that included in said return so made by said cashier was the real estate owned by the plaintiff, valued at $3,420, separately assessed and charged on the tax duplicate of said county; that thereupon said auditor proceeded, as required by section 2766 of the Revised Statutes of Ohio, to fix the total value of said shares according to their true value in money, and fixed the same at $74,710, exclusive of the assessed value of plaintiff's real estate, and made out and transmitted to the annual board of equalization of incorporated banks a copy of the report so made by said cashier, together with the valuation of such shares as was fixed by said auditor; that said state board of equalization, acting under section 2808 and 2809 of the Revised Statutes of Ohio, did examine the return aforesaid, made by said cashier to said county auditor, and the value of such shares as fixed by said county auditor, and did equalize said shares to their true value in money, and fixed the valuation thereof at $74,710, exclusive of the assessed value of plaintiff's real estate; and the auditor of said state did certify said valuation to the auditor of said county of Lorain, which said auditor of said county did enter upon the tax duplicate of said county for the year 1893.

'Fifth. That the following named stockholders of said bank were on the said day next preceding the second Monday of April, 1893, the owners of the number of shares of stock of said bank set opposite their respective names, to wit:

S. S. Warner.................. 150 shares.

R. A. Horr.................... 10 shares.

W. Cushion, Jr................ 50 shares.

C. W. Horr.................... 120 shares.

O. P. Chapman................. 10 shares.

E. F. Webster................. 10 shares.

W. R. Wean.................... 20 shares.

S. K. Laundon................. 120 shares.

'That said shares were valued by said state board of equalization for the year 1893 at $36,607.90, and certified by said board to the auditor of Lorain county as the taxable value of the same; that the rate of taxation for all taxes assessed and collected for the year 1893 within said county and village was $0.0255 on a dollar's valuation, and amounted on said value of said shares to $933.50.

'Sixth. That on said day next preceding said second Monday of April, 1893, and at the time the cashier of said banking association made return to the auditor of said county of the names and residences of the shareholders of said association, with the numbers and par value of the shares of capital stock of said banking association for the year 1893, to wit, between the first and second Mondays of May of said year, each of said abovenamed shareholders was indebted and owing to others of legal bona fide debts a sum in excess of the credits, from which, under the laws of Ohio, he was entitled to deduct said debts to an amount equal to the value of said shares; that proof of said indebtedness was duly made to said auditor by the shareholders aforesaid, at the time that the valuation of said shares of stock was so fixed by him; and that said auditor refused to allow the deduction o any indebtedness of said shareholders from the value of said shares, as so fixed by said board of equalization; and the auditor of said county carried upon the duplicate delivered to the treasurer the entire valuation of said shares so made, without allowing any deductions therefrom, by reason of any bona fide indebtedness of said shareholders to others, from the valuation so fixed by said board of equalization.

'Seventh. That the plaintiff tendered to said treasurer of Lorain county, on the 28th day of December, 1893, and offered to pay to said treasurer, the sum of $485.80, if he would receive the same in full for the tax assessed upon the valuation of the shares of stock owned by the shareholders named in the petition for the entire year of 1893, and said treasurer refused to accept the same, and said treasurer intends, if not enjoined by this court, to use all lawful means for the collection of said tax so assessed upon the valuation of said shares of stock.'

The court also found, as a conclusion of law from the above facts, that the injunction should be denied, and the petition dismissed. The plaintiff appealed to the circuit court of Lorain county, where, after argument, the judgment for defendant was reversed, and judgment ordered for plaintiff enjoining the collection of the tax. The defendant, the treasurer of Lorain county, brought the case to the supreme court of the state, where, after hearing, the court reversed the circuit court, and affirmed the judgment of the common pleas dismissing the petition. Chapman v. Bank, 56 Ohio St. 310, 47 N. E. 54.

The state law on the subject of taxation, so far as it may be claimed to in any way affect the question, is contained in the various sections of the Revised Statutes of Ohio which are set out in the margin.¹

W. W. Boynton, for plaintiff in error.

F. S. Monnett and S. W. Bennett, for defendant in error.

Mr. Justice PECKHAM, after stating the facts, delivered the opinion of the court.

Complaint is made in behalf of the shareholders of the national bank in question that they are, by means of the sys- tem of taxation adopted and enforced in the state of Ohio, subjected to taxation at a greater rate than is imposed upon other moneyed capital in the hands of individual citizens contrary to section 5219 of the Revised Statutes of the United States.

The complaint is founded upon the allegation that the owners of what is termed 'credits' in the law of Ohio (Rev. St. § 2730) are permitted to deduct certain kinds of their debts from the total amount of their credits, and such owners are assessed upon the balance only, while no such right is given to owners of shares in national banks. The claim is that shares in national banks should be treated the same as credits, and their owners permitted to deduct their debts from the valuation. The owners of property other than credits are not permitted to deduct their debts from the valuation of that property.

It is also claimed that there is an unfavorable discrimination against the national bank shareholder, and in favor of an unincorporated bank or banker.

At the outset it is plain that the system of taxation adopted in Ohio was not intended to be unfriendly to, or to discriminate against, the owners of shares in national banks; for, as observed by the state supreme court, that system was adopted long prior to the passage of the law by congress providing for the incorporation of national banks. Under this system, the owner of shares in national banks is taxed precisely like the owner of shares in incorporated state banks. Rev. St. Ohio, § 2762.

The main purpose of congress in fixing limits to state taxation on investments in national banks was to render it impossible for the state, in levying such a tax, to create and fix an unequal and unfriendly competition by favoring institutions or individuals carrying on a similar business and operations and investments of a like character. The language of the act of congress is to be read in the light of this policy. 'Moneyed capital' does not mean all capital the value of which is measured in terms of money, neither does it necessarily include all forms of...