First Nat. Bank of Albia v. City Council of Albia

• Decision Date: 28 May 1892
• Citation: 52 N.W. 334,86 Iowa 28
• Parties: FIRST NAT. BANK OF ALBIA ET AL. v. CITY COUNCIL OF ALBIA.
• Court: Iowa Supreme Court

86 Iowa 28

52 N.W. 334

FIRST NAT. BANK OF ALBIA ET AL.

v.CITY COUNCIL OF ALBIA.

Supreme Court of Iowa.

May 28, 1892.

Appeal from district court, Monroe county; E. L. BARTON, Judge.J. C. Mabry, for appellants.

T. B. Perry, for appellee.

KINNE, J.

1. The undisputed facts, as disclosed by the record in this case, are that the First National Bank of Albia is a corporation, organized and transacting the business of banking under and by virtue of the laws of the United States. The other parties plaintiff are officers and stockholders in said corporation. That the capital stock of said plaintiff bank is $50,000. That said bank has invested $13,500 in real estate. That property in the city of Albia for the year 1889 was assessed at 60 per cent. of its cash value. That the city assessor assessed the real estate of said bank in the same manner as other real estate. That he deducted $6,417 from the capital stock of plaintiff bank, and assessed the remainder to the individual stockholders according to the number of their shares. That on $7,083, the difference between the value of the real estate and the amount deducted from the capital stock on account of real estate, said bank claims to have been illegally assessed. Plaintiff T. D. Lockman, at the time the assessor assessed him, was the owner of 50 shares of stock in said bank, and was justly indebted in the sum of $4,500, and had no moneys and credits, except his shares of stock, from which he could deduct said indebtedness. The assessor deducted said indebtedness from the value of the shares of said Lockman, not already assessed as real estate, and it left nothing upon which Lockman was assessable as bank stock. Plaintiff J. H. Drake was the owner of 194 shares of stock in said bank, and at the time of his assessment was justly and in good faith indebted in the sum of $3,000, and had no other moneys and credits, except his shares of stock, from which to deduct said indebtedness. The assessor in his case deducted the $3,000 from the valuation of his shares of stock, and assessed the remainder not already assessed as real estate. That plaintiff bank appeared before the board of equalization of the city of Albia at the time required by law, and made complaint that it was, as a bank, doubly assessed on $7,083, being assessed on it as real estate and also as part of capital stock, and asked that said assessment be corrected so as to assess as capital stock or shares only the amount not invested in real estate. The board of equalization deducted $1,083 more from the capital stock assessment on account of the real estate, and refused further relief. That said board raised the assessment of plaintiffs Lockman and Drake by refusing to allow them any deduction on account of their individual indebtedness. From the action of the board of equalization all the plaintiffs appealed to the district court, which held the assessment valid.

It will be observed that there are two questions presented for our determination: First. Is the plaintiff bank entitled to have deducted from its assessable capital stock the value of its real estate? Second. Are plaintiffs Lockman and Drake entitled to have their individual indebtedness deducted from the shares of stock assessed to them respectively? Involved in the determination of these questions are others. Thus, if the bank is entitled to a deduction from its stock on account of its real estate, will it be the assessed value or actual value of the real estate which shall be deducted, and will the deduction be made from the par value of the stock or from its actual cash value?

2. This case is triable de novo. Davis v. City of Clinton, 55 Iowa, 549, 8 N. W. Rep. 423. The appellees introduced no evidence. It is insisted that the court below erred in not deducting the amount of the bank stock which was invested in real estate, viz., $13,500, from the total amount of its capital stock. Under our statute, (Code, §§ 818, 819,) all shares in national banks are listed in the names of the stockholders, but the tax is payable by the bank. The statute also provides that such shares shall not be assessed at a greater rate than other “moneyed capital in the hands of individuals.” Code, § 818. Section 5219 of the federal statutes authorizes the states to tax these banks, and contains the restriction “that the taxation shall not be at a greater rate than is assessed on other moneyed capital in the hands of individual citizens of such state.” The same statute authorizes the taxation of the real estate held by such banks “to the same extent, according to its value, as other real estate is taxed.” It is said in Bank v. Young, 25 Iowa, 314: “The shares of the stockholders represent the capital of the institution. To tax the shares, and also the property of the bank, would be double taxation.” People v. Weaver, 100 U. S. 539. 1 Desty, Tax'n, pp. 199, 200, 379, 383. See, also, Tallman v. Treasurer, 12 Iowa, 532, where the court said: “The shares of stockholders are theoretically, if not practically, measured in value by the property of the corporation. * * * However held, [the lands,] whether in fee or otherwise, by the company, they are a part of the capital,--affect the value of the stock which is taxable through the shares. To tax the land, and the stock also, which represents it, and which is enhanced by the value of the land, it seems to us would be double taxation.” In the case of Appeal of Des Moines Water Co., 48 Iowa, 333, it is held that the stock of a corporation must be taxed as the property of the corporation owners, and the question as to whether both the shares and the corporate property shall be taxed at the same time was not determined. In Cook v. City of Burlington, 59 Iowa, 252, 13 N. W. Rep. 113, the case last cited is approved, and a majority of the court held that the property of a corporation may be taxed, and that at the same time the stock can be taxed to the individual owners; and, after citing Tallman v. Treasurer, 12 Iowa, 534;Express Co. v. Ellyson, 28 Iowa, 378;McGregor's Ex'rs v. Vanpel, 24 Iowa, 436,--the court further says that it has never held “that what is denominated ‘duplicate taxation’ is in excess of the legislative power. The most that can be said of these utterances of the court is that it should be held in disfavor by courts and legislatures.” In Henkle v. Town of Keota, 68 Iowa, 338, 27 N. W. Rep. 250, the doctrine announced in Des Moines Water Co.'s Appeal and Cook v. City of Burlington is approved, and it is expressly held that shares of stock in a bank incorporated under the state law were taxable to the shareholders.

It is clear that, as the power to tax the property of national banks and their stock is derived from the legislation of the general government, the state is, in its exercise, bound by the limitations and restrictions placed thereon by congress, and our own statute which we have referred to is in accord with the provisions of the federal law. In this case the bank has $13,500 of its capital stock invested in its bank building and other real estate. This is taxable as is other real estate. It was thus taxed. Manifestly, if the $50,000 capital stock is assessed and taxed without regard to the portion thereof thus invested in real estate, it will amount to double taxation of the stock to the extent of the $13,500. In other words, if appellee's theory is correct, it is lawful to tax the entire capital stock of $50,000, and then, in addition, tax real estate which is acquired by an investment or use of $13,500 of this same stock. We think such a result would not only be most inequitable and unjust, but would be clearly in violation of the provision of both federal and state statutes, which limit the taxation of these corporations as heretofore stated. The statute of the United States in relation to the taxation of these corporations is explicit,--it condemns just such an exercise of the power of taxation as was attempted in the case at bar. It is binding on the state, and the state statute is in harmony with it.

Thus far we have assumed that the record shows that this real estate was purchased out of the bank stock. It appears that the bank's real estate consisted of the lot and building it now occupies; also other real estate formerly used by it in its business. There is nothing to show the separate value of these two pieces of real estate. It is claimed that the bank acquired the lot and building it now occupies by purchase upon an execution sale, had on foreclosure of a mortgage which it held by assignment to secure a debt; but, if this be so, it does not follow that the property was not paid for in fact out of the capital stock of the bank, as plaintiff's officers testify; and, while it is true that no formal pleadings are required to be filed in this class of cases, yet, in the answer filed to plaintiff's petition, the allegation of the petition that the real estate was acquired by the use of the capital stock of the bank is not denied.

From the record before us we think it fairly appears that the real estate was paid for out of the capital stock. The actual value of the stock, diminished by the proportionate value of the real estate owned by the bank, furnishes the proper sum in this case upon which to assess the tax. People v. Weaver, 100 U. S. 539;Supervisors v. Stanley, 105 U. S. 305; 1 Desty, Tax'n, p. 383. See Code, § 813. This actual cash value of the stock would be its market value, whether above, below, or at par. From the testimony in this case, we must presume that the value of the real estate was $13,500, and the actual value of the stock its par value. While there is some evidence relating to the value of the land and of the stock, there is nothing which justifies us in fixing any value other than that above stated.

3. Were the plaintiffs Lockman and Drake entitled to deduct their indebtedness from their shares of bank stock? The evidence shows, without conflict, that they...