Fourth Atlantic Nat. Bank of Boston v. City of Boston

• Decision Date: 15 July 1924
• Docket Number: 1744-1747.
• Citation: 300 F. 29
• Parties: FOURTH ATLANTIC NAT. BANK OF BOSTON v. CITY OF BOSTON, and three other cases.
• Court: U.S. Court of Appeals — First Circuit

300 F. 29

FOURTH ATLANTIC NAT. BANK OF BOSTON v. CITY OF BOSTON, and three other cases.

Nos. 1744-1747.

United States Court of Appeals, First Circuit.

July 15, 1924

Hollis R. Bailey, of Boston, Mass. (Walter H. Roberts, of Boston Mass., on the brief), for plaintiff in error Fourth Atlantic Nat. Bank.

Edmund A. Whitman, of Boston, Mass., for plaintiff in error National Security Bank.

Robert H. Holt (Gaston, Snow, Saltonstall & Hunt, of Boston, Mass on the brief), for plaintiff in error National Shawmut Bank.

John A Sullivan and William Harold Hitchcock, Sp. Counsel, both of Boston, Mass. (Jay R. Benton, Atty. Gen., on the brief), for defendant in error.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

BINGHAM Circuit Judge.

The plaintiffs (plaintiffs in error) in these four cases are national banks located and doing business at Boston, Mass. The defendant (defendant in error) is the city of Boston. The suits are actions at law brought in the federal District Court for the District of Massachusetts to recover sums of money paid in taxes and assessed by the city on shares of stock in the respective banks for the years 1917, 1918, 1919, and 1920. In its declaration each plaintiff alleges (1) that the city, 'purporting to act under and by virtue of the laws of Massachusetts (chapter 490, part 3, Acts of 1909), ' assessed the stock in said bank at 'a rate greater than was then assessed upon other moneyed capital in the hands of individual citizens of the state of Massachusetts'; (2) that said statute required plaintiff to pay such tax 'under pain of certain penalties'; (3) that the tax was committed to the defendant's collectors for collection and demand for payment was made on or about October 1 in each of the respective years; (4) that the plaintiff paid the tax under compulsion and duress; (5) that the tax thus paid was assessed and collected without warrant of law and contrary to the provisions of the Constitution and laws of the United States and was wholly unlawful. In No. 1747 the plaintiff's declaration contained a further allegation as to the taxes of 1917 and 1918, that they were paid under protest in writing signed by the plaintiff, but as to the payments of the taxes for 1919 and 1920 the allegations in this suit are the same as above stated in the other suits. The sums sought to be recovered range from about $30,000 to over $1,500,000.

The provisions of chapter 490, part 3, of the Acts of 1909, referred to in the declarations and relied upon, are sections 11 to 20, inclusive, which provisions are also found in General Laws of Massachusetts 1921, c. 63, Secs. 1 to 10, inclusive.

The defendant demurred, assigning as grounds of demurrer (1) that the matters alleged in each declaration were insufficient in law to enable the plaintiff to maintain the action; (2) that the declaration in each case does not state a cause of action substantially in accordance with the rules contained in chapter 490, part 2, Sec. 88, of the Acts of 1909, in that (a) the declaration shows that the action was brought to recover certain taxes assessed and paid under the provisions of the statute of Massachusetts, and that it is not alleged that the action was commenced within three months after the several dates when the taxes were paid; and (b) in that it is not alleged that such taxes were paid either after an arrest of the plaintiff, a levy upon its goods, a notice of a sale of its land, or a protest in writing signed by it. The defendant also moved to dismiss on the ground that the declarations did not allege facts stating a federal question, and therefore the District Court, as a federal court, was without jurisdiction.

In the District Court the motion to dismiss to dismiss was denied, the demurrer was sustained, and judgment was entered for the defendant in the respective cases, and these writs of error were brought.

The pertinent statutes involved are as follows:

United States Revised Statutes:

'Sec. 5219. 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 nonresidents 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. ' Comp. St. Sec. 9784.

St. Mass. 1909, c. 490, part 3:

'Sec. 11. All the shares of stock in banks, whether of issue or not, existing by authority of the United States or of the commonwealth, and located within the commonwealth, shall be assessed to the owner thereof in the city or town in which such bank is located, and not elsewhere, in the assessment of state, county and town taxes, whether such owner is a resident of said city or town or not. They shall be assessed at their fair cash value on the first day of May, first deducting therefrom the proportionate part of the value of the real estate belonging to the bank, at the same rate as other money capital in the hands of citizens is by law assessed. The persons who appear from the books of the banks to be owners of shares at the close of the business day last preceding the first day of May shall be deemed to be the owners thereof.

'Sec. 12. Every such bank shall pay the tax so assessed to the collector or other person authorized to receive the same at the time when other taxes in the city or town become due. If not so paid, said tax, with interest thereon at the rate of twelve per cent per annum from the day when it became due, may be recovered from said bank in an action of contract by the collector of such city or town.

'Sec. 13. The shares of such banks shall be subject to the tax paid thereon by the corporation or by the officers thereof, and the corporation and the officers thereof shall have a lien on all the shares in such bank and on all the rights and property of the shareholders in the corporate property for the payment of said taxes.'

St. Mass. 1909, c. 490, part. 2:

'Sec. 88. No action to recover back a tax shall be maintained, except as provided in section seventy-four, unless it is commenced within three months after payment of the tax nor unless such tax is paid either after an arrest of the person paying it, a levy upon his goods, a notice of a sale of his land, a protest in writing signed by him, or a withholding of money due to him under the provisions of section eighty-three. In an action founded upon an error or irregularity in the assessment or apportionment of a tax, only the amount in excess of the tax for which the plaintiff was liable shall be recoverable; and no sale, contract or levy shall be avoided solely by reason of such error or irregularity.' In 1916 the Legislature of Massachusetts passed an income tax law, chapter 269, Secs. 2 and 11, of which provide as follows:

'Sec. 2. Income of the following classes received by any inhabitant of this commonwealth during the calendar year prior to the assessment of the tax shall be taxed at the rate of six per cent per annum: * * *

'(b) Dividends on shares in all corporations and joint stock companies organized under the laws of any state or nation other than this commonwealth, except national banks and except such foreign corporations as are subject to a tax upon their franchises payable to this commonwealth under the provisions of sections forty-three and fifty-two of part III of chapter four hundred and ninety of the acts of the year nineteen hundred and nine, and acts in amendment thereof and in addition thereto.'

'Sec. 11. After the year nineteen hundred and sixteen, income which is taxable under the provisions of section five of this act, and, except as provided in section twenty-one, property, whether held by an executor, administrator, trustee or otherwise, the income of which, if any, is taxed or would be taxable under the provisions of section two of this act if received by an inhabitant of this commonwealth, shall be exempt from taxation under the provisions of chapter four hundred and ninety of the acts of the year nineteen hundred and nine and acts in amendment thereof and in addition thereto: Provided, however, that in determining the amount of any tax upon a corporate franchise under the provisions of part III of said chapter four hundred and ninety, the value of securities, the income of which, if any, is taxed or would be taxed under the provisions of this act if owned by a natural person, shall not be included in the deduction, authorized by section forty-one of said part of said chapter, of securities which, if owned by a natural person resident in this commonwealth, would not be liable to taxation, but, for the purposes of section forty-three of said part of said chapter, shall be included among securities which, if owned by a natural person resident in this commonwealth, would be liable to taxation. This act shall not be construed to impose a tax upon any corporation or person in respect to income derived from property exempted from taxation by provisions of law existing prior to the passage of this act, nor shall anything in this act exempt from taxation, under the provisions of

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