Hannan v. First Nat. Bank of Council Bluffs, Iowa

• Decision Date: 06 December 1920
• Docket Number: 5537.
• Citation: 269 F. 527
• Parties: HANNAN, County Auditor, et al. v. FIRST NAT. BANK OF COUNCIL BLUFFS, IOWA.
• Court: U.S. Court of Appeals — Eighth Circuit

269 F. 527

HANNAN, County Auditor, et al. v. FIRST NAT. BANK OF COUNCIL BLUFFS, IOWA.

No. 5537.

United States Court of Appeals, Eighth Circuit.

December 6, 1920

C. E Swanson, of Council Bluffs, Iowa (V. A. Morgan, of Council Bluffs, Iowa, on the brief), for appellants.

Addison G. Kistle, of Council Bluffs, Iowa (Tinley, Mitchell, Pryor Ross & Mitchell, on the brief), for appellee.

Before SANBORN and CARLAND, Circuit Judges, and MUNGER, District judge.

MUNGER District Judge.

This case presents an appeal from a decree enjoining the collection of taxes. The appellee, a national bank at Council Bluffs, Iowa, alleged that an attempted assessment for the years 1914 and 1915 had been made against its shareholders based on the entire value of such shares, and without deducting from the value of the shares the amount of bonds of the United States which the bank owned. It further alleged that the tax was void, because no tax could be levied against the shares of stock in the state and savings banks, under the Iowa statutes. There was a denial of the allegations and a trial to the court.

A preliminary question of the jurisdiction of the court arises inasmuch as the tax assessed to any one shareholder does not amount to the sum of over $3,000. The statutes of Iowa in reference to taxation of banks and bank shares are in part as follows (Code Supp. Iowa 1907, and Code Supp. Iowa 1913, Secs. 1321, 1322, 1325):

Section 1321: 'Private Bankers. Private banks or bankers, or any persons other than corporations hereinafter specified, a part of whose business is the receiving of deposits subject to check, on certificates, receipts, or otherwise, or the selling of exchange, shall prepare and furnish to the assessor a sworn statement, showing the assets, aside from real estate, and liabilities of such bank or banker on January 1st of the current year, as follows:

'1. The amount of moneys, specifying separately the amount of moneys on hand or in transit, the funds in the hands of other banks, bankers, brokers or other persons or corporations, and the amount of checks or other cash items not included in either of the preceding items;

'2. The actual value of credits, consisting of bills receivable owned by them, and other credits due or to become due;

'3. The amount of all deposits made with them by others, and also the amount of bills payable;

'4. The actual value of bonds and stocks of every kind and shares of capital stock or joint stock of other corporations or companies held as an investment, or in any way representing assets, and the specific kinds and description thereof exempt from taxation;

'5. All other property pertaining to said business, including real estate, which shall be specially listed and valued by the usual description thereof; 'The aggregate actual value of moneys and credits, after deducting therefrom the amount of deposits, and the aggregate actual value of bonds and stocks, after deducting the portion thereof otherwise taxed in this state, and also the other property pertaining to the business, shall be assessed at twenty-five per cent. of the actual value of the same, not including real estate, which shall be listed and assessed as other real estate.'

Section 1322: 'Shares of stock of national banks and state and savings banks, and loan and trust companies, located in this state, shall be assessed to the individual stockholders at the place where the bank or loan and trust company is located. At the time the assessment is made the officers of national banks and state and savings banks and loan and trust companies shall furnish the assessor with lists of all the stockholders and the number of shares owned by each, and the assessor shall list to each stockholder under the head of corporation stock the total value of such shares. To aid the assessor in fixing the value of such shares, the said corporation shall furnish him a verified statement of all the matter provided in section thirteen hundred and twenty-one (1321), of the Supplement to the Code, 1907, which shall also show separately the amount of the capital stock and the surplus and undivided earnings, and the assessor from such statement shall fix the value of such stock based upon the capital, surplus, and undivided earnings. In arriving at the total value of the shares of stock of such corporations, the amount of their capital actually invested in real estate owned by them and in the shares of stock of corporations owning only the real estate (inclusive of leasehold interests, if any), on or in which the bank or trust company is located, shall be deducted from the real value of such shares, and such real estate shall be assessed as other real estate, and the property of such corporation shall not be otherwise assessed.'

Section 1325: 'Corporation Liable. The corporations described in the preceding sections shall be liable for the payment of the taxes assessed to the stockholders of such corporations, and such tax shall be payable by the corporation in the same manner and under the same penalties as in case of taxes due from an individual taxpayer, and may be collected in the same manner as other taxes, or by action in the name of the county. Such corporations may recover from each stockholder his proportion of the taxes so paid, and shall have a lien on his stock and unpaid dividends therefor. If the unpaid dividends are not sufficient to pay such tax, the corporation may enforce such lien on the stock by public sale of the same, to be made by the sheriff at the principal office of such corporation in this state, after giving the stockholders thirty days' notice of the amount of such tax and the time and place of sale, such notices to be by registered letter addressed to the stockholder at his post-office address, as the same appears upon the books of the company, or is known by its secretary.'

It will be observed that by the last section quoted the bank is made liable for the payment of the taxes assessed to its stockholders under penalties, and that it may be collected as other taxes, or by action in the name of the county. The bank may recover such payments from the stockholders and is given a lien on the stock and unpaid dividends for the amount paid. The validity of statutes imposing such liability on national banks for the taxes levied against their shareholders is beyond question. National Bank v. Commonwealth, 9 Wall. 353, 362, 19 L.Ed. 701; Aberdeen Bank v. Chehalis County, 166 U.S. 440, 444, 17 Sup.Ct. 629, 41 L.Ed. 1069; Citizens' Nat. Bank v. Kentucky, 217 U.S. 443, 451, 30 Sup.Ct. 532, 54 L.Ed. 832. As a pecuniary liability is imposed on the bank for the payment of the total amount of the tax imposed on all its stockholders, it is the real party in interest in a suit to enjoin the collection from the assets, a collection which is in effect an enforced declaration of a dividend. Redhead v. Iowa Nat. Bank, 127 Iowa, 572, 103 N.W. 796.

In the case of Cummings v. National Bank, 101 U.S. 153, 156 (25 L.Ed. 903), the same claim of the incapacity of the bank to sue because only the shareholders were interested was considered, and it was decided that the bank might maintain such a suit as this under a similar statute of Ohio, but less burdensome on the bank because it declared that the bank might pay the tax, whereas this statute declares that the bank must pay it. In that case the court said:

'But the Ohio statute, by the remedies it provides, places the bank in a condition where it must pay the tax, or encounter other evils of a character which create a right to avoid them by instituting legal proceedings to ascertain the extent of its responsibility before it does the acts demanded by the statute.'

The bank, therefore, had the right to maintain the suit, and as the total amount due from it far exceeded the sum of $3,000, exclusive of interest and costs, the court had jurisdiction of the controversy.

It was shown that appellee was the owner of a large amount of bonds of the United States at the time of the assessments and that no deduction was allowed from the value of the shares because of that fact. One of the principal questions that is presented goes beyond the relationship of these bonds to the asserted tax, as the appellee denies the authority of the state to levy any tax against the bank or the shares of stock therein. The statute of the United States which relates to the taxation of national banks is section 5219 of the Revised Statutes (section 9784, U.S. Comp. Stats. Ann.). It is contained in the chapter relating to the creation and regulation of these banks and is as follows:

'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.'

It is contended by appellee that section 1322 of the Iowa statutes requires the taxation of the property of incorporated banks and not of the shares of stock therein....