Marcellus Lander v. Mercantile National Bank of Cleveland, Ohio

• Decision Date: 02 June 1902
• Docket Number: No. 227,227
• Citation: 22 S.Ct. 908,186 U.S. 458,46 L.Ed. 1247
• Parties: MARCELLUS A. LANDER, as Treasurer of Cuyahoga County, Ohio, Appt. , v. MERCANTILE NATIONAL BANK OF CLEVELAND, OHIO
• Court: U.S. Supreme Court

186 U.S. 458

22 S.Ct. 908

46 L.Ed. 1247

MARCELLUS A. LANDER, as Treasurer of Cuyahoga County, Ohio, Appt.,

v MERCANTILE NATIONAL BANK OF CLEVELAND, OHIO.

No. 227.

Argued April 18, 1902.

Decided June 2, 1902.

This suit was brought in the circuit court of the United States for the northern division of Ohio, eastern district, to restrain the collection of certain taxes levied by the officers of Cuyahoga county, Ohio, upon the appellee bank. The grounds of the suit were that the acts of the taxing officers of said county were in violation of the 'rights of the plaintiff (appellee) and of its shareholders accorded to them by § 5219 of the Revised Statutes of the United States, securing to said shareholders a restriction of the rate and limit of taxes assessed upon their said shares to that assessed upon other moneyed capital in the hands of individual citizens of the state of Ohio.'

The bill alleged that the plaintiff (appellee) was a national bank, and stated the capital stock of the bank and the number of shares into which it was divided; that its cashier made the proper returns of the resources and liabilities of the bank to the county auditor; that the latter fixed the value thereof, as required by § 2766 of the Revised Statutes of the state, after deducting the assessed value of the real estate of the bank, and transmitted a statement of his action, and a copy of the report made by the cashier, to the state board of equalization, for incorporated banks, and that board, professing to act under §§ 2808 and 2809 of the Revised Statutes of the state, increased the valuation of the shares without notice to the bank or its shareholders, and that the board was hence without jurisdiction to make such increase, and 'its action in respect thereto was void and of no effect.'

It was averred 'that said state board of equalization know- ingly and designedly did fix a much higher per centum of valuation and assessment for taxation upon the shares of the plaintiff's capital stock than was assessed upon other moneyed capital in the hands of individual citizens of the state of Ohio, and much higher than that fixed on other moneyed capital in the hands of such citizens in said county of Cuyahoga and said city of Cleveland.'

Section 2730 of the Revised Statutes of Ohio was set out in the bill, which defines 'credits' to be the excess of certain legal claims and demands over and above legal and bona fide debts, and it was averred 'that a large amount of moneyed capital in the hands of individual citizens of the state of Ohio invested in promissory notes and other legal obligations, securities, claims, and demands, amounting to several hundred millions of dollars, is by the aforesaid provision, allowing a deduction of legal bona fide debts to be made therefrom, expressly exempted from taxation.'

Figures were given in support of the allegation as to individuals, 'building and loan incorporations,' which, it was alleged, 'were empowered and authorized by said statute to borrow and loan money and to do a general banking business with their members and depositors,' and savings banks, in which it was alleged that there was on time deposit an amount exceeding the entire capital stock of all the national banks in the state, which deposits were credits belonging to the depositors from which legal bona fide debts were authorized by the statute to be deducted in order to ascertain the taxable value of said deposits.

That on account of such exemptions unlawful discrimination was practised against moneyed capital invested in national banks, and that the tax lawfully assessed and paid on its shares by complainant amounted to upwards of 20 per cent of the income which arose from its operations.

That each of the shareholders was indebted in an amount of bona fide debts, 'exclusive of the exceptions allowed by the statute, to an amount equal to the actual and par value of the number of shares specified opposite their respective names, and which said excess of said debts over said credits as aforesaid the said shareholders above named were entitled to have deducted from the assessed value of said shares so severally owned by them.'

Proof of this indebtedness was submitted to the county auditor, but he refused to make any deduction, and threatened to collect taxes on such shares with said deductions disallowed.

That the right to have such deductions made was adjudicated in a suit brought by plaintiff on the 8th of April, 1887, against Horatio N. Whitbeck, the predecessor of the defendant, as treasurer of Cuyahoga county, and also in other suits brought against other predecessors of the defendant, in which said suits the issues were the same as those in the present suit, and that each of the defendants in said suits 'represented the same interest, sustained the same relation, was charged with the same duties to the public as the present defendant,' and in which the issues determined and adjudged 'involved the same subject-matter, and that the judgments therein given are wholly unreversed and still in full force and operation.'

The bill prayed for an injunction of the collection of any of the taxes which were charged on the duplicate tax list of the county, 'including those levied on such unlawful increase of valuation by such state board of equalization for incorporated bank shares, permitting, however, said treasurer, without prejudice to his rights in the premises, to receive the amounts so as aforesaid tendered by the plaintiff to him.'

The answer admitted some of the averments of the bill and tendered issue on those upon which complainant based the charge of illegality of and discrimination in the assessment. As to the action of the auditor the answer alleged that 'the auditor was greatly deceived and misled by complainant's statement of the true value of its returns to him for taxation, and that the returns so made did not exceed forty (40) per cent of the actual value of said property and assets of complainant; when in truth and in fact the said complainant should have returned the same at its true value in money.' And also averred 'that said board of equalization began work at the time the statutes require, and continued its work continuously, but for want of the necessary information it could not complete its work earlier than December 6, 1897.'

In an amendment to the answer the deception of complainant cashier as to the true value of the shares was again averred, and the justness and legality of the action of the state board of equalization were circumstantially asserted.

As a second defense it was alleged that § 167 of the Revised Statutes of Ohio was in pari materia, and was a part of the taxing system of the state and of the machinery for the collection of the public revenue of the state, and provided that when the amount of taxes to be remitted exceeded $100, as in the case at bar, that the board of revision provided for by said section, consisting of the governor, auditor of state, and attorney general, was constituted an appellate board to the action of the state board of equalization, of shares of incorporated banks, and had the power and authority and jurisdiction to review, revise, and correct all excessive, illegal, or erroneous assessments, fines, or judgments that might have been made by said board of equalization; that complainant, not having appealed to such board of revision, and by refusing to submit to such board its 'cause and the matters in dispute, had not exhausted its usual and ordinary remedy at law,' and had not exhausted the remedies provided by the statutes of Ohio, and hence the court had 'no jurisdiction in equity to hear and determine said cause, and said plaintiff bank should not be permitted to further prosecute its action herein.'

The case was referred to a master, and upon the coming in of his report, and, after considering the exceptions of the parties to it, the court dissolved the injunction which had been granted, and dismissed the bill. 98 Fed. 465. That action was reversed by the circuit court of appeals and the cause remanded, with instructions to enter a decree in favor of the complainant (appellee here). 109 Fed. 21. Thereupon this appeal was taken. Other facts are stated in the opinion. Most of the sections of the Revised Statutes of Ohio on the subject of taxation, which are applicable to the questions involved, are printed at length in 173 U. S., pp. 209 et seq. 43 L. ed. 670, 19 Sup. Ct. Rep. 409. Other sections are inserted in the margin or referred to in the opinion.

This citation should be 45 C. C. A. 66, 105 Fed. 809. A later case in the circuit court is reported in 109 Fed. 21. [Ed.]

'Sec. 2807. The said boards (certain city boards) shall hear complaints and equalize the assessment of all personal property, moneys and Messrs. J. M. Sheets, Smith W. Bennett, and P. H. Kaiser for appellant.

Mr. W. W. Boynton for appellee.

Mr. Justice McKenna, after stating the case, delivered the opinion of the court:

The circuit court of appeals based its opinion on two questions: (1) The jurisdiction of the state board of equalization for incorporated banks to increase, without notice to the bank, the valuation fixed by the county auditor on the shares of its stock; (2) the fact of the former adjudications as determining the right to reduce the valuation of the shares by taking bona fide indebtedness therefrom. Counsel for appellee objects to a broader discussion by appellant's counsel of the case than those questions present, urging they were the only ones made by the appellee in the circuit court of appeals. In view of this insistence, and as appellee took the case to the latter court, we may make them the grounds of our discussion and decision, although the first question was not passed upon by the circuit court.

The findings of the master sustained the allegations of the bill as to the action of the auditor, and that the board of equalization met as required by § 2808 of the...