Mercantile Nat. Bank v. Shields

• Decision Date: 03 January 1894
• Docket Number: 5,122.
• Citation: 59 F. 952
• Parties: MERCANTILE NAT. BANK OF CLEVELAND v. SHIELDS, County Treasurer.
• Court: U.S. District Court — Northern District of Ohio

59 F. 952

MERCANTILE NAT. BANK OF CLEVELAND v. SHIELDS, County Treasurer.

No. 5,122.

United States Circuit Court, N.D. Ohio, Eastern Division.

January 3, 1894

The complainant files its bill on behalf of its shareholders asking for a permanent injunction against the defendant restraining him from collecting taxes levied upon the shares of stock owned by certain persons named in the bill, which taxes complainant avers are illegal and void because imposed in direct violation of section 5219 of the Revised Statutes of the United States, which provides that taxes imposed upon shares of national banks 'shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such states.' The complainant further avers that a large amount of the moneyed capital in the hands of individual citizens of the state, and of the county of Cuyahoga and city of Cleveland, invested in promissory notes and other obligations and securities, is, by provision of section 2730 of the Revised Statutes of Ohio (allowing a deduction of legal bona fide debts to be made from 'credits,') expressly exempted from taxation thereby making an unlawful discrimination against moneyed capital invested in national bank shares, as to which no exemption or deduction is provided for by the laws of Ohio, which discrimination is in violation of the provision of the laws of the United States above quoted. The bill further alleges that some 2,489 shares of complainant's stock, owned by the several shareholders named in the bill, were valued by the state board of equalization of Ohio for taxation for the year 1892 at $149,340, and were certified by said board to the auditor of Cuyahoga county as the taxable value thereof, which value, multiplied by the rate of two and seventy-five hundredths cents on the dollar, fixed for said year as the rate of taxation upon all property situated in said county upon a dollar's valuation, amounted, on said shares, to $4,106.84. The bill further avers that between the first and second Mondays in May of 1892, when the cashier of said bank made return to the auditor of said county of the names and residences of the shareholders of said bank, with the numbers and par value of the shares of the capital stock of said bank, each of said 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 par value of said shares, which said excess of said debts over credits, as aforesaid, the said shareholders were entitled to have deducted from the assessed value of said shares so severally owned by them. The complainant further avers that the said auditor did deduct and abate said indebtedness of said shareholders from the assessed value of their shares, thereby exempting the same from taxation, and delivered the duplicate, with said deduction, to the defendant as treasurer of said county, and said complainant paid to said treasurer, on December 20, 1892, the half-year taxes so due. The complainant further avers that the auditor of said county, on June 10, 1893, disregarding the deductions allowed as aforesaid, did, without authority of law, add to said duplicate the allowances so aforesaid made, and did assess against the same the rate and percentage of taxation for said city, county, and state for 1892, and now threatens to collect by distraint the said tax on said shares, with said deductions disallowed. Complainant further avers that, in case said taxes are not paid, the defendant threatens to give notice of a tax lien upon said shares to the cashier of said bank, so that, under section 2839 of the Revised Statutes of Ohio, such stock cannot be transferred, and no dividend can be paid thereon. Complainant further avers that, if said stock is permitted to be sold under said provision of law, great and irreparable injury will be done to the business of said bank. It is further alleged that since the tax as levied on said shares on December 20, 1892, was paid, a part of said shares have been sold and delivered. It is further averred that in a prior suit pending in this court between Whitbeck, as treasurer, and complainant, the precise issues now made were heard and adjudicated, and a decree entered, perpetually enjoining the defendant from collecting the tax then assessed, in which decree the right of shareholders to deduct from the value of their shares their bona fide debts was recognized and enforced. Said decree is still in full force; and complainant alleges that said issue so determined was between the same parties, and involved the same subject-matter and legislation. The complainant tenders the amount it claimed to be due, and asks an injunction to restrain the collection of the further amount put on the duplicate as aforesaid, and for the reasons stated. To this bill the defendant interposes a general demurrer.

Boynton & Horr, for complainant.

S. K. Dissette, for defendant.

RICKS District Judge, (after stating the facts.)

The defendant relies upon a recent decision of the supreme court of Ohio, of Niles v. Shaw, 50 Ohio St. 370, 34 N.E. 162, as justifying the county authorities in refusing to allow shareholders of national banks in the city of Cleveland to deduct from the value of their shares as fixed for taxation their bona fide indebtedness. The syllabus of the Ohio decision reads as follows:

'Our tax laws do not authorize the deduction, from the value of shares in a national bank entered upon the duplicate for taxation, of legal, bona fide debts owing by the holders of such shares of stock.'

It is contended that this construction of an Ohio statute relating to the levying and collecting of state taxes by the highest judicial tribunal of the state is controlling upon the federal courts. This proposition would unquestionably be true if the only question for consideration was the application or enforcement of such state statute. If nothing more were here involved, we would feel controlled by the construction of the Ohio statute as given by its highest court. And such construction is not questioned. Indeed, the supreme court of the United States, in the case of Whitbeck v. Bank, 127 U.S. 193, 8 S.Ct. 1124, in affirming the decree of this court in a similar suit, seeking the same relief now prayed for, approved the finding of this court that:

'The laws of Ohio make no provision for the deduction of bona fide indebtedness of any shareholder upon the shares of his stock, and provide no means by which said deduction can be secured.'

It is for the very reason that the laws of Ohio fail to provide for such right to the...