Montana Nat. Bank of Billings v. Yellowstone County

• Decision Date: 30 December 1926
• Docket Number: 6038.
• Citation: 252 P. 876,78 Mont. 62
• Parties: MONTANA NAT. BANK OF BILLINGS v. YELLOWSTONE COUNTY et al.
• Court: Montana Supreme Court

252 P. 876

78 Mont. 62

MONTANA NAT. BANK OF BILLINGS v. YELLOWSTONE COUNTY et al.

No. 6038.

Supreme Court of Montana

December 30, 1926

Appeal from District Court, Yellowstone County; Robert C. Stong Judge.

Action by the Montana National Bank of Billings against Yellowstone County and another. From an order sustaining a general demurrer to the complaint, and a judgment for defendants thereon, plaintiff appeals. Affirmed.

Brown Wiggenhorn & Davis, of Billings, for appellant.

L. A Foot, Atty. Gen., and A. H. Angstman, Asst. Atty. Gen., for respondents.

CALLAWAY C.J.

The plaintiff brought this action in behalf of its stockholders against Yellowstone county and its treasurer to recover certain taxes, paid under protest, which were levied against the stockholders on account of their ownership of the capital stock of plaintiff, a national bank, during the year 1925. The plaintiff is capitalized at $100,000, divided into 1,000 shares of the par value of $100 each. Upon the first Monday of March, 1925, plaintiff's surplus fund, in addition to its capital stock, was $50,000, and it had undivided profits to the amount of $2,659.13.

The plaintiff carries on a general banking business at Billings. Among its competitors in that city is the Security Trust & Savings Bank, a Montana corporation, which does a similar business. At various points throughout the state of Montana there are approximately 150 state banking corporations operating in competition with the plaintiff.

The net moneyed capital of the plaintiff which it employs in its banking business was on the day next preceding the first Monday of March, 1925, of the value of $129,463.49, including bonds and securities of the United States of the value of $101,671.25. In addition, it owned furniture and fixtures of the value of $23,195.64, but no real estate.

At the same time, the net moneyed capital of the Security Trust & Savings Bank employed in its business was of the value of $51,894.47, not including Liberty bonds and other securities of the United States of the value of $169,750 which it owned. It also owned furniture and fixtures of the value of $12,246.44 and real estate of the value of $62,375. Where the word "value" is used, "full cash value" is meant.

On March 2, 1925, plaintiff, pursuant to section 2066, R. C. 1921, delivered to the assessor of Yellowstone county the required verified statement, disclosing the value of its capital stock to be in the aggregate $152, 549.13, and of each share $152.66; thereupon, pursuant to the Classification Act (subdivision 6 of section 1999, R. C. 1921) and the provisions of chapter 162, part 3 of the Political Code, Revised Codes of 1921 (sections 2063 to 2067, inclusive), the shares of the plaintiff were assessed to its stockholders for the year 1925 at the value of $152,659.13 in the aggregate, and of $152.66 each, and without deduction in any manner from such value on account of the government securities owned by the plaintiff; in other words, the securities to the extent of $101,781.25, were included among the assets of the bank. The deduction of this item would have reduced the aggregate value of the capital stock of the bank to $50,877.88, or to a value of each share of $50.88. For the year 1925 the shares of the capital stock of the banking corporations organized under the laws of Montana, including the Security Trust & Savings Bank, were not taxed at all, but a tax was levied against the taxable property of these banks in accordance with the Classification Act. As illustrative, the moneyed capital of the Security Bank was ascertained by deducting from the moneys and credits of the bank the amount of the deposits and any indebtedness representing money borrowed for its use. The government securities, being exempt from taxation, were not reckoned as a part of the moneyed capital, but, on the contrary, served to eliminate the moneyed capital ascertained, as explained above; the bank wiped out the $51,894.46 by deducting therefrom a sufficient amount of the government securities (East Helena State Bank v. Rogers, 73 Mont. 210, 236 P. 1090), leaving no moneyed capital subject to assessment. Thus the Security Bank was assessed only upon its real estate and furniture and fixtures.

Plaintiff alleges that upon the day next preceding the first Monday of March, 1925, the net moneyed capital of the 150 state banking corporations doing business in competition with the plaintiff was of the value of approximately $5,500,000, including government bonds and securities of the value of approximately $3,000,000. These banks were then the owners of furniture and fixtures of the value of approximately $2,100,000, and of real estate of the approximate value of $2,000,000. The value of the moneyed capital of all these banks for the purposes of taxation was arrived at in the same manner employed by the Security Trust & Savings Bank; all deducted from their moneys and securities the amount of their deposits and any indebtedness representing money borrowed for use in their business, and in addition thereto the value of their government bonds and securities.

Upon the first Monday of March, 1925, the shares of stock of the Security Bank were of the aggregate cash value of $126,515.91, each share being of the value of $126.52. The plaintiff alleges that assessing the real estate, furniture, and fixtures at $74,621.44 only was equivalent to a direct assessment of the shares of stock in that amount, which was $51,894.47 less than the true value thereof, and was the equivalent of an assessment of these shares directly to the shareholders at an aggregate value of $12,246.44, and of the real estate directly to the bank at $62,475, and that such was the practice throughout Montana with respect to state banks. By reason of the difference between the method employed in fixing the value of the shares of the plaintiff for assessment purposes and the method followed in taxing state banks, the plaintiff alleges that the tax for the year 1925 upon its capital stock was at a greater rate than is assessed upon other moneyed capital in the hands of the state banks and of their shareholders, who are direct competitors of the plaintiff and, further, was not uniform upon the same class of property within the state or within Yellowstone county.

The plaintiff therefore alleges that subdivision 6 of section 1999, supra, and chapter 162, supra, and the assessments imposed thereunder are illegal and void (a) because they conflict with section 5219 of the Revised Statutes of the United States, as amended (U. S. Comp. St. § 9784), in that any tax levied and imposed by virtue of such assessment, or pursuant to such statutes and laws, upon the shares of the capital stock of the plaintiff, is at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of the state of Montana, coming into competition with the business of national banks; (b) bebause they conflict with the provisions of section 11 of article 12 of the Constitution of Montana, in that any tax imposed by virtue of the assessment, or in pursuance of such statutes, upon the shares of plaintiff is not uniform upon the same class of subjects within the territorial limits of the authority levying the tax; and (c) because they conflict with the Fourteenth Amendment to the Constitution of the United States by serving to deprive the plaintiff and its shareholders of their property without due process of law, and deprive them of the equal protection of the law.

The defendants interposed a general demurrer to the complaint which was sustained, whereupon plaintiff suffered judgment to go against it, and after entry thereof appealed to this court.

"National banks are not merely private moneyed institutions but agencies of the United States created under its laws to promote its fiscal policies; and hence the banks, their property, and their shares, cannot be taxed under state authority except as Congress consents and then only in conformity with the restrictions attached to its consent." First National Bank of Guthrie Center v. Anderson, 269 U.S. 341, 46 S.Ct. 135, 70 L.Ed. 295.

Section 5219 of the Revised Statutes of the United States, as amended by the Act of March 4, 1923 (chapter 267, 42 Stat. at Large, 1499) is applicable to the present controversy. (This section was again amended by Act approved March 25, 1926 [44 Stat. 223], but the last amendment does not affect this case.)

By this statute Congress has permitted the taxation of shares in national banks to their owners, under the laws of the state where the bank is located, subject to the restriction 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 has further assented to the taxation of the real property of the bank for state, county and municipal purposes "to the same extent according to its value, as other real property is taxed."

"The purpose of the restriction is to render it impossible for any state, in taxing the shares, to create and foster an unequal and unfriendly competition with national banks, by favoring shareholders in state banks or individuals interested in private banking or engaged in operations and investments normally common to the business of banking. * * * But every clear discrimination against national bank shares and in favor of a relatively material part of other moneyed capital employed in substantial competition with national banks is a violation of both the letter and spirit of the restriction." First National Bank of Guthrie Center v Anderson, supra; Des Moines National Bank v. Fairweather, 263 U.S. 103, 44 S.Ct. 23, 68 L.Ed. 191, and cases cited. In harmony are the following decisions of ...