National Bank of W. Va. at Wheeling, In re

• Decision Date: 16 December 1952
• Docket Number: No. 10426,10426
• Citation: 137 W.Va. 673,73 S.E.2d 655
• Court: West Virginia Supreme Court
• Parties: In re NATIONAL BANK OF WEST VIRGINIA AT WHEELING et al.

Page 655

73 S.E.2d 655

137 W.Va. 673

In re NATIONAL BANK OF WEST VIRGINIA AT WHEELING et al.

No. 10426.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 23, 1952.

Decided Dec. 16, 1952.

Syllabus by the Court.

1. National banks can be taxed by the state only to the extent, and in the manner expressly authorized by Congress.

2. Under authority of Congress, 12 U.S.C.A. § 548, the state is authorized to tax the shares of capital stock of a national bank against the respective owners or holders of such shares.

3. The Legislature of the state is vested with exclusive power to determine the basis and methods to be applied by the assessing authority in fixing tax assessment values.

4. Code, 11-3-14, as amended, requires that shares of stock in national banks and industrial loan companies be assessed 'at their true and actual value' to 'be ascertained according to the best information which the assessor may be able to obtain, * * *'.

5. The value of nontaxable securities owned by national banks and industrial loan companies represents part of the value of the shares of stock, and the value of such securities should not be deducted from the assets of such banks or companies in determining the assessment value of such shares.

6. The inconsistency of a state statute taxing national bank shares with 12 U.S.C.A. § 548, permitting state taxation of such shares at a rate no greater than is imposed upon other moneyed capital in the hands of individual citizens of the state coming in competition with the business of national banks, may not be established by showing merely that other moneyed capital is employed in lines of business in which national banks are authorized to engage, without showing actual substantial competition between them in such lines.

7. The equal protection clause of the Fourteenth Amendment to the Federal Constitution applies only to taxation which in fact bears unequally on persons and property of the same class, and mere differences in methods of assessment do not deny equal protection unless they are shown to produce such inequality.

W. F. Keefer, Asst. Pros. Atty., Ohio County, Wheeling, John R. Murphy, State Tax Commissioner's Office, Charleston, for plaintiff in error.

McCamic & Clarke, Charles McCamic and Jay T. McCamic, Wheeling, for defendants in error.

GIVEN, Judge.

This proceeding involves the correctness of ad valorem tax assessments for the year 1946 against the shareholders of The National Bank of West Virginia at Wheeling, and The Morris Plan Savings and Loan Company, an industrial loan company, of Wheeling. The Assessor of Ohio County, wherein Wheeling is situated, made assessments against the taxpayers in accordance with the method formulated by the State Tax Commissioner in 1941, and who sought its application by each of the assessors of the State in making assessments against all national banks, building and loan associations, federal savings and loan associations, industrial loan companies, small loan companies and credit unions. Appeals were taken from the assessments made by The Assessor of Ohio County to the county court of that county and, after a full hearing, the court revised downward the assessment as to each taxpayer. The taxpayers named, and others not involved here, appealed from the county court's order fixing the assessment values, to the Circuit Court of Ohio County. After a full hearing, upon the record made before the county court, the circuit court reversed the order of the county court and, by separate orders, fixed the amounts of the assessments of the respective taxpayers at values below the amounts fixed by the county court. Upon petition of the State Tax Commissioner, this Court granted a writ of error to the judgment of the Circuit Court of Ohio County.

The method now contended for by the State Tax Commissioner for determining the proper value of such assessments in referred to as the 'book value' method, and consists of the finding of the aggregate par value of the shares of capital stock outstanding, the amount of surplus, the amount of undivided profits, the amount of interest earned but not collected, and the amount of any reserves, deducting from such aggregate the amount of interest accrued on time and savings deposits, the amount of unearned discount included in undivided profits, and the amount of the assessed value of real estate. This method was approved by the State Tax Commissioner as the only method which would result in uniform taxation throughout the State, and apparently was adopted and applied by each of the assessors of the State in determining the proper valuation for tax assessment purposes, as to the property of each taxpayer included in the classes mentioned above. Also, this method was approved by the Assessors' Association for the State, and was followed by the Assessor of Ohio County in arriving at the proper value for the 1945 and 1946 assessments of the two taxpayers here involved. The Assessor of Ohio County testified to the effect that he believed the 'book value' method the proper method as applied to the 1945 and 1946 assessments; that he considered no factor other than such method in arriving at the values for such assessments; and that he was not coerced or unduly influenced by the State Tax Commissioner in adopting that method.

At the time of the 1946 assessment, The National Bank had five thousand shares of stock outstanding, of the par value of $100 per share, and The Morris Plan had outstanding one thousand shares of stock, of the par value of $100 per share. There is a stock exchange in the City of Wheeling; there are stock exchanges in certain counties in the State, but the greater number of counties in the State have no stock exchange and are not situated within any reasonable proximity to any such exchange. The stock of The National Bank is listed with the Wheeling Exchange, but the stock of The Morris Plan is not listed. In the year 1945 there were twelve shares of stock of The National Bank sold through the Wheeling Stock Exchange, each share at $165. Nineteen other shares were sold that year, but not through the exchange. The average price of the thirty-one shares was $154. From 1941 through 1945, 611 shares of The National Bank were sold, and the average price for the respective years varied from $115 in 1941 to $154 in 1945. No shares of The Morris Plan were sold through any exchange in 1945. From 1941 through 1944, 447 shares of The Morris Plan were sold, not through any stock exchange, and the average price therefor was $127. The dividends declared by The National Bank for the years 1941, through 1945, were, per share, $6, $7, $8, $8 and $10, respectively. Dividends declared for the same years by The Morris Plan were, per share, $8, $6, $6, $5 and $4, respectively.

In using the 'book value' method, excluding all other factors, the assessor, for the year 1946, found the actual value of the stock of The National Bank to be $1,231,000, or $246.20 per share value. The county court, considering all relative methods and factors, arrived at a value of $1,125,000, or $225 per share value. The circuit court, upon the record made before the county court, considered 'each and all the several elements of value disclosed by the record' and, after properly deducting the assessed value of real estate, found the assessment value of all shares to be $871,450, or $174.29 per share value. The taxpayer contends for a value of $618,800, or $123.76 per share value, and applied only the so called 'sales price' method in arriving at that amount. As to The Morris Plan for the year 1946, using the same method applied to The National Bank assessment, the assessor found the actual value of the stock to be $244,500, or $244.50 per share value. The county court found the assessment value to be $210,000, or $210 per share, and the circuit court, after deducting the assessed value of real estate, found the assessment value to be $172,110, or $172 per share value. The taxpayer contends for a value of $100,000, or $100 per share value, and arrives at that value by use of the so called 'sales price' method.

For the year 1946 the tax return furnished the assessor by The National Bank, in accordance with the requirements of Code, 11-3-2, 3, shows a surplus of $500,000.00 undivided profits, amounting to $292,035.53, and interest and other income earned but not collected, in the amount of $4,926.85. The return of The Morris Plan for 1946 shows a surplus of $100,000, undivided profits in the amount of $46,868.34, and unearned discounts in the amount of $46,530.68.

For the purpose of establishing discrimination, the taxpayers here involved offered certain evidence to the effect that in arriving at assessment values of insurance companies, reserve funds are not included in the assessment value, except to the extent that such reserves exceed the amount of reserves which may be due policyholders, and because of the allowance of certain deductions to 'ordinary companies other than banking institutions', such as percentages of book accounts, or intangibles questionable as to collectibility, such deductions not being allowed the class of taxpayers here involved. The evidence also shows that some of the taxpayers to whom such deductions are allowed lend money secured by mortgages or trust deed liens on real estate. It is not shown, however, to what extent such loans are made, or that such loans are actually made in competition with the businesses of the taxpayers here involved. Certain differences in the nature of the types of businesses conducted are pointed out. Taxpayers to whom such discounts are allowed do not receive banking deposits; do not rent safety deposit boxes; do not accept such property as jewelry, plate, stocks and bonds, for safekeeping; do not accept for payment at future dates drafts drawn on customers; do not issue letters of credit authorizing the owners thereof to draw drafts; do not act as trustee,...