People's Sav. Bank v. Layman

• Decision Date: 04 February 1905
• Docket Number: 2,406,2,407.
• Citation: 134 F. 635
• Parties: PEOPLE'S SAV. BANK v. LAYMAN, County Treasurer. DES MOINES SAV. BANK v. SAME.
• Court: U.S. District Court — Southern District of Iowa

134 F. 635

PEOPLE'S SAV. BANK v. LAYMAN, County Treasurer.

DES MOINES SAV. BANK v. SAME.

Nos. 2,406, 2,407.

United States Circuit Court, S.D. Iowa, Central Division.

February 4, 1905

N. T Guernsey and George F. Henry, for complainants.

Howard Clark, for defendant.

The case No. 2,406 will be first considered.

The complainant is a corporation organized under the laws of Iowa as a savings bank, and located at Des Moines. The defendant is the county treasurer. The bill alleges and the evidence shows that the assessments made by the assessor were for the years as follows: For the year 1898, $62,320; for the year 1899, $13,250; for the year 1900, $40,000; for the year 1901 $56,297. Within the time fixed by the law the taxes were levied on said assessments, and in due time paid. The bill alleges that the assessments were made by the assessor on all the property of the bank, after full disclosure of its assets, and was not an assessment on the value of the shares of stock of the bank. December 15, 1902, the treasurer of the county served upon the bank a notice to the effect that it had been discovered that there was withheld, overlooked, or from some cause omitted from the assessment and tax list personal property of the bank as follows: For the year 1898 $35,505; for the year 1899, $74,594; for the year 1900 $55,432; for the year 1901, $59,341. And the treasurer notified the bank to appear and show cause why said property thus committed as claimed should not be added to the assessment and taxes collected thereon. The bill alleges and the evidence shows that on the day covered by the assessments the bank held and owned bonds of the United States of the values as follows: For the year 1898, $28,656.25; for the year 1899, $80,600; for the year 1900, $47,800; for the year 1901, $55,000. And it is alleged that such bonds, and the value thereof, was the only property omitted for said years from the assessments and taxation, and on which taxes were timely paid, being the said United States bonds, a fact known by the assessor at the time he made the assessments. The complainant owns real estate in the county, on which said invalid taxes, if levied, will become an apparent lien, and will create a cloud on the title thereto. An injunction against said proposed assessments is prayed. A restraining order was issued, to remain in force until a hearing.

The answer alleges that by succession in office Charles H. Murrow is not treasurer of the county, and is made the defendant. It admits the assessment as alleged for the one year, but at the time of filing the answer is not advised as to the amounts for the other years. But denial is made that the said assessments for said years was the value of all of the personal property of complainants, or that it paid taxes on all of the personal property it owned for said years. It admits that the bank during said years owned real estate assessed, and on which it paid taxes. The answer also admits that the assessments for said four years was in form and in fact an assessment of the value of the personal property of the bank, and that neither of said four assessments was in form nor in fact an assessment of the value of the shares of the capital stock of the bank, but that in all of said four years the taxes based and collected were against the bank, on account of its property, and in collecting the taxes the same was treated, and in fact levied, collected, and paid, by the bank, as taxed against the bank, and not as against the shares of its capital stock. Defendant denies that it is his purpose to assess and collect taxes from the bank on account of any United States bonds. The evidence shows that for each of the four years the assessor handed the bank a printed form with blanks, to be filled out and verified, as was done with other similar corporations. The forms thus filled out by the bank officer for the different years was as follows, viz.:

1898.
Capital and surplus . . .	$1,000,000 00
Undivided profits . . .	$634 23
United States bonds . . .	$25,000 00
Real estate otherwise taxes . . .	$4,700 00
Balance after deducting the bonds and real estate . . .	$70,934 23
Assessment for the year . . .	$62,320 00
1899.
Capital and surplus . . .	$100,000 00
Profits . . .	$4,658 74
United States bonds . . .	$80,600 00
Real estate . . .	$15,300 00
Balance . . .	$8,758 74
Assessment for the year . . .	$13,250 00
1900.
Capital and surplus . . .	$100,000 00
Profits . . .	$6,928 62
United States bonds . . .	$47,800 00
Real estate . . .	$12,300 00
Balance . . .	$46,828 62
Assessment for the year . . .	$40,000 00
1901.
Capital and surplus . . .	$100,000 00
Profits . . .	$20,432 74
United States bonds . . .	$55,000 00
Real estate . . .	$12,000 00
Balance . . .	$53,432 74
Assessment for year . . .	$56,297 00

Of course, it is not claimed that the cash on hand and bills receivable were taxable, because they were offset by amounts due depositors. The real estate was properly deducted, because that was otherwise assessed. If the

bonds were exempt, then we have the following as the result of the assessor, the reviewing board, and the taxing authorities:

For the year 1898, underassessed . . . $8,614 23

For the year 1900, underassessed . . . $6,828 62

For the year 1899, overassessed . . . $4,491 26

For the year 1901, overassessed . . . $2,864 26

And, if the bonds are not to be deducted, then we have that the bank was not assessed as high as could have been, as follows:

For the year 1898 . . . $33,614 23

For the year 1899 . . . $76,108 74

For the year 1900 . . . $54,628 62

For the year 1901 . . . $52,135 74

The assessments demanded by the county treasurer, in round numbers, are the same as the bonds held by the bank, the precise statement for the four years being as follows:

Additional assessments demanded . . . $224,872

Aggregate of U.S. Bonds . . . $212,056

So that it can be stated as a fact that the discrepancy contended for is the amount of the bonds.

The case of the Des Moines Savings Bank as to pleadings and evidence, excepting as to the figures given, is in all respects like the other case. I shall not set out the figures in detail. Suffice it to say that, after deducting real estate and the United States bonds, the net worth of the bank was practically for each of the four years equal to the assessment for taxation. And, as with all property, each of the banks paid taxes on 25 per cent. of the assessment.

McPHERSON District Judge (after stating the facts).

From the foregoing statement of facts, two questions arise for determination: (1) Was the bank entitled to have deducted the amount of United States bonds from the net worth of the bank, in fixing the assessment? (2) If the bonds were not properly deducted, then after the bank was assessed and the taxes paid can the treasurer now add to the assessment?

That the Constitution is the Supreme law of the land need only be stated. And that the government has the power to borrow money by issuing its bonds and selling them is denied by no one. And that the bonds cannot be taxed by any state, county, or municipality is agreed to by all, and by none with more emphasis than by counsel for defendants herein. Men often deny this, for the reason, as it appears to them, that it allows the bondholder to escape taxation. But all informed men well know that the power to tax is the power to destroy, and if a state or any subdivision thereof could tax United States bonds then the power of the government to borrow money would either be destroyed or impaired, accordingly as the rate of taxation would be fixed. In any event, the ability of the government to borrow money at a nominal rate of interest is because of three things, all of which are controlling: (1) The length of time before the bonds mature. (2) The integrity of the government in observing its contracts. It never repudiates. It never flunks, as do so many states, political, municipal, and other corporations. It pays its debts as agreed. (3) The fact that its bonds are never taxed. The government is greater than any state. Its implied powers, as well as its express powers, are supreme. This is not at all times, with all people, popular, but it is at all times patriotic, and the recognized law of the country. All of which Mr. Clark, counsel for the county treasurer, indorses. But he contends that the question is not in the case, and whether it is in the case is now to be considered.

Section 1322 of the Iowa Code provides that all shares of stock of national banks shall be assessed to the individual stockholders at the place where the bank is located; but shares of stock of state and savings banks and loan and trust companies shall be assessed to such banks and loan and trust companies, and not to the individual stockholders. And the Iowa Supreme Court four times within the last two years, and once within the last few weeks, has held that the general exemption from state taxation with which the bonds of the United States are clothed does not entitle the bank to deduct the amount of such bonds from the value of the shares of their stock which are assessed to it for the purpose of taxation under Code Sec. 1322. Savings Bank v Burlington, 118 Iowa, 84. 91 N.W. 829; National State Bank v. Burlington, 119 Iowa, 696, 94 N.W. 234; National Bank v. Independence, 123 Iowa, 482, 99 N.W. 142; Savings Bank v. Des Moines (Iowa) 101 N.W. 867. The Iowa Supreme Court, in the cases cited, relied upon the following by the Supreme Court of the...