Posadas v. National City Bank of New York

• Decision Date: 06 January 1936
• Docket Number: No. 114,114
• Parties: POSADAS, Collector of Internal Revenue, v. NATIONAL CITY BANK OF NEW YORK
• Court: U.S. Supreme Court

296 U.S. 497

56 S.Ct. 349

80 L.Ed. 351

POSADAS, Collector of Internal Revenue,

v NATIONAL CITY BANK OF NEW YORK.

No. 114.

Argued Dec. 11, 12, 1935.

Decided Jan. 6, 1936.

Mr. Wm. Cattron Rigby, of Washington, D.C., for petitioner.

Messrs. Carl A. Mead and Harry W. Forbes, both of New York City, for respondent.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

The National City Bank of New York is organized under the National Banking Act, as amended from time to time since its enactment. In 1930 the bank, after complying with the requirements of section 25 of the Federal Reserve Act of December 23, 1913, c. 6, 38 Stat. 251, 273, as amended September 7, 1916, c. 461, 39 Stat. 752, 755 (12 U.S.C.A. § 601) infra, established branches at Manila and Cebu in the Philippine Islands. A tax was levied by and paid to the Philippine government on the net income of these branches for the first six months of the year 1931 (R.S. § 5219, as amended (12 U.S.C.A. § 548)),¹ about which there is no controversy. The Philippine government, however, in addition, levied capital and deposit taxes not permitted by section 5219, and, these having been paid by the bank under protest, this action was brought in the Court of First Instance of Manila to recover the amount. That court gave judgment in favor of the bank for only a part of the additional taxes; but the Philippine Supreme Court, upon appeal, reversed the judgment in so far as it was against the bank, and ordered a refund of the entire amount.

Section 25 of the Federal Reserve Act of 1913, supra, reproduced in the margin so far as it is pertinent here,² authorizes the establishment of branches of national-banking associations 'in foreign countries or dependencies of the United States.' It cannot be doubted that, viewing this section without regard to later legislation, the branches here in question were lawfully established; for, as will appear at a later point in this opinion, the Philippine Islands are included by the words 'dependencies of the United States.' In that view of the matter, the additional taxes imposed by the Philippine government are invalid under Domenech v. National City Bank, 29 U.S. 199, 204, 55 S.Ct. 366, 79 L.Ed. 857; Talbott v. Silver Bow County, 139 U.S. 438, 11 S.Ct. 594, 35 L.Ed. 210, and, were it not for the asserted effect of legislation subsequent to the passage of the Federal Reserve Act in 1913, which we shall examine in a moment, this case would be disposed of, without further detail, upon the authority of those cases. In the Domenech Case we held that the national-banking laws extended to Puerto Rico; that a tax on a branch of a national bank is a tax on the bank; and that Puerto Rico, being a dependency of the United States, could not, except as permitted by R.S. § 5219, tax a national bank, since it is an agency of the United States. The Talbott Case involved the power of a territory to impose a tax upon a national bank. This court held, in the first place, that the same power of taxation in respect of national banks exists in the territories as in the states; and, in the second place, that this power of taxation in the territories was limited by the provisions of section 5219 although in terms that section refers only to the states. 294 U.S. 199, 204, 55 S.Ct. 366, 369, 79 L.Ed. 857. We find nothing in the original Organic Act or in any of the early statutes relating to the Philippines referred to by petitioner which take those islands out of the controlling rule of the Domenech Case that a 'dependency may not tax its sovereign'; and we come to the only remaining point which we deem it necessary to discuss.

Petitioner contends that subsequent legislation has the effect of repealing and abrogating section 25 of the 1913 act, permitting the establishment of national bank branches, in so far as the Philippine Islands are concerned. This later legislation consists of certain provisions in the Organic Act for the Philippine Islands of August 29, 1916, c. 416, 39 Stat. 545, and the Act of September 7, 1916, supra, amending designated sections of the original Federal Reserve Act.

We examine these statutory provisions in their chronological order. By section 25 of the 1913 act, as we have seen, national banks were authorized to establish branches in the Philippine Islands. The Organic Act of 1916 provides:

'Sec. 5. That the statutory laws of the United States hereafter enacted (subsequent to August 29, 1916), shall not apply to the Philippine Islands, except when they specifically so provide, or it is so provided in this Act (chapter).

'Sec. 6. That the laws now in force in the Philippines (August 29, 1916), shall continue in force and effect, except as altered, amended, or modified herein (by this chapter), until altered, amended, or repealed by the legislative authority herein provided (by this chapter) or by Act of Congress of the United States.' 48 U.S.C.A. §§ 1003, 1004. (Section 6 obviously is to be taken distributively—that is to say, as conferring power on the local legislature to deal only with local laws. It, of course, confers no power on the local legislature to alter, am nd or repeal an act of Congress.)

'Sec. 31. That all laws or parts of laws applicable to the Philippines not in conflict with any of the provisions of this Act are (hereby) continued in force and effect.' 48 U.S.C.A. § 1006.

By sections 6 and 31 it is clear that section 25 of the Federal Reserve Act of 1913, not being in conflict with any provision of the Organic Act of 1916, was continued in full force and effect.

September 7, 1916, nine days after the passage of the new Organic Act, the act to amend the Federal Reserve Act, supra, was passed. It, first, is to be observed in respect of this amending act that it does not purport to enact a substitute for the Federal Reserve Act, or to rpeal and reenact any portion, but only to amend certain specific sections thereof. The old act contains thirty sections. The Act of September 7, 1916, amends sections 11, 13, subsection (e) of section 14, the second paragraph of section 16, sections 24 and 25 of Federal Reserve Act, and section 5202 of the Revised Statutes. The introductory words as to section 25 are: 'That section twenty-five be, and is hereby, amended to read as follows.' 39 Stat. 755. The original section is then copied, the only change or addition so far as the question here is concerned, being the insertion of the words 'or insular possessions' after the word 'dependencies.' No reason appears from anything called to our attention, and we are not ourselves aware of any reason, for the addition of these words, since the comprehensive term 'dependencies' would seem to include all insular possessions which we then had. But in any event, the Philippine Islands constituted a dependency, for they were not possessions merely, but possession held by right of cession from Spain and over which the United States undoubtedly had supreme power of legislation and government. See United States v. The Nancy, Fed.Cas.No. 15,854, 3 Wash.C.C. 281, 286 at seq. Compare 34 Op.Attys.Gen. 287, 291. The only substantial change made in the old section 25 is the addition of a provision authorizing a national-banking association to invest in the stock of other banks and corporations chartered or incorporated under the laws of the United States or of any state engaged in international or foreign banking, or banking in dependencies or insular possessions of the United States; and it is fairly plain that this addition constituted the sole reason for amending the section.

The amending act just described contains no words of repeal; and if it effected a repeal of section 25 of the 1913 act, it did so by implication only. The cardinal rule is that repeals by implication are not favored. Where there are two acts upon the same subject, effect should be given to both if possible. There are two well-settled categories of repeals by implication: (1) Where provisions in the two acts are in irreconcilable conflict, the later act to the extent of the conflict constitutes an implied repeal of the earlier one; and (2) if the later act covers the whole subject of the earlier one and is clearly intended as a substitute, it will operate similarly as a repeal of the earlier act. But, in either case, the intention of the legislature to repeal must be clear and manifest; otherwise, at least as a general thing, the later act is to be construed as a continuation of, and not a substitute for, the first act and will continue to speak, so far as the two acts are the same, from the time of the first enactment.

The law on the subject as we have just stated it finds abundant support in the decisions of this court, as well as in those of lower federal and state courts. It will be enough to direct attention to a few of these decisions out of a very large number. In United States v. Tynen, 11 Wall. 88, 92, 20 L.Ed. 153, Mr. Justice Field, speaking for the court, after stating the general rule, said that if two acts 'are repugnant in any of their provisions, the latter act, without any repealing clause, operates to the extent of the repugnancy as a repeal of the first, and even where two acts are not in express terms repugnant, yet if the latter act covers the whole subject of the first, and embraces new provisions, plainly showing that it was intended as a substitute for the first act, it will operate as a repeal of that act.' It was not meant by this statement to say, as a casual reading of it might suggest, that the mere fact that the latter act covers the whole...