San Francisco National Bank v. Washington Dodge

• Decision Date: 27 February 1905
• Docket Number: No. 44,44
• Citation: 49 L.Ed. 669,25 S.Ct. 384,197 U.S. 70
• Parties: SAN FRANCISCO NATIONAL BANK, Appt. , v. WASHINGTON DODGE, as Assessor of the City and County of San Francisco
• Court: U.S. Supreme Court

197 U.S. 70

25 S.Ct. 384

49 L.Ed. 669

SAN FRANCISCO NATIONAL BANK, Appt.,

v WASHINGTON DODGE, as Assessor of the City and County of San Francisco.

No. 44.

Argued November 7, 1904.

Decided February 27, 1905.

Messrs. William S. Wood, E. S. Pillsbury, Alfred Sutro, and Lloyd & Wood for appellant.

[Argument of Counsel from pages 71-73 intentionally omitted] Messrs. William Irwin Brobeck and Percy V. Long for appellee.

[Argument of Counsel from pages 73-75 intentionally omitted] Mr. Justice White delivered the opinion of the court:

The appellant bank sued to restrain the enforcement of state, county, and city taxes, levied for the year 1900, upon shares of stock of the bank. Adequate averments were made to show equitable jurisdiction. Cummings v. Merchants' Nat. Bank, 101 U. S. 153, 157, 25 L. ed. 903, 904; Hills v. National Albany Exch. Bank, 105 U. S. 319, 26 L. ed. 1052; Lander v. Mercantile Nat. Bank, 186 U. S. 458, 46 L. ed. 1247, 22 Sup. Ct. Rep. 908. The taxes were alleged to be in conflict with the law of the United States. Rev. Stat. § 5219, U. S. Comp. Stat. 1901, p. 3502.

The case was submitted upon the pleadings and an agreed statement of facts. A decree of dismissal was affirmed by the circuit court of appeals for the ninth circuit. That court deemed that the cause was controlled by the reasoning of an opinion delivered in deciding a previous case (Nevada Nat. Bank v. Dodge), the opinion in which case is reported in 50 C. C. A. 145, 119 Fed. 57.

Before considering the contentions relied on we quote the text of the Constitution of California directly relating to the subject in hand, and briefly advert to the legislation of that state which preceded the act under which the assailed tax was levied.

Section 1 of article 13 of the Constitution of California provides:

'All property in the state, no exempt under the laws of the United States, shall be taxed in proportion to its value to be ascertained as provided by law. The word 'property,' as used in this article and section, is hereby declared to include moneys, credits, bonds, stocks, dues, franchises, and all other matters and things, real, personal, and mixed, capable of private ownership. . . . The legislature may provide, except in the case of credits secured by mortgage or trust deed, for a reduction from credits of debts due to bona fide residents of this state.'

Carrying out the command to provide for the ascertainment of the value of property to be taxed, it was enacted (Pol. Code, § 3627) that all taxable property shall be assessed 'at its full cash value,' and (Pol. Code, § 3617) that 'the terms 'value' and 'full cash value' mean the amount at which the property would be taken in payment of a just debt due from a solvent debtor.'

Prior to 1881 shares of stock of all corporations were taxed, and § 3640 of the Political Code commanded that the market value of the stock of a corporation should be taken as the value of the shares for assessment. Where the shares of stock were taxed no tax was levied upon the corporate property. This was because the supreme court of California had decided that to tax both the stock and the corporate property would be double taxation. Burke v. Badlam, 57 Cal. 594.

In the year 1881 the general system of taxing shares of stock was abandoned, and a rule was put in force taxing the corporate property. Section 3608 of the Political Code, which embodied this change, was as follows:

'Shares of stock in corporations possess no intrinsic value over and above the actual value of the property of the corporation, which they stand for and represent, and the assessment and taxation of such shares and also of the corporate property would be double taxation. Therefore, all property belonging to corporations shall be assessed and taxed, but no assessment shall be made of shares of stock; nor shall any holder thereof be taxed therefor.'

The act of 1899, under which the tax in this case was levied, amended the section just quoted, by providing that all property belonging to corporations shall be assessed and taxed, 'save and except the property of national banking associations, not assessable by Federal statute;' and by adding to the provision commanding that no assessment shall be made of shares of stock in any corporation the following words: 'Save and except in national banking associations, whose property, other than real estate, is exempt from assessment by Federal statute.' To carry out the change made by the provision just referred to two sections were added to the Political Code, viz., 3609 and 3610. Section 3608, as amended by the act of 1899, and the two new sections resulting from that act, are in the margin.

3608. Shares of stock in corporations possess no intrinsic value over and above the actual value of the corporation which they stand for and represent; and the assessment and taxation of such shares, and also all the corporate property, would be double taxation. Therefore, all property belonging to corporations (save and except the property of national banking associations, not assessable by Federal statute) shall be assessed and taxed. But no assessment shall be made of shares and stocks in any corporation (save and except in national banking associations, whose property, other than real estate, is exempt from assessment by Federal statute).

3609. The stockholders in every national banking association doing business in this state, and having its principal place of business located in this state, shall be assessed and taxed on the value of their shares of stock therein; and said shares shall be valued and assessed as is other property for taxation, and shall be included in the valuation of the personal property of such stockholders in the assessment of the taxes at the place, city, town, and county where such national banking association is located, and not elsewhere, whether the said stockholders reside in said place, city, town, or county, or not; but in the assessment of such shares each stockholder shall be allowed all the deductions permitted by law to the holders of moneyed capital in the form of solvent credits, in the same manner as such deductions are allowed by the provisions of paragraph 6 of § 3629 of the Political Code of the state of Callfornia. In making such assessment to each stockholder there shall be deducted from the value of his shares of stock such sum as is in the same proportion to such value as the total value of its real estate and property exempt by law from taxation bears to the whole value of all the shares of capital stock in said national bank. And nothing herein shall be construed to exempt the real estate of such national bank from taxation. And the assessment and taxation of such shares of stock in said national banking associations shall not be at a greater rate than is made or assessed upon other moneyed capital in the hands of individual citizens of this state.

3610. The assessor charged by law with the assessment of said shares shall, within ten days after he has made such assessment, give written notice to each national banking association of such assessment of the shares of its respective shareholders; and no personal or other notice to such shareholder of such assessment shall be necessary for the purpose of this act. And, in case the tax on any such stock is unsecured by real estate owned by the holder of such stock, then the bank in which said stock is held shall become liable therefor; and the assessor shall collect the same from said bank, which may then charge the amount of the tax so collected to the account of the stockholder owning such stock, and shall have a lien, prior to all other liens, on his said stock, and the dividends and earnings thereof, for the reimbursement to it of such taxes so paid.

The first contention is that the law of 1899 is on its face in conflict with § 5219 of the Revised Statutes, because it taxes shares of stock in national banks, and does not tax such shares in state banks and other state moneyed corporations. As it is patent that the state banks and corporations are taxed on their property, the proposition reduces itself to this: That the states may not pursue the method permitted by the act of Congress of taxing shares of stock in national banks, unless the same method is employed as to the stock of state banks and other state moneyed corporations.

In Davenport Nat. Bank v. Board of Equalization, 123 U. S. 83, 31 L. ed. 94, 8 Sup. Ct. Rep. 73, it was decided that the provision of § 5219 of the Revised Statutes [U. S. Comp. Stat. 1901, p. 3502], authorizing the taxation of shares of stock in national banks, but exacting that the tax when levied should be at no greater rate than that imposed on other moneyed capital, did not require the states, in taxing their own corporations, 'to conform to the system of taxing national banks upon the shares of their stock in the hands of their owners.'

True it is in the Davenport Case it was also decided that the prohibition in the act of Congress of a higher rate of taxation of shares of stock in national banks than on other moneyed capital operated to avoid any method of assessment or taxa- tion, the usual or probable effect of which would be to discriminate in favor of state banks and against national banks. True, also, is it that in the same case it was held that, even where no such discrimination seemingly arose on the face of the statute, nevertheless, if from the record it appeared that the system created by the state in its practical execution produced an actual and material discrimination against national banks, it would be the duty of the court to hold the state statute to be in conflict with the act of Congress, and therefore void.

As, then, no conflict necessarily arises between the act of Congress and the state law, solely because the latter provides one method for taxation of state banks and other moneyed corporations and another method for national banks, it...