Sec. Sav. Bank of Valley Junction v. Connell

• Decision Date: 26 September 1924
• Docket Number: No. 35645.,35645.
• Citation: 198 Iowa 564,200 N.W. 8
• Parties: SECURITY SAV. BANK OF VALLEY JUNCTION v. CONNELL, MAYOR, ET AL.
• Court: Iowa Supreme Court

198 Iowa 564

200 N.W. 8

SECURITY SAV. BANK OF VALLEY JUNCTION

v.CONNELL, MAYOR, ET AL.

No. 35645.

Supreme Court of Iowa.

Sept. 26, 1924.

Appeal from District Court, Polk County; Jas. C. Hume, Judge.

Upon appeal to the district court by the plaintiff-appellant bank from the action of the board of review in refusing to deduct the value of obligations of the United States government held by the bank in determining the assessed value of the bank stock, a demurrer to the petition was sustained. From the ensuing judgment against the plaintiff for costs, it appeals. Affirmed.J. G. Myerly, of Des Moines, for appellant.

Volney Diltz, of Des Moines, for appellees.

VERMILION, J.

The plaintiff and appellant, a corporation engaged in the banking business, furnished to the assessor the sworn statement required by Code, § 1321, from which it appeared that on January 1, 1921, the bank was the owner of certain United States Liberty bonds and War Savings stamps and municipal bonds of the aggregate value of $30,280. The assessor, in determining the value of the shares of capital stock of the corporation for the purpose of taxation, made no deduction on account of any of these items. The appellant appeared before the board of review and claimed in writing that the value of these securities should be deducted in arriving at the assessed value of the stock. The board failed to grant any part of the relief asked, and allowed the assessment of the stock to stand as returned by the assessor.

Thereupon appellant perfected an appeal to the district court, and there filed a petition and certain amendments in which it alleged, in addition to the foregoing facts, that on January 1, 1920, it owned United States Liberty bonds and certificates of indebtedness of the aggregate value of $36,050, and that for that year the assessor and board of review refused to deduct the value of the same in determining the assessed value of its capital stock; that it appealed from the action of the board to the district court, and that court by decree reduced the assessment on the stock by the aggregate face value of the government securities so owned. It was further alleged that on January 1, 1919, it owned United States certificates of indebtedness, Liberty bonds, and War Savings stamps of the aggregate value of $21,100, and that, upon the assessor and board of review refusing to deduct the value of these securities from the value of its stock in making the assessment for that year, it appealed to the district court, where a decree was entered reducing the value of its stock for the purpose of taxation by the aggregate value of such securities. It was further alleged that, of the Liberty bonds owned on January 1, 1921, the amount of $16,050 thereof were the same bonds owned on January 1, 1920, and were involved in the appeal of that year.

These two decrees were pleaded as adjudications of the question involved in the instant appeal, and it was alleged that thereby the board of review was estopped from claiming that the value of the government securities owned by the bank on January 1, 1921, should not be deducted from the total value of its capital stock in fixing the assessed value of the stock.

A demurrer to the petition was sustained, and, appellant electing to stand on the ruling, judgment was rendered against it for costs, and from this judgment it appeals.

It is practically conceded that under the law, and independent of the question of res judicata, appellant was not entitled to have deducted from the value of its stock the amount of tax-exempt securities owned by it in arriving at the value of its capital stock for the purpose of assessment. Federal statutes exempting obligations of the United States from taxation do not require, under section 5219, Revised Statutes of the United States, the deduction of the amount of such securities held by a bank from the value of its stock for the purpose of assessment for taxation of the stock to the individual owners. Head v. Board of Review, 170 Iowa, 300, 152 N. W. 600;First National Bank v. City, 182 Iowa, 107, 161 N. W. 706;Des Moines National Bank v. Fairweather, 191 Iowa, 1240, 181 N. W. 459, 184 N. W. 313;Hammond v. Commonwealth, 154 U. S. 550, append., 14 Sup. Ct. 1202, 18 L. Ed. 229;Home Savings Bank v. City, 205 U. S. 503, 27 Sup. Ct. 571, 51 L. Ed. 901;Hannan v. Bank (C. C. A.) 269 Fed. 527.

Chapter 257, Acts Thirty-Eighth General Assembly, enacted in 1919, provided that:

“In determining the assessed value of bank stock, the amount of obligations issued by the United States government since the declaration of war against Germany, actually owned by a bank or trust company, shall be deducted.”

The statute was expressly made applicable to the assessment made in the year 1919. This statute was by this court on February 12, 1921, held to have been adopted in violation of constitutional provisions. Des Moines National Bank v. Fairweather, supra.

The judgments of the district court relied upon as res judicata of appellant's right to have deducted the amount of tax-exempt securities held by it January 1, 1921, in determining the assessable value of its stock for that year, were, it is to be observed, rendered after the statute above referred to went into effect according to its terms, and prior to its being declared unconstitutional. The judgment here appealed from was entered after the act had been held inoperative.

It has been held that an adjudication that certain property is not assessable for taxation for a particular year is res judicata of the right, as between the parties, to assess the same property for a subsequent year. Where the very right to tax the specific property at all was determined in the former action, and is an issue in the subsequent one, the estoppel is complete and the precise question cannot be again litigated. Goodenow v. Litchfield, 59 Iowa, 234, 9 N. W. 107, 13 N. W. 86; Defries v. McMeans, 121 Iowa, 540, 97 N. W. 65;New Orleans v. Bank, 167 U. S. 371, 17 Sup. Ct. 905, 42 L. Ed. 202. It is upon this doctrine that appellant relies. The position is fortified by the further rule that a judgment, although erroneous, as shown by subsequent decisions of a higher court, is still an adjudication. McCrillis v. Harrison County, 63 Iowa, 592, 19 N. W. 679;People v. Holladay, 93 Cal. 241, 29 Pac. 54, 27 Am. St. Rep. 186;Cain v. Ins. Co., 123 Ky. 59, 93 S. W. 622, 124 Am. St. Rep. 313. In none of the cited cases, however, did the error in the prior judgment consist in the fact that the judgment was based on an unconstitutional statute.

Taxation is the rule, exemption from taxation the exception. Cassady v. Hammer, 62 Iowa, 359, 17 N. W. 588;Trustees of Griswold College v. State, 46 Iowa, 275, 26 Am. Rep. 138; Sioux City v. School District, 55 Iowa, 150, 7 N. W. 488. There is no exemption from taxation unless so provided by statute.

The prior decrees, in effect granting to the holders of stock of the bank an exemption from taxation to the extent of the value of government securities held by the bank, were based on the statute. They were required by the provisions of the statute then apparently in force; they conformed to the statute, and were but the application of the statute to the matter in issue, the assessment of the shares of stock in the bank to the individual owners. It is claimed in argument that these decrees determined that the securities should be deducted for the reason that they were made nontaxable by federal statute. An allegation to this effect is found in the petition in respect to the judgment on the assessment in 1919. It is, of course, true that the securities themselves were nontaxable, and this fact must be the ultimate basis of any claim of exemption made in the prior cases or in this. But that fact did not prevent their value being taken into account in determining the value of the stock of the bank holding them for the purpose of the assessment of the shares of stock to the individual holders. This is settled by the cases first cited.

Moveover, the force of the estoppel, if estoppel there be, is in the judgments themselves, not in the finding or reasoning of the court by which the conclusions were reached. 23 Cyc. 1218. See, also, Linton v. Crosby, 61 Iowa, 293, 16 N. W. 113. The terms of the statute were plain and unambiguous, and, with its constitutionality then unquestioned, the basis for the decrees must be there found, and not elsewhere.

But, with its unconstitutionality subsequently determined, what is the situation of the decrees rendered under it? If the decrees were merely erroneous, it may be conceded the rule contended for would apply, and they would still be binding as adjudications of the matter then and now at issue, the right to deduct from the value of the shares of stock of the bank in arriving at the assessed value of the stock the amount of tax-exempt government obligations held by it. It is doubtless true, as argued by appellant, that the constitutionality of the statute in question could have been raised in the proceedings resulting in the decrees now relied upon as an estoppel; that it was as unconstitutional then as when so declared; and that it must be assumed it would have been so held had the question been then raised. But that contention does not fully meet the situation. Not only was the statute open to attack on constitutional grounds at the time the prior decrees were rendered, but when it was by this court declared to be unconstitutional it ceased to be, as effectually as if it had never been passed.

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