Shippee v. Commercial Trust Co.

• Decision Date: 12 July 1932
• Citation: 161 A. 781,115 Conn. 313
• Parties: SHIPPEE Bank Com'r, v. COMMERCIAL TRUST CO. NAUGATUCK NAT. BANK v. STATE BOARD OF EQUALIZATION.
• Court: Connecticut Supreme Court

161 A. 781

115 Conn. 313

SHIPPEE Bank Com'r, v. COMMERCIAL TRUST CO.

NAUGATUCK NAT. BANK v. STATE BOARD OF EQUALIZATION.

Supreme Court of Errors of Connecticut.

July 12, 1932

Appeal from Superior Court, Hartford County; Newell Jennings, Judge.

Case Reserved from Superior Court, New Haven County; Newell Jennings, Judge.

Proceedings by Lester E, Shippee, Bank Commissioner, against the Commercial Trust Company in receivership. On application by the receiver for advice concerning liability for a tax against bank and trust companies maintaining a savings department, under Gen. St. 1930, § 1287. From an order advising that neither the Commercial Trust Company nor the receiver pay the tax, the State of Connecticut appeals.

No error.

Proceedings in the matter of the assessment of certain taxes against the Naugatuck National Bank of Naugatuck, as receiver of the Naugatuck Bank & Trust Company. From a decision of the State Board of Equalization, the receiver appealed to the superior court, which reserved certain questions for decision and determination by the Supreme Court of errors.

Questions answered.

Ernest L. Averill, Deputy Atty. Gen. Bernard A. Kosicki, H. Roger Jones, and William H. Nelson, Asst. Attys. Gen. and Warren B Burrows, Atty. Gen., for the State.

John F. McDonough and William W. Gager, both of Waterbury, for appellant bank.

Donald Gaffney and Bernard F. Gaffney, both of New Britain, for appellee Sealre, receiver of Commercial Trust Co.

Ernest L. Averill, Deputy Atty. Gen., Bernard A. Kosicki, H. Roger Jones, and William H. Nelson, Asst. Attys. Gen., and Warren B. Burrows, Atty. Gen., all of Hartford, for State Treasurer.

HINMAN, J.

The first question reserved in the Naugatuck Bank & Trust Company case is as follows: " Is the Naugatuck National Bank as receiver of the Naugatuck Bank and Trust Company liable for the payment of a tax in accordance with sections 1285 and 1287 of the General Statutes, computed on a basis of the amount of deposits on hand as of January 1, 1932?" The answer thereto is determinative of both cases, argued together in this court. The material facts concerning the appointment of the respective receivers and their powers and acts thereunder will be stated hereafter in appropriate connection. It suffices for present purposes to note that both receiverships were in full force and effect on January 1, 1932. On that date, the finding in the Commercial Trust Company case states, the deposits in the savings department amounted to $913,242.94; the amount exempt from tax was $52,500: " The amount claimed by the State of Connecticut as taxable under sections 1285 and 1287 *** was $860,742.94" : the total amount of tax claimed is $2,151.86, one-half due February 20, 1932, and the balance July 20, 1932. The trial court reached the conclusion that the receiver was not liable for the payment of this tax, and error is assigned that the facts do not support this conclusion, especially in that the defendant bank, on January, 1, 1932, was an existing corporation, was not restrained from transacting business, and had not dissolved or forfeited its charter.

In the Naugatuck Bank & Trust Company case the stipulation sets forth that the bank had maintained a savings department: that the tax commissioner requested the permanent receiver to file a sworn statement pursuant to sections 1285 and 1287; that the receiver, under date of January 20, 1932, rendered a statement accompanied by a letter maintaining that no tax was due; that thereafter the tax commissioner incorporated the information contained in the statement in a printed form regularly used for the purpose of making returns in compliance with sections 1285 and 1287, and on February 25, 1932, the board of equalization notified the receiver that the board confirmed the assessment of a tax in the amount of $636.55.

Theses cases as presented here require determination whether the tax in question is upon franchise, like that imposed under section 1285, or upon property, and, if the former, whether, in the situations disclosed by the facts such a franchise tax is applicable, and collectible from the receivers. Decision as to the nature of the tax necessitates consideration of both section 1285 and section 1287. These are printed as a footnote to Shippee v. Riverside Trust Co., 113 Conn. 661, 665, 156 A. 43, 44, and need not be repeated here.

Section 1285 originated as section 18 of chapter 47 of the Public Acts of 1851. Supplanting a prior statute (chap. 51, Public Acts 1846) which subjected deposits in savings banks in excess of $250 to a tax assessed in the town where the depositor recoded. The act of 1851 required treasurers of savings banks and savings associations annually on the first day of July, or within ten days thereafter, to make to the comptroller of public accounts a statement of the total amount of all deposits on that day and to pay to the state treasurer, " for the use of the State, a sum equal to one-eighth of one per cent. Upon the total amount of deposits," which shall be in lieu of all other taxes upon such institutions, or deposits therein. Various amendments in matters of detail not affecting the general plan and nature of the tax were made in 1857, 1859, and 1862 (chap. 55, Public Acts 1862). Then the statute was subjected to careful judicial scrutiny and consideration by this court and by the Supreme Court of the United States, and it was decisively determined that the tax imposed was one upon the franchise and not on the property of the defendant bank. Coite v. Society for Savings (1864) 32 Conn. 173; Society for Savings v. Coite, 5 Wail (U. S.) 594, 18 L.Ed. 897. This court pointed out (page 185 of 32 Conn.) that savings banks act under charters from the state which confer privileges of great value, and the state by statute and supervision safeguards and protects their interests, also grants important exemptions from other forms of taxation. In return for these privileges an equivalent is exacted in the payment in the form prescribed by the statute which adopts as a rule of assessment the amount of deposits on hand at particular times. It provides for no valuation of property and it makes no notice of the manner in which the deposits are invested or whether they are invested at all. " The tax is not imposed on the securities, but on the bank: and it is not imposed on the bank because of its holding the securities, but in consequence of its doing, under favor of the state, certain business which that favor renders profitable. The tax is a payment for the benefit. It is proportionate to the extent of the business, and the amount of the deposits is the index or measure of that extent." Page 187 of 32 Conn. " The tax is laid *** on the corporation for its facilities of business, and not on its assets." Page 198 of 32 Conn. In affirming this view the United States Supreme Court notes that, in the statute: " Reference is evidently made to the total amount of deposits on the day named, not as the subject-matter for assessment, but as the basis for computing the tax required to be paid by the corporation defendants. They enjoy important privileges, and it is just that they should contribute to the public burdens *** Neither investment nor the value of the deposits being mentioned in the provision it seems clear that they are unimportant in this investigation, as the amount of the tax is the same whether the deposits, on the day named, have or have not been invested, and whether they deposits, on the day named, and whether they are above the par value or of no value at all. Moneys received constitute deposits in the sense in which the word is used in that provision, and the total amount of such deposits on that day furnishes the true basis of computation, wholly irrespective of their market value or of the disposition made of the funds by the defendants." Society for Savings v. Coite, supra (pages 903, 904 of 18 L. Ed., 6 Wall. 594, 608). See, also, Provident Savings Institution v. Massachusetts, 6 Wall, 611, 18 L.Ed. 907.

The statute which is now section 1285 was thus decisively construed as imposing on savings banks a franchise tax, and in 1878 (chap. 64, Public Acts) an insertion was made in the statute itself expressly denominating the tax as on the bank's corporate franchise, computed upon the amount of its deposits after making the specified deduction. We have adverted to the foregoing extent to the reasoning supporting the conclusion that the savings bank tax is on franchise instead of on property for the reason that we regard these considerations as applicable also to the contention now made that the tax on savings deposits under section 1287 is a property tax.

The genesis of section 1287 was in a provision of section 2 chapter 85, Public Acts of 1907, that " banks and trust companies shall pay to the state on all savings deposits the same tax which is required to be paid by savings banks by section 2422 of the general statutes [1902, now section 1285, General Statutes, 1930] *** on the savings deposits held by them, and such savings deposits shall be exempt from all other taxation." The intent of the General Assembly manifested by the reference to the savings bank tax statute in lieu of detailed separate provisions was to impose the " same" tax in nature, as well as in all other applicable respects, upon other banks and on trust companies. We can discover no justification for the limitation of identity, now suggested, as to the rate and the exemptions only to the exclusion of the nature and other attributes of the tax. Had a different tax been intended there would have been no difficulty in making a clear designation, as witness the Act of 1915, chapter 301, sections 1288 and 1289, General Statutes, taxing...