Shippee v. Riversidetrust Co.

• Decision Date: 29 July 1931
• Citation: 156 A. 43
• Parties: SHIPPEE, Bank Com'r v. RIVERSIDETRUST CO.
• Court: Connecticut Supreme Court

156 A. 43

SHIPPEE, Bank Com'r

v. RIVERSIDETRUST CO.

Supreme Court of Errors of Connecticut.

July 29, 1931.

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

Proceedings by Lester E. Shippee, Bank Commissioner, against the Riverside Trust Company, in which the Hartford-Connecticut Trust Company was appointed temporary receiver of the Riverside Trust Company. On application by the temporary receiver for advice concerning the payment of claims of the state for taxes on the capital stock and on the savings deposits of the defendant corporation. The case was reserved by the superior court for the advice of the Supreme Court of Errors.

Questions answered.

Argued before MALTBIE, C. J., and HAINES, HINMAN, BANKS, and AVERY, JJ.

Ernest L. Averill, Deputy Atty. Gen., William N. Nelson, Asst. Atty. Gen., Warren B. Burrows, Atty.

Gen., and John H. King, Asst. Atty. Gen., for plaintiff.

Barclay Robinson and William W. Fisher, both of Hartford, for Hartford-Connecticut Trust Co.

HINMAN, J.

On or before October 15, 1930, pursuant to section 1272 of the General Statutes, the Riverside Trust Company filed in the office of the state tax commissioner a statement under oath showing the number of shares of its capital stock and the fair market value thereof on the 1st day of October, 1930, and on December 31, 1930, the state board of equalization, pursuant to section 1112 of the General Statutes, determined the fair market value of the shares of stock and computed the tax payable thereon at $11,760.63. The tax so determined and assessed was due and payable on or before February 28, 1931.

On December 23, 1930, Lester E. Shippee, state bank commissioner, pursuant to section 3870 of the General Statutes, issued an order restraining the Riverside Trust Company from paying out funds or receiving deposits, and On January 6, 1931, upon the application of the bank commissioner, the Hartford-Connecticut Trust Company was appointed temporary receiver of the corporation by the superior court.

The company maintained a savings department, and pursuant to sections 1285 and 1287 of the General Statutes the temporary receiver delivered to the state tax commissioner a sworn statement showing the amount of all the deposits, exclusive of surplus, in the savings department on January 1, 1931, and the amount of the tax due and payable thereon to be $2,584.64. On February 2, 1931, the board of equalization examined and found correct this return, and no application in the nature of an appeal from this action has been taken pursuant to section 1124 of the General Statutes. One-half of this tax, under section 1285, was payable on or before February 20, 1931, and one-half on or before July 20, 1931.

The state treasurer has filed with the temporary receiver a claim for the payment of the taxes above mentioned, claiming that the state is entitled to a preference in the paymeht thereof over the claims of depositors, and the questions, pertaining thereto, upon which advice is desired, are as follows: (1) Is the claim of the state for tax on the shares of the capital stock entitled to a preference over the claims of depositors? (2) If the answer to question 1 is "No," then is the claim of the state to be included with "all other liabilities" in class 5 of section 3935 of the General Statutes? (3) Is the claim of the state for tax on savings deposits entitled to a preference over the claims of depositors, either of the savings department or of the commercial department? (4) If entitled to any prefer ence, should the tax on savings deposits be paid out of the funds of the savings department? (5) If the answer to question 3 is "No," then is the claim to be included with "all other liabilities" in class 5 of said section 3935? (6) Is the Riverside Trust Company liable to the state for a tax under the provisions of sections 1285 and 1287 of the General Statutes, upon its savings department deposits as of January 1, 1931?

So much of the sections of the statutes above mentioned as is material to the inquiry is quoted in a footnote.¹ The pith of the questions which relate to the tax on shares of the capital stock (1 and 2) is whether the nature of the tax and the statutory provisions for its payment are such that it should (a) be accorded priority over general claims against the corporation, (b) share with other general claims, or (c) be payable only from the surplus, if any, distributable to stockholders. Judicial construction of the statute imposing this tax leaves no doubt as to its nature, or of the general principles governing its administration, including the duty of the corporation, ordinarily, to pay to the state the amount of the tax.

The statute (Gen. St. 1930, § 1275) "provides for the collection of the tax from the corporation by the treasurer of the state, who is required to pay over to the towns in which resident stockholders reside the taxes derived from such stockholders' shares. The tax is * * * imposed upon the shares of stock. * * * The same tax is collected upon resident and nonresident stockholders' shares, * * * but [the statute] requires, as it may do, the corporation to pay it in behalf of the shareholder. 'The tax assessed to shareholders may be required by law to be paid in the first instance by the corporations themselves as the debt and in behalf of the shareholder, leaving to the corporation the right to reimbursement for the tax paid from their shareholders, either under some express statutory authority for their recovery, or under the general principle of law that one who pays the debt of another at his request can recover the amount from him.' Home Savings Bank v. Des Moines, 205 U. S. 503, 518, 27 S. Ct. 571, 51 L. Ed. 901. The present statute [now section 1272 of the General Statutes], like the former one [sections 3836, 3837, General Statutes 1888; State v. Travelers' Ins. Co., 70 Conn. 590, 40 A. 465 (66 Am. St. Rep. 138); Barrett's Appeal, 73 Conn. 288, 47 A. 243], imposes the city in this state, in aid of the construction of any railroad, and which, by the statutes of this state, are exempt from taxation, and also the amount exempted from taxation by the provisions of section 1286; and the annual tax shall equal one-fourth of one per centum of the amount of its deposits remaining, less the amount of taxes paid or payable by it upon its real estate in Connecticut during the year prior to the first day of said January. Said state tax shall be in lieu of all other taxes upon savings banks, their deposits and surplus, except the aforesaid taxation upon their real estate."

"Sec. 1287. Tax on savings deposits in banks and trust companies. All banks and trust companies maintaining a savings department, or soliciting or receiving deposits as savings, shall pay to the state on all savings deposits held by them the same tax which is required to be paid by savings banks by section 1285, less the amount of taxes paid by it upon real estate assessed against it, which real estate is held as an asset of its savings department, and such savings deposits shall be exempt from all other taxation."

tax upon the shares of stock which belong to the stockholder, and not upon the capital or property of the corporation. The purpose is apparently to accomplish the same result as was accomplished by the former statute, only so modifying it as to make the taxation uniform as between resident and nonresident shareholders and also between the resident shareholders in the different towns and taxing districts, for under the earlier law a different value might be placed upon the shares in the different towns, and the tax rate in the different towns was not uniform. * * * As a convenient means of accomplishing this result, the corporation is made paymaster for the shareholders, the amount of the tax, less the deduction, is fixed by the state and the tax collected by the state and paid over to the towns where the shareholders reside." Roberts v. Automobile Ins. Co., 89 Conn. 181, 188, 93 A. 243, 245. The tax is upon the property of the shareholder, not upon the property of the corporation and upon or levied against the corporation as such. The duty and obligation of the corporation is merely as "paymaster for the shareholders," to pay the tax in the first instance, "as the debt and in behalf of the shareholder." Roberts v. Automobile Ins. Co., supra.

This reservation requires us to determine, further, the effect of the intervention of insolvency of the corporation and the appointment of a receiver. Since this tax is not properly to be regarded as against the corporation in the usual and accepted sense, it is apparent that, though such taxes be entitled to priority in receivership, the corporation's obligation respecting the tax now under consideration could be regarded, at most, only as a debt coming under subdivision (5) of section 3935 of the General Statutes, which is quoted in a footnote.² However, careful consideration and the available precedents indicate that this claim of the state is not entitled to participate with those of the general creditors of the corporation, but is payable only from assets, if any, ultimately remaining and distributable to the shareholders.

Statutes of other states, similar in purpose and nature, which have been involved in cases pertaining to the collectibility of the tax from corporations in receivership, and in which recovery either as a preferred or a common claim was denied, disclose differences in detail, but in no respect which we regard as materially affecting the reasoning or result in the present instance. Some such statutes provide for assessment against the individual stockholders at the place where the bank is located but for payment by the bank with a lien upon the shares of each stockholder for his proportion of the tax so paid. Others require assessment in the name of the bank, with a similar lien. Ward County v. Baird, 55 N. D. 670, 215 N. W. 163; Andrew v. Munn, ...