Suffolk Sav. Bank v. Com.

• Decision Date: 26 February 1890
• Citation: 151 Mass. 103,23 N.E. 728
• Parties: SUFFOLK SAV. BANK v. COMMONWEALTH.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

151 Mass. 103

23 N.E. 728

SUFFOLK SAV. BANK v. COMMONWEALTH.

Supreme Judicial Court of Massachusetts, Suffolk.

February 26, 1890

COUNSEL

Francis C. Lowell and A. Lawrence Lowell, for plaintiff.

A.J Waterman, Atty. Gen., and H.C. Bliss, Asst. Atty. Gen., for defendant.

OPINION

KNOWLTON J.

The controversy in this case relates to the meaning of the word "deposits" in the first part of Pub.St. c. 13, § 20. The petitioner contends that it means the amount due and payable to the depositors, being the amount deposited by them, together with all interest and dividends accruing and payable thereon. The commonwealth, on the other hand contends that, as here used, it includes the guaranty fund of the bank, and the undivided profits, when there are any. The statute of 1862, c. 224, which is found in part in Pub.St. c 13, § 20, provided a new method of taxing savings banks. Before the enactment of it, taxes had been levied on the deposits as the property of individual depositors. Gen.St. c. 57, § 150. The new statute abolished property taxes on moneys held by savings banks, and established an excise tax, to be collected from each bank on the privilege of using its franchise. It adopted a simple method of ascertaining in each case the amount to be collected, by making it a fixed percentage, to be paid semi-annually on the average amount of the bank's deposits for the six months preceding the 1st day of May and the 1st day of November in each year. That the excise or duty might be reasonable, as required by our constitution, it was necessary to ascertain a just basis on which to calculate the amount of the tax, which should show a proper proportion between the benefits received and the sum paid for the enjoyment of them. Hence this rule was adopted, making the amount of the tax to be paid at stated periods by each bank depend on the extent of its business during the six months next preceding. The best measure of a savings bank's business is the amount received on deposit and held subject to the call of depositors. The president and treasurer are required, semi-annually, to make returns, under oath, of the amount of the deposits, by which the excise tax is to be determined. These amounts are certain and definite, and it is easy for the officers of the bank to perform their duty. If the returns were to include undivided profits, the amount would be uncertain, and fluctuating from day to day, and impossible to determine otherwise than by a daily estimate of the value of all the assets of the bank. Such an estimate could never be anything better than a matter of very doubtful opinion, upon which the best men would widely differ. If it be said that, instead of making daily estimates of values to ascertain the undivided profits, the returns should be according to the estimates which had been formulated and carried into an account on the books as undivided profits, it is obvious that such a method would be arbitrary and incorrect. The item could be only estimated and approximated when first determined upon and stated in the account. Inasmuch as the entry would be hardly more than a matter of book-keeping, it might become very far from true before the officers would think it their duty to change it. The statute requires a return founded on a computation of exact sums, which can be accurately known, and not on estimates of the values of investments.

Moreover, if the word "deposits" were to be held to mean, not the amount credited to depositors, but the amount that the assets are fairly worth, it would follow, if the investments should greatly depreciate, that the tax should be estimated on a sum less than the amounts credited to depositors. But the contrary is assumed, both by counsel and the court, in Com. v. Barnstable Sav. Bank, 126 Mass. 526, and Com. v. Lancaster Sav. Bank, 123 Mass. 493. In the former case it appears that the assets were insufficient to pay the depositors, and the full tax was collected while the bank was in the hands of receivers, so long as it was permitted, under certain limitations, to exercise its franchise. In the latter case no tax was payable, because the bank had ceased to use its franchise.

The constitutionality of the statute has been fully considered both by this court and the supreme court of the United States. It is very clear that, viewed as a statute creating a tax on property, it would be unconstitutional, because it is not proportional. Com. v. People's, etc., Bank, 5 Allen, 428; Com. v. Provident Inst., 12 Allen 312, Provident Inst. v. Massachusetts, 6 Wa 1.611. Its constitutionality is sustained under that part of chapter 1, § 1, art. 4, of the constitution of the commonwealth, which authorizes the legislature "to impose and levy reasonable duties and excises," etc. Undoubtedly the legislature, in devising this method of raising money to help defray the expenses of government, had in mind an equitable relation between a payment of this excise tax on account of the privileges which depositors in savings banks enjoy and a property tax upon an amount of money equal to the deposits. For that reason, doubtless, it was deemed best to provide that the amount of deposits lawfully held divested in real estate, or in loans secured by mortgages of taxable real estate, should be deducted from the whole amount of...