Toy Nat. Bank v. Nelson, 695-697.

Decision Date05 February 1930
Docket NumberNo. 695-697.,695-697.
Citation38 F.2d 261
PartiesTOY NAT. BANK OF SIOUX CITY, IOWA, v. NELSON, County Treasurer, et al. IOWA JOINT-STOCK LAND BANK OF SIOUX CITY, IOWA, v. SAME. SECURITY NAT. BANK OF SIOUX CITY, IOWA, v. SAME.
CourtU.S. District Court — Northern District of Iowa

Edwin J. Stason and Karl J. Knoepfler, both of Sioux City, Iowa, for plaintiffs in first and second cases.

E. M. Corbett and C. M. Corbett, both of Sioux City, Iowa, for plaintiff in third case.

O. T. Naglestad and A. R. Strong, both of Sioux City, Iowa, for defendants.

SCOTT, District Judge.

The three foregoing entitled cases were simultaneously brought against common defendants to recover sums of money paid yearly as taxes over a period of years 1923 to 1929, inclusive. The allegations of the respective petitions are the same in substance, mutatis mutandis. The following statement of material and controlling facts alleged in the several petitions is taken from the plaintiffs' brief. Comparison with the petitions themselves convince me that the statement is a fair one, and sufficient to serve as a basis for consideration of the legal questions presented by the demurrers filed in each case by the defendants.

"Facts Admitted by Defendants' Demurrer.

"The defendants admit by their demurrer certain facts properly alleged, including the following:

"1. The plaintiffs were taxed at the consolidated rate of approximately 150 mills on the dollar for the years 1923, 1924, 1925, 1926, 1927, 1928 and 1929, while other `moneyed capital' in substantial competition with the plaintiffs was taxed at the rate of 5 mills on the dollar for 1923, and 6 mills on the dollar for 1924, 1925, 1926, 1927, 1928 and 1929.

"2. The plaintiffs were not permitted to deduct for those years, from the valuations of their stocks in the plaintiffs' institutions, the individual indebtedness of the stockholder while the owners of other `moneyed capital,' which was in substantial competitions with the plaintiffs, were permitted to make such deductions.

"3. For a number of years, including those of 1923-1929, inclusive, it had been the practice of the assessors and the policy of the board of supervisors of the defendant county to knowingly and intentionally assess `other moneyed capital' in the form of credits, and to collect taxes computed thereon, at the rate of 5 mills for 1923 and 6 mills on the dollar for 1924, 1925, 1926, 1927, 1928 and 1929, irrespective of whether all or any part of such credits was invested in securities so as to come in substantial competition with the business of national banks and joint stock land banks in the loan market.

"4. That during the said years the defendants as taxing officers assessed all intangible property, subject to taxation, either as national, state and savings banks and loan and trust company stock, or as credits; that in the latter class of securities was included all securities designated as `other moneyed capital' in Section 5219 of the United States Revised Statutes (12 USCA § 548); that said method of assessing has been pursued not only in Woodbury County, Iowa, but throughout the State, and said method has been repeatedly and wrongfully sustained by state courts of Iowa; that the said credits so taxed at 5 mills on the dollar for 1923, and 6 mills on the dollar for the years 1924 to 1929 inclusive included all `moneyed capital' in Woodbury County, Iowa, as that term is used in said section of the Revised Statutes, to the approximate amount of $5,000,000, which said `moneyed capital,' during said period was at all times in constant, active and substantial competition with the normal and ordinary loan and investment business of the plaintiffs."

The contentions of the plaintiffs are that the system and practice of assessments intentionally carried out by the defendants resulted in discrimination against the shares of stock of the plaintiff banks, and imposed a greater rate than was assessed against other moneyed capital in the hands of individual citizens of the state, coming into competition with the business of national banks. That the taxes imposed were not uniform upon such moneyed capital and upon the shares of stock in such banks, and therefore the imposition of such taxes contravenes that part of section 5219 of the Revised Statutes of the United States (now section 548, Title 12, United States Code 12 USCA § 548), which prohibits a state from taxing the shares in national banks at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state, coming into competition with the business of national banks, and that such taxes are illegal and void; and contravenes that part of the Fourteenth Amendment to the Constitution of the United States which provides that no state shall deny to any person within its jurisdiction the equal protection of the laws.

It also contended that the statutes hereinafter set out are unconstitutional in so far as they relate to the taxation of shares in national banks and other moneyed capital in competition therewith, for the reasons assigned for the illegality of the tax.

The following are the statutory provisions of the state of Iowa (Code 1927) under which the taxes in question were imposed:

"6984. "Credits" defined. The term credit, as used in this chapter, includes every claim or demand due or to become due for money, labor, or other valuable thing, every annuity or sum of money receivable at stated periods, and all money or property of any kind secured by deed, title bond, mortgage, or otherwise. * * *"

"6985. Moneys — credits — annuities — bank notes — stocks. Moneys, credits, and corporation shares or stocks, except as otherwise provided, cash, circulating notes of national banking associations, and United States legal tender notes, * * * notes, including those secured by mortgage, accounts, contracts, for cash or labor, bills of exchange, judgments, choses in action, liens of any kind, securities, debentures, bonds other than those of the United States, annuities, and corporation shares or stocks not otherwise taxed in kind, shall be assessed and, excepting shares of stock of national, state, and savings banks, and loan and trust companies, and moneyed capital as hereinafter defined, shall be taxed upon the uniform basis throughout the state of five mills on the dollar of actual valuation, same to be assessed and collected where the owner resides."

"6987. Bonus bond levy. Until the soldiers' bonus bonds are retired and paid, there shall be levied and collected upon all property taxed at five mills on the dollar of actual valuation as provided in the second preceding section and additional tax of one mill on the dollar of actual valuation. * * *"

"6988. Deduction of debts. In making up the amount of money or credits which any person is required to list, or to have listed or assessed, including actual value of any building and loan shares, he will be entitled to deduct from the actual value thereof the gross amount of all debts in good faith owing by him."

"6992. Stock and "moneyed" capital denied deduction. No deduction for debts shall be allowed from the shares of stock of any state, savings or national bank or loan and trust company, nor from moneyed capital used in competition with banks, within the meaning of section 5219 of the revised statutes of the United States."

"6998. National and state bank stock — place of assessment. Shares of stock of national banks and state and savings banks and loan and trust companies, located in this state, shall be assessed to the individual stockholders at the place where the bank or loan and trust company is located."

"7003. Rule of actual and taxable value. The assessor from such statement shall fix the value of such stock based upon the capital, surplus, and undivided earnings, at the same ratio of assessed value to actual value as the assessed value of real estate in the taxing district where such bank is located generally bears to its actual value.

"The taxable value of such shares of stock shall be one-fourth of the assessed value and shall be taxed as other property of such taxing district. * * *"

"7005. "Moneyed" capital. All moneyed capital within the meaning of section 5219 of the revised statutes of the United States shall be listed and assessed against the owner thereof at his place of business, and if a corporation at its principal place of business, at the same rate as state, savings, national bank and loan and trust company stock is taxed, in the same taxing district, and at the actual value of the moneyed capital so invested."

"7006. Listing. The person or corporation using moneyed capital in competition with bank capital shall furnish the assessor upon demand a full and complete itemized sworn statement showing the amount of moneyed capital so used."

"7007 — al. Liability of corporation for tax. The corporations described in this chapter shall be liable for the payment of the taxes assessed to the stockholders of such corporations, and such tax shall be payable by the corporation in the same manner and under the same penalties as in cases of taxes due from an individual taxpayer, and may be collected in the same manner as other taxes, or by action in the name of the county."

Consideration and determination of the legal sufficiency of these demurrers present three major questions:

1. Are these Iowa taxing statutes, in the light of such construction as the Supreme Court of the State has given them, unconstitutional in so far as they apply to taxation of shares of national banks?

2. Do these Iowa taxing statutes, in the light of such construction as the Supreme Court of the state has given them, contravene the prohibition of section 5219, Revised Statutes of the United States (now section 548, Title 12, U. S. Code 12 USCA § 548)?

3. Have the assessing and taxing officials of the state, in executing and applying these statutes, systematically and intentionally...

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