United States v. Lewis
| Decision Date | 08 April 1935 |
| Citation | 10 F. Supp. 471 |
| Parties | UNITED STATES et al. v. LEWIS et al. |
| Court | U.S. District Court — Western District of Kentucky |
T. J. Sparks, U. S. Atty., Elwood Hamilton, Oldham Clarke, and Woodward, Hamilton & Hobson, all of Louisville, Ky., and William C. Fitts, of Washington, D. C., for plaintiffs.
Bailey P. Wootton, Atty. Gen., S. H. Brown and W. R. Attkisson, Asst. Attys. Gen., and J. Ward Lehigh and Mark Beauchamp, both of Louisville, Ky., for defendants.
Before MOORMAN, Circuit Judge, and ANDERSON and DAWSON, District Judges.
The Reconstruction Finance Corporation holds legal title to preferred stock in eighteen national banks located in Kentucky, and in forty-six state banks organized under the laws of this state. Acting on an opinion of the Attorney General of the state, the state and local authorities are contending that these shares of preferred stock are subject to taxation, under section 4092 of Kentucky Statutes (Carroll's 1930 Edition), and must be listed for taxation in the manner provided in section 4019a-10, Kentucky Statutes (Carroll's 1930 Edition). The plaintiffs resist the assessment of these shares of stock for taxation and the collection of any tax thereon, upon the ground that the Reconstruction Finance Corporation is an agency and arm of the United States government, and that the property in its name is really the property of the United States, and exempt from taxation by state and local authorities. The case is before us on motion of the plaintiffs for a preliminary injunction, restraining the defendants from assessing and certifying for taxation to the various taxing units the value of these shares of stock; and on defendants' motion to dismiss the bill.
This court, as a federal court, undoubtedly has jurisdiction of this controversy, under that provision of section 24 (1) of the Judicial Code (section 41 (1), title 28 USCA) which confers upon District Courts original jurisdiction "of all suits of a civil nature, at common law or in equity, brought by the United States." The United States is one of the plaintiffs, and joined in the suit for the purpose of asserting and protecting its immunity and the immunity of its agent, the Reconstruction Finance Corporation, from state and local taxation. Its claim of interest in the controversy is real and substantial; and the fact that there is another party plaintiff does not prevent the action from being one brought by the United States, within the meaning of the Judicial Code. Erickson et al. v. United States et al., 264 U. S. 246, 44 S. Ct. 310, 68 L. Ed. 661.
The motion to dismiss for want of equity and the motion for a preliminary injunction involve substantially the same questions, and are necessarily considered together.
The pertinent part of section 4092 of Kentucky Statutes reads as follows:
Section 4019a-10 of Kentucky Statutes requires each bank to furnish to the assessing authorities and to the state tax commission certain information therein set out, to enable them to arrive at the taxable value of the shares of stock of such bank; and it will be observed that section 4092 requires each bank to pay the taxes due thereunder to the tax collecting officer; but according to the plain language of the act, such payment is made "for and on behalf of the owners of such shares of stock." It seems perfectly clear, therefore, that the tax imposed by section 4092 is a tax against the owner of the shares of stock, and not against the issuing bank.
It was stated at the argument of this case that the universal practice in this state is for the banks to pay the tax, without charging it back to the owners of the shares of stock; but this practice cannot change the plain language of the act, nor render the shareholder any the less liable for the tax imposed by section 4092. There can be no doubt whatever that the paying banks may require the shareholders to reimburse them; and it is their duty so to do. The statute, in its requirement that the bank shall pay the tax for and on behalf of its shareholders, merely adopts a convenient method of collection. It was not intended to exempt the shareholder from liability for the tax paid by the bank on his behalf. Such a provision is valid. Bank of California v. Richardson, 248 U. S. 476, 39 S. Ct. 165, 63 L. Ed. 372. On the other hand, to so construe section 4092 as to make the banks liable for the tax on their shares, would make the section entirely invalid, in so far as the taxation of national bank shares is concerned. It is well settled that national banks, their property, or their shares of stock can be taxed by the states only to the extent and in the manner...
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