It is contended on behalf of the plaintiff in error that an assessment and taxation of all the shares of the stock of a national bank in solido to the bank direct, as owner thereof, constitutes a tax upon the bank forbidden by section 5219 of the Revised Statutes of the United States.
The tax in question was assessed under section 21 of an act of the legislature of the State of Washington, approved March 9, 1891, Laws of Washington, 1891, pp. 280-289, in the following terms:
"Every individual, firm, corporation or association of persons, carrying on a general banking business in this State, whether the same has been organized under the banking laws of this State or the United States, or conducted under the style of private bankers, shall be assessed and taxed in the county, town, city or village where such bank or banking association is located, and not elsewhere, in the following manner: Annually, at such times as provided for listing property for taxation, every such bank or banking association as contemplated in this section shall, by its accounting officer, furnish the county or city assessor a statement verified by oath giving the amount of paid-up capital stock, the amount of surplus or reserved fund and the amount of undivided profits of such bank or banking association. The aggregate amount of capital, surplus and undivided profits shall be assessed and taxed as other like property in the State is assessed and taxed: Provided, At the time of listing the capital stock, the amount and description of its legally authorized investments in real estate shall be assessed and taxed as other real estate is assessed and taxed under this act, and the assessor shall deduct the amount of such investments in real estate from the aggregate amount of such capital, surplus and undivided profits, and the remainder then taxed as above provided."
If this section stood alone there might be ground for the contention that it contemplates taxation of the capital of the bank. But section 23 of the statute provides that "each bank
The Supreme Court of Washington held in this case that these two sections are to be read together, and that, so read, their provisions are not inconsistent with those of the Federal statute.
That the two sections of the state law should be read together is obviously proper, and, at any rate, we are bound by the judgment of the Supreme Court of the State in the mere matter of the construction of that law.
In holding that the state law, in the provisions under consideration, was not in contravention of the Federal statute, the Supreme Court of Washington claimed to follow the case of National Bank v. Commonwealth, 9 Wall. 353; and we agree with that court in thinking that the case referred to is decisive of the contention now made. In that case it appeared that a statute of the State of Kentucky provided that a tax should be laid on "the bank stock or stock in any moneyed corporation of loan or discount, fifty cents on each share thereof equal to one hundred dollars, or on each one hundred dollars of stock therein owned by individuals, corporation or societies"; and further provided that "the cashier of a bank, whose stock is taxed, shall, on the first day of July in each year, pay into the treasury the amount of tax due. If such tax be not paid, the cashier and his sureties shall be liable for the same and twenty per cent upon the amount."
It was claimed by the bank that the shares of the stock were the property of the individual stockholders, and that the bank could not be made responsible for a tax levied on those shares, and could not be compelled to collect and pay such tax to the State. In delivering the opinion of the court, Mr. Justice Miller said:
"It is strongly urged that it is to be deemed a tax on the
This case was followed in Bell's Gap Railroad v. Pennsylvania, 134 U.S. 232, 239, and Van Slyke v. Wisconsin, 154 U.S. 581; and its doctrine, that the statutory appointment of the bank to pay the whole tax as agent of the stockholders, is not inconsistent with the Federal law pertaining to national banks, was correctly interpreted and applied by the state court to the case in hand. It was not alleged in the bill, or claimed on argument, that the bank was not in possession of funds, belonging to the stockholders severally, sufficient to pay the tax, proportioned to their ownership of the stock.
It is also contended that the Supreme Court of Washington erred in not holding that the bill of complaint showed that the taxation of the shares of capital stock of the plaintiff was at a greater rate than was assessed upon other moneyed capital in the hands of individual citizens of the State of Washington, and was, therefore, void under section 5219 of the Revised Statutes of the United States.
As the case was disposed of in the court below on a demurrer to the bill, it is proper to have before us the very language of the bill which presents this question, and which was as follows:
"That on the first day of April, 1891, there existed in the county of Chehalis, State of Washington, taxable moneyed capital (other than and beyond that invested in shares of stock of national banks and banking business), owned by citizens of said State, resident in said county and there invested in loans and securities to them payable, and owing by other citizens of said State residing in said county, of vast amount, to wit, exceeding the sum of two hundred and thirty-seven thousand four hundred dollars: That on said first day of April, 1891, there existed in the State of Washington, in counties other than the county of Chehalis aforesaid, other taxable capital in money and moneyed capital (aside from the moneyed capital referred to in the paragraph preceding, and aside from the capital in banks and banking business), owned by citizens of the State of Washington resident in said State (in counties other than the county of Chehalis), and there invested in loans
"That the facts alleged in the preceding paragraphs thereof were then and during all of the times intervening between the first day of April, 1891, and the time of the return of the several assessment rolls throughout the State of Washington by the county assessors to the county auditors, well know to the assessor of the county of Chehalis and all other county assessors throughout the State of Washington, and during all of said times and until the first day of March, 1892, were well known to the several county and state officers hereinbefore referred to, and also to the boards of equalization and boards of county commissioners and the auditor of each of the counties
Before we consider the legal import of these statements in the complaint, we shall briefly review some of the previous decisions of this court in which similar questions have been dealt with.
In People v. Commissioners, 4 Wall. 244, the question presented was whether a tax imposed, under a law of the State of New York, on shares of a national bank, was invalid, as a discrimination against the shareholders, because no allowance or deduction was made on account of investments made by the bank in United States bonds, whereas such a deduction or allowance was made in assessments upon insurance companies and individuals. The answer given by this court was that upon a true construction of that clause of the act which provided that taxation of such shares by state authority should not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such States, "the meaning and intent of the lawmakers were that the rate of taxation of the shares should be the same, or not greater than upon the moneyed capital of the individual citizen which is subject or liable to taxation; that is, no greater proportion or percentage of tax in the valuation of the shares should be levied than upon other moneyed taxable capital in the hands of the citizens." And it was said that "it is known as sound policy that, in every well-regulated and enlightened State or government, certain descriptions of property, and also certain institutions — such as churches, hospitals, academies, cemeteries and the like — are exempt from taxation; but these exemptions have never been regarded as disturbing the rates of taxation, even where the fundamental law had ordered that it should be uniform."
In Lionberger v. Rouse, 9 Wall. 468, a shareholder in the Third National Bank of St. Louis resisted payment of a tax
"It is very clear that Congress, in conceding to the States the right to tax, adopted a measure which it was supposed would operate to restrain them from legislating adversely to the interests of the national banks. The measure itself had reference to prospective legislation by the States, and its object was accomplished when the States conformed, as far as practicable, their revenue systems to it. Exact conformity was required, if attainable, but the law-making power did not intend such an absurd thing, as that the power of the State to tax should depend on its doing an act, which it had obliged itself not to do. It was well known at the time, and Congress must be supposed to have legislated on this subject with reference to it, that States, by contracts with individuals or corporations, could grant away the right of taxation, and that this power had been frequently exercised. It was equally within the knowledge of Congress that the policy on this subject varied in different States; while some of them retained in their own hands the power of taxation over all species of property, except such as were devoted to religious or charitable purposes, others had parted with it to interests of a purely business character, like banks and railroads. Can it be supposed that Congress, in this condition of things in the country, meant to confer a privilege by one section of a law which by another it made practically unavailable? If the construction contended for by the plaintiff in error be allowed,
By a statute of Pennsylvania of March 31, 1870, all mortgages, judgments, recognizances and moneys owing upon articles of agreement for the sale of real estate were made exempt from taxation except for state purposes. The stock of one Hepburn in the First National Bank of Carlisle, the par value of which was one hundred dollars a share, was subjected, at its market value of one hundred and fifty dollars per share, to taxation for county, school and borough purposes. The validity of such taxation was upheld by the Supreme Court of Pennsylvania, and the case was brought to this court. It was contended on behalf of the shareholder that as, by the Pennsylvania statute, other moneyed capital in the hands of individuals in the county where the bank was located was not subject to taxation for local purposes, such taxes upon shares in a national bank were in the nature of a discrimination and void. It was also contended that in valuing these shares at fifty per cent above par the tax was made fifty per cent greater than on "other moneyed capital in the hands of individuals."
Both these contentions were overruled by this court; and, in disposing of the argument that the taxes in question made
"It is next insisted that no municipal or school taxes could be assessed upon the shares of the First National Bank of Carlisle, located within the borough of Carlisle, ... because by the laws of Pennsylvania, as is claimed, other moneyed capital in the bands of individual citizens at that place is exempt from such taxation. In support of this claim it is shown that all mortgages, judgments, recognizances and moneys owing upon articles of agreement for the sale of real estate are exempt from taxation in that borough except for state purposes. This is a partial exemption only. It was evidently intended to prevent a double burden by the taxation both of property and debts secured upon it. Necessarily there may be other moneyed capital in the locality than such as is exempt... . Some part of it only is. It could not have been the intention of Congress to exempt bank shares from taxation because some moneyed capital was exempt. Certainly there is no presumption in favor of such an intention. To have effect it must be manifest. The affirmative of the proposition rests upon him who asserts it. In this case it has not been made to appear." Hepburn v. School Directors, 23 Wall. 480.
To the same effect was the case of Adams v. Nashville, 95 U.S. 19.
In People v. Weaver, 100 U.S. 539, it was held that the statute of a State which establishes a mode of assessment by which shares in a national bank are valued higher in proportion to their real value than other moneyed capital is in conflict with section 5219 of the Revised Statutes, although no greater percentage is levied on such valuation than on that of other moneyed capital; and that the statutes of New York which permit a party to deduct his just debts from the valuation of all his personal property, except so much thereof as consists of such shares, tax them at a greater rate than other moneyed capital, and were, therefore, void as to them.
In Boyer v. Boyer, 113 U.S. 689, there was brought into question the validity of a county tax levied on national bank shares under a law of the State of Pennsylvania, where other
That case, like the present one, was determined in the court below on bill and demurrer, and this court thought the better course was to remand the cause with a recommendation that the defendants should be put to answer, so that the facts of the case might be more fully disclosed.
In Bell's Gap Railroad v. Pennsylvania, 134 U.S. 232, 237, a question was raised, in behalf of citizens of other States, of the validity of a law of the State of Pennsylvania which imposed a tax upon the nominal or face value of corporation bonds, instead of a tax upon their actual value; and, while it was not a case of taxation of national bank stock, some observations were made by Mr. Justice Bradley, in expressing the views of the court, that are applicable to the question before us:
"The provision in the Fourteenth Amendment, that no State shall deny to any person within its jurisdiction the equal protection of the laws, was not intended to prevent a State from adjusting its system of taxation in all proper and reasonable ways. It may, if it chooses, except certain classes of property from any taxation at all, such as churches, libraries and the property of charitable institutions. It may impose different specific taxes upon different trades and professions, and may vary the rates of exercise upon various products; it may tax real estate and personal property in a different manner;
Mercantile Bank v. New York, 121 U.S. 138, was the case of a bill filed by a national bank in the city of New York, the object of which was to restrain the collection of taxes assessed upon its stockholders on the ground that the taxes assessed were illegal and void under section 5219 of the Revised Statutes of the United States, as being at a greater rate than those assessed under the laws of New York upon other moneyed capital in the hands of the individual citizens of that State. From the decree of the Circuit Court of the United States dismissing the bill an appeal was prosecuted to this court.
The question presented was thus stated by Mr. Justice Matthews, who delivered the opinion of this court:
"The proposition which the appellant seeks to establish is that the State of New York, in seeking to tax national bank
The exemptions referred to were classified as follows: Shares of stock in the hands of the individual shareholders of all incorporated moneyed or stock corporations deriving an income or profit from their capital or otherwise, incorporated by the laws of New York, not including trust companies and life insurance companies, and state or national banks — the value of such shares was admitted to be $755,018,892; trust companies and life insurance companies — the value of whose shares was admitted to be $35,558,900 — in addition the life insurance companies owned personal property composed of mortgages, loans and bonds to the amount of $195,257,305; savings banks and the deposits therein amounting to $437,107,501, and a surplus of $68,669,001; certain municipal bonds, issued by the city of New York under an act passed in 1880, of the value of $13,467,000; shares of stock in corporations created by States other than New York, in the hands of individual holders, resident of said State, amounting to $250,000,000.
The contention on behalf of the national bank was that within the doctrine of the case of Boyer v. Boyer, 113 U.S. 689, these exemptions constituted so material a part relatively of the moneyed capital in the hands of individual citizens as to make the tax upon the shares of national banks an unfair discrimination against that class of property.
"That `moneyed capital in the hands of individual citizens' does not necessarily embrace shares of stock held by them in all corporations whose capital is employed, according to their respective corporate powers and privileges, in business carried on for the pecuniary profit of shareholders, although shares in some corporations, according to the nature of their business, may be such moneyed capital... . The key to the proper interpretation of the act of Congress is its policy and purpose. The object of the law was to establish a system of national banking institutions, in order to provide a uniform and secure currency for the people, and to facilitate the operations of the Treasury of the United States. The capital of each of the banks in this system was to be furnished entirely by private individuals; but, for the protection of the government and the people, it was required that this capital, so far as it was the security for its circulating notes, should be invested in the bonds of the United States. These bonds were not subjects of taxation; and neither the banks themselves, nor their capital, however invested, nor the shares of stock therein held by individuals, could be taxed by the States in which they were located without the consent of Congress, being exempted from the power of the States in this respect,
"The terms of the act of Congress, therefore, include shares of stock or other interests owned by individuals in all enterprises in which the capital employed in carrying on its business is money, where the object of the business is the making of profit by its use as money. The moneyed capital thus employed is invested for that purpose in securities by way of loan, discount, or otherwise, which are from time to time, according to the rules of the business, reduced again to money and reinvested. It includes money in the hands of individuals employed in a similar way, invested in loans, or in securities for the payment of money, either as an investment of a permanent character, or temporarily with a view to sale or repayment and reinvestment. In this way the moneyed capital in the hands of individuals is distinguished from what is known generally as personal property. Accordingly, it was said in Evansville Bank v. Britton, 105 U.S. 322: `The act of Congress does not make the tax on personal property the measure of the tax on the bank shares in the State, but the tax on moneyed capital in the hands of the individual citizens. Credits, moneys loaned at interest, and demands against persons or corporations, are more purely representative of moneyed capital than personal property, so far as they can be said to differ. Undoubtedly, there may be said to be much personal property exempt from taxation without giving bank shares a right to similar exemption, because personal property
In respect to trust companies the court held that it was evident, from the powers granted them in the legislation of New York, that they were not banks in the commercial sense of that word, and did not perform the function of banks in carrying on the exchanges of commerce, and that, taxed as they were, on their franchises based on income, it could not be said that there existed any discrimination against national banks. As to savings banks it was held that, though it could not be denied that their deposits constituted moneyed capital in the hands of individuals, yet it was clear that they were not within the meaning of the act of Congress in such a sense as to require that, if they are exempted from taxation, shares of stock in national banks must also be exempted; that it was part of the policy of the State to encourage the accumulation of small savings belonging to the industrious and thrifty, and it was within the reasonable exercise of the power of the State to exempt particular kinds of property, and the conclusion of the court, in respect to savings banks, was thus expressed: "The only limitation, upon deliberate reflection, we now think it necessary to add, is that these exceptions should be founded on just reason, and not operate as an unfriendly discrimination against investments in national bank shares. However large, therefore, may be the amount of moneyed capital in the hands of individuals, in the shape of deposits in savings banks as now organized, which the policy of the State exempts from taxation for its own purposes, that exemption cannot affect the rule for the taxation of shares in national banks, provided they are taxed at a rate not greater than other moneyed capital in the hands of individual citizens otherwise subject to taxation."
The conclusions to be deduced from these decisions are that money invested in corporations or in individual enterprises that carry on the business of railroads, of manufacturing enterprises, mining investments and investments in mortgages,
We shall now, in the light of the previous decisions, advert to the allegations contained in the bill of complaint.
The substance of those allegations is: First, that there was taxable moneyed capital in Chehalis County, which escaped taxation, amounting to $237,400; second, that there was also unassessed moneyed capital in other portions of the State exceeding $14,000,000; third, that the moneyed capital invested in banks, national and state, was $11,000,000; fourth, that there was invested in the stocks and bonds of insurance, wharf and gas companies and other moneyed institutions, moneyed capital amounting to at least $26,000,000.
Even if it be conceded that the stocks and bonds of insurance, wharf and gas companies were, in point of fact, exempted from taxation, such companies are not, as we have seen, competitors for business with the national banks, and, therefore, might be legally exempted. As to the sum of $237,400, alleged to be invested by individual citizens of Chehalis County in loans and securities to them payable and owing by other citizens of that county, we are not informed by the bill of the nature of such loans and securities, and, as against the pleader, we may well assume that they belong to a class of investments which does not compete with the business of national banks. The same is true of the sum of $14,000,000 alleged to be invested in loans and securities by citizens of the State of Washington and to them payable and owing by other citizens of said State.
It is, indeed, alleged in the bill that these investments were "taxable capital," but that is an averment in the nature of a
There is an allegation in the bill that the omission by the taxing officers of these classes of capital from assessment and taxation was in pursuance of an opinion rendered by the attorney general of the State of Washington; and it is alleged that the said attorney general was required by the laws of the State to render opinions upon request of the assessors. But the bill does not set forth that opinion, or the reasons upon which the attorney general proceeded. The Supreme Court of the State of Washington, adverting to this allegation of the bill, suggests that it is probable that the opinion referred to was one dated February 5, 1891, addressed to the state auditor, and in which the attorney general advised that accounts, promissory notes and mortgages were to be exempted, in order, perhaps, to avoid double taxation. And the Supreme Court well observes that if the action of the assessors was based upon this decision of the law officer of the State, and went no further, the allegations of the bill would certainly turn out to be unsupported 6 Washington, 64.
We agree with the Supreme Court of Washington in thinking that the allegations of this complaint nowhere show that any moneyed capital of the character defined by the Federal Supreme Court was omitted or intended to be omitted by the assessors; or if the intention of the complaint be to cover any such existing cases, the allegations are so general and indefinite that they cannot be made the basis of action.
The judgment of the Supreme Court of Washington is
MR. JUSTICE HARLAN, MR. JUSTICE BROWN and MR. JUSTICE WHITE are of opinion that the bill makes a prima facie case of illegal discrimination against capital invested in national bank stock, and, therefore, that the demurrer should have been overruled.