First National Bank of Garnett v. Ayers - 160 U.S. 660 (1896)
U.S. Supreme Court
First National Bank of Garnett v. Ayers, 160 U.S. 660 (1896)
First National Bank of Garnett v. Ayers
Submitted January 7, 1896
Decided January 27, 1896
160 U.S. 660
The single fact that the statutes of Kansas regulating the assessment and taxation of shares in national banks permit some debts to be deducted from some moneyed capital, but not from that which is invested in the shares of national banks, is not sufficient to show that the amount of moneyed capital in the State of Kansas from which debts maybe deducted. as compared with the moneyed capital invested in shares of national banks, is so large and substantial as to amount to an illegal discrimination against national bank shareholders in violation of the provisions of Rev.Stat. § 5219.
This is a writ of error to the Supreme Court of Kansas to review a judgment of that court affirming the judgment of the District Court of Anderson County, which was in favor of the defendants, and for costs against plaintiff. The action was brought to restrain the defendants from levying upon the property of the plaintiff in error for the purpose of collecting a warrant issued for the collection of taxes upon the stockholders of the bank on the ground that certain deductions claimed on the part of some of the stockholders from the assessment upon their shares of stock were not allowed them, as they claimed they should have been, under the statutes of the United States.
The petition of the plaintiff in error stated the facts upon
which it was alleged the cause of action arose, and the defendants voluntarily entered appearance in the cause, and thereupon an agreement was signed by the parties to the action setting forth the facts upon which the case was to be tried. The material portion of the agreement sets forth that the plaintiff is a corporation organized under the laws of the United States, with its office at the City of Garnett, Anderson County, Kansas. The defendant Ayers was Sheriff of the County of Anderson during all the time mentioned in the complaint, and the defendant Hargrave, during such time, was treasurer of that county. The plaintiff is a national bank, with a capital stock of $75,000, divided into 750 shares of the par value of $100 each. The actual value of such shares of stock was $100 per share on the first day of March, 1890. On the day last named, certain stockholders named in the statement were justly indebted and owed in good faith the several sums of money set opposite their respective names in plaintiff's petition. These debts were not owing to any person, company, or corporation as depositors in any bank or banking association, or any person or firm engaged in the business of banking in Kansas or elsewhere, nor were they debts owing on account of any of the things named in the Kansas statute hereinafter alluded to. The stockholders owing such debts duly complied with the statutes of Kansas in asking to be allowed to deduct from the value of their stock the amount of the debts which they were justly owing in good faith, as above stated. This was refused by the proper authorities, and an assessment was made against the named stockholders of the plaintiff without allowing any such deductions as claimed, and the taxes so levied on the stock held by the stockholders amounted to the sum of about $2,000. The debts of the stockholders were all of the kind and character that could be deducted from "credits" under the statutes of Kansas, and due and legal demand was made to have such debts deducted from the value of the stock, which was refused. The debts were justly due and owing on the first of March, 1890, and no part of them had been deducted from the "credits" at any time or place during that year. The plaintiff paid the taxes assessed against its stockholders who did not
claim any deductions, and the only taxes remaining due were those assessed against the named stockholders who claimed deductions for their debts as above stated. Other facts were agreed upon which it is not necessary to mention for the purpose of discussing the question involved in this case.
Several statutes of the State of Kansas are set forth, the first being the one which permits an action of this kind to be brought for the purpose of enjoining an illegal levy of any tax, charge, or assessment. Paragraph 6847, General Statutes of Kansas (to be found in vol. 2 of those laws), defines the different terms used in the chapter on taxation. In this paragraph, the term "credit" is defined as follows:
"The term 'credit,' when used in this act, shall mean and include every demand for money, labor, or other valuable thing, whether due or to become due, but not secured by lien on real estate."
Paragraph 6851 of the same General Statutes permits a deduction of debts from "credits." That part of the paragraph bearing upon this subject is as follows:
"Debts owing in good faith by any person, company, or corporation may be deducted from the gross amount of credits belonging to such person, company, or corporation, provided such debts are not owing to any person, company, or corporation as depositors in any bank or banking association, or with any person or firm engaged in the business of banking in this state or elsewhere, and the person, company, or corporation making out the statement of personal property to be given to the assessor, claiming deductions herein provided for, shall set forth both the amount and nature of the credits and the amount and nature of his debts sought to be deducted; but no person, company, or corporation shall be entitled to any deduction on account of any bond, note, or obligation given to any mutual insurance company, or deferred payment, or loan for a policy of life insurance, nor on account of any unpaid subscription to any religious, literary, scientific, or benevolent institution or society, provided that in deducting debts from credits, no debt shall be deducted where said debt was created by a loan on government bonds or other taxable securities. "
Section 1, c. 84, of the Session Laws of Kansas for 1891 provides for the taxation of bank stock, and is as follows:
"Section 1. That section 6868 of the General Statutes of 1889 be amended as follows:"
" SEC. 6868. Stockholders in banks and banking associations and loan and investment companies, organized under the laws of this state or the United States, shall be assessed and taxed on the true value of their shares of stock in the city or township where such banks, banking associations, loan or investment companies are located, and the president, cashier, or other managing officers thereof shall, under oath, return to the assessor on demand a list of the names of the stockholders and amount and value of stock held by each, together with the value of any undivided profit or surplus, and said banks, banking associations, loan or investment companies shall pay the tax assessed upon said stock and undivided profits or surplus, and shall have a lien thereon until the same is satisfied, provided that if from any causes the taxes levied upon the stock of any banking association, loan or investment company shall not be paid by said corporation, the property of the individual stockholders shall be held liable therefor: provided further that if any portion of the capital stock of any bank or banking association or loan or investment company shall be invested in real estate, and said corporation shall hold a title in fee simple thereto, the assessed value of said real estate shall be deducted from the original assessment of the paid-up capital stock of said corporation, and said real estate shall be assessed as other lands or lots, and provided further that banking stock or loan and investment company stock or capital shall not be assessed at any higher rate than other property, and provided further that the provisions of this act shall apply to all mutual, fire, and insurance companies or associations having assets, accumulations, money or credits, and doing business under the laws of this state, and provided further that such assets, money, and credits, held and under the control of such mutual fire and life insurance companies or associations, shall be subject to assessment and taxation. "
These are the only paragraphs of the Kansas statute that the plaintiff in error claims have any bearing upon this case, and counsel for plaintiff in error states that the only really important question herein is the right of stockholders of a national bank to treat their stock therein as a credit from which they may be allowed to deduct the debts which they are owing in good faith.
Upon the above agreed statement of facts, the court, after due consideration, found generally for the defendants and entered judgment in their favor for the costs of this action against the plaintiff, to which finding and judgment of the court plaintiff at the time duly excepted. The plaintiff also filed its motion for a new trial, which motion was by the court overruled and duly excepted to by plaintiff. The summons in error issued from the Supreme Court of Kansas was duly served, and the record removed into that court for review, where, after argument, the judgment of the court below was affirmed with costs, 53 Kan. 463, upon the opinion in Dutton v. Bank, 53 Kan. 440. The plaintiff thereupon sued out a writ of error from this Court directed to the Supreme Court of Kansas, and the record is now here for review.