Covington v. First National Bank
198 U.S. 100 (1905)

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U.S. Supreme Court

Covington v. First National Bank, 198 U.S. 100 (1905)

Covington v. First National Bank of Covington

Nos. 113-114

Argued January 5, 1905

Decided April 17, 1905

198 U.S. 100

Syllabus

A federal court is not required to give a judgment in a state court any greater weight than is awarded to it in the courts of the state in which it was rendered. As it is the settled rule in Kentucky that an adjudication in a suit for taxes is not an estoppel between the parties as to taxes of any other year, even though such adjudication involves the finding of an exemption by contract, not only as to taxes involved in the suit, but also as to all taxes that might be levied under the contract, the

Page 198 U. S. 101

federal courts will not enjoin the collection of taxes for subsequent years on the ground that their invalidity was adjudicated by such a judgment.

The statute of Kentucky of March 21, 1900, taxing shares of national banks, from the years 1893 to 1900 and thereafter, held void and in conflict with § 5219, Rev.Stat., as to those portions which are retroactive as imposing a burden on the bank not borne by other moneyed corporations of the state, and valid and not in conflict with § 5219 as to taxes imposed thereafter.

A difference in methods in assessing shares of national banks from that of taxing state banks does not necessarily amount to a discrimination, rendering the act invalid under § 5219, and justify the judicial interference of courts for the protection of the shareholders, unless it appears that the difference in method actually results in imposing a greater burden on the national banks than is imposed on other moneyed capital in the state.

This case was here upon a former appeal, which was dismissed for want of final decree in the court below. Covington v. Covington First National Bank,185 U. S. 270.

The original action was brought to enjoin the assessment or collection of taxes on certain shares of capital stock of the First National Bank of Covington for the years from 1893 to 1900, inclusive, and to enjoin the arrest of the president and cashier of the bank for not listing such shares, and for a decree adjudicating the same not liable to taxation up to the time of the expiration of the charter of the bank on November 17, 1904.

The principal grounds alleged and relied upon are that, by reason of the acceptance of the terms of the act of the General Assembly of Kentucky, passed in 1886, known as the Hewitt Law, an irrevocable contract had been made between the bank and the state whereby the former was to pay to the state taxes at a certain rate on its stock, surplus, and undivided profits, which, when paid, were to be in full of all other state, county, or municipal taxes, except those levied on the bank's real estate. It was averred that complainant had regularly paid such taxes up to and including those due July 1, 1900. That the fact that the bank had such irrevocable contract had been adjudicated and finally determined by a decision in the

Page 198 U. S. 102

Court of Appeals of Kentucky in a litigation wherein the state and the City of Covington and the bank were parties. The bill further set up that an attempt was being made to compel the complainant to list for taxation its shares of stock under an act of the State of Kentucky, passed March 21, 1900 (Session Acts 1900, p. 65). The act under which the taxes were assessed is given in the margin of the opinion in the case of Covington v. First National Bank,185 U. S. 270, and for convenience of reference is also inserted in the margin here. * It was also averred in the bill that the Act of March 21,

Page 198 U. S. 103

1900, which undertakes to impose taxes for the years 1893 and following, is unconstitutional and void, and operates to discriminate against the complainant, in violation of § 5219 of the Revised Statutes of the United States. The defendants having filed a plea to the jurisdiction and a general demurrer to the bill, upon motion for a temporary injunction, attempt to enforce taxes levied or assessed upon the shares of capital stock at any time previous to March 21, 1900, were enjoined. 103 F. 523.

December 17, 1900, a decree was entered, but, not being final, the writ of error was dismissed. 185 U. S. 270. After the case was sent back to the circuit court the prior decision in that court was followed, and it was further held that the judgment of the state court was not a bar to the right to collect taxes for other years than the year directly involved in the judgment set up, and that, as the Hewitt Law and its acceptance by the bank had been conclusively held not to constitute an irrevocable contract as to taxes between the state and the complainant, and as the law was valid as to future taxation, the injunction could not be granted as to taxes assessed under the law of March 21, 1900, after its passage. A decree was therefore entered, dismissing the complainant's bill as to taxes levied after said date and permitting the former

Page 198 U. S. 104

decree enjoining the assessment and levying of taxes before the passage of the law to stand. 129 F. 792.

From so much of the decree as enjoined the taxes assessed prior to March 21, 1900, the city appealed; from so much thereof as refused the injunction and dismissed the bill as to taxes assessed after that date, the bank appealed. Both appeals are now before this Court.

Page 198 U. S. 107

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