Warren v. Shook
91 U.S. 704 (1875)

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U.S. Supreme Court

Warren v. Shook, 91 U.S. 704 (1875)

Warren v. Shook

91 U.S. 704

Syllabus

1. The substance of the business of a banker, as defined by the Acts of Congress approved June 30, 1864, 13 Stat. 252, and March 3, 7865, id., 472, is having a place of business where deposits are received and paid out on checks and where money is loaned upon security.

2. By the same acts, a broker is defined to be one whose business it is to negotiate purchases or sales of stocks, exchange, bullion, coined money, banknotes, promissory notes, or other securities, for himself or for others.

3. The words "whose business it is," employed in the ninth subdivision of the seventy-ninth section of the Act of 1864, qualify all parts of the definition of a broker as given in the act, so that a person becomes a broker, within the meaning of the statute only when making sales and purchases is his business, trade, profession, means of getting his living, or making his fortune.

4. While the sale by a person doing a banking business only of a security received by him for the repayment of a legitimate loan does not make him a broker and subject him to taxation as such, yet when it is his business, the statute properly holds all such acts, whether in the name of himself ostensibly or in the name of others, to be those of a broker.

5. Congress, by enacting "that all brokers and bankers doing business as brokers shall be subject" to the duties specified, plainly intended to include the entire class of persons engaged in the business of buying and selling stocks and coin.

This case was tried upon the following agreed statement of facts:

First,

"That the plaintiffs, from the first day of April, 1865, to the first day of May, 1866, were co-partners in the City of New York, doing business under the firm name of 'John Warren & Son.'"

Second, that during such time, the plaintiffs, as such co-partners, had a place of business in the Thirty-Second Collection District of New York, where credits were opened by the deposit and collection of money and currency subject to be paid or remitted upon draft, check, or order, and where money was advanced and loaned by plaintiffs on stocks, bonds, bullion, bills of exchange, and promissory notes, and where stocks, bonds, bullion, bills of exchange, and promissory notes, were received by plaintiffs for discount and sale.

Third, that during the period aforesaid, the said plaintiffs, as such co-partners, duly paid the special tax imposed upon

Page 91 U. S. 705

them as bankers in accordance with the provisions of the seventy-ninth section of the Act of Congress entitled "An Act to provide internal revenue to support the government," &c., approved June 30, 1864.

Fourth, that during the period aforesaid, the defendant was Collector of Internal Revenue for the said Thirty-Second Collection District of New York.

Fifth, that during the period aforesaid, the plaintiffs bought and sold stock and gold, both of their own property on their own account and also upon commission for other parties.

The sales in question were of three kinds:

1st, sales of their own property.

2d, sales of gold, stocks, bonds, bullion &c., transmitted to them by their correspondents, and the same or the proceeds drawn against, in some of which cases the sales of the transmitted property were made immediately and the proceeds at once applied to the payment of drafts so drawn, and in others of which the drafts were accepted or paid, and the gold, stock &c. were held for a better market or to await further orders, and in the meantime stood as their security for their advances, and to provide reimbursement therefor. In other cases, there were no actual advances, but the property held for sale, and when sold by order of the customer, the proceeds were placed to credit, subject to draft.

3d, sales of stock made in pursuance of an arrangement for what is called carrying stocks on a margin, wherein they, upon the deposit with them of a percentage on the amount of the stocks, advanced money and purchased stocks for the dealer or speculator (who dealt in hope of making a profit by the rise in the market price), and held the same subject to his order to sell, and finally sold the same for his account as to profit and loss. These transactions were conducted in the name of the plaintiffs, the name of the customer not being disclosed to those to whom the stocks were finally sold.

Upon these purchases and sales they charged and received from their customers the usual commission for purchasing and selling stocks for account of others, and the tax imposed and paid to the United States on the sales was also charged to such customers. If the transaction showed a profit, it was paid

Page 91 U. S. 706

to the customer, with a return to him of the cash or security held as a margin; if the transaction resulted in a loss, the amount of such margin returned to the customer was correspondingly reduced.

Sixth, that during the period aforesaid, the assessor of internal revenue for the said district assessed monthly against the said plaintiffs the tax of one-twentieth of one percentum on stock, securities, gold &c., provided for by the ninety-ninth section of the act aforesaid, to be paid by brokers, and bankers doing business as brokers, and assessed such tax against the plaintiffs alike upon the securities, stocks, bullion &c., sold by them on commission for others, and upon those owned by said plaintiffs, and sold by them upon their own account.

Seventh, that at the times of the said several assessments so made by said assessor, the plaintiffs protested against their liability to pay, and against the right of the said assessor to impose or assess, the said tax of one-twentieth of one percentum, or any other sum whatever, upon the value of the stocks, gold, or securities owned by said plaintiffs and sold by them upon and for their own account, and not upon commission or for others.

Eighth, that the assessment roll containing said assessment was transmitted to the said defendant as such collector, and the said defendant, as such collector, demanded from said plaintiffs the whole sum so assessed against them by said assessor as and for the said tax, and the plaintiffs were compelled to pay, and did pay under protest, to the said defendant, as such collector, the said tax upon the whole amount of their sales during said period, including sales made on their own account as aforesaid.

Ninth, that the amount of such payments so made by the said plaintiffs, with the dates thereof are correctly set forth in the schedule hereto annexed, marked "A:" the first column in such schedule showing the whole amount of such tax paid at the respective dates therein indicated, and the second column showing the portions of said several payments, which were for taxes upon sales made by plaintiffs upon their own account, and not upon commission, and which plaintiffs seek in this action to recover.

Tenth, that about the third day of December, 1870, the plaintiffs duly appealed, pursuant to law and the regulations of

Page 91 U. S. 707

the Treasury Department made in pursuance thereof, to the Commissioner of Internal Revenue, from the assessment and collection of said taxes, imposed upon said plaintiffs, upon sales made by them upon their own account, and claimed by them to be erroneously and illegally assessed against and collected from them, and the said commissioner, on the twenty-fourth day of May, 1871, and less than six months before the commencement of this action, rendered his decision upon said appeal adversely to these plaintiffs.

No further evidence was offered by either party.

Thereupon the counsel moved the said court that judgment be entered for the defendant, and said plaintiffs' counsel moved that judgment be entered for the plaintiffs.

After argument and deliberation, the court denied the said motion of said plaintiffs' counsel, whereupon the said counsel for the plaintiffs did then and there duly except thereto.

The court then directed that judgment be entered for the defendant, to which direction and conclusions of law of the court upon the foregoing facts set forth in said direction the said plaintiffs' counsel then and there duly excepted, and sued out this writ of error.

"SCHEDULE A"

"List of Taxes paid by John Warren & Son on Sales of Stocks and Gold"

Bills paid Amt. for own

account

1865

June 16 For April, on stock . . . . $597.50

" " on gold. . . . . 28.78

------- $626.28 $501.28

17. For May on stock. . . . . . $324.65

" " on gold . . . . . . 38.42

------- 363.07 295.25

Aug. 19. For June, on stock. . . . . $242.50

------- 242.50 219.00

Sept. 18. For July, on stock . . . . $515.75

" " on gold. . . . . . 60

------- 516.35 366.75

Page 91 U. S. 708

Oct. 13. For August, on stock . . . $346.50

------- $346,50 287.50

Dec. 1. For September, on stock. . $422.95

" " on stock . . . 510.20

------- 933.15 422.95

1866

Jan. 6. For October, on stock . . . $805.97

" " on stock . . . 685.50

------- 1,491.47 685.50

18. For November, on stock. . . $520.11

Allowed overpaid for Sept. 422.95

------- 103.16 124.20

April 2. For February, on stock. . . $185.60

" " on stock. . . 172.50

------- 358.10 172.50

28. For March, on stock . . . . $227.10

" " on stock . . . . . 311.50

------- 538.60 311.50

Sept. 21. For April, on stock . . . . $210.31

" May, " " . . . . 93.86

" " " " . . . . 95.64

------- 399.81

-------- ---------

$3,386.43

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