Mercantile Bank v. New York, 121 U.S. 138 (1887)
U.S. Supreme CourtMercantile Bank v. New York, 121 U.S. 138 (1887)
Mercantile Bank v. New York
Argued March 11-12, 1887
Decided April 4, 1887
121 U.S. 138
The main purpose of Congress in fixing limits to state taxation on investments in shares of national banks was to reader it impossible for the state, in levying such a tax, to create and foster an unequal and unfriendly competition by favoring institutions or individuals carrying on a similar business and operations and investments of like character.
The term "moneyed capital," as used in Rev.Stat. § 6219, respecting state taxation of shares in national banks, embraces capital employed in national banks and capital employed by individuals when the object of their business is the making of profit by the use of their moneyed capital as money -- as in banking as that business is defined in the opinion of the Court; but it does not include moneyed capital in the hands of a corporation, even if its business be such as to make its shares moneyed capital when in the hands of individuals, or if it invests its capital in securities payable in money.
The mode of taxation adopted by the State of New York in reference to its corporations, excluding trust companies and savings banks, does not operate in such a way as to make the tax assessed upon shares of national banks at a greater rate than that imposed upon other moneyed capital in the hands of individual citizens.
Although trust companies created under the laws of New York are not banks in the commercial sense of the word, shares in such companies are moneyed capital in the hands of individuals; but as these companies are taxed upon the value of their capital stock, with deductions on account of property in which it is invested either otherwise taxed or not taxable, and are additionally taxed upon their income by way of
franchise tax, it does not appear that the rate of taxation thus imposed by the laws of New York is less than that upon shares in national banks.
Deposits in savings banks are exempted from state taxation for just reasons, and, as the exemption does not operate as an unfriendly discrimination against investments in national bank shares, it cannot affect the role for the taxation of the latter.
The amount of bonds of the City of New York which are exempt from taxation under state laws is too small, as compared with the whole amount of personal property and credits which are the subject of taxation, to affect, under Rev.Stat. § 6219, the validity of an assessment.
The bonds of municipal corporations are not within the reason of the rule established by Congress for the taxation of national banks.
The bill in this case was filed by the appellant, an association organized as a national bank, in the City of New York, the object and prayer of which were to restrain the collection of taxes assessed upon its stockholders in respect to their shares therein, on the ground that the taxes assessed and sought to be collected by the defendants were illegal and void under § 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. The assessment in question was made for the year 1885 by the proper officer, acting in pursuance of § 312 of an act of the Legislature of the State of New York passed July 1, 1882, entitled "An act to revise the statutes of this state relating to banks, banking, and trust companies," which reads as follows:
"SEC. 312. The stockholders in every bank or banking association organized under the authority of this state or of the United States shall be assessed and taxed on the value of their shares of stock therein. Said shares shall be included in the valuation of the personal property of such stockholders in the assessment of taxes at the place, city, town, or ward where such bank or banking association is located, and not elsewhere, whether the said stockholders reside in said place, city, town, or ward or not. But in the assessment of said shares, each stockholder shall be allowed all the deductions and exceptions allowed by law in assessing the value of other taxable personal property owned by individual citizens of this state, and the
assessment and taxation shall not be at a greater rate than is made or assessed upon other moneyed capital in the hands of individual citizens of this state. In making such assessment, there shall also be deducted from the value of such shares such sum as is in the same proportion to such value as is the assessed value of the real estate of the bank or banking association and in which any portion of their capital is invested in which said shares are held, to the whole amount of the capital stock of said bank or banking association. Nothing herein contained shall be held or construed to exempt the real estate of banks or banking associations from either state, county, or municipal taxes, but the same shall be subject to state, county, municipal, and other taxation to the same extent and rate, and in the same manner, according to its value, as other real estate is taxed. The local authorities charged by law with the assessment of the said shares shall, within ten days after they have completed such assessment, give written notice to each bank or banking association of such assessment of the shares of its respective shareholders, and no personal or other notice to such shareholders of such assessment shall be necessary for the purpose of this act."
The hearing in the circuit court was had upon an agreed statement of facts, as follows:
"It is hereby stipulated and agreed by and between the parties to the above-entitled suit that, for the purpose of the trial of this cause, the facts hereinafter stated are true, and that the cause be submitted for trial and decree upon such statement alone, together with the pleadings:"
"1. That the complainant, on the second Monday of January, A.D. 1885, and for several months prior thereto, had a capital stock of the par value of $1,000,000, and a surplus fund of $200,000; that nearly the whole of said capital and surplus fund was, during that period, invested in bonds of the United States of the par value of $949,000, and of a market value and cost largely exceeding that sum; that its shares of stock were each of the par value of $100, and of the number of 10,000, and were then held by 142 persons and corporations, 50 of whom, owning 1,877 shares, were residents of states
other than the State of New York, and the remainder residents of the State of New York."
"2. That on the second Monday of January, 1885, the proper tax officers of the City of New York, acting under chapter 409 of the Laws of 1882 of the State of New York, did value and assess for taxation the shares of stock of said bank against the individual shareholders thereof at the rate of $89 per share, after deducting the proportion of the assessed value of the real estate of said bank applicable to each share of stock as by law required, making the total gross valuation of said shares in the hands of the shareholders the sum of $890,000, from which sum the debts of sundry indebted stockholders, amounting to $89,128, were deducted, as by law allowed, leaving the total valuation of said shares against said stockholders upon which taxes were thereafter assessed the sum of $800,872."
"3. That on the second Monday of January, 1885, the aggregate actual value of the shares of stock of the incorporated moneyed and stock corporations incorporated by the laws of the State of New York, deriving an income or profit from their capital or otherwise (not including life insurance companies, trust companies, banks, or banking associations, organized under the authority of this state or of the United States), amounted to the sum of $755,018,892; that Exhibit A, hereto appended and made a part of this agreement, contains a list of the corporations whose shares of capital stock are embraced in said sum of $755,018,892, and also shows the total par value of the shares of capital stock of each of said corporations."
"4. That at the period aforesaid, the aggregate actual value of the shares of stock of the life insurance companies incorporated under the laws of this state amounted to the sum of $3,540,000, and at the same period the aggregate value of the personal property of said companies, consisting of mortgages, loans with collateral security, state, county, and municipal bonds, and railroad bonds and shares of stock of corporations (but not including the bonds of the United States, nor the shares of corporations created by the State of New York),
amounted to $195,257,305, all of which is shown in detail in the schedule hereto annexed, marked 'Exhibit B.'"
"5. That at the said period, the aggregate actual value of the shares of the capital stock of the trust companies existing in the State of New York and organized under its laws, amounted to $32,018,900, as is shown in detail in the schedule hereto annexed, marked 'Exhibit C,' of which sum the amount of $30,215,900 was of trust companies located in the City of New York."
"6. That at the same period, the aggregate actual value of the deposits due by the savings banks of this state to depositors was $437,107,501 (not including the surplus accumulated by the said corporations, amounting to $68,669,001)."
"7. That the aggregate actual value of the bonds and stocks issued by the City of New York, subject to the provisions of chapter 552 of the Laws of 1880, at the said period amounted to $13,467,000."
"8. That the aggregate actual value at the same period of the shares of stock of corporations created by states other than the State of New York, owned by the citizens of the State of New York, amounted to at least the sum of $250,000,000."
"9. The assessed valuation of all personal property, after making the deductions allowed by law, in the City of New York (at the said period), as shown by the annual record of the assessed valuation of real and personal estate of the said city for the year 1885, was $202,673,806. This sum included the capital of corporations (after making deductions for investments thereof in real estate, shares of New York corporations, taxable upon their capital stock under the laws of this state, and non taxable securities), as follows:"
Insurance companies . . . . . . . . . . . $ 2,146,379
Trust companies . . . . . . . . . . . . . 156,506
Miscellaneous companies . . . . . . . . . 29,234,409
Railroad companies. . . . . . . . . . . . 12,339,871
"It also included:"
Shares of national banks. . . . . . . . . 45,046,074
Shares of state banks . . . . . . . . . . 15,700,220
"The sum so deducted for the value of the real estate belonging to said trust companies located in the city of New York did not exceed $2,336,572.31."
The assessed value of the real estate
in said city for said period is . . . . 1,168,443,137
And in the said state, including the
City of New York, is. . . . . . . . . . 2,761,973,845
The latter sum including the sum of
about . . . . . . . . . . . . . . . . . 340,000,000
being the assessed value of the real
estate located in said state belonging
"The 'aggregate amount of the taxable personal estate' within the State of New York, exclusive of said city, after deducting debts due by the owners thereof for the year ending December 31, 1884, as assessed by the assessors and returned to the State Comptroller, is $151,632,369. This sum included the capital of corporations (after making the deductions for investments thereof in real estate, shares of New York corporations taxable upon their capital stock under the laws of this state, and nontaxable securities, of the amount of $34,466,612)."
The aggregate capital stock, taken at
par, of the national banks outside of
the City of New York, but within the
State of New York, on December 20, 1884,
as shown by the report of the Comp-
troller of the Currency of the United
States, was. . . . . . . . . . . . . . . $ 36,804,160
And that of state banks, outside of the
said city, but within said state, as
shown by the report of the bank super-
intendent of New York, is. . . . . . . . 8,128,000
Total (outside of New York City) . . . $ 44,932,160
The total par value of the shares of
national banks in said state, includ-
ing the City of New York, for the
period aforesaid, is . . . . . . . . . . $ 83,054,160
And of the state banks . . . . . . . . . . 32,815,700
"10. That it is the intention of the defendants, unless restrained by injunction, to collect the said tax levied by them
against the shareholders of the said complainant upon said shares by the use of all needful legal process."
311. That any statutes of the United States, or of the State of New York, may be cited and relied upon before the said court as if herein fully set forth.
From a decree dismissing the bill the present appeal is prosecuted.