The auditor of Cuyahoga County, Ohio, fixed the taxable value of
shares in a national bank at 60 percent of their true value in
money, in accordance with the practice adopted for the valuation of
other moneyed capital of individuals in the courts and state, and
transmitted the same to the State Board of Equalization for
incorporated banks. That board increased the valuation to 65
percent, and this value, being certified back to the auditor, was
placed by him on the tax list without a corresponding change being
made in the valuation of other moneyed capital of individuals.
Held that this was such a discrimination as is forbidden
by § 5219 of the Revised Statutes of the United States.
The statutes of Ohio regulating assessments for taxation allow
an owner of moneyed capital other than shares in a national bank to
have a deduction equal to his
bona fide indebtedness made
from the amount of the assessment of the value of such moneyed
capital, but they make no provision for a similar deduction from
the assessed value of shares in a national bank, and provide no
means by which such a deduction may be obtained.
Held:
(1) That the owners of such shares are entitled to have a
deduction of their indebtedness made from its assessed value as in
the case of other moneyed capital, and
(2) That the right to it is not lost by not making a demand for
it until the entire process of the appraisement and equalization of
the value of the shares for taxation is completed and the tax
duplicate is delivered to the treasurer for collection.
The laws of Ohio regulating the taxation of shares in national
banks considered.
Bill in equity to restrain the treasurer of Cuyahoga County,
Ohio, from collecting a tax upon shares of the stock of a national
bank in Cleveland alleged to have been illegally assessed. Decree
granting the relief prayed for except as to three stockholders. The
treasurer appealed. The bank took no appeal as to the three
shareholders. A certificate of division of opinion was filed. The
case is stated in the opinion of the court.
Page 127 U. S. 194
MR. JUSTICE MILLER delivered the opinion of the Court.
This is an appeal from the Circuit Court of the United States
for the Northern District of Ohio.
The Mercantile National Bank of Cleveland, Ohio, brought this
suit against Horatio N. Whitbeck, the appellant here, as Treasurer
of Cuyahoga County in that state, in which the City of Cleveland is
located, to restrain him from the collection of certain taxes
levied upon the shares of the capital stock of that bank. The
substantial allegations of the bill are that, upon the assessment
of the value of the shares of its capital stock for purposes of
taxation, they were estimated at 65 cents on the dollar of their
real value in money, while all other personal property in the City
of Cleveland and County of Cuyahoga, including the moneyed capital
in the hands of individual citizens of said city and county, was
estimated at only sixty cents upon the same basis.
This occurred in the following manner:
The auditor of Cuyahoga County, in accordance with the rules and
practice adopted for the valuation of other moneyed capital of
individuals, fixed the taxable value of these bank shares at sixty
percent of their true value in money, and certified and transmitted
the same to the annual State Board of Equalization for incorporated
banks. This board made an order increasing the valuation to
sixty-five percent, which latter value was certified back to the
auditor, and by him placed upon the tax duplicate for the year
1885. This was delivered to the defendant, the treasurer of said
county, for the collection of the taxes thereon. Another point made
by the bill was that while the statutes of Ohio permit the taxpayer
owning moneyed capital subject to taxation to make a deduction from
the amount assessed
Page 127 U. S. 195
against him on account of credits of the amount of his
bona
fide indebtedness, no such provision is made in regard to the
indebtedness of any holder of bank stock. The bill sets up as
affected by this proposition the names of certain shareholders of
the plaintiff bank, who claim that they should be allowed this
deduction for their indebtedness upon the taxable value of their
bank shares.
The case was tried before the circuit and district judges,
sitting together, and a certificate of a division of opinion was
made, accompanied by a statement of the facts on which the
difference arose. A decree was entered in accordance with the
opinion of the circuit judge enjoining the collection of the amount
represented by the difference between 60 and 65 percent of the
actual value of the stock and granting the relief asked for by the
shareholders who claimed a deduction on account of their
indebtedness, except as to three of them.
As regards the allegation of a discrimination against the
stockholders on account of the shares held by them, caused by the
increase in the assessment of five percent made by the State Board
of Equalization, the matter is not altogether free from difficulty,
but we are of opinion that there is such a discrimination as is
forbidden by § 5219 of the Revised Statutes. It is certainly true
that the tax upon personal property, including the moneyed capital
of private citizens, in Cuyahoga County is made upon an estimate of
sixty percent of its cash value in all cases except with regard to
bank stocks, and that in regard to these the valuation is fixed
upon the same basis at sixty-five percent. It is probably the fact,
as alleged by the counsel for the treasurer, that the state board
having these stocks under consideration may have made a truer
estimate, and may have equalized their assessed value over the
entire state; but this equalization, from the very nature of the
functions and powers of that body, merely has reference to bank
shares as among themselves; that is to say, its purpose is to make
the capital stock of all incorporated banks in the state equal in
valuation for the purposes of taxation so far as relates to their
actual cash value. This
Page 127 U. S. 196
board has no other power than this; it has no capacity to
equalize the valuation of bank shares for taxation as compared with
other moneyed capital in the state. Such capital may therefore have
a valuation very much below its real value, and even very much
below the conventional rate fixed upon bank stocks by the action of
this body, and that result almost necessarily follows in this case
from the nature of the powers which have been conferred upon it.
While it has the power, and it is made its duty, to take the
valuation of bank shares as reported to it by the Auditor of
Cuyahoga County, and make a comparison between it and the reports
of the same character made to it by the eighty other counties in
the state, it receives no such report in regard to any other
moneyed capital. There is no means furnished it for the purpose of
making a comparison of the proportion which the assessment sustains
to the true value, as between the banks and the other moneyed
capital of the state, in the different counties thereof. While it
is not an absolute necessity that this method should result in a
discrimination against the national banks, it is one of the
probabilities, as has happened in this case, that it may produce
such a result which shall be unfavorable to those institutions.
Section 2804 of the Revised Statutes of Ohio enacts that an
annual county board for the equalization of the real and personal
property, moneys, and credits in each county, exclusive of cities
of the first and second class, shall be composed of the county
commissioners and county auditor, who shall meet at the office of
the latter in each county on the Wednesday after the third Monday
in May annually. It is provided that this board shall have power to
hear complaints and to equalize the valuation of all real and
personal property, moneys, and credits within the county. It is
under this statute that the assessment was made which the auditor
certified to the State Board of Equalization. No complaint has been
made that this assessment upon the capital shares of the plaintiff
bank was in any wise unequal as regards the assessment upon other
moneyed capital.
The organization and method of proceeding of the State
Page 127 U. S. 197
Board of Equalization for incorporated banks is provided for in
the following sections of the Revised Statutes of Ohio, 1880:
"SEC. 2808. [As reenacted March 9, 1883; 80 Ohio Laws, 55.] The
Governor, Auditor of State, and Attorney General shall constitute a
board for the equalization of the shares of incorporated banks, and
for this purpose they shall meet on the third Tuesday of June,
annually at the office of the Auditor of State and examine the
returns of said banks to the county auditors, and the value of said
shares as fixed by the county auditors, as the same shall have been
reported by the county auditors to the state auditor."
"SEC. 2809. [As amended March 9, 1883; 80 Ohio Laws, 55.] Said
board shall hear complaints, and equalize the value of said shares
according to the rules prescribed by this title for valuing and
equalizing the values of real and personal property, and if in the
judgment of the board, or a majority of them, the aggregate value
of all the bank property so reported to said board by the county
auditors is below its true value in money, they may increase or
diminish the value of said shares by such a percent as will
equalize said shares to their true value in money, provided that
said board shall not increase or reduce the grand aggregate value
of bank shares as returned by the several county auditors by more
than twenty (20) percent."
It is obvious from these two sections that the only power of
this board is to diminish or increase the assessed value of the
shares of stock by such a percent as will make them equal among
themselves, and that there is no power of equalization so far as
other personal property is concerned, or in comparison with other
moneyed capital in the hands of individuals. The language directing
the board to proceed "according to the rules prescribed by this
title for valuing and equalizing the values of real and personal
property" does not authorize a comparison of the value of bank
shares with that of real and personal property, but is only
intended to have regard to the mode of procedure, such as laying
before that body the reports of the county auditors, hearing
complaints, and equalizing the assessments as between the shares of
the different
Page 127 U. S. 198
banks. Therefore, in the order by which it equalized the various
bank shares as among themselves, from all over the state, and
certified this increase of five percent upon the assessment to the
Auditor of Cuyahoga County, it had no purpose to change or to
equalize the assessment in its relation to other moneyed capital of
the state, of the City of Cleveland, or of the County of
Cuyahoga.
It is said, however, that the standard of comparison required by
the act of Congress is the assessment of all the banks in the state
with that upon moneyed capital all over the state, and that there
is no evidence presented in this suit that there was any
discrimination against the bank if the standard of comparison here
suggested is the one which should govern. There is evidence that
the rule which was adopted by the Board of Equalization of Cuyahoga
County, of fixing the assessment at sixty percent of the cash value
of the property, prevailed in eleven other counties in the state.
It is also a fact that in regard to those counties, the
discrimination against the national banks, as compared with other
moneyed capital, is established.
This alone would be sufficient to establish a discrimination as
to 23.6 mills out of the entire rate of 26 mills on the dollar of
valuation, it being found as a matter of fact that 26 mills was the
entire tax levied upon all the property in the County of Cuyahoga
under this assessment, of which the amount of 23.6 mills was
exclusively devoted to county and city purposes, and but 2.4 mills
was levied for state purposes. While it might perhaps be plausibly
said that in regard to taxation for state purposes, the rule of
comparison should include the whole state, it is equally clear that
for the much larger proportion of tax levied for county and city
purposes, the assessment upon the moneyed capital of the citizens
in such county and city should furnish the standard by which the
inequality of taxation should be determined. As it has already been
shown that the board for the equalization of the shares of
incorporated banks had neither the authority nor the means to
establish and equalize the assessment of the shares of all the
banks of the state with the other moneyed capital of the state, we
do not very well see how the
Page 127 U. S. 199
oral testimony of witnesses offered to establish this uniformity
of assessment could do so, and if it could, how it was competent to
do it in the face of the fact that the board had no such power.
In regard to the deduction of their
bona fide
indebtedness, claimed on the part of certain owners of shares in
the plaintiff bank from the assessment levied upon such shares, the
court finds that no demand was made therefor,
"either by the complainant or by any of its shareholders, until
the 17th day of December, A.D. 1885 -- a date prior to the
commencement of this action at which time the entire process of the
appraisement and equalization of the value of said shares for
taxation had been completed, and the tax duplicate for said year
had been delivered, in accordance with law, to the treasurer of
said county for the collection of said taxes; but the laws of Ohio
make no provisions for the deduction of the
bona fide
indebtedness of any shareholder from the shares of his stock, and
provide no means by which said deduction can be secured."
Under the decision in
Hills v. Exchange Bank,
105 U. S. 319, we
are of opinion that the bank was entitled to relief in the cases of
all the shareholders named in the bill (except James A. Barnett,
Robert L. Chamberlain, and James Parmalee), and that the fact that
they did not make an earlier demand for the deduction of their
indebtedness from the assessed value of the shares of their bank
stock does not defeat their right to have it made by this bill in
chancery, for the reason that the court expressly finds that
"the laws of Ohio make no provision for the deduction of the
bona fide indebtedness of any shareholder from the shares
of his stock, and provide no means by which said deduction can be
secured."
This was precisely the case in regard to
Hills v. Exchange
Bank, in which this Court said:
"We are of opinion that, considering the decision of the Court
of Appeals of New York, the action of the assessors in the case of
Williams, and their own testimony in this case, it is entirely
clear that all affidavits and demands for deduction which could and
might have been made would have been disregarded and unavailing,
and that the assessors had a fixed purpose, generally known to
all
Page 127 U. S. 200
persons interested, that no deduction for debts would be made in
the valuation of bank shares for taxation. It is therefore not now
essential to show such an offer, when it is established that there
were debts to be deducted, and when the matter is still
in
fieri, the tax being unpaid."
In regard to all of the shareholders claiming this deduction,
except Barnett, Chamberlain, and Parmalee, the court finds that the
allegations of the bill are true, but that as to them they are
untrue. It therefore granted relief by the injunction as to all of
them except these three, as to which it was denied. It is to be
observed, however, that the bank takes no appeal from the part of
the decree denying relief to these three shareholders.
These principles require the affirmance of the decree of the
circuit court, and while there will be found in them a sufficient
answer to the questions certified by the judges of that court, we
do not think it necessary to make a more specific answer to each of
them.
The decree is affirmed.