1. The taxation of national bank shares, authorized by
Rev.Stats. § 5219, is against the holders of the shares ,and is to
be measured by the value of the shares, and not by the assets of
the bank without deducting its liabilities. P. 273 U. S.
2. A tax on national bank shares at a greater rate than that
imposed on competing credits in the hands of individuals cannot be
sustained upon the ground that the discrimination is removed in
practice by deducting liabilities of the bank from its assets in
valuing its shares, while allowing no deduction of their
liabilities to individuals in valuing their credits. P.
273 U. S.
3. The shares of corporations employing capital in the note
brokerage business or in buying and selling securities are "moneyed
capital in the hands of individual citizens" (R.S. § 5219),
the individuals holding the shares. P. 273 U. S.
4. The competition guarded against by § 5219 may arise from the
employment of capital invested in a business, even though the
competition be with some but not all phases of the business of
national banks, or it may arise from the employment of capital
invested by institutions or individuals in particular operations or
investments like those of national banks. P. 273 U. S.
5. The evidence sustains a finding by the state court that
moneyed capital in the hands of individuals was in competition with
the business of national banks, including the plaintiff. P.
273 U. S.
Page 273 U. S. 562
6. Surplus capital of individuals seeking investment and
reinvestment in bonds, mortgages, and other evidences of
indebtedness in competition with the capital of national banks is
moneyed capital coming into competition with the business of
national banks within the meaning of Rev.Stats. § 5219. P.
273 U. S. 568
164 Minn. 550 affirmed.
Certiorari (269 U.S. 550) to a judgment of the Supreme Court of
Minnesota which affirmed a judgment for the bank in an action
brought against it by the state to recover taxes assessed against
MR. JUSTICE STONE delivered the opinion of the court.
The State of Minnesota, the petitioner, brought suit in the
district court of Ramsey County, Minnesota, to recover from the
First National Bank of St. Paul, the respondent, taxes assessed
against its shareholders for the years 1921 and 1922. Respondent
resisted the payment of the tax on the ground that the assessment
was at a higher rate than that on moneyed capital employed in
competition with national banks, and hence prohibited by § 5219 of
the Revised Statutes of the United States. The trial court gave
judgment for petitioner. On appeal, judgment was reversed by the
Supreme Court of Minnesota, and a new trial ordered. 164 Minn. 235.
Upon the second trial, had upon the record of the first, the
district court held that, at the time of the assessment of the
taxes in question,
"a substantial and relatively material portion of the money and
credits so listed and assessed in said
Page 273 U. S. 563
Ramsey County consisted of moneyed capital in the hands of
individual citizens of said county, coming into competition with
the business of national banks in said county, and with the
business of said defendant."
Judgment in respondent's favor was affirmed by the Supreme Court
of Minnesota. 164 Minn. 235. This Court granted certiorari. 269
U.S. 550; Judicial Code, § 237(b).
The questions raised are similar to those considered in
First National Bank of Hartford v. City of Hartford, ante,
p. 273 U. S. 548
may be disposed of by the application to the present facts of the
principles there considered.
Under the Minnesota statutes, shares of national banks and the
moneyed capital of banks or mortgage loan companies organized under
the laws of the state are assessed and taxed at 40 percent of their
full value in the district where located. Gen.Stat. 1923, § 2023;
Laws 1921, c. 416. Money and credits are taxed at the rate of 3
mills on the dollar of their full cash value, and are exempt from
all other taxation. Gen.Stat. 1913, § 2316; Laws of 1911, c. 285.
Mortgages upon real estate and executory contracts for the sale of
real estate are separately taxed at a lower rate, 15 cents per $100
where the period to run is for five years or less, and 25 cents per
$100 on mortgages and contracts for a longer period. Gen.Stat.
1913, § 2301, et seq.;
Laws 1921, c. 445. Money is defined
as gold and silver coin, all forms of currency, and all deposits
subject to withdrawal on demand. Credits include every demand for
money or other valuable thing. Gen.Stat. 1923, § 1980; Laws 1917,
c. 130. Under these statutes, money and credits, as defined, are
taxed at the 3-mill rate and mortgages on real estate at a lesser
It appears that the tax assessed upon the shares of respondent
was 67 mills in 1921 and 61 1/2 mills in 1922. Although based upon
a 40 percent valuation, the actual rate upon the shares was
Page 273 U. S. 564
higher than the prescribed tax of 3 mills per dollar of full
valuation of money and credits, and therefore was discriminatory.
Petitioner argues that, in its actual operation, the tax on
national bank shares is no greater than the tax on credits, since,
under the statute, individuals are taxed at the rate of 3 mills
upon the full value of their credits, without deducting their
liabilities, whereas, in taxing bank shares, the liabilities of the
banks are deducted from their assets in ascertaining the 40 percent
valuation of their shares. Therefore, it is urged, if bank shares
were taxed at the same rate without deducting the bank's
liabilities in ascertaining the value of their shares, the amount
of the tax would be approximately the same. This argument ignores
the fact that the tax authorized by § 5219 is against the holders
of the bank shares, and is measured by the value of the shares, and
not by the assets of the bank without deduction of its liabilities,
Des Moines National Bank v. Fairweather, 263 U.
, and that the bank share tax must be compared
with the tax assessed on competing moneyed capital of individuals
invested in credits, or the tax on capital invested by individuals
in the shares of corporations whose business competes with that of
national banks, Mercantile Bank v. New York, 121 U.
, 121 U. S.
-157; First National Bank v. Anderson,
269 U. S. 341
269 U. S. 348
Thus compared, the actual tax imposed upon the shares of
respondent, like the tax imposed upon credits in the hands of
individuals, is assessed without deducting the liabilities of their
individual owners, but at different rates. This discrimination is
prohibited by § 5219, if moneyed capital in the hands of
individuals in Minnesota is employed in substantial competition
with national banks within the state.
The evidence shows that there were money and credits listed for
taxation in the entire state during each of the years in question
in excess of $400,000,000, exclusive of municipal bonds and
recorded real estate mortgages, and
Page 273 U. S. 565
in Ramsey County alone, where respondent conducts its banking
business, there were like money and credits in excess of
$83,000,000, all of which were subject to the 3-mill tax. The
evidence shows that, in Ramsey County, there were listed for
taxation for 1921 in the hands of individuals promissory notes
amounting to $2,481,446, and bonds, exclusive of tax exempt bonds
and real estate mortgages, to $7,595,975; for 1922, notes to
$1,648,810, bonds to $9,931,955. There was invested in those years
in real estate mortgages in Minnesota over $185,000,000 annually.
The investment of national banks in Minnesota in those years in
real estate mortgages was in excess of $19,000,000, in United
States government bonds in excess of $41,000,000, and in other
securities $33,800,000. The share value of national banks in
Minnesota in those years, not including real estate, was a little
more than $60,000,000, and less than two-thirds of their total
investment in the securities mentioned.
Note brokers within the state in those years made loans to their
customers upon paper which they sell to banks and other investors
amounting to as much as $100,000,000 annually. Much of this paper
is sold outside of the state, but the amount sold to banks and to
individuals within the state is substantial. One class of this
paper known as "cattle loan paper" exceeded $22,000,000 annually in
the years in question, and, of this, $13,000,000 was sold to banks,
corporations, firms, and individuals in Minnesota. The amount shown
to have been sold to individuals approximated $1,000,000. Eleven
business concerns to whom respondent made loans, borrowed from
their own officers and employees in one of the years in question
Individuals and corporations using substantial capital are
engaged within the state in business as investment houses, dealing
in bonds and mortgages, such as normally enter into the business of
banking. Two such corporations
Page 273 U. S. 566
in Ramsey County had a capital aggregating $2,250,000. One of
them sold $13,000,000 of bonds in Minnesota in 1922, and had sold
prior to May 1, 1921, mortgages which were still outstanding
aggregating more than $25,000,000.
Taken as a whole, the evidence tends to show without material
contradiction that there is a large amount of moneyed capital in
the state employed in normal banking activities, such as loans,
purchases and sale of notes, bonds, and real estate mortgages, and
that large amounts of capital are invested and reinvested in such
securities by individual investors within the state.
But petitioner asserts that it does not appear from the record
whether those engaged in the business of note brokers or in the
business of acquiring and selling securities are individuals or
corporations, and the amount of capital employed by any of them is
not indicated. While this assertion is not borne out completely by
the record, in the view we take, its truth is not of controlling
consequence. The business and activities described could not be
carried on in the volume indicated without the employment of large
amounts of capital, and in fact some corporations engaged in these
activities were shown to have a large capitalization. It was not
necessary that the particular amounts be specified. That capital,
if invested in the business of individuals, is moneyed capital in
the hands of individual citizens within the meaning of § 5219. If
invested in corporations, as appears in some instances, the share
capital in the hands of shareholders is likewise moneyed capital
within the meaning of that section.
It is said also that the evidence as to individuals was that
large amounts of credits, including bonds, mortgages, and notes,
were acquired by individuals by loan or purchase in the state and
county, but that there is no evidence tending to show that any of
these securities were held or employed by individuals in banking or
Page 273 U. S. 567
or in any other business. But, as we have held in First
National Bank of Hartford v. City of Hartford,
guarded against by § 5219 may arise either from the employment of
capital invested in a business, even though the competition be with
some, but not all, phases of the business of national banks, or it
may arise from the employment of capital invested by institutions
or individuals in particular operations or investments like those
of national banks.
It is also urged that the record does not admit of a finding
that the funds invested in these credits come into competition with
national banks within the meaning of § 5219. To this it is answered
by respondent that the court is required to take judicial notice of
general conditions to which the law applies, and that the taxing
laws of Minnesota, construed in the light of conditions generally
known, show upon their face that they create a discrimination
against national banks not permitted by the federal act. But it is
unnecessary for us to enter upon the field of judicial notice, for
it clearly appears from the evidence, as the court below found,
that a large proportion of these investments consisted of
investments of individuals out of surplus funds which they were
investing and reinvesting in bonds, mortgages, and other evidence
of indebtedness, and that these transactions or continued
activities are such as normally constitute an important part of the
business of banking as conducted by respondent and other national
banks in Minnesota. There is direct evidence also that the
investments of individuals in this type of security aggregating
large amounts lessens the opportunity for the investment of capital
by national banks. The only witness called by petitioner admitted
that, to some extent, such competition existed. In this state of
the record, we think the findings of the state court are supported
by the evidence.
Page 273 U. S. 568
That capital of individuals thus seeking investment and
reinvestment in competition with the capital in national banks is
moneyed capital coming into competition with the business of
national banks within the meaning of § 5219 is the effect of our
decision in First National Bank of Hartford v. City of
and other cases there considered.