Bank for Savings v. The Collector, 70 U.S. 495 (1865)
U.S. Supreme CourtBank for Savings v. The Collector, 70 U.S. 3 Wall. 495 495 (1865)
Bank for Savings v. The Collector
70 U.S. (3 Wall.) 495
1. Savings banks which receive deposits and lend the same for the benefit of their depositors, although they may have no capital stock and neither make discounts nor issue any money for circulation, are "engaged in the business of banking" within the meaning of the first clause of the 110th section of the Revenue Act of 30 June, 1864, which enacts that
"There shall be levied, collected, and paid a duty of 1/24 of 1 percent each month upon the average amount of the deposits of money . . . . . with any person, bank, association, corporation, or company engaged in the business of banking."
2. On the repeal of the proviso to that section which declared that the section should not apply
"to any savings bank having no capital stock, and whose business is confined to receiving deposits and loaning the same on interest for the benefit of the depositors only, and which do no other business of banking,"
such savings banks became subject to the duty imposed by the principal enactment.
3. Moneys received by such banks from depositors become "deposits" within the meaning of the act as soon as they are received, and as such are immediately subject to taxation.
4. In interpreting a section of a statute which remains in force, resort may be had to a proviso to it, although the proviso be repealed.
The 110th section of the Internal Revenue Act of June 30, 1864, enacted as follows:
"There shall be levied, collected, and paid a duty of 1/24th of one percent each month upon the average amount of the deposits of money subject to payment by check or draft, or represented by certificates of deposit, or otherwise, whether payable on demand or at some future day, with any person, bank, association, company, or corporation, engaged in the business of banking. . . ."
"And a duty of 1/24th of one percent each month, as aforesaid, upon the average amount of the capital of any bank, association, company, or corporation, or person engaged in the business of banking beyond the amount invested in United States bonds."
"And a duty of 1/12th of one percent each month upon the average amount of circulation issued by any bank, association, corporation, company, or person, including as circulation all certified checks, and all notes and other obligations calculated or intended to circulate or be used as money. "
"PROVIDED, that this section shall not apply to associations which are taxed under and by virtue of the act 'to provide a national currency,' &c. . . . [Nor to any savings bank having no capital stock, and whose business is confined to receiving deposits and loaning the same on interest for the benefit of the depositors only, and which do no other business of banking.]"
By an Act of March 3, 1865 -- an act itself of numerous pages -- amendatory of the former one, and inserting or striking out passages all through it, this 110th section was amended by "striking out" that part of the proviso relating to savings banks, and above enclosed in brackets.
In this state of the revenue statutes, "The Bank for Savings in the City of New York," a respectable institution, incorporated by the State of New York, A.D. 1819, was existing in the city just named. The features which, under its charter and bylaws, distinguished, as was conceived by its managers, this corporation from those which exercise to some extent the same functions, and especially from ordinary banking corporations and associations, were apparently these:
1. It was incorporated, not for private gain, but upon the application of the Society for the Prevention of Pauperism in the City of New York.
2. It had no capital stock.
3. It had no shareholders, and no corporators interested in or entitled to participate in the profits of the institution.
4. The corporators were the "trustees" for the time being, who constituted the "Board of Managers." These were prohibited from directly or indirectly receiving any pay or emolument for their services; neither could they have any interest in the deposits or the profits arising therefrom.
5. It was prohibited from issuing notes, making discounts, or transacting any business which belongs to or is transacted by incorporated banks other than is specified in the act, and from lending money "upon notes, bills of exchange, drafts, or any other personal securities whatever."
6. It was enjoined and required to use the funds entrusted to it, and exercise the powers conferred for the promotion of the objects stated in the preamble to its charter, viz.,
"encouraging in the community habits of industry and economy by securing and investing in government securities or stock created and issued under and by virtue of any law of the United States, or of this state, and in no other way, such small sums of money as may BE SAVED from the earnings of tradesmen, mechanics, laborers, minors, servants, and others, thereby affording the twofold advantage of security and interest."
Its object, as declared in the preamble, was "to ameliorate the condition of the poor and laboring classes of the community."
[Power was subsequently given to invest in the debt of the City of New York and to lend upon bond secured by mortgage upon unencumbered real property in the City of New York, and the institution was subjected to a closer scrutiny by the officers of the state.]
7. All the profits derived from the business were divisible ratably semi-annually among the depositors, except that a small percentage was permitted to be retained for accumulation, to prevent or to make good any loss to the depositors by reason of a reduction in the market price of securities or stocks held below the par value.
8. Money, when received by it from its depositors, was to be entered in a pass book, which, when presented, was a voucher or warrant for payments made by the bank and entered in the book, and the corporation -- which by its charter had power to pay cash to depositors when required, and at such times and with such interest and under such regulations as the trustees should from time to time prescribe -- could by its bylaws only be called upon to make payments either of principal or profits on four stated days in the year, and then only upon a week's notice of the intended call. It was at liberty, however, to return all or any part of any deposit whenever it thought proper, and moneys might "be voluntarily paid by the bank daily and without such notice, and without thereby waiving the right of the bank to such notice and time of payment."
One of its bylaws was that "all drafts must be made personally,
or by order in writing, . . . and must be accompanied by the pass book."
9. All the money received by it under the charter was, and at all times had been, either actually invested in stocks or lent on bond and mortgage except some small sum which was kept on deposit in a bank of deposit in the city for current expenses, or waiting an opportunity to invest.
10. Deposits of $1 or of any number of dollars were receivable, but no person, "except in rare and special cases," and with the special direction of the attending committee, was allowed to have with the corporation moneys amounting in the aggregate to more than $1,000, and in no case could the amount exceed $5,000. Those having less than $500 with the corporation were, by law, entitled to receive one percent more of the profits than the others.
11. A large proportion of the depositors, it appeared, had incomes less in amount than $600 per annum, and were not liable to pay an income tax.
12. Courts were enjoined by the charter of the institution to construe the act of incorporation favorably and benignly for every beneficial purpose therein intended.
It was not asserted that the corporation had in any way exceeded its powers or violated the laws of its creation.
The character of its "depositors" appeared from a return of the new ones in 1865. These numbered 13,071, of whom 5,905 were married women, minors &c.; 300 washers, 571 seamstresses, 798 laborers, 1,534 domestics. About four-fifths of the deposits were in sums of less than $100.
It may be here well to add that the statute of 1864, already spoken of, enacts by its 79th section thus:
"Every person, firm, or company, and every incorporated or other bank having a place of business where credits are opened by the deposit or collection of money or currency, subject to be paid or remitted upon draft, check, or order; or where money is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes; or where stocks, bonds, bullion, bills of exchange, or promissory notes, are received for discount or sale shall be regarded a banker under this act. "
"PROVIDED that any savings bank, having no capital stock and whose business is confined to receiving deposits and loaning the same for the benefit of its depositors, and which does no other business of banking, shall not be liable to pay for a license as a banker."
In the amendatory act of 1865, the above given proviso to this 79th section, a proviso which, the reader will have observed, much resembles that to the 110th section, was not stricken out.
The directors of the institution, conceiving that this was not a corporation "engaged in the business of banking" nor otherwise within the sections of the act already quoted, made no returns for several months to the assessor of the United States of the average amount of the deposits out on loan or invested for individuals in pursuance of its charter, as every corporation engaged in the business of banking is required to do. Hereupon the assessor estimated the amount as the statute provides in cases of delinquency, and these being returned to and adopted by the commissioner, the last-named officer gave a warrant to the collector of the district, to collect the amount as estimated and assessed, with penalties. The collector being about to proceed accordingly, the corporation filed a bill in the supreme court of New York to enjoin him. A preliminary injunction having been granted there, the case was removed by certiorari into the Circuit Court of the United States for the Southern District of that state.
The case coming on to be tried, the judges there were divided on the following questions:
1. Whether the circuit court could restrain the collection of the tax and penalties by injunction?
2. Whether an injunction could properly issue in this case?
3. Whether under the 110th section of the act of June 30, 1864, as amended by the act of March 3, 1865, the corporation was liable to pay a duty of 1/24th of one percent per month on the average amount of money so received and invested or lent as aforesaid, and represented and entered in the pass book as aforesaid,
and payable to the parties entitled under the laws of the corporation already sufficiently set forth.
4. Whether moneys so received and invested were deposits within the meaning of the acts of Congress.
5. Whether moneys received on deposit in any one month and invested as aforesaid during the same month were "deposits" within the meaning of the said acts, so as to render the plaintiff liable to pay a tax thereon for such month.
And on a certificate of division these questions were now before this Court.