The ninth section of the Internal Revenue Act of 1866 subjects
to the tax of five percent laid on the undistributed sum or sums
made and added during the year to their surplus or contingent funds
by banks and savings institutions generally, such sum or sums, when
made and added to such funds even by savings banks without
stockholders or capital stock, and which do the business of
receiving deposits to be lent or invested for the sole benefit of
their depositors.
Page 86 U. S. 228
2. A construction of a proviso to an act which makes the proviso
plainly repugnant to the body of the act is inadmissible.
3. The construction given to the Internal Revenue Act by
Commissioners of Internal Revenue, even though published in an
Internal Revenue Record, is not a construction of so much dignity
that a reenactment of the statute subsequent to the construction's
having been made and published is to be regarded as a legislative
adoption of that construction, especially not when the construction
made a proviso to an act repugnant to the body of the act.
4. By the Internal Revenue law, the United States are not
prohibited from adopting the action of
debt or any other
common law remedy for collecting what is due to them. This is true
on general principles.
5. Under the Internal Revenue Act of July 13, 1866, "taxes may
be sued for and recovered in the name of the United States in any
proper form of action."
6. The requirement by statute on all banks to pay a tax of a
certain sum, percent, on all undistributed earnings made or added
during the year to their contingent funds is a charge of a certain
sum upon the banks, and without assessment makes the banks a debtor
for the sum prescribed.
The United States brought an action of debt against The Dollar
Savings Bank in the court below to recover certain internal revenue
taxes which the declaration alleged were due from it to the
government. These taxes were asserted to have been authorized by an
amendment contained in the ninth section of the Internal Revenue
Act of July 13, 1866, [
Footnote
1] by which part of a prior Internal Revenue Act, the act,
namely, of June 30, 1864, was repealed, and in place thereof it was
enacted:
"That there shall be levied and collected
a tax of five
percentum on all dividends in scrip or money thereafter declared
due, wherever and whenever the same shall be payable, to
stockholders, policyholders, or depositors, or parties whatsoever,
. . .
as part of the earnings, income, or gains of any
bank, trust company, savings institution, and of any . . .
insurance company . . . in the United States or territories, . . .
and on all undistributed sums, or sums made or added during the
year to their surplus or contingent funds, and said banks, trust
companies, savings
Page 86 U. S. 229
institutions, and insurance companies shall pay the said tax,
and are hereby authorized to deduct and withhold from all payments
made on account of any dividends or sums of money that may be due
and payable as aforesaid, the said tax of five percentum.
And a
list or return shall be made and rendered to the assessor, . .
. on or before the tenth day of month following that in which any
dividends or sums of money become due or payable as aforesaid, and
said list or return shall contain a true and faithful account of
the amount of taxes as aforesaid, and there shall be annexed
thereto a declaration of the president, cashier, or treasurer of
the bank, trust company, savings institution, or insurance company,
under oath or affirmation,
in form and manner as may be
prescribed by the Commissioner of Internal Revenue, that the
same contains a true and faithful account of the taxes as
aforesaid. And for any default in the making or rendering of such
list or return, with such declaration annexed, the bank, trust
company, savings institution, or insurance company making such
default shall forfeit as a penalty the sum of $1,000, and in case
of any default in making or rendering said list or return, or of
any default in the payment of the tax as required, or any part
thereof,
the assessment and collection of the tax and penalty
shall be in accordance with the general provisions of law in other
cases of neglect and refusal."
"
Provided that the tax upon the dividends of life
insurance companies shall not be deemed due until such dividends
are payable; nor shall the portion of premiums returned by mutual
life insurance companies to their policyholders, nor
the annual
or semiannual interest allowed or paid to the depositors in savings
banks or savings institutions, be considered as
dividends."
The view of the government was that this act required a tax of
five percent to be levied and collected, amongst other things, on
sums added during the year by the Dollar Savings Bank, the
defendant in the case, to its surplus or contingent fund, without
regard to the character of the bank, or the nature and purpose of
that fund.
The section above quoted, as the reader has observed, contains a
requirement that each bank shall make a certain return,
"in form and manner as may be prescribed by the Commissioner of
Internal Revenue, that the same contains a
Page 86 U. S. 230
true and faithful account of the taxes aforesaid."
It appeared in this case that after the passage of the act in
question, Mr. Rollins, the then Commissioner of Internal Revenue,
made, in February, 1867, a construction of it, so far as it
affected banks of the character of the one now sued, and held that
they were not required to pay a tax upon amounts which were added
to their retained funds instead of being divided among their
depositors, and that of course no return relating to any such
subjects was required from such a bank. [
Footnote 2]
This action of Commissioner Rollins was repeated by his
successor, Commissioner Delano, in 1870; [
Footnote 3] and it was reaffirmed and repeated by
Commissioner Pleasanton, in 1871. [
Footnote 4]
The Dollar Savings Bank, it seemed, had accordingly made no
return during either of the years mentioned in the declaration, not
being required to do so by the Commissioner of Internal
Revenue.
In the year 1872, the successor of Commissioner Pleasanton
adopted a different construction of the act, and this action of
debt was brought to recover the taxes which the declaration alleged
should have been paid between June, 1866, and December, 1870,
inclusive, and these taxes, thus alleged to be due, formed the
subject matter of this suit. The jury found a special verdict:
"We find that the Dollar Savings Bank is a banking institution
created by the laws of the State of Pennsylvania, without
stockholders or capital stock, and doing the business of receiving
deposits to be loaned or invested for the sole benefit of its
depositors; that the charter authorizes the
retention of a
contingent fund, accumulated from the earnings, to the extent of
ten percentum of its deposits
for the security of its
depositors; that it has earned and added to the said
contingent fund, or
undistributed sum, from 13th July,
1866, to 31st December, 1870, $107,000 (the tax of five percent on
its earnings having been paid prior to 13th July, 1866); that the
earnings were carried to and added to the said contingent or
undistributed fund semiannually,
Page 86 U. S. 231
on the first days of July and January in each year. And we find,
if the court should be of opinion, on this state of facts, that the
plaintiff is entitled to recover, a verdict for the United States
for the sum of $5,356, to which is to be added, if the court should
be of opinion that plaintiff is entitled to interest on the
semiannual taxes from the time they were due and payable, the
further sum of $1,100; but if the court should be of opinion on the
said facts so found that the plaintiff is not entitled to recover
under the law, then we find for the defendant."
The court rendered a judgment in favor of the United States for
the principal sum of $5,356, with costs of suit, and this writ of
error was taken. [
Footnote
5]
The errors assigned were:
1st. Holding that the Act of Congress authorized the levy and
collection of the tax.
2d. Holding that an action of debt was maintainable for the
recovery of the tax.
No question was made in the court below as to whether debt was
the proper form of action, nor any question except as to the
liability of the savings bank to pay the tax.
Page 86 U. S. 234
MR. JUSTICE STRONG delivered the opinion of the Court.
The facts found by the special verdict are that the plaintiff in
error is a banking institution created by the laws of the State of
Pennsylvania, without stockholders or capital stock, and doing the
business of receiving deposits to be loaned or invested for the
sole benefit of its depositors; that the charter authorizes the
retention of a contingent fund accumulated from the earnings to the
extent of ten percentum of its deposits for the security of its
depositors; that the bank has earned and added to the said
contingent fund, or undistributed sum, from July 13, 1866, to
December 31, 1870, one hundred and seven thousand dollars, and that
such earnings were carried to and added to said contingent or
undistributed fund semiannually, on the first days of January and
July in each year.
Upon this state of facts, the first question presented is
whether the Act of Congress of July 13, 1866, which was an
amendment to the Internal Revenue law, [
Footnote 6] authorizes the
Page 86 U. S. 235
levy and collection of a tax upon the accumulated earnings
carried to the contingent fund. It is very plain that the first
intent of the act was to impose a tax upon all the earnings,
income, or gains, of the institutions mentioned therein. The
language of its one hundred and twentieth section is
"There shall be levied and collected a tax of five percentum on
all dividends in scrip or money thereafter declared due, whenever
and wherever the same shall be payable to stockholders,
policyholders, or depositors, or parties whatsoever, including
nonresidents, whether citizens or aliens, as part of the earnings,
income, or gains of any bank, trust company, savings institution,
and of any fire, marine, life, inland insurance company, either
stock or mutual, under whatever name or style known or called in
the United States or territories, whether specially incorporated or
existing under general laws,
and on all undistributed sum or
sums made and added during the year to their surplus or contingent
funds."
This tax the banks, trust companies, savings institutions, and
insurance companies are required to pay, and they are authorized to
deduct it from all payments made on account of any dividends or
sums of money that may be due and payable as aforesaid. It is,
however, only so much of the tax as is levied upon dividends or
sums of money due and payable to stockholders, policyholders, or
depositors &c., which they are authorized to deduct. Thus it
appears the tax is laid upon two subjects -- the one dividends or
sums due and payable, and the other the undistributed surplus of
gains or earnings carried to a surplus or contingent fund. These
subjects, though together making up the entire net earnings, are
distinct from each other, and they are thus treated throughout the
section as well as throughout other sections of the act. If the
portion of the act which we have quoted were all, it would not
admit of a doubt that both these subjects -- the dividends, or
annual or semiannual payments, and the sums added to the contingent
fund -- are made taxable.
It is argued, however, that savings institutions were relieved
by the proviso to the section. That, of course, is to
Page 86 U. S. 236
be construed in connection with the section of which it is a
part, and it is substantially an exception. It takes out of the
operation of the body of the enactment that which otherwise would
be within it. It restrains the generality of the previous
provisions. Its language is:
"
Provided that the tax upon dividends of life insurance
companies shall not be deemed due until such dividends are payable;
nor shall the portion of premiums returned by mutual life insurance
companies, nor the annual or semiannual interest allowed or paid to
the depositors in savings banks or savings institutions be
considered as dividends."
But so far as it relates to savings banks, the only subject of
the proviso is the annual or semiannual interest allowed or paid to
the depositors. It makes no reference to the undistributed surplus
which may be carried to a surplus fund. That it leaves as it was in
the body of the section, subject to the tax therein imposed. And to
us it appears quite plain that such was the intention of Congress.
Had it been the purpose to exempt savings banks from liability to
pay the tax on both the interest paid to its depositors and on all
undistributed sums carried to the surplus fund, the plain mode of
expressing such a purpose was to say in the proviso that such banks
should be excepted from the operation of the section. If such was
the purpose, why except them expressly from the operation of a part
of the section only? Why take out one subject of taxation
specifically and leave the other unmentioned? And still more. If,
as the plaintiff in error contends, it was intended that savings
banks should pay no tax on either of the two subjects mentioned in
the body of the section, why were such banks mentioned in the
section at all? The broad construction of the proviso contended for
makes it plainly repugnant to the body of the act, and it is
therefore inadmissible.
Our attention has been called to the fact that in 1867 and again
in 1870, the Commissioners of Internal Revenue construed the
proviso as exempting savings institutions from the tax upon all
sums added to their surplus or contingent funds, and that the Act
of Congress of July 14, 1870, which
Page 86 U. S. 237
reduced internal taxation, employed substantially the same
language respecting savings banks as that contained in the act of
1866. In view of this, the plaintiffs in error argue that Congress
required the Commissioner to prescribe what returns savings banks
should make; that this made it his duty to put a construction on
the law; that he did so, and held that such institutions were not
required to return undistributed earnings carried to a surplus
fund, and that after this practical construction had been made and
acted upon more than three years, Congress reenacted the tax,
reduced in amount, in the same words. Hence, it is inferred, the
construction given by the Commissioner was adopted. It is doubtless
a rule that when a judicial construction has been given to a
statute, the reenactment of the statute is generally held to be in
effect a legislative adoption of that construction. This, however,
can only be when the statute is capable of the construction given
to it and when that construction has become a settled rule of
conduct. The rule, we think, is inapplicable to this case. In the
first place, the decisions of the Internal Revenue Commissioner can
hardly be denominated judicial constructions. That officer was not
required by the law to prescribe what returns savings banks were
required to make. That was prescribed by the act of Congress
itself, and he had no power to dispense with the requisition. There
is therefore no presumption that his decisions were brought to the
knowledge of Congress when the Act of 1870 was passed. And again,
the construction he gave is an impossible one, for, as we have
seen, it makes the proviso plainly repugnant to the body of the
section.
We are constrained, then, to hold that the act of Congress does
impose upon the plaintiffs in error the tax to recover which the
present suit was brought.
The second error assigned is that the circuit court erred in
holding that an action of debt is maintainable in that court for
the recovery of the taxes.
We do not perceive that the question presented by this
assignment was raised or even mentioned in the court below,
Page 86 U. S. 238
and it is not clear that it may first be raised here. But if it
may, the answer must be that the taxes may be recovered in an
action of debt brought in the circuit court.
The argument in support of the assignment of error is that the
United States has no common law; that the thirty-fourth section of
the Judiciary Act enacts that the laws of the several states shall
be the rules of decision in the trial of actions at common law, of
which debt is one; that the act of Congress which imposes the tax
on savings banks provides a special remedy for its assessment and
collection, and that it is a principle of the common law of
Pennsylvania that when a statute creates a right and provides a
particular remedy by which that right may be enforced, no other
remedy than that afforded by the statute can be used.
It must be conceded that in the section of the act [
Footnote 7] which required savings
banks to pay the tax, they are also required to render to the
assessor or assistant assessor a list of the amount of taxes with a
declaration under oath attached thereto on or before the 10th day
of the month following that in which any dividends or sums of money
may be due and payable, and for any default in rendering such a
list they are liable to a penalty. The act also declares that
"In case of any default in making or rendering said list or
return or any default in the payment of the tax as required or any
part thereof, the assessment and collection of the tax and penalty
shall be in accordance with the general provisions of law in other
cases of neglect and refusal."
What those general provisions are may be seen in other sections
of the act which prescribe assessments, delivery thereof to the
collectors, and distraint if necessary.
It must also be conceded to be a rule of the common law in
England, as it is in Pennsylvania and many of the other states,
that where a statute creates a right and provides a particular
remedy for its enforcement, the remedy is generally exclusive of
all common law remedies.
But it is important to notice upon what the rule is
Page 86 U. S. 239
founded. The reason of the rule is that the statute, by
providing a particular remedy, manifests an intention to prohibit
other remedies, and the rule therefore rests upon a presumed
statutory prohibition. It applies and it is enforced when anyone to
whom the statute is a rule of conduct seeks redress for a civil
wrong. He is confined to the remedy pointed out in the statute, for
he is forbidden to make use of any other. But by the Internal
Revenue law, the United States are not prohibited from adopting any
remedies for the recovery of a debt due to them which are known to
the laws of Pennsylvania. The prohibitions, if any, either express
or implied, contained in the enactment of 1866 are for others, not
for the government. They may be obligatory upon tax collectors.
They may prevent any suit at law by such officers or agents. But
they are not rules for the conduct of the state. It is a familiar
principle that the King is not bound by any act of Parliament
unless he be named therein by special and particular words. The
most general words that can be devised (for example, any person or
persons, bodies politic or corporate) affect not him in the least
if they may tend to restrain or diminish any of his rights and
interests. [
Footnote 8] He may
even take the benefit of any particular act, though not named.
[
Footnote 9] The rule thus
settled respecting the British Crown is equally applicable to this
government, and it has been applied frequently in the different
states, and practically in the federal courts. It may be considered
as settled that so much of the royal prerogatives as belonged to
the King in his capacity of
parens patriae, or universal
trustee, enters as much into our political state as it does into
the principles of the British constitution. [
Footnote 10]
It must, then, be concluded that the government is not
prohibited by anything contained in the Act of 1866 from
employing
Page 86 U. S. 240
any common law remedy for the collection of its dues. The reason
for the rule which denies to others the use of any other than the
statutory remedy is wanting, therefore, in applicability of the
government, and the rule itself must not be extended beyond its
reason. And we do not find that either in England or in
Pennsylvania it has been held to be applicable. On the contrary, in
England, informations of debt and exchequer informations for
discovery and account to recover duties on importations have been
of frequent occurrence, though the acts of Parliament have provided
a different remedy for enforcing the payment. Numerous such cases
are reported in Bunbury's Reports. [
Footnote 11] And in
United States v. Lyman,
[
Footnote 12] Judge Story
held that debt might be maintained in the circuit court for
Massachusetts to recover duties upon imported goods, a doctrine
reasserted by this Court in
Meredith v. United States.
[
Footnote 13]
But all this is superfluous, for the Act of Congress authorizes
suits at law to recover unpaid taxes. [
Footnote 14] It enacts as follows:
"And taxes may be sued for and recovered in the name of the
United States in any proper form of action before any circuit or
district court of the United States for the district in which the
liability for such tax may have been or may be incurred or where
the party from whom such tax is due may reside at the time of the
commencement of said action."
Nor is there anything in the objection that the taxes for which
judgment has been recovered in this case had not been assessed. No
other assessment than that made by the statute was necessary to
determine the extent of the bank's liability. An assessment is only
determining the value of the thing taxed, and the amount of the tax
required of each individual. It may be made by designated officers
or by the law itself. In the present case, the statute required
every savings bank to pay a tax of five percent on all
undistributed earnings made, or added during the year to their
Page 86 U. S. 241
contingent funds. There was no occasion or room for any other
assessment. This was a charge of a certain sum upon the bank,
[
Footnote 15] and without
more it made the bank a debtor.
We think, therefore, the second assignment of error cannot by
sustained.
Judgment affirmed.
[
Footnote 1]
14 Stat. at Large 138.
[
Footnote 2]
5 Internal Revenue Record 60.
[
Footnote 3]
11
id. 73.
[
Footnote 4]
13
id. 73.
[
Footnote 5]
The court gave no interest, because it was admitted that the
savings bank was not reprehensibly in default, and that its refusal
to pay the tax was induced by the inconsistent action and the
conflicting opinions of the Internal Revenue Department.
[
Footnote 6]
14 Stat. at Large 138.
[
Footnote 7]
Act of 1866, ยง 120.
[
Footnote 8]
Magdalen College Case, 11 Reports, 74; King v. Allen 15 East
333.
[
Footnote 9]
7 Reports 32; Potter's Dwarris on Statutes 151, 152.
[
Footnote 10]
Commonwealth v. Baldwin, 1 Watts 54;
People v.
Rossiter, 4 Cowen 143;
United States v. Davis, 3
McLean 483;
Same v. Williams, 5
id. 133;
Commonwealth v. Johnson, 6 Pa.St. 136;
United States
v. Greene, 4 Mason 427;
Same v. Hoar, 2
id.
311;
Same v. Hewes, Crabbe 307.
[
Footnote 11]
See pp. 155, 299, 300, 339;
see also Comyn's
Digest, title "Debt," A. 9; 1 Rolle 383.
[
Footnote 12]
1 Mason 482.
[
Footnote 13]
38 U. S. 13 Pet.
486.
[
Footnote 14]
14 Stat. at Large 111.
[
Footnote 15]
Attorney General v. _____, 2 Anstruther 558.
MR. JUSTICE BRADLEY, with whom concurred MR. JUSTICE FIELD,
dissenting:
I dissent from the judgment of the Court on the ground that an
action will not lie for a tax of the kind in question in this case
unless it be first entered on the assessment roll. The assessment
roll should be regarded as conclusive as to the persons or things
liable to taxation. If it is not, if the matter is left open so
that any person or corporation may be prosecuted for taxes at any
time, it leaves the citizen exposed to many hazards and to the
mercy of prying informers when the evidence by which he could have
shown his immunity or exemption has perished. If an action of debt
without an assessment can be brought, what is the limit of time
within which it must be brought? To what statute of limitations is
the government subject? It seems to me that the decision introduces
a new principle in the system of taxation dangerous to the rights
of the citizen and the peace and security of society.
