103 F. 523 | U.S. Circuit Court for the District of Kentucky | 1900
The complainant brings this action to enjoin the city of Covington and its officers from assessing and collecting for municipal purposes the taxation on its shares of capital
“Whereas, the supreme court of the United States has lately decided that article 3, chapter one hundred and three, of the acts eighteen hundred and ninety-one, eighteen hundred and ninety-two, eighteen hundred and ninety-three, is void and of no effect in so far as the same provides for the taxation of the franchise of national banks, in consequence of which decision there is not now and has not been since adoption of said article in eighteen hundred and ninety-two, any adequate mode of taxing national hanks, while state hanks are now and have been ever since eighteen hundred and ninety-two taxable for all purposes, state and local; therefore — he it enacted by the general assembly of the commonwealth of Kentucky:
“Section 1. That the shares of stock in each national hank of this state shall he subject to taxation for all state purposes, and shall he subject to taxation for the purposes of each county, city, town and taxing district in which the hank is located.
“Sec. 2. For the purposes of the taxation provided for by the next preceding-section, it shall be the duty of the president and the cashier of the bank to list the said shares of stock with the assessing officers authorized to assess real estate for taxation, and the hank shall he and remain liable to the state, county, city, town and district for the taxes upon said shares of stock.
“Sec. 3. When any of said shares of stock have not been listed for taxation for any of said purposes under levy or levies of any year or years since the adoption of the revenue law of eighteen hundred and ninety-two, it shall be the duty of the president and cashier to list the same for taxation under said levy or levies: provided, that where any national hank has heretofore, for any year or years, paid taxes upon its franchise as provided in article three of the revenue law of eighteen hundred and ninety-two, said hank shall he excepted from the operation of this section as to said year or years: and provided further, that where any national bank has heretofore, for any year or years, paid state taxes under the Hewitt bill in excess of the state taxes required by this act for the same year or years, said bank shall be entitled to credit by said excess upon its state taxes required by this act.
“Sec. 4. All assessments of shares of stock contemplated by this act shall he entered upon the assessor’s hooks, certified and reported by the assessing officers as assessments of real estate are entered, certified and reported, and the same shall he certified to the proper collecting officers for collection as assessments of real estate are certified for collection of taxes thereon.
“Sec. 5. The assessment of said shares of stock and collection of taxes thereon, as contemplated by this act, may he enforced as assessment of real estate and collection of taxes thereon may he enforced.
“Sec. 6. The purpose of this act is to place national banks of this state, with respect to taxation, upon the same footing as state hanks as nearly as may be consistently with said article three of the revenue law and said decision of the supreme court.
“Sec. 7. Whereas, it is important that state banks .and national hanks should he taxed equally for all purposes, an emergency exists, and this act .shall take effect and he in force from and after its passage.”
To clearly understand the scope of this very important controversy, it is necessary to say that in 1886, in an effort to remedy the confusion growing out of certain unrepealable provisions in- the charters of the older banks in regard to taxes, the legislature passed what is commonly called the Hewitt act, the pertinent provisions of which are as follows:
“Section 1. That shares of stock in state and national banks, and other institutions of loan or discount, and in all corporations required by law to he taxed on their capital stock, shall he taxed 75 cents on each share thereof, equal to $100, or on each $100 of stock therein owned by individuals, corporations or societies, and said banks, institutions and corporations shall, in addi*525 tion, pay upon each •‘5100 of so much of their surplus, undivided surplus, undivided profits or undivided accumulations as exceeds an amount equal to 10 per cent, of their capital stock, which shall he in full of all tax, state, county and municipal. * * *”
“Sec. 4. That each of said hanks, institutions and corporations, by its corporate authority, with the consent of a majority in interest of a quorum of its stockholders, at a regular or called meeting thereof, may give its consent to the levying of said tax, and agree to pay the same as herein provided, and to waive and release all right under the act of congress,, or under the charters of the state banks, to a different mode or smaller rate of taxation, which consent or agreement to and with the state of Kentucky shall be evidenced by writing under the seal of such hank and delivered to the governor of this commonwealth; and upon such agreement and consent being delivered, and in consideration thereof, such hank and its shares of stock shall be exempt from all other taxation whatsoever so long as said tax shall bo paid during the corporate existence of such banks.” Gen. St. Ky. 1886, c. 92, art. 2.
This rate of taxation, all the avails of which went to the state, was higher than that paid by other property, but on that account the banks were exempted from local taxation. In 1892 the legislature enacted what is now section 4077 of the Kentucky Statutes, as follows:
“Sec. 4077. Every railway company or corporation, and every incorporated bank, trust company, guarantee or security company, gas company, water company, ferry company, bridge company, street railway company, express company, electric light company, electric power company, telegraph company, press dispatch company, telephone company, turnpike company, palace car company, dining car company, sleeping car company, chair car company, and every other like company, corporation or association, and also every other corporation, company or association having or exercising any special or exclusive privilege or franchise, not allowed by law to natural persons, or performing any public service, shall, in addition to the other taxes imposed on it by law, annually pay a tax on its franchise to the state, and a local tax thereon to the county, incorporated city, town and taxing district, where its franchise may be exercised. The auditor, treasurer and secretary of state art* hereby constituted a board of valuation and assessment for fixing the value of said franchise, except as to turnpike companies, -which are provided for in section 4095 of this article, the place or places where such local taxes are to be paid by other corporations on their franchises and how apportioned, where more than one jurisdiction is entitled to a share of such tax, shall be determined by the board of valuation and assessment, and for the discharge of such other duties as may be imposed on them by this act. The auditor shall be chairman of said board, and shall convene the same from time to time as the business of the board may require.”
Suction 4078 prescribed the manner of ascertaining the value of the franchises to be assessed. As a basis for this assessment, banks, under section 4092, were required to make reports on the 1st day of March of each year of their condition the preceding 31st day of December, and to pay ihe tax on July 1st following. This subsequent legislation was intended to repeal, and in express terms did repeal, the Hewitt law. After the enactment of the legislation last referred to, the complainant, in November, 1893, instituted an action in the state court to enjoin the levy for that year, as against it, of the taxation thereby provided for, and in its petition averred that long before the enactment of this legislation it had accepted the provisions of the Hewitt act, within the time named therein, and that it had up to that date paid the taxes provided for by the terms of the Hewitt act, as accepted by complainant, and in due
As clearly established by many decisions, and particularly by that announced in the case of Owensboro Nat. Bank v. City of Owensboro, 173 U. S. 664, 19 Sup. Ct. 537, 43 L. Ed. 850, all state laws providing for the taxation of shares of national banks must be subject to the provisions of section 5219 of the Revised Statutes of the United States, which is in this language:
“Sec. 5219. Nothing herein shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the state within which the association is located; but the legislature of each state may determine and direct the manner and- place of taxing all the shares of national banking associations located within the state, subject only to the two restrictions, that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state, and that the shares of any national'banking association owned by non-residents of any state shall be taxed in the city or town where the bank is located, and not elsewhere. Nothing herein shall be construed to exempt the real property of associations from either state, county, or municipal taxes, to the same extent, according to its value, as other real property is taxed.”
Tbe supreme court, in the case last referred to,, held that section 4077 of the Kentucky Statutes, so far as it affects national banks," is void, because it is in . conflict with that section. The Hewitt law having been repealed in 1892, and section 4077 of the Kentucky Statutes being void as to national banks, there was no state statute in force for taxing the shares of the latter for municipal purposes until the act of March 21, 1900, was passed. The third section of. that act is now assailed upon the ground that it undertakes to tax those shares retroactively and illegally. The court will not attempt
As the present holders of the complainant’s shares may be very different persons from those who held them in previous years, as the present holders may have purchased under the previously existing law, and as their rights and interests would be injuriously affected by large payments for retroactive taxation,, at least one phase of what has been said is well supported by the reasoning of the opinion of the court of appeals in Town of Bellevue v. Peacock, 89 Ky. 495, 12 S. W. 1042. When the town of Bellevue made a contract with certain persons to improve a street, it was supposed by all parties that the law empowered the town to impose the cost upon the abutting property, and the contract so required. The court of appeals, however, decided that the town had no such power. Subsequently the legislature passed an act attempting to validate the contract, and to impose the necessary taxation retrospectively upon the property. In a suit to test that question the court, in the opinion referred to, held the act unconsitutional, largely upon the ground that, as there was no law to so burden the property at the time the improvements were made, the legislature could not subsequently impose it. The complainant and its shareholders in the case before us stand in substantially the same position as did the owners of the abutting property in the Bellevue Case in respect to previous judicial decisions and otherwise. There was no law, until the act of 1900, imposing any such liability as it attempted to create; and, at least unless a similar burden is imposed upon other moneyed capital, the retroactive liability canot be imposed upon national banks.
Coming now to the question of whether the whole act of March, 1900, is void, as being in conflict with section 5219 of the Revised Statutes, it must be borne in mind that this may be manifested in either of two' forms: First,- it may appear on the face of the state law itself, ms in the statute-..of 1892, pronounced invalid by the supreme
In this particular case, however, the views so far expressed may all become subordinate to the question most energetically urged, that, as to the complainant, the act of 1900 can have no operation before 1904, because up to that time it lias an irrevocable contract with the state to the effect that its shares shall only be taxed according to the provisions of the Hewitt law, and that this matter has been finally adjudicated by the courts of the state in the manner stated in the bilí. The general doctrine as to the conclusive effect of judgments upon matters in controversy between the same parties, or' those in privity with them, is certainly broad enough, as usually stated, to cover cases like this, if there are no exceptions to it. The case of City of New Orleans v. Citizens’ Bank, 167 U. S. 371, 17 Sup. Ct. 905, 42 L. Ed. 202, goes far towards closing the question, and will do so unless its operation should be limiied by considerations now to be stated. Of course, as to the claim for taxes for the year named in the suit described in the
It has been suggested that, before any injunction is granted, the complainant in such a case should pay the amount of taxes which is fairly due from it. This is a principle certainly in force where a valid law leaves no doubt that something is due. But, if the claim of res ad judicata made by the complainant is maintained, such payment in this case has already been made. And, even if the principle could apply here at all, where the entire tax is contested, it can hardly be enforced until a final judgment has determined whether there is anything at all due from the complainant; and, besides, there appears to be manifest equity in the bill, so far as it seeks to enjoin the enforcement of section 3 of the act.
It is also insisted that for the case made by the bill there is an adequate remedy at law. The case of Bank v. Stone (C. C.) 88 Fed. 383, is a sufficient authority to the contrary. That case, it is true, was affirmed by a divided court (174 U. S. 408, 799, 19 Sup. Ct. 881, 43 L. Ed. 1187). And, besides, the relief sought as to section 3 of the act appears to be decisive of this question. It also seems to be settled upon the authority of Hills v. Bank, 105 U. S. 319, 26 L. Ed. 1052, and the cases there cited, that the bank itself may sue in cases like this, to protect the interest of its shareholders.
It follows that the complainant is entitled to an injunction pendente lite, restraining the defendants, and each of them, until the further order of the court, from making, either against the complainant or any holder of its shares, any assessment or levy of any taxes upon the shares of complainant’s capital stock for any purpose, for any time or period previous to March 21, 1900, and also, until the further order of the court, restraining the defendants, and each of them, from collecting, either from the complainant or from any of the holders of shares of its capital stock, any taxes upon any of said shares upon any assessment or levy to be made therefor for any time subsequent to that date. The defendants are left at liberty to make assessments of said shares for taxation for any proper time or period after March 21,1900; but not to make any collection of taxes so assessed until the court shall have determined from the evidence whether the taxes so assessed are at a rate higher than is permitted by section 5219. Rev. St., and, if so, to what extent. Counsel will prepare the proper orders.