139 Minn. 162 | Minn. | 1918
This is a proceeding to collect from the Security National Bank of the city of Minneapolis the amount of a personal property tax upon the shares of its stock. The bank interposed as a defense that it had sold and transferred all its property of every kind and nature and had distributed the proceeds thereof to its shareholders and had gone out of business before the tax accrued. The trial court directed judgment for the amount of the tax and the bank appealed from an order denying á new trial.
The Security National Bank, originally organized as a state bank, was incorporated as a national bank in 1907, with a capital stock of one million dollars, and conducted a general banking business until it sold, and transferred all its business and assets to the First 'National Bank of Minneapolis in 1915. In the early part of 1915, an arrangement was made to combine and consolidate the two banks into one. To accomplish this purpose the board of directors of the First National Bank, on March 19, 1915, unanimously adopted a resolution to purchase all the assets and good will of the Security National Bank, subject to all its liabilities and obligations, for the sum of five million dollars; to increase the capital stock of the First National Bank from $2,500,000 to $5,000,000; to set aside 20,000 shares of this increase in capital stock for sale to the shareholders of the Security National Bank at $250 per share and in the proportion of two shares of this stock for each share of the stock of the Security National Bank held by them; and directing the executive officers to call a meeting of the shareholders of the First National Bank for May 4,1915, to consider and vote upon the several propositions. The resolution contained a provision by which it did not become effective un
On the same day, March 19, 1915, the shareholders of the Security National Bank held an adjourned annual meeting at which more than two-thirds of all its capital stock was represented. These shareholders unanimously adopted a resolution in which the resolution adopted by the board of directors of the First National Bank was set forth in full, and which authorized and directed the officers of the- Security National Bank to make the proposed sale upon the proposed terms, and to do all acts necessary or proper to carry it into effect. On the same day, March 19, 1915, the board, of directors of the1 Security National Bank adopted a resolution in which the resolution adopted by the shareholders was set forth in full, and which authorized and directed the executive officers to make the proposed sale and to do all acts necessary or advisable to carry it into effect, and to call a meeting of the shareholders for May 4, 1915, for the purpose of voting upon placing the bank in liquidation and upon any matters necessary to carry out the propositions contained in the resolutions. To insure the consummation of the project, the individual shareholders of the Security 'National Bank executed instruments (all of the same tenor and too lengthy to quote), in which each shareholder for himself assented to and approved all the propositions contained in the several resolutions, and the proposition to liquidate the Security National Bank, and subscribed for two shares of the proposed increase in the capital stock of the First National Bank for each share held by him in the Security National Bank; and in which he also authorized the Security National Bank and its executive officers to accept the certificates for such stock when ready for delivery and to pay therefor out of any funds in its or their hands belonging to him from the liquidation of the .Security National Bank; and in which he also appointed George K. Belden or L. L. Dodge or Frank K. Pratt, as. his proxy, to vote his stock in favor of these several propositions at the shareholders’ meeting to be held on May 4, 1915. Before March 27, 1915, nearly all the shareholders of the Security National Bank executed one of these instruments and delivered it, together with his certificates of stock indorsed in blank,
After a sufficient number of the shareholders of each bank had assented to the several propositions and directed their respective representatives to vote their stock in favor of the same to insure the approval and carrying out of such propositions, and on March 27, 1915, the Security National Bank transferred and delivered all its property and assets of every kind and nature to the First National Bank and quit business entirely. Shortly-afterwards the First National Bank entered upon its books a credit of five million dollars to the “Security National Bank in liquidation.” On May 4, 1915, the shareholders of the First National Bank duly voted to increase its capital stock to five million dollars, and ratified and confirmed the resolution of March 19 and all things done thereunder, and the shareholders of the Security National Bank ratified and approved the resolutions of March 19, and voted that the Security National'Bank be placed in voluntary liquidation and appointed a liquidating committee. On May 14, 1915, the comptroller of the currency approved the increase of the capital stock of the First National Bank, and on the following day, May 15, 20,000 shares of such stock were issued and delivered to the shareholders of the Security National Bank pursuant to their subscriptions therefor made as hereinbefore stated. The purchase price for these shares exactly equalled the five million dollars to be paid for the property of the Security National Bank, and by direction of the officers of that bank the five million dollars credited to the “Security National Bank in liquidation” as above stated was applied as payment for such shares, and was credited in proper amounts to the respective share
The Security National Bank made no return of its capital stock for taxation in the year 1915; but the five million dollars ydiieh on May 1, 1915, stood on the books of the First National Bank as a credit to the “Security National Bank in liquidation,” was assessed as money and credits and, as a matter of convenience and by agreement with the assessor, this assessment was placed against the First National Bank. The tax upon this assessment in the sum of $15,000 was subsequently paid. The rate upon money and credits is much less than the rate upon capital stock and in October, 1915, the assessment of the capital stock upon which the tax in controversy is based was made by direction of the State Tax Commission.
That a state cannot tax a national bank upon its capital, but may tax its shareholders upon their stock in the 'bank is conceded and is too well settled to require discussion. It is also settled that the state, by statute, may require the bank to pay the tax upon the stock of its shareholders out of any funds in its possession available for that purpose, that such statutes malfe the bank a sort of equitable or statutory garnishee and may provide an appropriate procedure for enforcing payment from it. Nat. Bank v. Commonwealth, 9 Wall. [76 U. S.] 353, 19 L. ed. 701; First Natl Bank v. Chehalis County, 166 U. S. 440, 17 Sup. Ct. 629, 41 L. ed. 1069; Merchants and M. Bank v. Pennsylvania, 167 U. S. 461, 17 Sup. Ct. 829, 42 L. ed. 236.
The present question is whether our statute imposes the tax upon the bank, or upon the interest of the shareholders in the bank, upon the capital of the bank, or upon the stock of the shareholders.
The statute provides that the stock of every bank shall be assessed in the name of the bank; that the proper officer shall list all shares of the bank for assessment; that, “to aid the assessor in determining the value
The statute provides that “personal property shall be listed and assessed annually with reference to its value on May 1.” Consequently the present question is whether this stock had value on May 1. That it did we think is too clear to require extended discussion. True defendant quit business on March 27 and turned over all its assets to the First National Bank on that date, but this transaction was not completed, and under the resolutions adopted by the banks, could not be completed until after the meeting of the shareholders of the First National Bank on May 4. But passing this fact, the stock represented the interest of the shareholders in the property of defendant as well after defendant ceased to
The tax is against the shareholders and the statute merely makes use of the bank as a convenient instrumentality for collecting it from the shareholders-. Although the stock of a bank represents the interest of the shareholders in the capital as well as in the earnings of the bank, the state cannot require a national bank to impair its capital by paying the tax of its shareholders. Our statute recognizes the limited power of the state, and simply requires that the tax upon the stock be paid out of the earnings distributable to the holders of such stock. Defendant was in business and made earnings for nearly three months in 1915. It then closed its doors and went into voluntary liquidation, and thereafter each and every shareholder surrendered his stock and received and accepted his proportion of the assets by applying it in payment for stock in the First National Bank. By this transaction, which was completed on May 15, 1915, the entire assets of defendant were in effect distributed to its shareholders, and since that date defendant has had no property of any kind. By this distribution, the earnings then on hand were in effect paid to the shareholders as a dividend, and the real question is whether the statutes imposed upon defendant the duty'to retain sufficient of these funds to pay the tax in controversy.
A tax is not a lien upon property except as made so by statute. State
“The taxes upon personal property shall be a lien upon the personal property of the person assessed from and after the time the tax books are received by the county treasurer.” G. S. 1913, § 2180. As the tax books embracing the tax in controversy were not delivered to the county treasurer until long after defendant had disposed of all its property, the tax never attached as a lien upon such property, even assuming that this statute gives a lien upon'the property of the bank for the tax of its shareholders.
Counsel for the state insists, however, that the provision that every bank shall, before declaring any dividend, deduct from the annual earnings of the bank such amount as may be necessary to pay any taxes levied upon the shares of stock, imposed upon defendant the duty to withhold a sufficient amount from the funds distributed in May to pay the tax in controversy. The bank is required to retain sufficient of its earnings “to pay any taxes levied upon the shares of stock.” The term “levied” as used in our tax laws has different meanings in different parts of the laws. It sometimes refers to the legislative act of imposing the tax, and sometimes to the administrative act of making the assessment, and extending the tax upon the tax lists. State v. Lakeside Land Co. 71 Minn. 283, 73 N. W. 970. Here the term plainly refers to the administrative act, and the tax was not “levied upon the shares of the stock,” until it was entered upon the tax lists. The term “levied” is in the past tense and denotes past time — something already done; and the language used cannot fairly be construed as requiring the bank to withhold from its shareholders sufficient funds to pay whatever tax might be levied at any time in the future. If the legislature had intended to require banks to retain sufficient funds to pay a tax of unknown amount to be imposed in the future, they would have used language plainly indicating that such was their intention. When a bank pays a- dividend it knows, or can readily ascertain, the amount of any tax upon the shares of its stock then entered upon the tax lists, and must make provision for the payment of such tax, but the statute does not require it to provide at that time for a tax neither due nor levied and the amount of which cannot then be ascertained. State v. Barnesville Nat. Bank, 134 Minn. 315, 159 N. W. 754.
Order reversed.
