Opinion
No. 29835.
January 11, 1932.
1. TAXATION.
Surplus of national bank held not exempt from taxation where bank did not fully comply with guaranty assessment statute (Laws 1930, chapter 22, sections 6-A, 11; 12 U.S.C.A., section 548).
2. TAXATION.
Compliance with guaranty assessment statute does not impose greater rate of taxation on national banks than is imposed on state banks (Laws 1930, chapter 22, sections 6-A, 11; 12 U.S.C.A., section 548).
3. TAXATION.
Statute requiring state banks and permitting national banks to pay guaranty assessment on surplus, which is then exempt from taxation, does not discriminate against national banks (Laws 1930, chapter 22, sections 6-A, 11; 12 U.S.C.A., section 548).
APPEAL from circuit court of Hinds county. HON.W.H. POTTER, Judge.
Alexander Alexander, of Jackson, for appellant.
Appellant has complied with the provisions in regard to the investment of its surplus and has accumulated a surplus equal to and in excess of the amount of its capital stock. It has therefore, "complied with the provisions of this act," as stated in said section 11, and thus has fulfilled the end and purpose of the act. It has not however, complied with all the regulatory requirements of the act, particularly those with regard to the depositing of its bonds and securities with the treasurer of the state of Mississippi as required by section 2, and the payment of assessments referred to in sections 3 and 6a. As to these regulatory requirements applicable and appropriate only to banking institutions "operating as state banks," appellant, as a national bank, is not required nor authorized to comply therewith.
Abilene National Bank v. Dolley, 102 C.C.A. 607; 32 L.R.A. (N.S.) 1065.
States have no power by taxation or otherwise to retard, impede, burden or in any manner control the operation of a constitutional law enacted by Congress to carry into execution the powers vested in the general government.
McCullough v. Maryland, 4 Wheat. 316; Osborne v. Bank, 9 Wheat. 738; Bank Tax Case, 2 Wall 200; Bradley v. People, 4 Wall 459; Tappan v. Bank, 19 Wall 490; Bank of Commerce v. N.Y. City, 2 Black 620; Linton v. Childs, 33 S.E. 617; United States Fidelity Guaranty Co. v. First National Bank, 76 So. 747.
Chapter 22 of the Laws of 1930 is an exercise of the police power of the state, and does not relate in its theory or purpose to the subject of taxation.
Abie State Bank v. Bryan, 75 L.Ed. 420; Shallenberger v. First State Bank, 55 L.Ed. 117; Noble State Bank v. Haskell, 55 L.Ed. 116.
The police power and taxing power are entirely separate in legal theory and purpose, and the exercise of powers by municipalities must be referred clearly to one or the other.
City of Jackson v. Newman, 59 Miss. 385.
All matters involving taxation must be considered with reference to the taxing power and may not be otherwise interpreted.
Cooley on Taxation (3 Ed.) 262.
Since the United States supreme court, as well as other courts, has always held that a statute which discriminates in the matter of taxation against national banks is void, and since our own supreme court has held the act of 1930 to be valid, it therefore follows that the act must be so construed as not to discriminate against national banks.
In construing a statute the court will not be confined to its literal meaning. A thing within the intention is regarded within the statute although not within the letter.
People v. Stratton, 167 N.E. 31.
Statutes general in terms are often construed to contain exceptions.
McDonald v. Springvalley, etc., 2 A.L.R. 1361.
It is the duty of the court to uphold a statute when it is fairly susceptible of two interpretations, one which will uphold its constitutionality, and the other defeat it, though the adoption of the former be the less natural.
State v. Pitts, 49 So. 441.
A law may be unconstitutional, and void, in relation to particular cases, and yet valid to all intents and purposes in its application to other cases which differ from the former in material characteristics. The courts in some instances by a restrictive construction have limited the effect of a statute to cases clearly within the field of legislative control. For example, a state tax law, general in its terms, and on its face applying alike to all taxpayers, may be restricted by the court so as to exempt from its operation stockholders in national banks. Such a statute would not for that reason be declared void as a whole, but should be given effect in reference to all persons embraced within the general language employed with the exception of those outside the proper field of such legislation.
Albany County v. Stanley, 105 U.S. 305, 26 L.Ed. 1044; State v. Smiley, 65 Kan. 240, 69 P. 199, 67 L.R.A. 903; 6 R.C.L., p. 130.
When an exemption or deduction is allowed by the laws of the state, which is of such general operation in assessing shares as to affect all classes of taxable property, it must be allowed in assessing shares, in national banks, because it necesarily is the rule of assessment.
First National Bank v. Waters, 7 Fed. 152.
A tax against a state bank, which is entitled to have deducted from the assessment of its capital so much of its capital as was invested in the bonds of the United States, discriminates in law against a national bank shareholder, who is assessed upon the value of his share in the national bank's capital, from which no such deduction is allowed.
Citizens National Bank v. Burton, 90 S.W. 944; 10 L.R.A. (N.S.) 947.
It does not matter under what guise or for what purpose the tax is imposed or the exception allowed. If the result is that a national bank is taxed at a higher rate or upon a different valuation or without a stated exemption, there is unfair and unlawful discrimination.
Van Allen v. Assessors, 18 L.Ed. 229; People v. Weaver, 100 U.S. 539, 25 L.Ed. 705; Cleveland Trust Company v. Lander, 56 N.E. 1036.
The words "at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens" refer to the entire process of assessments, which in the case of national bank shares, includes both their valuation and the rate of percentage on such valuation; consequently, the act of congress is violated if, in connection with a fixed percentage applicable to the valuation alike of national bank shares and of other moneyed investments or capital, the state law establishes or permits a mode of assessment by which such shares are valued higher in proportion to their real value than is other moneyed capital.
Boyer v. Boyer, 113 U.S. 689, 28 L.Ed. 1089.
The limit to which the legislature may go is in taxing national banks equally with other moneyed capital in competition with them. There may of course be an inequality in favor of the national banks.
Davenport National Bank v. Board of Equalization, 123 U.S. 83.
Section 5219, Revised Statutes prescribes the full measure of the power of the several states to impose taxes upon national banking associations or their stockholders. Any assessment not in conformity therewith is unauthorized and invalid.
First National Bank of Gulfport v. Adams, 123 Miss. 279; 66 L.Ed. 661.
There being then no equivalency between the assessment of the bank and the assessment of the shares in the names of the shareholders, it follows that the tax here complained of, which was assessed on the franchise or intangible property of the corporation, was not within the purview of the authority conferred by the act of congress, and was therefore illegal.
Owensboro National Bank v. Owensboro, 43 L.Ed. 851.
It seems inescapable that if the tax exemption provision found in section 11, had been omitted, the act could not be deemed a taxing statute. Certainly it is not made so by appending this incidental reference, in order to promote the original purpose of the act, to-wit, the protection of depositors in state banks.
W.E. Morse, of Jackson, for appellee.
Section 11 of Chapter 22 of the Laws of 1930 provides that national banks may avail themselves of the exemption herein granted by complying with the provisions of this law, by the compliance with the provisions that are not in conflict with the federal law.
The states may regulate national banks so far as such regulation does not conflict with the express provision of the congressional legislation or with the purpose thereof.
National Bank v. Commonwealth, 76 U.S. 353; McClellon v. Chipman, 164 U.S. 347; Waite v. Dowley, 94 U.S. 527; First National Bk. of St. Louis v. State of Missouri, 263 U.S. 640.
A national bank has the right to contract with reference to taxation.
Clements National Bank v. State of Vermont, 58 L.Ed. 147.
In order to render an assessment for taxes illegal against a national bank it must appear that the scheme of taxation constitutes an unjust discrimination.
Clements National Bank v. State of Vermont, 58 L.Ed. 155; Merchants Mfg. Nat'l Bank v. Penn, 167 U.S. 461, 42 L.Ed. 32.
The fact that a special system of taxation of national banks may not be as favorable to the general system of taxation in an isolated case, does not render the system unlawful as discriminating against those institutions, so long as there is no intentional discrimination and not unequal in effect upon their stockholders.
People v. Feitner, 191 N.Y. 88, 83 N.E. 593.
The state banks have the greater burden and this act imposes no additional burden on the national banks, but simply gives them the benefit of the exemption by the payment of the three per cent on the surplus up to one hundred per cent of the capital stock.
It would be perfectly proper for the court to construe this three per cent assessment to be a tax, and if the court were to so construe it would be binding on the United States supreme court.
Clements National Bank v. Vermont, 58 L.Ed. 147.
The fact that appellant invested its money in tax exempt securities would not entitle it to this exemption, even though the entire capital stock and surplus were invested in such securities.
Van Allen v. Assessors, 70 U.S. 573, 18 L.Ed. 229; People v. Commissioners, 71 U.S. 244, 18 L.Ed. 344.
Argued orally by Julian Alexander and J.C. Satterfield, for appellant, and by W.H. Watkins, for appellee.
The appellant appealed to the court below from an order by the appellee raising the assessment of its personal property over its written protest, which order the court below affirmed.
The assessment complained of is against the appellant in its corporate capacity, and not on the shares of its capital stock, but it disclaims any objection to the assessment on that ground. The appellant is a national bank domiciled at Jackson, Mississippi, and in returning its property for assessment for municipal taxes it set forth that its capital stock was three hundred thousand dollars, and its surplus amounted to three hundred twenty-five thousand dollars. It then deducted from the aggregate of these two amounts the sum of three hundred thousand dollars, leaving the value of its property for assessment of taxes at three hundred twenty-five thousand dollars. The appellee declined to permit this deduction, and assessed the bank's property at six hundred twenty-five thousand dollars. The appellant's contention is that under section 11, chapter 22, Laws of 1930, and section 5219 of the United States Revised Statutes (as amended 12 U.S.C.A., sec. 548), its surplus to the amount equal to its capital stock is exempt from taxation. The first of these statutes grants such exemption to state banks and to national banks which comply with its provisions. The appellant has complied with only one of these provisions, and that is the one set forth in section 10 of the statute, which requires the investment of a bank's surplus "up to one hundred per cent of its capital in bonds of the United States, state of Mississippi, counties, districts and municipalities of the state of Mississippi."
In 1914 the legislature, by chapter 124 of the laws of that year, established a state banking department and provided an elaborate scheme for guaranteeing the payment of bank deposits by the assessment of all banks therefor. This assessment (section 35 of the statute as amended by section 33, chapter 172 of the Laws of 1922) is one-twentieth of one per cent of the average guaranteed deposits less capital and surplus of each bank. The money realized from this assessment was insufficient for that purpose, so that when the legislature met in 1930 it was confronted with an immense deficit in the amount due depositors of banks that had failed. In order to remedy the situation, chapter 22, Laws of 1930, was enacted, by which the issuance of guaranty certificates to the depositors of banks that should thereafter fail was discontinued. By section 3 thereof the assessment of one-twentieth of one per cent on unsecured bank deposits was continued, the money realized therefrom to be applied to the payment of guaranty certificates theretofore issued by the state banking department.
Sections 6-A and 11, chapter 22, Laws of 1930, are as follows: "Sec. 6-A. That for the purpose of creating a depositor's protection fund to be applied to the payment of depositors in such banks as may fail during the time required under this act for liquidating its present guaranty deficit, each bank operating under this act shall be assessed by the superintendent of banks on December 31st, of each calendar year, beginning December 31, 1930, three per cent on the part of its surplus, herein, by this act, exempted from taxation; Provided that the rate of assessment, on the surplus exempted in this act shall never, for any one calendar year, be less than three per cent, unless the depositor's protection fund so created by the assessment of three per cent shall exceed three hundred thousand dollars and in such event the rate of assessment may be lowered to such rate of assessment on the tax exempt surplus as will produce for the depositor's protection fund three hundred thousand dollars and no more for any calendar year.
"Sec. 11. Provided the surplus is invested as provided in the preceding section that to encourage banks to accumulate surplus and thereby better maintain themselves as public institutions and to justify the requirements that while operating as state banks they meet the assessment made by the state banking department from year to year to pay the outstanding guaranty certificates, the surplus of all state banks in an amount not exceeding one hundred per cent of their capital at the time of the passage of this act, or at the time of their organization if organized after the passage of this act, shall be exempt from all taxation until the outstanding guaranty certificates as described in this act are liquidated as herein provided, at which time such exemptions shall cease. In returning their property for taxation for the year 1930 and thereafter, so long as the bank pays the guaranty assessments as herein provided, each bank shall deduct such exempt surplus from the valuation of the shares of capital stock arrived at in the manner provided by section 1 of chapter 193 of the Laws of 1920, being section 8203 of Hemingway's Code of 1927, for the purpose of fixing the valuation on which state, county and municipal taxes shall be paid; provided that where banks existing under the national laws comply with the provisions of this act, the basis for the taxation of the shareholders thereof shall be the same as for state banks."
This statute was declared constitutionally valid in City of Jackson v. Deposit Guaranty Bank Trust Co., 160 Miss. 752, 133 So. 195.
The reasons advanced by the appellant in support of its contention that its surplus to an amount equal to its capital stock is exempt from taxation may be reduced in substance to this: National banks are without authority under the national banking act to comply with the requirements of sections 6-A and 11 of chapter 22, Laws of 1930, and therefore the proviso of section 11 should be construed not to require national banks to comply therewith; but if the contrary construction should be adopted, then the statute violates section 5219, Revised United States Statutes (as amended 12 U.S.C.A., sec. 548), which provides that "in the case of a tax on said shares (of national banks) the tax imposed shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state coming into competition with the business of national banks."
Chapter 22, Laws of 1930, does not contemplate, and the appellant makes no contention to the contrary, that national banks shall come under the supervision of the state banking department and become members of the state bank guaranty system. The provisions of the statute with which a national bank must comply in order to obtain the exemption from taxation on its surplus are the provisions thereof on which the exemption from taxation of the surplus of state banks is based. This exemption is clearly based on the new burdens which the statute places on banks, and which are set forth in sections 6-A, 10, and 11 thereof.
We will assume that the state could not coerce national banks into doing the things required by these sections of the statute, but our attention has not been called to any federal statute which prevents national banks from voluntarily doing things of that character in lieu of ad valorem taxes.
This brings us to the real question for decision, which is: Does a compliance with the provisions of the statute impose a greater rate of taxation on national banks than is imposed on state banks?
It is manifest that the legislature did not intend to discriminate against national banks by the enactment of chapter 22, Laws of 1930, but was attempting to exercise its undoubted power to regulate the state banks in such way as to place such banks and national banks on a parity, in so far as it exacted money from them for public purposes. In so far as the national banking act is concerned, leaving constitutional questions out of view, the state could have exacted the same ad valorem tax from state and national banks and then appropriated from its treasury the amount of taxes it collected on the surplus of these banks, or any other amount it desired, for the purposes set forth in sections 6-A and 11 of the statute. Instead of taking that course, it assessed the surplus of state banks directly for the purposes set forth in those sections in lieu of ad valorem taxes thereon, and granted to the national banks the right to voluntarily pay the same per cent on their surplus as assessed against state banks in lieu of ad valorem taxes thereon. Both methods impose the same burden and reach the same end, and it is difficult to see why national banks can complain of the one but could not of the other.
But it is said that the three per cent of their surplus which the state banks are required, and national banks are permitted, to pay goes to guarantee the payment by state banks of money deposited with them, and to that extent national banks are placed at a disadvantage in competition with state banks. What we have just hereinbefore said would seem to cover this objection also, but, aside from that, the alleged discrimination against national banks is more apparent than real, when the other burdens which the statute places on state banks are taken into consideration, the freedom from which renders the situation of national banks, if not more desirable certainly not more burdensome. We are unable to perceive how the statute puts national banks at a disadvantage in their competition with state banks, or other moneyed capital in the hands of citizens of this state, and unless such disadvantage can be said to result therefrom section 5219, United States Revised Statutes (as amended 12 U.S.C.A., sec. 548) is not violated.
Affirmed.