People ex rel. Bridgeport Savings Bank v. Feitner

furnished by such bank or banking association shall be deemed to contain the names of the owners of such shares as are set opposite them, respectively, for the purpose of assessment and taxation.” And section 24 provides that-: “In assessing the shares of stock of banks or banking associations, organized under the authority of this State or the.United States, the assessment and. taxation shall not be at a greater rate than is made or assessed upon other monied capital in the hands of individual citizens "of this State. The value of each share of stock of each bank and banking association shall be ascertained and fixed by adding together the amount of the capital stock, surplus and undivided profits of such bank or banking association, and by dividing the result by the number of outstanding shares of such bank or banking association. The rate of tax upon the shares of stock of banks and banking associations shall be one per centum upon the value thereof, as ascertained and fixed in the manner hereinbefore provided, and the owners of the stock' of banks and banking associations shall be entitled to no deduction from the taxable value of their shares because of the personal indebtedness of "such owners or for any other reason whatsoever. Complaints in relation to the assessments of the shares of stock of banks and banking associations made under the provisions of this act shall be heard and determined as provided in article two, section thirty-six, of the Tax Law. * * * .” As required by section 23, the chief fiscal officers of the banks whose shares are owned by relator reported to respondents their respective conditions. The relator gave notice on June first that it claimed to be exempt from assessment on account of its debts, but was refused a hearing, The stocks were assessed prior to October 30, 1901, and notice given the respective banks on October 31, 1901, whereupon relator sued out the writ herein. The tax rate for 1901, in the borough of Manhattan, city of New York, where all the banks are located, was 2.31733 per cent, while the rate fixed by section 24 (supra) for bank stocks is one per cent upon their value as determined by said section. The omission to provide by statute for a hearing of the individual owners of stocks in banks, before determining the value of the shares for purposes of taxation, is claimed by relator to deprive it of its property without due process of law, and to be contrary to the Constitutions

both of this State and of the United States. The only provision for the hearing of. complaints of individual shareholders is contained in section 24 (supra), which says“ Complaints in relation to the assess-' ments of the shares .of stock of banks anc( banking associations, made, under the provisions of this act, shall be heard and determined as' jwovided in article two, section thirty-six, of the Tax' Law.” Section 36 relates to assessment rolls completed on or before August-first in each year. Thus the time, for hearing complaints, as provided for by sections 24 and 36, expires before the first step is taken to assess bank stocks as provided by section 24, and relator is thus deprived of an individual hearing. What is “ due process of law” is a matter that is always determined by courts upon the facts of each case. As said in Glidden v. Harrington ( 189 U. S. 255 ), “ such notices shall be given as are suitable in a given case and it is only where the proceedings are arbitrary, oppressive or unjust that they are declared -to be not due process of'law.” Again in the case of Turpin v. Lemon ( 187 U. S. 51 ) the Supreme Court-of the "United States, said: “Exactly what due process of law requires in the assessment and collection of general taxes has never yet been decided by this court, although we have had frequent occasion to hold that, in proceedings for the condemnation of land under the laws of eminent, domain, or for the imposition of special taxes for local improvements, notice to the owner at some stage of the proceedings, as well as an opportunity to defend, is essential (citing cases). But laws for the assessment and collection of general taxes stand- upon a somewhat .different footing, and are • construed with the utmost liberality,-sometimes even to the extent of holding that no notice whatever is necessary.” In the case at bar relator has an opportunity .to contest the validity of the tax in this proceeding when it becomes practically de novo héaring and obtain for itself due and legal disposition of its objections to the tax imposed. In Hagar v. Reclamation District No, 108 ( 111 U. S. 701 ) the Supreme Court of the United States again stated : “ In some States, instead.of a board of revision or equalization, the assessment may be revised by proceedings in the courts and be then corrected if erroneous, or set aside if invalid ; or objections to the validity or amount of the assessment may be taken when the attempt is made to enforce it. In such cases all [Le opportunity is giyeu tQ the taxpayer to he hearcj. respecting the

county or municipal purposes.' (People ex rel. Cornell Steamboat Co. v. Dederick, 161 N. Y. 195 .) By comparing section 21 with section 24 it appears that owners of personal property generally throughout this State are taxed for their personal property, less any debts they may owe which' were not incurred in the purchase of nondaxable property at the same rate as-all .other property within the tax district where the owner resides ; while. as. to bank shares the rate is one per cent upon their value without any right to-a-deduction for debts of the owner, and the taxis payable in' the tax district where the bank is located. The relator relies principally upon the case of People v. Weaver ( 100 U. S. 539 ), which was decided under chapter 161 of the Laws of 1866, the Tax Law of. this State then in forcé. The facts are the same as in the .case at bar. The debts of the person taxed were not deducted from the amount assessed against him on account of his ownership of bank shares, although it was not disputed that- he would have had, the right in the event that the assessment was against his pérsonal property other than bank shares. The court said: “ It cannot be disputed — it. is not disputed here—nor is it denied in the- opinion of the State court, that the effect of the State.law is to permit a citizen of. .New York, who lias monied'capital invested otherwise ’ than in banks to deduct from that-capital the sum of all his debts, leaving . the remainder alone subject to taxation, while- he whose money is invested in shares of bank stocks,can make nó such deduction. Nor, inas.mticli as nearly all the banks in that State and in all others are national -banks, can it'be -denied that the owner of such .shares' who owes debts is subjected to a heavier tax on account of those shares than the owner of moneyed capital otherwise. invested, who also is in debt, because the latter can diminish- the amount of his tax by the amount of his indebtedness, while the former cannot.. That this works a discrimination against the national bank shares as subjects of taxation-," unfavorable to the owners of such shares,, is also free from doubt.” The court held that the word “ rate ” in section 5219 did not mean the tax rate alone, but that the assessment, the rate of assessment and the valuation must all be taken •together' when considering the question of whether the act of - the commissioners in the method of enforcing the tax worked a d-iscrimination. Were that decision the only one upon this- question,

a rule prescribed by the Igw. . In fixing those limits it became necessary to prohibit the States from imposing such a burden as would prevent the capital of individuals from freely seeking investment in institutions which it was the express object of the law to establish and promote. The business of banking, including all the operations which distinguish it, might be carried on under State laws, either by corporations or private persons, and capital in the form of money might be invested and employed by individual citizens iii many sin.gle and separate operations forming substantial parts of the business pf banking. A tax upon the money of individuals, invested in the form of shares of stock in national banks would diminish their valué as an investment and drive the capital so invested from this employ-. ment, if at the same time similar investments and similar employments under the authority of State laws were exempt from an equal burden. The main purpose, therefore, of Congress in fixing'limits to State taxation on investments in the shares of national banks was to render it impossible for the- State, in levying such, a tax, to create and foster an-unequal and unfriendly Competition by favoring insti-' tntions or individuals carrying on'a similar business and operations and investments of a like character.” And it then seemed to the court necessary to ascertain what the words “ other moneyed capital in the hands of individual citizens,” as used in the statute, meant, and this was defined in the same case and followed later in other cases as follows: “ Of course, it includes shares' in national banks; the. usé of the word ‘other’ requires that. If bank shares were not moneyed capital the word ‘ other ’ in this connection would be without significance. But ‘ moneyed capital ’ does not mean all capital, the value of which- is- measured in terms of money. In this sense, all kinds of real and personal property would ■ be embraced by it, for they all have an estimated value as the-subjects of sale. Neither does it necessarily include all forms of investment in which the interest of the owner is expressed in money. Shares, of stock in railroad -companies, mining companies, manufacturing companies and other corporations are represented by certificates showing that the owner is entitled to an interest, expressed in money value, in the entire capital and property of the éorporation, but the property of the corporation which constitutes its invested capital may consist mainly of real and personal property, which, in the hands of individuals, no

one would think of calling moneyed capital, and its business may not consist in any kind of dealing in money, or commercial representatives of money. So far as the policy of the government in reference to national banks is concerned, it is indifferent how the States may choose to tax such corporations as those just mentioned, ■ or the interests of individuals in them, or whether they should be taxed at all. Whether property interests in railroads, in manufacturing enterprises, in mining investments and others of that description are taxed or exempt from taxation, in the contemplation of the law, would have no effect upon the success of national banks.. There is no reason, therefore, to suppose that Congress intended in respect to these matters to interfere with the power and policy of the States. The business of banking as defined by law and custom consists in the issue of notes payable on demand, intended to circulate as money where the banks are banks of issue; in receiving deposits payable on demand; in discounting commercial paper; making loans of money on collateral security; buying and selling bills of exchange, negotiating loans and dealing in negotiable securities issued by the government, State and national, and municipal and other corporations. These are the operations in which the capital invested in national banks is employed, and it is the nature of that employment which constitutes it in the eye of this, statute ‘ moneyed capital.’ Corporations and individuals carrying on these operations do come into competition with the business of national banks, and capital in the hands of individuals thus employed is what is intended to be described by the act of Congress.” This case is approved and followed in Aberdeen Bank v. Chehalis County ( 166 U. S. 440 ); National Bank of Wellington v. Chapman (173 id. 205), and Commercial Bank v. Chambers (182 id. 556). The Chambers case was one arising under the laws of Utah and it approved the distinction heretofore pointed out between “ moneyed capital ” and capital which does not comeinto competition with the businessof national banks. It also approved of the decision of the courts of Utah in refusing to deduct the value of real estate ownéd by the bank outside the State, though individual non-resident owners would not be taxed for such real estate. The Chapmam case was one arising under the laws of Ohio, and again the distinction between “ moneyed capital ” and capital not coming into competition with national

banks was approved. The court there pointed out ■ that, the Ohio law was- not intended to be unfriendly to or to discriminate against owners of national bank shares, and that exemptions from taxa-tion made for reasons of public policy and -not as an unfriendly discrimination against investments in national bank shares could not be regarded as forbidden by the statute. From the clearly defined purpose of the act of Congress as expressed by the Supreme Court' of the United States in the Mercantile Bank v. New York case, and from the construction of the term “ moneyed capital ” in the same case I have arrived at the conclusion that Unless the owner of national bank shares can show that there is some unfriendly discrimination against national bank shares-as a whole throughout the State that the tax is right and -should be" Upheld. I can see no reason for finding unfriendly discrimination against national- bank shares by the respondents, because in the one instance the individual owner of national bank-shares may have debts which lie could have deducted from his assessment for personal-property, but which the law says he cannot deduct from -the amount assessed, against him for national bank shares. ' The State has. fixed the rate of assessment on bank shares at one per cent, while in the. city of Hew York for the year 1901 the rate on property generally was, over. two and-thirty-one ' One-hundredths per cent. Couple this with- the fact that this rate of assessment was applied not to the actual salable market value of the shares of said stock,, but to the book value, and then applying the key. to the proper interpretation of the act of Congress, to wit, its policy and purpose. (Mercantile Bank v. New York, supra), it becomes exceedingly difficult to Spell out a discrimination forbidden by such act from tfie mere fact that in addition to the favor shown both in the rate applied and the valuation- taken, there'was not th<. further one given of allowing the deduction of debts.

. Writ dismissed, with costs.