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averred in the bill that the act of March 21, | permitting the former decree enjoining the 1900, which undertakes to impose taxes for the years 1893 and following, is unconstitutional and void, and operates to discriminate against the complainant, in violation of § 5219 of the Revised Statutes of the United States (U. S. Comp. Stat. 1901, p. 3502). The defendants having filed a plea to the jurisdiction and a general demurrer to the bill, upon motion for a temporary injunction, attempt to enforce taxes levied or assessed upon the shares of capital stock at any time previous to March 21, 1900, were enjoined. 103 Fed. 523.
assessment and levying of taxes before the passage of the law to stand. 129 Fed. 792.
From so much of the decree as enjoined the taxes assessed prior to March 21, 1900, the city appealed; from so much thereof as refused the injunction and dismissed the bill as to taxes assessed after that date, the | bank appealed. Both appeals are now before this court:
December 17, 1900, a decree was entered, but, not being final, the writ of error was dismissed. 185 U. S. 270, 46 L. ed. 906, 22 Sup. Ct. Rep. 645. After the case was sent back to the circuit court the prior decision in that court was followed, and it was further held that the judgment of the state court was not a bar to the right to collect taxes for other years than the year directly involved in the judgment set up, and that, as the Hewitt law and its acceptance by the bank had been conclusively held not to constitute an irrevocable contract as to taxes between the state and the complainant, and as the law was valid as to future taxation, the injunction could not be granted as to taxes assessed under the law of March 21, 1900, after its passage. A decree was, therefore, entered, dismissing the complainant's bill as to taxes levied after said date, and
Messrs. Shelley D. Rouse, Edmund F. Trabue, James S. Pirtle, John C. Doolan, and Attilla Cox, Jr., for the bank.
Messrs. F. J. Hanlon, J. H. Hazelrig, and Ira Julian for the city of Covington.
Mr. Justice Day delivered the opinion of the court:
That the acceptance of the provisions of the so-called Hewitt law did not constitute an irrevocable contract, releasing the bank from taxes upon compliance with its terms, has been settled. Bank Tax Cases, 102 Ky.
174, 44 L. R. A. 825, 39 S. W. 1030; Citizens' Sav. Bank v. Owensboro, 173 U. S. 636, 43 L. ed. 840, 19 Sup. Ct. Rep. 530. Reference is made to the various cases leading up to this result in Deposit Bank v. Frankfort, 191 U. S. 499, 508, 48 L. ed. 276, 279, 24 Sup. Ct. Rep. 154. We are therefore left upon this branch of the case to consider the effect of the judgment of the state court of Kentucky, set up in the com
of no effect in so far as the same provides for | 1892, said bank shall be excepted from the 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 1892, any adequate mode of taxing national banks, while state banks are now, and have been ever since 1892, taxable for all purposes, state and local; therefore:
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
"Be it enacted by the General Assembly of state taxes required by this act. the Commonwealth of Kentucky:
"Section 1. That the shares of stock in each national bank of this state shall be subject to taxation for all state purposes, and shall be subject to taxation for the purposes of each county, city, town, and taxing district in which the bank is located.
"Sec. 2. For 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 bank shall be 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 1892, 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 bank has heretofore, for any year or years paid taxes upon its franchise as provided in article three (3) of the revenue law of
"Sec. 3. All assessments of shares of stock contemplated by this act shall be entered upon the assessor's books, certified, and reported by the assessing officers as assessments of real estate are entered, certified, and reported, and the same shall be certified to the proper collecting officers for collection as assessments of real estate are certified for collection of taxes there
"Sec. 5. The assessments of said shares of stock and collection of taxes thereon, as contemplated by this act, may be enforced as assessments of real estate, and collection of taxes thereon may be 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 banks as nearly as may be consistently with said article three (3) of the revenue law and said decision of the supreme court.
"Sec. 7. Whereas, it is important that state banks and national banks should be taxed equally for all purposes, an emergency exists, and this act shall take effect and be in force from and after its passage."
Approved March 21, 1900.
plainant's bill as an adjudication of the | ferent rule prevails in the courts of the rights of the parties and a final determina- United States. The reasons therefor were tion that the acceptance of the Hewitt law had the effect of a valid contract. When this case was before the circuit court for the second time (129 Fed. 792), Judge Cochran, after an elaborate review of the Kentucky cases, reached the conclusion that, as the taxes involved in the case in which the adjudication was had were for a different year than those involved in this suit, the former judgment did not have the effect of an estoppel between the parties, being only conclusive, under the Kentucky decisions, as to taxes in the years involved in the suit in which the judgment was rendered. We do not doubt that this is the settled law of the supreme court of Kentucky. Nor does it make any difference, in the view which that court takes of the matter, that the adjudication as to the right to collect the taxes involved the finding of an exemption by contract, which included, not only the taxes for the years in suit, but all taxes which might be levied under the authority of the contract. The ground upon which the court based its decision with reference to the effect of such adjudication is stated in the case of Newport v. Com. 106 Ky. 444, 45 L. R. A. 518, 50 S. W. 845, 51 S. W. 433, as follows:
"The only question remaining for decision is upon the plea of res judicata. The plea in this case avers that the subject-matter of the former suit was identical with that involved in this action, and that the facts were the same in both actions, except that the former action attempted to collect a tax for the year 1893, and the present action was attempting to collect a tax for the year 1894. .
"The authorities seem to hold that when a court of competent jurisdiction has, upon a proper issue, decided that a contract, out of which several distinct promises to pay money arose, has been adjudged invalid in a suit upon one of those promises, the judgment is an estoppel to a suit upon another promise founded on the same contract. But taxes do not arise out of contract. They are imposed in invitum. The taxpayer does not agree to pay, but is forced to pay, and the right to litigate the legality of a tax upon all grounds must of necessity exist, regardless of former adjudications as to the validity of a different tax."
It is unnecessary to cite the cases; they will be found in Judge Cochran's opinion. It is sufficient to say that, if this case had been decided in the state court in Kentucky, the adjudication pleaded herein, not involving taxes for the same years as those now in controversy, would not avail as an estoppel between the parties. It is true that a dif
stated in an opinion by Mr. Justice White,
The case of Deposit Bank v. Frankfort
As to the taxes for the years prior to the passage of the act of March 21, 1900, it is
argued by the bank that to give this retro- | 109 Ky. 526, 59 S. W. 860, has held that active effect to the law will be to deprive it and its stockholders of their property without due process of law, and will be in violation of § 5219 of the Revised Statutes, prohibiting discrimination against national banks and their stockholders. The act of March 21, 1900, as stated in the preamble, was passed because of a decision of this court holding prior legislation of the state undertaking to tax the property of national banks unconstitutional. Owensboro Nat. Bank v. Owensboro, 173 U. S. 664, 43 L. ed. 850, 19 Sup. Ct. Rep. 537. In the Owensboro Case it was held that § 5219, Rev. Stat. U. S., was the measure of the power of the state to tax national banks, their property, or franchises, which power was confined to the taxing of the stock in the name of the shareholders and the assessment of the real estate of the banks, and that taxation under the laws of the state of Kentucky upon the franchise of the bank was not within the purview of the authority conferred by the act of Congress, and was therefore illegal. Section 5219, of the Revised Statutes of the United States is as follows:
there was ample statute law in that state for the taxing of shares in national banks under the laws of that state providing for the taxation of real and personal property of every kind, and that the provision that the individual shareholder in a corporation shall not be required to list his property therein so long as the corporation pays the taxes on its property of every kind, impliedly requires the individual to list his shares and pay the tax in the absence of the return required by law of the corporation. In that case the court held that there was nothing in its decisions running counter to § 5219. These views were further enforced in Com. v. Citizens' Nat. Bank, 25 Ky. L. Rep. 2100, 80 S. W. 158; London v. Hope, 26 Ky. L. Rep. 112, 80 S. W. 817; Citizens' Nat. Bank v. Com. 25 Ky. L. Rep. 2254, 80 S. W. 479. Following the state court in the interpretation of its own statutes, it may be said that, as to shareholders residing in Kentucky and over whom the state has jurisdiction, the supreme court of that state has construed its statutes as requiring shareholders in national banks for the years 1893 to 1900, inclusive, to return their shares for taxation; and if they did not make the return the duty was required of the corporation. In this view of the law it may be that, as to local shareholders, the act of March 21, 1900, as held by the supreme court of Kentucky, created no new right of taxation, but gave simply a new remedy, which by the law, is operative to enforce pre-existing obligations. It may be admitted that § 5219 permits the state to require the bank to pay the tax for the shareholders. First Nat. Bank v. Kentucky, 9 Wall. 353, 19 L. ed. 701; Van Slyke v. Wisconsin, 154 Ụ. S. 581, and 20 L. ed. 240, 11 Sup. Ct. Rep. 1168; First Nat. Bank v. Chehalis County, 166 U. S. 440, 41 L. ed. 1069, 17 Sup. Ct. Rep. 629.
"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 nonresidents of any state shall be taxed in the city or town where the bank is located, and not elsewhere. Nothing herein But there is nothing in the general statshall be construed to exempt the real prop- utes of Kentucky before the act of March erty of associations from either state, 23, 1900, specifically requiring national county, or municipal taxes, to the same ex-banks to return shares of stock in the corpotent, according to its value, as other real property is taxed."
Under the new taxing law (act of March 21, 1900), it is declared to be the purpose to require the bank to return the shares of stock for the years prior to 1900, and since the adoption of the revenue law of 1892, with the privileges and deductions stated in § 3 of the act. Notwithstanding the prior revenue law had been held invalid, and there was no statute specifically taxing these shares of national bank stock on the statute books of Kentucky, prior to the passage of the act of March 21, 1900, the supreme court of Kentucky, in the case of Scobee v. Bean,
ration when such shares are held by persons domiciled beyond the state. This situs of shares of foreign-held stock in an incorporated company, in the absence of legislation imposing a duty upon the company to return the stock within the state as the agent of the owner, is at the domicil of the owner. Cooley, Taxn. 16. It is true that the state may require its own corporations to return the foreign-held shares for the owner for the purposes of taxation. Corry v. Baltimore, 196 U. S. 466, ante, p. 297, 25 Sup. Ct. Rep. 297. Section 5219, Rev. Stat., authorizes the state to tax all the shares of a national banking association,
p. 3498), requiring a list of the shareholders to be kept by the bank, has the effect to levy taxes. It is a limitation upon the right of the state, and the state must not discriminate against national banks by the use of methods of taxation differing from those in use in taxing other moneyed capital in the hands of individual citizens.
including those owned by nonresidents, as | Revised Statutes (U. S. Comp. Stat. 1901, well as those owned in the state, in the city or town where the bank is located; but this section does not itself impose the tax; it is authority for state legislation to thus tax national bank shareholders. And this statute is express authority to the state by appropriate legislation to make the bank the agent of the shareholders for the purpose of returning the shares and paying the taxes thereon.
It is averred in the amended bill, and, the answer having been stricken from the files and the case submitted upon the plea to the jurisdiction and general demurrer, it must be taken as true, "that during said years [1893 to 1900] many of its shareholders were nonresidents of the state of Kentucky, who, in many instances, have sold and transferred their shares of stock during said time."
In Com. v. Citizens' Nat. Bank, 25 Ky. L. Rep. 2100, 80 S. W. 158, the Kentucky court of appeals seems to have held that a national bank might be required, under § 4241, Ky. Stat. 1903, to return the shares held in it for the years 1893 to 1900, inclusive, as omitted property. In that case it is said: "It was held under the previous statute that the shares of stock in national The statutes of the state of Kentucky, banks might be assessed to the shareholder which have been construed by the supreme by the assessor, and should be given in by court of that state in the cases cited, to rethe shareholder in the list of his personal quire the payment of taxes by the shareproperty. Scobee v. Bean, 109 Ky. 526, 59 holders or by the bank for its shareholders, S. W. 860. The act of March 21, 1900, did can have reference only to shareholders not [it was held], therefore, make that tax- within the jurisdiction of the state. Whether able which was not taxable before, but sim- the system operates as a discrimination ply provided another mode for the assess- against national banks within the prohibiment of the shares of stock and the payment tion of § 5219, involving, as it does, a right of the taxes. It was the duty of the assessor of Federal creation, must be ultimately deto make the assessment. It was also the termined in this court. The act of March duty of the president and cashier of the 21, 1900, imposes upon the bank a liability bank to list the shares of stock with the for taxes assessed upon its shareholders, assessor; but when the assessment was not whether within or without the state. This made the property was simply omitted from liability did not exist before the passage of the tax list, and the sheriff is authorized the act, and in Com. v. Citizens' Nat. Bank, by § 4241, Ky. Stat.  to institute the 25 Ky. L. Rep. 2100, 80 S. W. 158, the court proceeding to have any omitted property of appeals of Kentucky held that the statassessed." And the court further held the utes of the state made the bank liable for bank liable for the penalty imposed for not a penalty of 20 per cent for the years 1893 listing taxable property. The ground upon to 1900, inclusive. It seems to us that to which this judgment rests is that share-permit the statute to require the bank to holders were bound to return the shares in return the shares of such foreign-held stock, the years from 1893 to 1900 under the then and be subjected to a penalty in addition, existing state law, and the act of 1900 made is imposing upon national banks a burden the bank the agent of the shareholders, and not borne by other moneyed capital within did not require a new duty, but only im- the state. In support of the equivalency posed the duty upon the agent as a means of taxation, which it is the purpose of of making effectual the former obligation § 5219 to require, this court said, in Owensof the shareholders. None of the Kentucky boro Nat. Bank v. Owensboro, 173 U. S. 664, cases deals with the effect of the require- 676, 43 L. ed. 850, 855, 19 Sup. Ct. Rep. ment under the act of 1900, that the bank 537, 540: "The alleged equivalency, in return the shares of stock held by foreign order to be of any cogency, must of necessity stockholders, who clearly were not required, contain two distinct and essential elements, under the previous laws of that state, to--equivalency in law and equivalency in return shares of stock when neither the shares nor the owners were within the state.
Without considering the question of constitutional power to tax nonresident shareholders by means of this retroactive law, it seems to us that, in imposing upon the bank the liability for the past years, for taxes and penalty, upon stock held without the state, and which before the taking effect of the act under consideration it was not
required to return, there has been imposed upon national banks in this retroactive feature of the law a burden not borne by other moneyed capital in the state. This law
sion so acquired is good as against the trus tee under the state laws.
makes a bank liable for taxes upon property Argued March 7, 1905. Decided April 17, beyond the jurisdiction of the state, not required to be returned by the bank as agent for the shareholders, by a statute
passed in pursuance of the authority dele-IN ERROR to the Superior Court of the
gated in § 5219; thus imposing a burden not borne by other moneyed capital within
We think the circuit court was right in that part of the decree which enjoined the collection of taxes against the bank for the years 1893 to 1900, inclusive.
As to the alleged discrimination against share holders in national banks because the assessment of the property of state banks is upon the franchise, and not upon the shares of stock, there is nothing in the bill to show that this difference in method operates to discriminate against national bank shareholders by assessing their property at higher rates than are imposed upon capital invested in state banks. And, as to the deduction of the value of real estate and other deductions allowed to state banks, the supreme court of Kentucky has held that all deductions allowed to state banks must be allowed in like manner in assessing the property of shareholders in national banks. Com. v. Citizens' Nat. Bank, 25 Ky. L. Rep. 2100, 80 S. W. 158. Nor does the allegation that in cities of the first, second, and third class state banks are assessed upon their shares for city taxation, but upon their franchises and property for state and county taxation, in the absence of averments of fact showing that thereby a heavier burden of taxation is imposed upon national than state banks in such cities, warrant judicial interference for the protection of shareholders in national banks. Davenport Nat. Bank, v. Board of Equalization, 123 U. S. 83, 31 L. ed. 94, 8 Sup. Ct. Rep. 73. Judgment affirmed.
State of Massachusetts for the County of Worcester in that state to review a judgment for plaintiff in an action by a trustee in bankruptcy to recover an alleged preference, entered pursuant to the mandate of the Supreme Judicial Court of that state on an appeal from a judgment of the Superior Court in favor of defendant. Reversed.
See same case below, 184 Mass. 361, 63 L. R. A. 738, 100 Am. St. Rep. 562, 68 N. E.
The facts are stated in the opinion. Messrs. William H. Brown and Henry W. Putnam for plaintiff in error.
Mr. Charles T. Tatman for defendant in error.
Mr. Justice Holmes delivered the opinion of the court:
This is an action brought by a trustee in bankruptcy, the defendant in error, to recover an alleged preference. The case was heard on agreed facts, which may be summed up as follows: Davis filed a voluntary petition in bankruptcy on May 23, 1901. Two years before, on May 6, 1899, being then solvent, he executed to the plaintiff in error, Humphrey, a mortgage of his present and after-acquired stock in trade and fixtures, which covered the goods in controversy; but the mortgage was not recorded, and the goods remained in Davis's possession. On April 30, 1901, Humphrey, having reasonable cause to believe that Davis was insolvent, took possession of the goods, in accordance, it fairly is implied, with the terms of the mortgage, although against the wishes and protest of Davis. The defendant in error was qualified as trustee on June 18, 1901, and at once demanded the goods without payment of the mortgage debt. The case went from the superior court to the supreme judicial court of the state, and the latter court ordered judgment for the plaintiff (184 Mass. 361, 63 L. R. A. CHARLES T. TATMAN, Trustee in Bank- 738, 100 Am. St. Rep. 562, 68 N. E. 844),
(198 U. S. 91)
JOHN B. HUMPHREY, Plff. in Err.,
ruptcy of Nelson H. Davis.
which was entered below, and thereupon the case was brought here.
It may be assumed, in view of the recent decision in Thompson v. Fairbanks, 196 U. S. 516, 25 Sup. Ct. Rep. 306, 49 L. ed. 577, that, if the taking possession was good as against the trustee in bankruptcy so far as the Massachusetts law is concerned, it We assume also, should be held good here.
Taking possession of the mortgaged property under an unrecorded chattel mortgage does not amount to a preference voidable by the mortgagor's trustee in bankruptcy, although such action was taken within four months of the bankruptcy proceedings, if a posses- without deciding, that if, as against the