Citizens' Nat. Bank v. Commonwealth

Opikion of the coukt by JUDGE BARKER. An auditor’s agent instituted this proceeding in the Marion county court to require the appellant to list the shares of its stockholders for State, county, and municipal taxation for the years 1893-1902, inclusive, under the provisions of section 4241, Ky. St., 1903, and an act approved March 21, 1900 (Acts 1900, p. 65, c. 23), entitled “An act relating to the taxation of the shares of stock of national banks.” A demurrer to so much of the proceeding as sought to list in the county court the property involved herein for municipal purposes was sustained by the court, as we think, correctly; Lebanon — 58 — being a city of the fourth class, and it appearing-' from an inspection of subdivision 5 of the act for the government of cities of the fourth class (Ky. St. 1903, sections, 3531-3549, inclusive), that they are provided with an elaborate system foi\ the purpose of assessment and collection of municipal taxes on all property liable thereto. The bank then pleaded in bar to the proceeding against it the following defenses: (1) The statute of limitation. (2) As to the county taxes, two compromises with the fiscal court, by which it paid certain sums in 1898 and 1899 in full settlement of the county’s claim for taxes against it. (3) As to the claim for State taxes, it was admitted that the bank had fully paid all claims against it up to the year 1900, except for the year 1899. As to that year, it appears that the bank paid a franchise tax to the auditor, amounting to $813.75. This was pleaded in bar to any further taxation for the given year. (4) For the years 1900, 1901, and 1902, the bank alleges-that its property was duly and legally- assessed by the county board of equalization, and that it fully paid its taxes for those years. (5) The invalidity of the act of 1900. There is no dispute in this case as to the facts. The questions arising are purely of law, and will be considered in the order above named. The county court listed the stock of, appellant’s shareholders for State and county taxation for all the years as claimed in the petition of the Commonwealth, overruling all the defenses of appellant. Upon appeal to the circuit court, this judgment was substantially affirmed, of which appellant is now complaining. The plea of the statute of limitation should have been sustained. Commonwealth v. Nute, 72 S. W., 1090; 24 Ky. — 59 — Law Rep., 2138; Chicago, St. Louis & N. O. Ry. v. Commonwealth, 72 S. W., 1119; 24 Ky. Law Rep., 2124; and Commonwealth v. Citizens’ National Bank (opinion filed April 15, 1904) 117 Ky. —, 25 R., 2100; 80 S. W., 158. This eliminates all further consideration of any of the years involved in this litigation prior to five years nest before the institution of this proceeding (1902). As to the compromises with the fiscal court of Marion county, it appears that, at the time they were made, great confusion and uncertainty existed as to the legal status of national bank stock for the purpose of taxation; it being unknown whether or not, under the law as it then existed, it was taxable at all, or, at least, this was the opinion of the parties in interest here. Whereupon the bank and the fiscal court agreed that the former should pay certain sums in lieu of all claims of the latter for taxes agaifist the shares of its stockholders. These compromises, under the provisions of section 52 of the Constitution, as expounded in the case of City of Louisville v. Louisville Railway Company, 63 S. W., 14; 23 Ky. Law Rep., 390, were ultra vires and therefore void, as the court below correctly decided., The sums paid thereunder are to be credited upon whatever is found due to the county, under the principles herein enunciated, upon the return of the case to the lower court. In 1899 the franchise of the bank appears to have been listed with the auditor in the same manner as State ¡banks are required to do, and $813.75 paid to that officer as a franchise tax. This was an unauthorized procedure. Owensboro National Bank v. Owensboro, 173 U. S. 664; 19 Sup. Ct., 537; 43 L. Ed., 850. And therefore appellant should be required to list its property for that year, receiving credit for the amount paid the auditor on whatever is found due. — 60 — For the years 1900, 1901, and 1902, the .bank, by its proper officers, went before the county board of equalization, and stated all the facts concerning the shares of its stockholders that were necessary to enable those officials to lawfully assess it for taxation. The number of shares was given, their par value, and the highest price at which any of it had been sold, together with all other data by which an intelligent opinion could be acquired as to its actual cash value. Whereupon the board, having all the facts before them, assessed the stock as so much cash, at 60 per cent, of its real value. This was held by the court as a mere assessment pro taivto and! the difference between the assessment and the actual value of the whole stock was considered as omitted property, and listed for taxation for the years named. In this, we think, the court erred. It was the duty of the board of equalization to assess the property for the years involved •at its fair cash value, but the fact that they assessed it too ■low can not be remedied in a judicial procedure. Both the State and the county, in this regard, are bound by the action of their fiscal officers. It is urgently insisted by appellant that the act of March 21, 1900, regulating the taxation of national bank stock, is void, because it permits an illegal discrimination against stock in national banks, as compared, with other moneyed ■capital in the hands of individual citizens, contrary to the provisions of the federal statute authorizing its taxation. This question was fully settled in the case of Commonwealth v. Citizens’ National Bank, cited above. In that case the court, speaking through Judge Hobson, elaborately discussed the phase of the question now under consideration, and upheld the act by showing that the very purpose of the Legis — 61 — lature was to insure equality of taxation between State and national banks, and bolding that, in the assessment of the shares of the stockholders in the latter institutions, no discrimination was to be made as between it and the property of the former; that whatever deductions were authorized and given to the State banks when their property was assessed was also to be given when the shares of the-stockholders in national banks were assessed, under the provisions of the act. Appellee prayed a cross-appeal from so much of the judgment as credited appellant with over payments under the provisions of the Hewitt bill. This cross-appeal was prosecuted because the auditor had already certified to the sheriff of Marion county the amount due from the Commonwealth, and directed that officer to credit it on whatever execution came to his hands against the bank in this proceeding, and therefore, as the judgment also credits appellant with the same sum, it thereby secures a double credit. The court very properly allowed the credit in the judgment. The officer will, of course, not credit it a second time when the execution comes to his hands. For the reasons indicated, the. judgment is affirmed on the cross-appeal, and reversed on the direct appeal, for proceedings consistent with this opinion. Response of Judge Barker to petition by appellant for rehearing : These cases were considered together, as they (with slight differences) involved the same questions. The court erred in attributing to the Citizens’ National Bank the páyment of a franchise tax, when it was the Marion National Bank, which made the payment. We now make the correction — 62 — by withdrawing all that was said in this matter so far as the Citizens’ National Bank is concerned and extending it to the Marion National Bank. The act of 1900 -(Acts 1900, p. 65, c. 23) did not give the Commonwealth a new cause of action, but a new remedy for the collection of taxes on national bank stock. The stock was always assessable in the hands of its owner. The new law merely made the bank the agent for the stockholders to pay the tax on stock, which payment it recoups from the stockholders out of the dividends due them. This being true, the statute of limitation is a bar to all recovery beyond five years next before the institution of these proceedings. ■ The remuneration of the auditor’s agent is to be based on the amount actually covered into the treasury by his efforts, which, of course, means the net result of this proceeding. We do not think the county levies for the years involved were void. Petition for rehearing and other modification, except as herein indicated, overruled.