Bank for Savings v. Collector

Mr. Justice CLIFFORD delivered the opinion of the court. * Immediate purpose of the suit in this case was to restrain the respondent, as the collector of internal revenue for the sixth collection district of the State of New York, from collecting certain internal duties or taxes assessed against the corporation complainants, by7 the commissioner of internal revenue. Charter of the complainants was granted by a special act of the legislature of the State of New York, passed on the twenty-sixth day of March, 1819, and entitled An Act to incorporate an association by the name of a Bank for Savings in the City of New York. Statement of facts as proved or admitted shows that the complainants did business in the city of New York under that act of incorporation, and certain other acts of the legislature of the State, as detailed in the record from the date of their charter to the time of the filing of the bill of complaint. Complainants denied that they were subject to the payment of any internal duties or taxes as a savings bank, and they accordingly neglected and refused to make any returns either to the commissioner of internal revenue or to the assessor of the district. Failing to receive such returns the assessor of the district estimated the average amount of their deposits for the periods specified in the record, and certified the same to the commissioner of internal revenue as required by law ■ in ease of delinquency7. ' Assessor’s estimates as certified were adopted by the commissioner as correct, and he thereupon proceeded to assess the duties or taxes in controversy, adding thereto certain penalties for the neglect and refusal to make the returns as *508 required by the act of Congress, and directed the respondent as the collector of that collection district to collect the amount so estimated and assessed. 1. Exemption from liability to taxation in the case is claimed by the complainants upon the ground that the corporation is not a bank, either in the ordinary and popular sense or in the legal sense of that word, and they allege that they have never transacted any business of banking within the meaning of the acts of Congress under which the duties or taxes were estimated and levied. Respondent in his answer alleged that the complainants were an incorporated savings bank within the usual and proper meaning of that term, and that as such they have been and were engaged in the business of bankiug .as assumed by the revenue officers. Wholly unable to agree in opinion, the judges of the Circuit Court certified five questions to this court for decision, but in the view taken of the case it will not be necessary to examine the first two, as the answers to he certified to the other three will enable the Circuit Court to dispose of the cause. 2. Substantial import of the third question is whether the complainants are liable under the internal revenue acts to pay a duty of one-twenty-fourth of one per cent, per month on the average amount of money which they receive and invest or loan, as described in the statement of facts exhibited in the record. Their powers are set forth in their charter and the other acts of the legislature to which reference has been made. Purpose of the charter as described in the preamble is to encourage in the community habits of industry and economy, by receiving and investing in government securities or in Federal or State stocks, such small sums of money as may be saved from the earnings of tradesmen, mechanics, laborers, minors, servants, and others. They are constituted by the first section of the charter a body corporate and politic by the name of the Bank for Savings in the City of New York, and the provision is, that by that name they shall have perpetual succession, and that they shall be capable of suing *509 and being sued, pleading and being impleaded, and defending and being defended in all courts and places whatsoever. Power to hold real and personal estate to such an amount as may be necessary for the purposes of the incorporation is also conferred, provided that the clear annual value thereof, exclusive of profits arising from interest or from tbe sale of any stock in which the deposits made in the bank may be invested, shall not exceed the sum of five thousand dollars. Trustees or managers are appointed by the act of incorporation, but they are forbidden to receive any pay or emolument for their services, and it is provided that they shall not “issue any notes, make any discounts, or transact any business which belongs to or is transacted by incorporated banks, other than is herein specified,” Funds of the corporation are required to be used and appropriated for the promotion of the objects stated in the preamble, and the second section of the charter provides, in effect, that the association shall receive as deposits, from persons of the description mentioned in the recital to the act, all sums of money which may, on the terms specified, be offered for that purpose, and that the same shall be invested accordingly, and shall be repaid to the respective depositors when required, and at such times, and with such interest, and under such regulations as the trustees shall from time to time prescribe. 3. Such trustees may make by-laws and regulations, and they are expressly required by the charter to regulate the rate of interest to be allowed to depositors, so that they shall receive a ratable proportion of all the profits of the bank after deducting all necessary expenses. Authority is conferred upon the trustees to manage the affairs of the bank, and for that purpose to appoint clerks and fix their salaries, but they are required to make an annual report of their funds to the legislature and to common council of the city. Subsequent enactments very much enlarged the powers of the trustees, and subjected the bank to a much closer scrutiny by the proper authorities of the State. Investment of the funds under those additional provisions may be made in any State stocks, where the faith of the State is pledged for *510 their redemption, or the moneys received on deposit may be loaned on bonds secured by mortgage of real estate in the city where the bank is located. They are also authorized to accumulate and “ hold invested” a surplus fund, not exceeding ten per cent, on the amount of deposits, as a protection to depositors against loss in case of tbe reduction in the market price of their securities. Bank commissioners have the power to visit and inspect the bank under existing laws whenever they deem it necessary, or whenever thereto required by the comptroller of the State, and they are required to report the general condition of the bank to the legislature once at least in every three years. 4. Intention of Congress undoubtedly was, to impose a duty of one-twenty-fourth of one per centum each month, upon the average amount of deposits of money, subject to payment by check or draft, or represented by certificates of deposit, or otherwise, whether payable on demand, or at some future day, if made with any person, bank, association, company, or corporation engaged in the business of banking, except deposits with associations which were taxed under and by virtue of the áct “ to provide a national currency,” and with savings bank having no capital stock, and whose business was confined to receiving deposits and loaning the same on interest, for the benefit of the depositors only, and which were doing no other business of banking.* Confirmation of that view is derived from the language of the next clause, which imposes the same duty upon the average amount of the capital of any bank, association, company, or corporation, or person engaged in the business of banking, beyond the amount invested in United States bonds. Savings banks having no capital are not included in that provision; nor are they included in the next succeeding clause, which imposes a duty of one-twelfth of one per cent, each month upon the average amount of circulation issued by any bank, association, corporation, company, or person, including as circulation, all certified checks, and all notes *511 and other obligations calculated or intended to circulate or to be used as money. Such savings banks having neither capital nor circulation, did not fall within the words of either of those clauses, and consequently it did not require any proviso to exclude them from the operation of those provisions. But those banks, as banks of deposit, did fall directly within the words of the first clause of the section, and therefore it became necessary to. insert the proviso near the close of the section, to exclude them from the otherwise plain meaning and operation of the clause. Precise language of the proviso is, that the section shall not apply “ to any savings bank having no capital stock, and whose business is confined to receiving deposits, and loaning the same on interest, for the benefit of the depositors only, and which do no other business of banking.” More exact description of the corporation complainants than is expressed in the language of that proviso, could not be conceived; and it amounts to a legislative enactment, that the receiving of deposits and loaning the same on interest, for the benefit of the depositors, is a business of banking. Throughout the section the distinction between deposits, capital, and circulation as separate objects of taxation, is clearly maintained and enforced, both in respect to the monthly returns and the monthly payment of the duties. Same remarks apply to the seventy-ninth section of the act, which requires bankers to pay a certain sum for a license, and defines the meaning of the word as used in the section. Doubt cannot be entertained that the definition as there given would have included savings banks having no capital- stock, but for the proviso annexed to the clause, which is in the very words of the proviso under consideration. 5. Argument for the complainants is, that the proviso was only inserted out, of abundant caution, and that it was unnecessary, inasmuch as such an association was not included in the substantive words of the section; but it is not possible to sustain that proposition for the reasons already given, as well as others -which will be briefly stated. 1. Unquestion *512 ably the complainants receive deposits as one of the primary purposes of the charter, and the second by-law of the bank provides, that “deposits of one dollar, or any number of dollars, may be received, but are not, in the whole, to exceed one thousand dollars from any depositor, without the special direction of the attending committee.” General rule is, that no depositor is allowed to have deposits beyond one thousand dollars; but he may have that amount, and, in special cases, when it is made to appear that he can find no other investment, he may exceed that amount. 2. By the terms of their charter they are obliged to pay each depositor, when required, “ and at such times, and with such interest, and under such regulations as the trustees shall from time to time presci-ibe.” Obligation of repayment exists throughout, and it cannot make any difference as to the liability of the complainants in this case that the entries are made in a pass-book, and that the depositors can only obtain their deposits at certain stated periods. Deposits are made to be invested for the benefit of the depositors, and the bank is under obligations to repay the amount when demanded, agreeably to the bylaw's and charter. 3. Only remaining condition to bring the case within the words of the body of the act is, that the deposits should be made with a person, bank, association, company, or corporation engaged in the business of banking. Agreed case shows that the corporation complainants were engaged in receiving deposits, and loaning the same on interest for the benefit of the depositors. Irrespective of the definition given to that phrase in the language of the proviso, the same conclusion must be adopted from the facts exhibited in the statement of the case, unless it can be established that the receiving of deposits by a chartered company, and loaning or investing the same for the benefit of the depositors, is not a business of banking. Banks, in the commercial sense, are of three kinds, to wit : 1, of deposit; 2, of discount; 3, of circulation. All or any two of these functions may, and frequently are, exercised by the same association; but there are still banks of deposit, *513 without authority to make discounts or issue a circulating medium. * “Banks for savings,” says McCulloch, “are "banks established for the receipt of small sums deposited by the poorer class of persons for accumulation at interest.” † Definition given by Grant is more extended, but it amounts to the same thing. ‡ Courts of justice, also, as well as text writers, recognize the 'well-known distinction between banks of deposit and banks of discount or circulation. § 6. Beyond all controversy the proviso, while it continued in force, had the effect to exclude the corporation complainants from the operation of the substantive words of the section. Since the passage of the act, however, the proviso has been stricken out, and the palpable effect of the repeal is to leave the body of the act in full force and operation, without any such qualification as was imposed by the proviso. ǁ Although the proviso is repealed, still it is proper to resort to it as well as to the proviso in the seventy-ninth section of the same act, as affording a legislative exposition of what is meant by the phrase, engaged in the business of banking, as employed in the first clause of the section under consideration. Looking at the case, therefore, in any point of view, it is clear that the answer to the third question must be in the affirmative. 7. Fourth question presented for decision is, whether the moneys so received on deposit and invested, are deposits within the meaning of the act of Congress. Obviously the question as presented is substantially answered by the remarks already made in disposing of the preceding question. All the moneys received by the bank, whether for safe-keeping or for investment, are deposits within the meaning of their by-laws, and within the very words of their charter. Answer to this question, also, must be in the affirmative. *514 8. Fifth question is, whether moneys received on deposit in any one month, and invested during the same month, are deposits within the meaning of said acts, so as to render the complainants liable to pay a tax thereon for such month. Moneys received, as already explained, whether invested or not, are deposits within the meaning of the acts of Congress, and if so, then it is clear that the amount, whatever it may be, is liable to taxation as soon as it is received by the bank, because when received by the bank, it becomes deposits, and continues to be such till it is repaid to the depositor. An affirmative answer must also be certified to this question. No answers will be certified to the first two questions, because the court is of the opinion that those given to the others are sufficient to dispose of the cause. Answers accordingly. GRIER and NELSON, JJ., dissented; FIELD, J., who, as already said, had not sat in the case, took no part in the judgment. Footnotes [*] Field, J., not having sat. [*] Angel & Ames on Corporations, § 55; McCulloch’s Commercial Dictionary, 73. [†] Id. 146. [‡] Grant on Banking, 614. [§] Duncan v. Savings Institution, 10 Gill & Johnson, 309; People v. Utica Insurance Co., 15 Johnson, 390; Grant on Banking, 1, 6, 381, 614. [ǁ] 13 Stat. at Large,479.