Opinion · Supreme Court of the United States

Montana National Bank v. Yellowstone County of Montana

276 U.S. 499

Type
Opinion
Court
Supreme Court of the United States
Jurisdiction
Federal
Date
1928-04-09
Topic
general

How later courts describe this case

  • granting a refund and rejecting the possibility of clawbacks because state tax officials had not indicated that they would collect retroactive taxes
  • taxpayer seeking refund not required to exhaust where "any such application [would have been] utterly futile since the county board of equalization was powerless to grant any appropriate relief" in face of prior controlling court decision
  • no need to exhaust administrative remedies where agency process would be futile due to the agency’s inability to provide appropriate relief
  • taxpayer seeking refund not required to exhaust where “any such application [would have been] utterly futile since the county board of equalization was powerless to grant any appropriate rehef’

Citator

UpLaw has not yet analyzed Montana National Bank v. Yellowstone County of Montana. The absence of a flag is not a finding that it is good law.

Cited by
100 opinions

Headnotes

  1. Tax Law — National Banks — Discrimination Against National Banks A substantial discrimination against national banks in favor of incorporated state banks, in violation of Rev. Stats. § 5219, results where national bank shares are taxed upon a valuation equal to the bank's assets, including United States bonds and like securities, while shares of state banks are not taxed and the state banks themselves are taxed only on the value of their assets after excluding United States bonds and securities. 276 U.S. at 502
  2. Tax Law — National Banks — Equality of Share Taxation Taxation of shares of state corporate banks must be like the taxation of shares of national banks, so far as necessary to prevent discrimination; in neither case does the exemption of federal securities held by the bank apply in the taxation of the shares, because the shares are the property of the shareholders distinct from the corporate assets. 276 U.S. at 503
  3. Tax Law — National Banks — Invalid Assessment Under Prior Construction Statutes, as construed and applied by state taxing officials at the time of an assessment, that produce a substantial discrimination against a national bank in violation of Rev. Stats. § 5219 are invalid, and the bank, suing for its shareholders, may challenge that construction and application and recover taxes paid; the invalidity is not cured by a later state supreme court decision repudiating the earlier construction, where the earlier construction had already been acted upon in making the unlawful exaction. 276 U.S. at 504
  4. Tax Law — National Banks — Speculative Equalization The fact that, under a later state supreme court decision, taxing officials are empowered to tax the shares of state banks so as to bring about equality is not an obstacle to a national bank's action to recover unlawfully exacted taxes, where no intention to exercise that power has been manifested. 276 U.S. at 504
  5. Tax Law — Administrative Remedies — Futility Failure to apply to a county board of equalization for administrative relief is no bar to an action to recover taxes, where the board had no power to grant appropriate relief under the statutes as construed at the time the taxes were imposed and collected. 276 U.S. at 504
MONT. BANKv. YELLOWSTONE COUNTY,276 U.S. 499(1928)
48 S.Ct. 331
THE MONTANA NATIONAL BANK OF BILLINGSv. YELLOWSTONE COUNTY OF MONTANA ET
AL.
ERROR TO THE SUPREME COURT OF THE STATE OF MONTANA.
No. 207.
Argued January 20, 1928.
Decided April 9, 1928.
1. A substantial discrimination against national banks in favor of incorporated state banks resulting from taxation of national bank shares upon a valuation equal to that of the assets of the bank, including bonds and like securities of the United States, while the shares of the state banks are not taxed and the state banks themselvesPage 500are taxed only on the value of their assets after excluding United States bonds and securities, violates Rev. Stats., § 5219. P. 502. 2. Taxation of shares of state corporate banks must be like that of shares of national banks, so far as necessary to prevent discrimination; in neither case does the exemption of federal securities held by the bank apply in taxation of the shares.Des Moines Bankv.Fairweather,263 U.S. 103, distinguished. P. 503. 3. Where the shares of a national bank were taxed and the tax paid, under statutes then construed by the State Supreme Court as not permitting shares of state corporate banks to be taxed, but only the state banks themselves, thus creating a discrimination due to the inclusion of United States securities owned by the national bank in the valuation of its shares and to the necessary exclusion of like securities owned by the state banks in assessing their assets,held— (1) that the right of the national bank, suing for its shareholders, to challenge the validity of the statutes as so construed and applied, and to recover the taxes paid, was not affected by a decision of the State Supreme Court in the suit repudiating the earlier construction and declaring the state bank shares taxable; (2) that the fact that under the later decision the taxing officials were empowered to tax the shares of state banks and thus bring about equality, was not an obstacle to the suit, no intention to exercise the power having been manifested; and (3) that failure to apply to the county board of equalization for administrative relief was no bar to maintenance of the action, since the board had no power to grant it under the statute as construed when the taxes were imposed and collected. P. 504.78 Mont. 62, reversed.
Error to a judgment of the Supreme Court of Montana, denying
relief in an action by the bank to recover taxes on its shares
collected by the county.
Mr. Horace S. Davis, with whomMessrs. M.S. Gunn, RockwoodBrown, andR.G. Wiggenhornwere on the brief, for plaintiff in error.Mr. L.A. Foot, Attorney General of Montana, with whomMessrs. A.H. AngstmanandC.N. Davidson, AssistantPage 501Attorneys General, were on the brief, for defendants in error.
MR. JUSTICE SUTHERLAND delivered the opinion of the Court.
Plaintiff in error, a banking corporation organized under the laws of the United States, is engaged in a general commercial banking business in Yellowstone County, Montana. For the year 1925, an assessment for taxes was made by the assessor of Yellowstone County upon the shareholders, based upon the value of their shares of stock in the bank. The bank owned no real estate. In pursuance of the assessment, taxes were levied in the aggregate sum of $3,897.84 and demand was made for the payment of fifty per cent. of that amount, as provided by the Montana statutes. The bank paid the sum demanded under protest, claiming that the assessment and levy and the statutes of Montana under which they were made were invalid as being in conflict with Rev. Stats. § 5219, with certain provisions of the constitution of Montana, and with the due process and equal protection of law clauses of the Fourteenth Amendment to the Constitution of the United States. This action was then brought by the bank in behalf of its shareholders to recover the amount of the payment. The court of first instance sustained a general demurrer to the complaint and rendered final judgment against plaintiff in error, which, upon appeal to the state supreme court, was affirmed.78 Mont. 62.

Here the argument is confined to the question whether there is a violation of the restriction upon the state power of taxation contained in Rev. Stats. § 5219 that the taxation of shares of national banking associations "shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State."Page 502The contention that the laws of Montana, under which the assessment and levy were made, contravene this restriction, rests upon the fact that shares of national banks were valued for assessment purposes at an amount equivalent to the value of the corporate assets, including Liberty Loan bonds and similar securities of the United States, and were taxed accordingly, while shares of state banks were not assessed or taxed at all, and the banks themselves were taxed upon the value of their assets, after excluding such bonds and similar securities.

It is clear that the state statutes, as construed by the state supreme courtin the present case, do not produce the discrimination asserted or any discrimination in favor of the moneyed capital employed by state banks in competition with national banks. That court now holds that the provisions of the state constitution and statutes require the state to tax the property of every state bank and also the shares to the extent that they have a value beyond that of the taxable property of the bank. In assessing and imposing taxes upon the corporations, the value of the United States securities owned by the corporations is excluded, because such securities are exempted from state taxation by the laws of the United States. But in the taxation of shares of state as well as of national banks, the value of these securities, so far as it contributes to the value of the shares, is included, because the shares are the property of the shareholders distinct from the corporate assets, which are the property of the banks. SeeHome Savings Bankv.Des Moines,205 U.S. 503,518.

If this were all, there would be no discrimination within the meaning of the federal law. But it is not all. The assessment, as actually made, clearly violated the restriction in § 5219 here relied upon; and it was made in conformity with the state statutes as construed by the state supreme court in the earlier case ofEast Helena StatePage 503Bankv.Rogers,73 Mont. 210. In that case the requirement of the statutes, so far as it applied to state banks, was stated by the court as follows (p. 217):

"This state had the option to tax the shares of stock in state banks to the individual shareholders, or to tax the property of such banks to the banks themselves. It could not tax both at the same time. (Sec. 17, Art.XII, Constitution of Montana.) If it had chosen the first alternative, it might then have assessed the shares at their full cash value without reference to the character of the securities in which the bank's funds were invested (Van Allenv.Assessors, 3 Wall. 573,18 L.Ed. 229[see, also, Rose's U.S. Notes]); but it chose to tax the property of the banks, and must abide the consequences."

The taxing officials, conforming to this construction of the state law, as they were bound to do, while they assessed, levied and collected the tax now under review, laid no tax whatever upon shares of state banking corporations, although, as the record shows, these shares had a very large taxable value over and above the value of the taxable property of the banks, due to the ownership by the banks of tax-exempt federal securities. That this resulted in a substantial discrimination against plaintiff in error within the meaning of the restriction contained in § 5219 does not admit of doubt.Van Allenv.Assessors, 3 Wall. 573, 581;Mercantile Bankv.New York,121 U.S. 138,148,152;Owensboro National Bankv.Owensboro,173 U.S. 664,677.

Nevertheless, it is contended for the defendants in error that, since the exemption from taxation of the federal securities in the hands of the state banks is created by federal statute, the discrimination is one which the state could not avoid. It is said that it was so decided inDes Moines Bankv.Fairweather,263 U.S. 103. But this view of that decision is entirely erroneous. The statutes of Iowa there under review expressly provide that sharesPage 504of stock in national banks and state and savings banks and loan and trust companies located in the state shall be assessed to the individual stockholders; and shares of national banks and those of competing state corporations are put, for purposes of taxation, upon terms of exact equality. The provision of the Iowa statute which was assailed related to the assessment of capital employed byindividualbankers (p. 105); and this Court held that the restriction of § 5219 was not violated because the state, perforce, allowed a deduction of federal securities in assessing the capital of such individual bankers; that the federal law made such securities exempt and the state merely respected the exemption. P. 117. The decision in no way affects the rule (Van Allenv.Assessorsand other cases,supra) that in respect of the taxation of statecorporatebanks, the shares must be taxed as they are in the case of national banks, so far as necessary to prevent discrimination, and that, in neither case, does the exemption of federal securities apply in the taxation of such shares.

It is true that the state supreme court in the present case expressly repudiated the construction theretofore put by it upon the state statutes in theRogerscase,supra, and, as already stated, adopted one to the exact contrary. But that does not cure the mischief which had been done under the earlier construction. That construction had already been acted upon by the taxing officials and the application thus made of the statutes had given rise to the present cause of action and an undoubted right to recover thereon. The statutes, as thus construed and applied to the concrete facts of the case, were invalid; and this is enough to justify the challenge here under consideration.Cudahy Co. v.Parramore,263 U.S. 418,422;Ward Gowv.Krinsky,259 U.S. 503,510. Plaintiff in error cannot be deprived of its legal right to recover the amount of the tax unlawfully exacted of itPage 505by the later decision which, while repudiating the construction under which the unlawful exaction was made, leaves the monies thus exacted in the public treasury.

But it is said that the taxing officers of the county, in view of the later decision, now have the power to tax the shares of state banks and thus bring about an equality. As to this it is unnecessary to say more than that it nowhere appears that these officers, if they possess the power, have undertaken to exercise it or that they have any intention of ever doing so. It will be soon enough to invite consideration of this purely speculative suggestion when, if ever, the taxing officials shall have put it into practical effect.

Finally, it is urged that plaintiff in error may not maintain this action because of its failure to apply to the county board of equalization for an administrative remedy. We do not stop to inquire whether under any circumstances such remedy was open to the taxpayer, for the short answer is that the decision of the Supreme Court of Montana in theRogerscase would have rendered any such application utterly futile since the county board of equalization was powerless to grant any appropriate relief in the face of that conclusive decision. SeeHillsv.Exchange Bank,105 U.S. 319,321;Whitbeckv.Mercantile Bank,127 U.S. 193,199. Compare,First Natl. Bankv.Weld County,264 U.S. 450,454-455.Judgment reversed.