This action was brought to restrain the collection of taxes, through or by means of the bank, by the defendant in error, levied under a statute of Ohio, upon certain individual shareholders in the bank, on the ground, as alleged, that the assessments upon such specified shareholders were illegal, as having been made without regard to the debts of such individual [173 U.S. 205, 206] owners, contrary to the case of other moneyed capital in the hands of individual citizens whose debts were permitted to be deducted from the value of such capital before the assessment of taxes thereon.
The petition contained allegations intended to show a case for the interposition of a court of equity, and a tender was therein made of the amount of the taxes which the plaintiff admitted to be due on such shares after deducting the debts.
The answer, while not taking any objection that a case for equitable relief by injunction was not made, provided the contention of the petition as to the assessments being illegal was well founded, claimed, substantially, that, by the laws of the United States and of Ohio, the assessments were legal, and the petition should therefore be dismissed. Upon trial in the court of common pleas of Lorain county, the court found the following facts:
S. S. Warner 150 shares. R. A. Horr 10 shares. W. Cushion, Jr. 50 shares. C. W. Horr 120 shares. O. P. Chapman 10 shares. E. F. Webster 10 shares. W. R. Wean 20 shares. S. K. Laundon 120 shares.
The court also found, as a conclusion of law from the above facts, that the injunction should be denied, and the petition dismissed. The plaintiff appealed to the circuit court [173 U.S. 205, 209] of Lorain county, where, after argument, the judgment for defendant was reversed, and judgment ordered for plaintiff enjoining the collection of the tax. The defendant, the treasurer of Lorain county, brought the case to the supreme court of the state, where, after hearing, the court reversed the circuit court, and affirmed the judgment of the common pleas dismissing the petition. Chapman v. Bank, 56 Ohio St. 310, 47 N. E. 54.
The state law on the subject of taxation, so far as it may be claimed to in any way affect the question, is contained in the various sections of the Revised Statutes of Ohio which are set out in the margin. 1 [173 U.S. 205, 210] W. W. Boynton, for plaintiff in error.
F. S. Monnett and S. W. Bennett, for defendant in error. [173 U.S. 205, 211]
Mr. Justice PECKHAM, after stating the facts, delivered the opinion of the court.
Complaint is made in behalf of the shareholders of the national bank in question that they are, by means of the sys- [173 U.S. 205, 212] tem of taxation adopted and enforced in the state of Ohio, subjected to taxation at a greater rate than is imposed upon other moneyed capital in the hands of individual citizens, [173 U.S. 205, 213] contrary to section 5219 of the Revised Statutes of the United States.
The complaint is founded upon the allegation that the owners of what is termed 'credits' in the law of Ohio (Rev. St. 2730) are permitted to deduct certain kinds of their debts from the total amount of their credits, and such owners are assessed upon the balance only, while no such right is given to owners of shares in national banks. The claim is that shares in national banks should be treated the same as credits, and their owners permitted to deduct their debts from the valuation. The owners of property other than credits are not permitted to deduct their debts from the valuation of that property.
It is also claimed that there is an unfavorable discrimination against the national bank shareholder, and in favor of an unincorporated bank or banker.
At the outset it is plain that the system of taxation adopted in Ohio was not intended to be unfriendly to, or to discriminate against, the owners of shares in national banks; for, as observed by the state supreme court, that system was adopted long prior to the passage of the law by congress providing for the incorporation of national banks. Under this system, the owner of shares in national banks is taxed precisely like the owner of shares in incorporated state banks. Rev. St. Ohio, 2762.
The main purpose of congress in fixing limits to state taxation on investments in national banks was to render it impossible for the state, in levying such a tax, to create and [173 U.S. 205, 214] fix an unequal and unfriendly competition by favoring institutions or individuals carrying on a similar business and operations and investments of a like character. The language of the act of congress is to be read in the light of this policy. 'Moneyed capital' does not mean all capital the value of which is measured in terms of money, neither does it necessarily include all forms of investments 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 corporation; but the property of the corporation which constitutes this invested capital may consist mainly of real and personal property, which, in the hands of individuals, none would think of calling moneyed capital, and its business may not consist in any kind of dealing in money or commercial representatives of money. This statement is taken from Mercantile Bank v. City of New York, 121 U.S. 138, 155 , 7 S. Sup. Ct. 826. That case has been cited with approval many times, especially in Bank v. Ayers, 160 U.S. 660 , 16 Sup. Ct. 412, and in First Nat. Bank of Aberdeen v. Chehalis Co., 166 U.S. 440 , 17 Sup. Ct. 629.
The result seems to be that the term 'moneyed capital,' as used in the federal statute, does not include capital which does not come into competition with the business of national banks, and that exemptions from taxation, however large, such as deposits in savings banks or of moneys belonging to charitable institutions, which are exempted for reasons of public policy, and not as an unfriendly discrimination as against investments in national bank shares, cannot be regarded as forbidden by the federal statute.
The case last cited contains a full and careful reference to most of the prior cases decided in this court upon the subject, and gives the meaning (as above stated) of the term 'moneyed capital,' when used in the federal statute.
With no purpose to discriminate against the holders of shares in national banks, and with the taxation of the shareholders in the two classes of banks, state and national, pre- [173 U.S. 205, 215] cisely the same, the question is whether this system of taxation in Ohio, in its practical operation, does materially discriminate against the national bank shareholder in the assessment upon his bank shares.
Under the Ohio law, the shares in national and also in state banks are what is termed 'stocks' or 'investments in stocks,' and are not credits from which debts can be deducted. As between the holders of shares in incorporated state banks and national banks, on the one hand, and unincorporated banks or bankers, on the other, we find no evidence of discrimination in favor of unincorporated state banks or bankers. In regard to this latter class, there is no 'capital stock,' so called; and section 2759 of the Revised Statutes therefore makes provision, in order to determine the amount to be assessed for taxation, for deducting the debts existing in the business itself from the amount of moneyed capital belonging to the bank or banker, and employed in the business, and the remainder is entered on the tax book in the name of the bank or banker, and taxes assessed thereon. This does not give the unincorporated bank or banker the right to deduct his general debts disconnected from the business of banking, and not incurred therein, from the remainder above mentioned. It cannot be doubted that, under this section, those debts which are disconnected from the banking business cannot be deducted from the aggregate amount of the capital employed therein. The debts that are incurred in the actual conduct of the business are deducted so that the real value of the capital that is employed may be determined, and the taxes assessed thereon.
This system is, as nearly as may be, equivalent in its results to that employed in the case of incorporated state banks and of national banks. Under the sections of the Revised Statutes which relate to the taxation of these latter classes of banks (section 2762, et seq.), the shares are to be listed by the auditor at their true value in money, which necessarily demands the deduction of the debts of the bank, because the true value of the shares in money is necessarily reduced by an amount corresponding to the amount of such debts. In order to arrive at their true value in money, the bank returns to the auditor [173 U.S. 205, 216] the amount of its liabilities as well as its resources. Thus, in both incorporated and unincorporated banks the same thing is desired, and the same result of assessing the value of the capital employed in the business, after the deduction of the debts incurred in its conduct, is arrived at in each case as nearly as is possible, considering the difference in manner in which the moneyed capital is represented in unincorporated banks as compared with incorporated banks, which have a capital stock divided into shares. That mathematical equality is not arrived at in the process is immaterial. It cannot be reached in any system of taxation, and it is useless and idle to attempt it. Equality, so far as the differing facts will permit, and as near as they will permit, is all that can be aimed at or reached. That measure of equality, we think, is reached under this system. So far as this point is concerned, it is entirely plain there is no discrimination between unincorporated banks and bankers, on the one hand, and holders of shares in national banks, on the other.
If the value of national bank shares is increased by reason of the franchises of the bank itself, as claimed by the plaintiff in error, while no such added value obtains in the case of unincorporated banks, there is no discrimination against bank shareholders on that account. This is simply a case where added elements of value exist in the national bank shares which are absent in the case of unincorporated banks; but in both cases all the debts of the business itself are deducted from the capital employed before reaching the sum which is assessed for taxation, and in neither case can the debts of the individual, simply as an individual, be deducted from the value of the capital assessed for taxation.
The court below did not hold, as erroneously suggested by counsel for plaintiff in error, that, as the state and national banks were placed on an exact equality regarding taxation, therefore there was no discrimination made against national banks, and in favor of other moneyed capital in the hands of individual citizens. The state court said upon this subject that, if the state and national banks were treated equally, the latter were not assessed at a greater rate than the former; [173 U.S. 205, 217] that national bank shareholders were not, in such event, illegally assessed, unless there were a clear discrimination in favor of moneyed capital other than that employed in either state or national banks. This statement, we think, is plainly correct.
The question recognized by the state court, therefore, remains, whether there is any such discrimination.
The chief ground for maintaining that there is exists in the fact that the owner of what is termed 'credits' in the statute is permitted to deduct certain classes of debts from the sum of those credits, upon the remainder of which taxes are to be assessed, while the national bank shareholder is not permitted to deduct his debts from the value of his shares upon which he is assessed for taxation.
It is claimed, in substance, that all credits are moneyed capital, and that they are large enough in amount, when compared with the moneyed capital invested in national banks, to become an illegal discrimination against the holders of such shares.
There is no finding of the trial court upon the subject of the total amount of credits in the state. Reference was made on the argument to the report of the auditor of the state for 1893, from which it is said to appear that the total credits, after deducting the debts allowed, were $ 106,000,000 or $111,000,000, the amounts differing to that extent as presented by the counsel for the different parties. The case does not show that the trial court received the report in evidence, and nothing in any finding has reference in any way to that report. We do not think it is a document of which we can take judicial notice, or that we could refer to any statement or alleged fact contained therein, unless such fact were embraced in the finding of facts of the trial court, upon which we must decide this case.
However, if we were to look at this report, we should then see that the total credits do not show what portion of those credits consists of moneyed capital in the hands of individuals, which in fact enters into competition for business with national banks. It is only that kind of moneyed capital which this [173 U.S. 205, 218] court, in its decisions above cited, holds is moneyed capital, within the meaning of the act of congress.
Indeed, there is no evidence as to what the total moneyed capital in the hands of individual citizens, and included in the term 'credits,' amounts to, even under the widest definition of that term.
In looking at the statutory definition of the term 'credits,' we find that so far from its including all legal claims and demands of every conceivable kind, except investments in bonds of the classes described in section 2730, and investments in stocks, it does not include any claim or demand for deposits which the person owning, holding in trust, or having the beneficial interest therein is entitled to withdraw in money on demand, nor the surplus or undivided profits held by societies for savings or banks having no capital stock, nor bank notes of solvent banks in actual possession; and, from the credits as defined, their owner cannot deduct certain kinds of indebtedness therein mentioned. It cannot be contended that all credits, as defined in the statute, are moneyed capital, within the meaning of the act of congress. The term 'credits' includes, among other things, as stated in the statute, 'all legal claims and demands ... for labor or service due or to become due to the person liable to pay taxes thereon.' These claims are not, in any sense of the statute, moneyed capital. They include all claims for professional or clerical services, as well as for what may be termed 'manual labor,' and their total must amount to a large sum. What proportion that total bears to the whole sum of credits we do not know, and the record contains no means of ascertaining.
It is impossible to tell, from anything appearing in the record, what proportion of the whole sum of credits consists of moneyed capital, within the meaning of the federal act. We know that claims for labor or services do not consist of that kind of capital. We also know that there are probably large amounts of other forms of property which might enter into the class of credits as defined in the act which would not be moneyed capital, within the meaning of the act of congress, as that meaning has been defined by this court in [173 U.S. 205, 219] the cases above cited. It is thus seen that there are large and unknown amounts of what are in the act termed 'credits' which are not moneyed capital, and that the total amount of credits which are moneyed capital, within the definition given by this court to that term, is also unknown. That pertion of credits which is not moneyed capital, as so defined, does not enter into the question, because the comparison must be made with other moneyed capital in the hands of individual citizens. We are thus wholly prevented from ascertaining what proportion the moneyed capital of individual citizens included in the term 'credits' (and from which some classes of debts can be deducted) bears to the amount invested in national bank shares. We are therefore unable to say whether there has or has not been any material discrimination such as the federal statute was enacted to prevent. We cannot see upon these facts any substantial difference between this case and those of Bank v. Ayers, 160 U.S. 660 , 16 Sup. Ct. 412, First Nat. Bank of Aberdeen v. Chehalis Co., 16 U.S. 440 , 17 Sup. Ct. 629, and National Bank of Commerce v. City of Seattle, 166 U.S. 463 , 17 Sup. Ct. 996.
As a result, we find in this record no means of ascertaining whether there is any unfavorable discrimination against the shareholders of national banks in the taxation of their shares, and in favor of other moneyed capital in the hands of individual citizens. There is nothing upon the face of these statutes which shows such discrimination, and therefore it would seem that the plaintiff in error has failed to make out a case for the intervention of the court.
It is stated, however, that this specific question has been otherwise decided in Whitbeck v. Bank, 127 U.S. 193 , 8 Sup. Ct. 1121. If this were true, we should be guided by and follow that decision. Upon an examination of the case, it is seen that the court gave chief attention to the question whether an increase in the value of the shares in national banks made by the state board of equalization, from 60 per cent. of their true value in money, as fixed by the auditor of Cuyahoga county, to 65 per cent ., as fixed by the board (other property being valued at only 60 per cent .), amounted to such a discrimination in the taxation of the [173 U.S. 205, 220] shareholders of such banks as is forbidden by the federal statute. It was held that it did.
Coming to the question of the deduction of the bona fide indebtedness of shareholders, the court assumed that, under the statute of Ohio, owners of all moneyed capital other than shares in a national bank were permitted to deduct their bona fide indebtedness from the value of their moneyed capital, but that no provision for a similar deduction was made in regard to the owner of shares in a national bank; and it was held that the owners of such shares were entitled to a deduction of their indebtedness from the assessed value of the shares as in the case of other moneyed capital. The point to which the court chiefly directed its attention related to the question whether a timely demand had been made for such deduction of indebtedness. It was held that it was made in time, for the reason that the court below expressly found that 'the laws of Ohio make no provision for the deduction of the bona fide indebtedness of any shareholder from the shares of his stock, and provide no means by which such deduction could be secured.' As a demand at an earlier period would have been useless, the court held it unnecessary.
An examination of the statutes of Ohio in regard to taxation shows that debts can only be deducted from credits, and how much of credits is moneyed capital is unknown. The case is not authority adverse to the principle we now hold.
For the reasons already stated, we think the judgment in this case should be affirmed, and it is so ordered.
[ Footnote 1 ] Section 2730 gives definitions of the terms used in the article relating to taxation. This section is not set out in so many words, but, as therein used, the following terms are thus defined:
(a) 'Real property' and 'lands' mean, not only land itself, but everything connected therewith in the way of buildings, structures, and improvements, and all rights and privileges appertaining thereto.
(b) 'Investment in bonds' includes moneys in bonds or certificates of indebtedness of whatever kind, issued by incorporated or unincorporated companies, towns, cities, villages, townships, counties, states, or other incorporations, or by the United States.
(c) 'Investment in stocks' includes all moneys invested in the capital stock of any association, corporation, joint-stock company, or other company, where the capital or stock is divided into shares, transferable by each owner without the consent of the other shareholders, for the taxation of which no special provision is made by law.
(d) 'Personal property' includes (1) every tangible thing the subject of ownership, whether animate or inanimate, other than money, and not forming part or any parcel of real property; (2) the capital stock, undivided profits, and all other means not forming part of the capital tock of a company, whether incorporated or unincorporated, and all interest in such stock, profits, or means, including shares in a vessel, as therein stated; (3) money loaned on pledge or mortgage of real estate, although a deed may have been given, provided the parties consider it as security merely.
(e) The term 'moneys' includes surplus or undivided profits held by societies for savings or banks having no capital stock, gold and silver coin, bank notes of solvent banks in actual possession, and every deposit which the person owning, holding in trust, or having the beneficial interest therein, is entitled to withdraw in money on demand.
(f) The term 'credits' means the excess of the sum of all legal claims and demands, whether for money or other valuable thing, or for labor or service due or to become due to the person liable to pay the tax thereon,
including deposits in banks, or with persons in or out of the state, other than such as are held to be money as defined in this section, when added together (estimating every such claim or demand at its true value in money ), over and above the sum of legal bona fide debts owing by such person; but, in making up the sum of such debts owing, no obligation can be taken into account (1) to any mutual insurance company; (2) for any unpaid subscription to the capital stock of any joint-stock company; (3) for any subscription for any religious, scientific, or charitable purpose; (4) for any indebtedness acknowledged, unless founded upon some consideration actually received and believed at the time of making the acknowledgment to be a full consideration therefor; (5) for any acknowledgment made for the purpose of diminishing the amount of credits to be listed for taxation; (6) for any greater amount or portion of any liability as surety than the person required to make the statement of such credits believes that such surety is, in equity, bound to pay, etc.
Other sections read as follows:
person is required to list as a merchant; eleventh, the value of the property which such person is required to list as a banker, broker or stock jobber; twelfth, the average value of the materials and manufactured articles which such person is required to list as a manufacturer; thirteenth, moneys on hand or on deposit subject to order; fourteen h, the amount of credits as hereinbefore defined: fifteenth, the amount of all moneys invested in bonds, stocks, joint stock companies, annuities or otherwise; sixteenth, the monthly average amount or value, for the time he held or controlled the same, within the preceding year, of all moneys, credits or other effects, within that time invested in or converted into bonds or other securities of the United States or of this state, not taxed, to the extent he may hold or control such bonds or securities on said day preceding the second Monday of April; and any indebtedness created in the purchase of such bonds or securities shall not be deducted from the credits under the fourteenth item of this section; but the person making such statements may exhibit to the assessor the property covered by the first nine items of this section; and allow the assessor to affix the valve thereof, and in such case the oath of the person making the statement shall be in that regard only that he has fully exhibited the property covered by said nine items.'
purchased in the course of business, by such unincorporated bank, banker or bankers, and considered good and collectible.
ing said second Monday, together with a full statement of the names and residences of the stockholders therein, with the number of shares held by each, and the par value of each share.