Cleveland Trust Company v. Lander

This, a writ of error, to review the judgment of the supreme court of the state of Ohio, which sustained the ruling of the court of common pleas of Cuyahoga county, dismissing upon the demurrer of the defendant in error the petition of the plaintiff in error praying for an order and decree restraining the collection of taxes levied upon the shares of the stockholders of plaintiff in error. 62 Ohio St. 266, 56 N. E. 1036.

The plaintiff (plaintiff in error was plaintiff in the court below) is a banking corporation with a capital stock of $500,000, divided into 5,000 shares of $100 each, all of which are paid up, and for which certificates are outstanding and owned by a large number of persons, most of whom reside in Ohio.

The plaintiff made in due time return of its resources and liabilities, in accordance with § 2765 of the Revised Statutes of Ohio, to the auditor of the county, together with a full statement of the names and residences of the stockholders of the company, and with the number of shares held by each and the par value thereof, as required by the statute. The return included its real estate and 174 bonds of the United States of the denomination of $1,000 each, 'then and for a long time prior thereto owned by the plaintiff and in which the plaintiff had invested its capital stock.' The plaintiff valued these bonds at the sum of $213,274.81, and in its return deducted that sum from the $500,000 par value of paid-in capital stock included among the liabilities of the plaintiff, leaving a balance of $286,725.19.

The county auditor refused to allow the deduction of the government bonds, and fixed the value of the shares of the capital stock at $338,700, exclusive of the assessed value of the real estate. No notice of this action was given plaintiff or its stockholders, nor did plaintiff or its stockholders know until the 11th of November, 1898, that said bonds had been included in fixing the valuation of the shares of the bank.

It is alleged in the petition that it is the custom of banks and banking institutions throughout the state of Ohio to deduct the value of government bonds from the paid-in capital stock returned, 'although not so apparent upon the face of their returns to the several county auditors; that said bonds were by the banks and banking associations of this state so deducted in the returns for 1897; that similar deductions of the United States government bonds are likewise made by unincorporated banks in the state of Ohio under and by virtue of the Revised Statutes of state of Ohio, § 2759; that the auditor of Cuyahoga county and the county auditors elsewhere throughout the state, as this plaintiff is informed and believes, did not include United States government bonds so owned in fixing the total value for 1898 of the shares of the several incorporated banks of Ohio, as directed by § 2766 of the Revised Statutes of Ohio.'

The county auditor entered the valuation of the property of plaintiff, including said government bonds, upon the tax duplicate of the county, and assessed taxes against the same at the rate of .02955 cents on each dollar's valuation of the shares, making an excess of taxation of $4,283.71, and that that sum stands against said shareholders upon the tax duplicate in the hands of the defendant, 'together with the remaining amount of taxes lawfully assessed against them upon the valuation so fixed by the county auditor.' The plaintiff tendered the sum which it regarded as legally due, and alleged the grounds upon which it claimed equitable relief.

The error in the judgment of the supreme court of the state is assigned as follows:

'First. The court erred in affirming the judgment of the circuit court in sustaining the judgment of the court of common pleas on the demurrer of the defendant to the petition of the plaintiff.

'Second. The court erred in holding and deciding that the Cleveland Trust Company was not entitled, in making its statement to the auditor of Cuyahoga county, Ohio, under § 2765 of the Revised Statutes of Ohio, to deduct, for the purpose of taxation, from its capital and surplus, the amount of the United States government bonds owned by it under and by virtue of § 3701 of the Revised Statutes of the United States, as claimed in the original petition of the plaintiff.'

Messrs. James R. Garfield, Harry A. Garfield, and Frederic C. Howe for plaintiff in error.

Messrs. P. H. Kaiser and O. L. Neff for defendant in error.

Mr. Justice McKenna delivered the opinion of the court: