President Directors of Manhattan Company v. Blake/Opinion of the Court

The statute of the United States under which the tax was assessed was section 110 of the act of June 30, 1864, c. 173, (13 St. p. 277,) afterwards embodied in section 3408 of the Revised Statutes, which latter section reads as follows: 'There shall be levied, collected, and paid, as hereinafter provided: First. A tax of one twenty-fourth of one per centum each month upon the average amount of the deposits of money, subject to payment by check or draft, or represented by certificates of deposit of otherwise, whether payable on demand or at some future day, with any person, bank, association, company, or corporation, engaged in the business of banking.' Although this tax on deposits in banks was repealed by the act of congress of March 3, 1883, c. 121, (22 St. p. 488,) yet the latter act expressly excepted 'such taxes as are now due and payable.'

It is contended for the plaintiff (1) that the contract before set forth, made July 13, 1840, under the provisions of which the money in question was sent by the treasurer of the state to the plaintiff, and the manner in which that money was credited and disbursed by the plaintiff, show that the ordinary relation of banker and depositor never arose; that congress did not contemplate the including of such money for purposes of taxation, under the general title of 'deposits,' as used in section 3408; and that the bank, as to the funds in question, was merely the salaried disbursing agent of the state and a trustee for the creditors of the state; (2) that the money paid by the plaintiff, which it now seeks to recover, was the proceeds of a tax collected by the agent of the United States, and levied upon all the money in the hands of the plaintiff, including money of the state of New York, then in the possession of an agent of that state, and held for immediate disbursement by that agent to the creditors of the state, such agent receiving a salary to effect such disbursement; that such tax was, to that extent, a tax upon the revenues of the state in the hands of its disbursing agent; and that such money could not be included constitutionally in the term 'deposits,' as used in the statute of the United States.

The money in question was deposited with the plaintiff by the treasurer of the state of New York, to be afterwards disbursed by the plaintiff, as agent of the state, for certain purposes designated in the statute of the state and in the contract of July 13, 1840. The money, when so deposited, became the property of the plaintiff, and was credited by it to the treasurer of the state in account, and was thereafter drawn for by drafts made by the treasurer of the state, and sent to the plaintiff. If such money had been lost or stolen while in the hands of the plaintiff, the plaintiff, and not the state, would have borne the loss. The identical money received by the plaintiff from the treasurer of the state was not to be returned to the treasurer, or paid to his drawee, or kept distinct from the other funds of the plaintiff. It was not only a deposit of money, but was subject to payment by check or draft, and was payable either on demand or at some future day, all within the terms of the taxing statute of the United States. That statute covered general deposits, and not special deposits.

There is no foundation for the contention on the part of the plaintiff that a trust was created in its hands in favor of each creditor of the state intended to be paid through the plaintiff, as a consequence resulting from each deposit of money made by the treasurer of the state with the plaintiff. The money so deposited was not placed, by the mere fact of the deposit, irrevocably beyond the control of the state. Neither the money credited to the account called 'Interest New York State Stocks, Canal Loan,' nor that credited to the account entitled 'Interest Loan for Payment of Bounties to Volunteers,' became, by such respective credits, the property of the holders of the securities for the respective loans, so as to create a title in them to the money as interest money. If the money had been withdrawn by the state from the plaintiff, the latter could not have been liable therefor to the creditors holding such securities.

By the contract of July 13, 1840, the plaintiff agreed to act as agent of the state in paying out from the deposits made with it by the state sums of money in favor of the holders of the obligations of the state, to pay such holders the interest on such obligations. The plaintiff occupied two relations to the state, one that of debtor as a bank for the money deposited with it by the state, and the other that of agent of the state to pay out from the money deposited, if it remained on deposit, money for certain specified purposes. The tax was assessed on 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;' and the clear purpose of the statute was to tax deposits of money in the situation of those in question. There is nothing in the contract of July 13, 1840, to relieve the plaintiff from its liability as a bank for the money deposited with it by the state. The plaintiff did not hold the money as an agent of the state, but was such agent only to disburse the money. The theory that the plaintiff was a trustee of the money deposited, for certain cestuis que trustent, on the ground that the right to the money had become vested, by the mere fact of the deposit, in the creditors of the state, would make it necessary that it should be impossible for the state to withdraw the deposit, which was not the fact.

We see nothing to affect these views in the cases cited by the plaintiff, of Mechanics' Bank v. Merchants' Bank, 6 Metc. (Mass.) 13; Sharpless v. Welsh, 4 Dall. 279; Van Alen v. Bank, 52 N. Y. 1; Martin v. Funk, 75 N. Y. 134; Machine Works v. Kelley, 88 N. Y. 234; People v. Bank, 96 N. Y. 32; National Bank v. Insurance Co., 104 U.S. 54; Libby v. Hopkins, 104 U.S. 303; Pennell v. Deffell, 4 De Gex, M. & G. 372; Frith v. Cartland, 2 Hem. & M. 417.

It is distinctly provided by section 8, tit. 4, c. 8, pt. 1, Rev. St. N. Y., that 'all moneys directed by law to be deposited in the Manhattan Bank, in the city of New York, to the credit of the treasurer, shall remain in said bank, subject to be drawn for as the same may be required.' This shows clearly that the money put into the plaintiff's bank by the state is 'deposited' there, and is to lie there, to the credit of the treasurer of the state, and may be drawn at any time when required by the state. Section 9 also shows that the money so deposited is considered by the state as 'deposits.' It thus becomes 'deposits of money, subject to payment by check or draft,' within the meaning of the statute of the United States imposing the tax.

Nor do we perceive any soundness in the view that the money on which the tax in question was assessed was a part of the revenue of the state in the hands of its agent for immediate disbursement, and so not liable for the tax. We cannot regard the money in question as the money of the state in the hands of its agent. After it was deposited with the plaintiff, it was the money of the plaintiff, and no tax was put upon the plaintiff as respected its function as agent of the state. It might as well be said that a tax upon the business of the plaintiff would have been invalid because such business embraced transactions with the state. Even regarding the tax as a tax upon the plaintiff as a bank, it was not a tax upon it as agent of the state, but as a bank receiving deposits. The account of the state was not charged by the plaintiff with the amount of the tax, nor was that amount deducted from the deposits made by the treasurer of the state with the plaintiff. So the tax did not fall upon the state in any way.

The contention is, however, that if the tax was not on the function of the plaintiff as agent of the state, it was on the revenue of the state. It might as well be contended that a federal tax assessed on, and collected from, the money of a citizen of New York, who was in arrears to the state in respect of his taxes, was laid on the revenues of the state, and therefore illegal. The cases cited by the plaintiff in this connection, of McCulloch v. Maryland, 4 Wheat. 316; Weston v. City of Charleston, 2 Pet. 449; Dobbins v. Commissioners, 16 Pet. 435; Bank v. Fenno, 8 Wall. 533; Collector v. Day, 11 Wall. 113; U.S. v. Railroad Co., 17 Wall. 322; Bank of Commerce v. New York City, 2 Black, 620; National Bank v. U.S. 101 U.S. 1; and People v. Commissioners of Taxes, 90 N. Y. 63,-have no application to the case in hand. The plaintiff in the present case was not required to withhold, and did not withhold, from the state anything that would otherwise be due to the state. Judgment affirmed.