Richmond v. Blake/Opinion of the Court

This action was brought to recover certain sums of money paid under protest by the plaintiff in error to the United States in the years 1881, 1882, and 1883, and which he alleged were exacted from him under an illegal assessment made upon capital employed in his business.

If within the meaning of the statutes under which the assessment was made the plaintiff was a banker, and if the capital assessed was employed in the business of banking, the judgment must be affirmed.

By section 3407 of the Revised Statutes of the United States it is provided that 'every incorporated or other bank, and every person, firm, or company having a place of business where credits are opened by the deposit or collection of money or currency, subject to be paid or remitted upon draft, check, or order, or where money is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes, or where stocks, bonds, bullion, bills of exchange, or promissory notes are received for discount or for sale, shall be regarded as a bank or as a banker.' 13 St. 251, c. 173, § 79; 14 St. 115, c. 184, § 9.

Section 3408 provides that there shall be levied, collected, and paid a tax of one twenty-fourth of 1 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 or otherwise, whether payable on demand or at some future day, with any person, bank, association, company, or corporation, engaged in the business of banking; also 'a tax of one twenty-fourth of 1 per centum each month upon the capital of any bank, association, company, corporation, and on the capital employed by any person in the business of banking, beyond the average amount invested in United States bonds: provided, that the words 'capital employed' shall not include money borrowed or received from day to day, in the usual course of business, from any person not a partner of or interested in the said bank, association, or firm.' 13 St. p. 277, c. 173, § 110; 14 St. pp. 137, 146, c. 184, § 9; 17 St. p. 256, c. 315, § 37; 18 St. p. 311, c. 36, § 19.

That the plaintiff, during the period covered by the assessment against him, employed a capital in his business is beyond dispute; for he distinctly states that the capital used by him in his business ranged from $30,000 to $50,000. Upon that basis he made his returns for taxation. But did he, during that period, have a place of business where stocks were received for sale? If he did, then, by the very terms of the statute, he was a banker under the definition given in section 3407.

It is contended by him that he was only a stock-broker, and, within the true meaning of section 3407, did not have 'a place of business,' nor 'receive' stocks for sale. That he had a room or place, indicated by a sign over the door, where his mail matter was received, and where he was or could be met by his clients, and where the latter could deliver stocks to be sold by him, or under his supervision, and that he bought and sold stocks for his customers, is abundantly shown by his own testimony. Still, he insists that when stocks were delivered to him at this place of business for sale they were not 'received' by him 'forsale,' within the meaning of the statute. We cannot assent to this view.

In support of this position the plaintiff cites Warren v. Shook, 91 U.S. 704, and Selden v. Trust Co., 94 U.S. 419. In the first of those cases the question was whether a firm, holding a special license as bankers, was liable to the tax imposed by section 99 of the act of June 30, 1864, (13 St. 273.) That statute imposed a tax of one-twentieth of 1 per cen tum upon the par value of stock and bonds sold by 'brokers and bankers doing business as brokers.' It * was held that congress intended to impose the duty prescribed by section 99 upon bankers doing business as brokers, although a person, firm, or company, having a license as a banker, might be exempted by subdivision 9 of section 79 of the act of 1864, as amended by the act of March 3, 1865, (13 St. 472,) from paying the special tax imposed upon brokers. Nothing more is decided in that case.

In Selden v. Trust Co. the question was whether corporations whose business was to invest their own capital, not that of others, in bonds secured by mortgage upon real estate, and to negotiate, sell, and g aranty such bonds, were banks or bankers, within the meaning of section 3407 of the Revised Statutes. It was held that they were not; that congress did not intend that a person or corporation selling its own property, nor that received from its own property, not that received from a banker or bank for the purposes of taxation. The court in that case referred to section 3407 as describing three distinct classes of artificial and natural persons distinguished by the nature of their business: First, those who have a place of business where credits are opened by the deposit or collection of money or currency subject to be paid or remitted upon draft, check, or order; second, those having a place of business where money is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes; third, those having a place of business where stocks, bonds, bullion, bills of exchange, or promissory notes are received for discount or for sale. In respect to the third class it was said: 'The language of the statute is, 'where' such property is 'received' 'for discount or for sale.' The use of the word 'received' is significant. In no proper sense can it be understood that one receives his own stocks and bonds or bills or notes for discount or for sale. He receives the bonds, bills, or notes belonging to him as evidences of debt, though he may sell them afterwards. Nobody would understand that to be banking business. But when a corporation or natural person receives from another person, for discount, bills of exchange or promissory notes belonging to that other, he is acting as a banker; and when a customer brings bonds, bullion, or stocks for sale, and they are received for the purpose for which they are brought, that is, to be sold, the case is presented which we think was contemplated by the statute. In common understanding, he who receives goods for sale is one who receives them as agent for a principal, who is the owner. He is not one who buys and sells on his own account.'

This language embraces the present case. The plaintiff was not a broker who, without employing capital of his own, simply negotiated purchases and sales of stocks for others, receiving only the usual commissions for services of that character. In his business of buying and selling stocks for others, he regularly employed capital, by the use of which interest was earned upon moneys advanced by him for his customers substantially as it would be earned by a bank upon money loaned to its customers. In the parlance of the stock exchange he might be called a 'stock-broker;' yet here were all the conditions which under the statute made the case of a banker whose capital employed in his business was liable to a tax of one twenty-fourth of 1 per centum each month. It is not a sufficient answer to this view to say that the business of a stock-broker is ordinarily distinct from the business of a banker, or that according to the common understanding a stock-broker is not a banker. A stock-broker may do some of the kinds of business that are usually done by bankers, and many banks and bankers do business which, as a general rule, is only done by stock-brokers. Congress did not intend that the question of taxation upon capital employed in the business of banking should depend upon the mere name given to such business, either by those engaged in it or by others. When the plaintiff admits, as he does, that his business was that of buying and selling stocks for his customers, and that in such business he employed capital, he proves that he was a banker, within the statutory definition, and that, within the meaning of section 3408, his capital was employed in the business of banking. He brings himself within the rule that congress prescribed for determining who, for the purposes of the taxation in question, though not necessarily in the commercial sense,-were bankers, and what was banking business. That rule is expressed in words that leave no doubt as to what was the intention of congress. The judgment below gives effect to that intention, and it is affirmed.

FIELD and MILLER, JJ., dissent.