Veazie Bank v. Fenno

ON certificate of division for the Circuit Court for Maine.

The Constitution ordains that:

'The Congress shall have power—

'To lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defence and general welfare of the United States; but all duties, imposts, and excises shall be uniform throughout the United States.

'To regulate commerce with foreign nations, and among the several States, and with the Indian tribes.

'To coin money, regulate the value thereof, and of foreign coin.'

It also ordains that:

'Direct taxes shall be apportioned among the several States. . . according to their respective numbers.'

'No capitation or other direct tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be made.'

'The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.'

With these provisions in force as fundamental law, Congress passed, July 13th, 1866, an act, the second clause of the 9th section of which enacts:

'That every National banking association, State bank, or State banking association, shall pay a tax of ten per centum on the amount of notes of any person, State bank, or State banking association, used for circulation and paid out by them after the 1st day of August, 1866, and such tax shall be assessed and paid in such manner as shall be prescribed by the Commissioner of Internal Revenue.'

Under this act a tax of ten per cent. was assessed upon the Veazie Bank, for its bank notes issued for circulation, after the day named in the act.

The Veazie Bank was a corporation chartered by the State of Maine, with authority to issue bank notes for circulation, and the notes on which the tax imposed by the act was collected, were issued under this authority. There was nothing in the case showing that the bank sustained any relation to the State as a financial agent, or that its authority to issue notes was conferred or exercised with any special reference to other than private interests.

The bank declined to pay the tax, alleging it to be unconstitutional, and the collector of internal revenue, one Fenno, was proceeding to make a distraint in order to collect it, with penalty and costs, when, in order to prevent this, the bank paid it under protest. An unsuccessful claim having been made on the commissioner of internal revenue for reimbursement, suit was brought by the bank against the collector, in the court below.

The case was presented to that court upon an agreed statement of facts, and, upon a prayer for instructions to the jury, the judges found themselves opposed in opinion on three questions, the first of which-the two others differing from it in form only, and not needing to be recited-was this:

'Whether the second clause of the 9th section of the act of Congress of the 13th of July, 1866, under which the tax in his case was levied and collected, is a valid and constitutional law.'

The case coming here, Messrs. Reverdy Johnson and C. Cushing, for the Veazie Bank, contended:

1. That the tax in question was a direct tax, and that it had not been apportioned among the States agreeably to the Constitution.

In explanation of the nature of direct taxes they relied largely upon the writings of Adam Smith, and upon other treatises, English and American, of political economy.

2. That the act imposing the tax impaired a franchise granted by the State, and that Congress had no power to pass any law which could do that.

Mr. Hoar, Attorney-General of the United States, argued the case fully, contra; he relying upon the case of Hylton v. The United States, as conclusive of the question independently of principle; and referring to the brief recently published of General Hamilton, by whom the case was argued, to explain and support his view of what was there decided; a case confirmed recently, the Attorney-General observed, in Pacific Insurance Company v. Soule.

In reply, it was contended that Hylton v. The United States adjudged one point alone, which was that a tax on carriages was not a direct tax, and that from the dicta of the judges, in the case, it was obvious that the great question of what were direct taxes was but crudely considered.

The arguments at the bar, by which these views of the respective counsel were maintained, are not presented, the views of both sides of the case being fully presented from the bench, in the opinion of the court, and in the dissent from it.

The CHIEF JUSTICE delivered the opinion of the court.