In the practice of the state of Illinois and in the territory of Col. orado, writs of attachment and other process for commencing suits were made returnable to terms of court. Under that system of procedure the meaning of the section was well understood. It defined a class of creditors who were entitled to participate ill the proceeds of property which should be seized by attachment. They were creditors who had writs of attachment returned and returnable to the same term of court,and other creditors proceeding by ordinary summons, who might be able to obtain judgment in the same term with the attaching creditor. This is shown by the case from 11 Ill. before referred to. In the Code of Colorado there is no such clas8 of creditors. Writs of attachment are not made returnable on any day or at any term of court, and process of summons requires the defendant to answer within a certain number of days after service, so that there are no such creditors known to the courts of Colorado or defined in the laws of the state as are mentioned in section 116 of the Code. By their motion, plaintiffs allege in substance that they are of a class of the creditors of H. S. Gosline who are entitled to share in the proceeds of this property. But It seems that there is no such class under the law,and therefore the motion must be denied. In No. l043,the Exchange Bank against the same defendant, and No. 1066, C. E. Mantz et al. against the same defendant, judgments were also entered at this term, and the plaintiffs would be entitled to participate in the distribution if any order of that kind could be made; but the rule must be the same as to all these parties. Section 116 is entirely inoperative in connection with the other provisions of the Code, and no order of distribution can be made.
UNITED STATES V. CENTRAL NAT. HANK.
(District Court, 8. D. NmD York.
February 1, 1883.)
INTERNAL REVENUE-TAXATION OF NATIONAL BANKS.
Under section 120 of the revenue act of June 30, 1864, (13 St. at Large, 283,) the plaintiff, in order to recover a duty upon certain sums alleged not to have been returned, must prove that these sums were either declared as dividends, or added to the surplus or contingent funds of the bank
Construing together sections 120 and 121, their import should be held to be to tax only the actual profits made-i. 6., under section 120 for profits declared or added to their surplus funds, and under section 121 for such profits earned as were not so declared or added to the surl'lus or contingent fund; and whero
UNITED S'UTESV. OENTlUL NAT..'BANE.
a decla,red by.a qank, bei$ides paying under the state law the state tax imposed upon the par value of its shares a.s the stpckholders, and the bank made return of and paid to the Uhited8tates officers the tax on the 'dividend declared, but not on the state tax paid on a.ccount of its stockholders, and iJ;"fterwards app.eared that embezzlements concealed during this the amount of the state tax not reJ-urned: hd4, on that if the bank would have been liable to pay the duty upon the sum paid for state' tax, it was entitled to: shOw the embezzlements as a correction of the resection 120w$sdue to the,government., turns, and that no further
S.L. Woodford, U. S. Atty., and E. B. Hilt Asst.., for theJITnited ." States.. Martin for defendant. . . By the lj,mended oom.plaint in 'this' aotion the ,plainpassed June tiff seeks to recoverQpderseotion ,120 of the revenue 30, 1864, (13 St. at Large, 283,) a duty of lS' per ,centum upon 'certain sums of money alleged to, 1>,e dividends declared. by ,the defendant due to stoQkholqera, of whioh the defendantmaden,o return, and upon which it is duty. See same oa8e,.10 FED. REP. 612. :The answer, by its first defense, denies that it made a.ny such dividends as alleged. For·a seoond defense it avers that the SUmS olaimedas dividends were paid to the, state of New York: as taxes levied upon the par value of the shares of its capital stook, pursQant to law. By .the third defense, it avers that its returns were in exoess of the reQllirements of the by rea.son of large embezzlements, through whioh it had lost large sums in excess of the amounts alleged not to .have been returned, and which losses were not discovered until long afterwards. The plaintiff demurs to the. second and third defenses. I am of the opinion that to entitle the plaintff to recover it must show that the sum paid taxes, on whioh it claims duty under section 120, was a dividend or apart of a dividend declared by .the defendant due to stockholders· . .The second defense asserts that it is advised and believes that these moneys so paid for taxes were a legitimate expense of its business, and in. no sense a part of its dividends. Ido not find any averment or admission in the second defense that such moneys so paid were a. part of any dividends deolared. and, under the state law as pleaded, it. does not appear that they would be necessarily suoh. For this and to the other analoreason the dtjillurrer to the gous defenses, must be overruled. In regard to the third defense, the demurrer admits that the loss from embezzlements, whioh were concealed and unknown to the de-
fendant at the time it made its returns, exceeded the amount claimed to be deficient in its returns, being the amount paid by the defendant for state taxes; that its return was made in good faith, and with the belief that it was a correct statement of the profits realized; that in consequence thereof it was led and induced to pay and distribute among its stockholders a much larger sum than it really earned, and to pay a much larger tax thereon to the plaintiff than it was in fact liable to pay; and that in making such payment it in fact did pay and distribute among its stockholders from its capital, and from its surplus and contingent fund earned in former years, not only the amounts now claimed, but a much larger sum, and did erroneously pay for the year mentioned an exoessive tax. This defense, if true, it seems to me ought to be upheld. It leaves no equity in the olaim for duty under section 120. Sections 120 and 121 seem to me clearly to indicate the real intention of the law, namely, that the banks should pay a tax upon all their profits and earnings for the year; if declared as dividends, or added to their surplus or contingent funds then payable under seotion 120; but if no dividends or additions to the surplus or contingent funds were made, then upon the amount of profits "accrued or earned and received" under section 121, of which the president or cashier was required to make return under oath. The question is not presented here as to the obligation of a bank where it intentionally declares a fictitious dividend, for the answer states that the dividends were declared in good faith, and in ignorance of the large losses by concealed embezzlements, whereby the dividends actually returned, and on which duty was paid, were in excess of its "earnings, income, or gains. It That a dividend is declared is undoubtedly prima facie evidence of such "earnings, income, and gains," under section 120; and the burden of proof to show the contrary is upon the defendant. But if the defendant, after having declared such dividends in ignorance of large losses, had discovered these losses before the time for making its return, it would clearly have the right to have the' error corrected. I think the court ought to allow the same correction now, by way of defense, as the government officers must have allowed, if opportunity had occurred for correction before them. No injury is thereby done to the government, and no injury ought to be done to the defendant by refusing such a correction. The demurrer, therefore, to the third defense and-the others similar to it, should also be overruled.
DAVENPOR'J: NAT. BANi:
Collector, etc., and
(Circuit Court, 8. D. IOtDa. January. 1883.)
TAXATION-STOCK OF SAVINGS BANKS.
Whether the law of Iowa exempts from taxation the shares of the oapital stock of savings banks, not decided.
STATE STATUTEs---CONSTRUCTION OF-PROVINOE OF STATE SUPREME CoURT.
It is the peculiar province of the supreme court of the state to determine the meaning of the statutes of such state, and with such determination courts of the United States will hesitate to place upon a state statute any construction which will bring such statute in conflict with a statute of the United States, and therefore render it void.
SAME-REVENUE LAWs---CONSTRUOTION-RULE OF.
In the construction of revenue laws, if property, whioh by a preVlous general statute is declared liable to taxation, is to be exempted under a later act from bearing its proportion of the public burden, the exemption must rest upon some clear and 'unequivocal provision of the statute.
In Equity. On final hearing. A. J. Hirschl, for complainant. Nath. French, for defendants. MCCRARY, J. The complainant is a national bank located in the city of Davenport, Iowa. The defendant Mittelbuscher, as taxcollector for said city, has demanded of complainant $1,631 as tax levied by said city upon the shares of the capital stock of the bank. The complainant alleges that said tax is an illegal charge against it, and that the same is null and void, because the statutes under which the same was levied are contrary to section 5219 of the Revised Statutes ot the United States, which provides that shares ,of national banking associations shall "not be taxed at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens." H is alleged that under the statutes of Iowa the shares of stock in savings banks are exempt from taxation, while those in national banks are subject thereto, whereby the latter class of property is taxed at a greater rate than the former. Complainant alleges a willingness to be taxed the same as savings banks, and as a reason for not tendering any sum as the tax legally due, it says that if assessed or taxed under the statute of Iowa, under which savings banks are taxed, it would have nothing at all to pay as city tax for 1882, because all its ca:pital stock and all its surplus are now and were during the whole of the years 1881 and 1882, and long prior v.15,no.3-15