Creighton National Bank v. Knox County , 108 Neb. 610 ( 1922 )

Day, J.

On April 1,1915, the Creighton National Bank of Creighton, Nebraska, made a return to the assessor of Knox county for the purpose of fixing a value for taxation upon the shares of its capital stock. The schedule showed that the capital stock was $25,000, divided into 250 shares of $100 each, surplus, $8,500, and undivided profits of $698.26, making a total hook value of its shares of $34,198.26.

It was the claim of the hank that it was entitled to deduct from this aggregate amount the sum of $12,900, because the bank held on April 1, as a part of its assets, notes secured by mortgages on real estate in this amount, in which the mortgagors agreed to pay the amount of any taxes which might be levied upon the debt secured by the mortgages. The assessor refused to make any deduction on account of this claim by the bank.. An appeal was taken to the county board of equalization^ where the board also refused to make the deduction. The bank then took an appeal to the district court, the case being docket No. 3793. Nothing was done in the case until 1919, when it was consolidated with another case between the same parties, and involving the same legal questions.

It also appears that the bank made a similar return to the assessor for the year 1918. In that schedule the capital stock, surplus, and undivided profits amounted in the aggregate to the sum of $40,207.43. At that time it was the claim of the bank that among its assets were notes secured by real estate mortgages aggregating $22,789, in which the mortgagors agreed to pay any tax which might be levied upon the debt secured by such mortgages, and also that it held $8,200 of liberty bonds. The bank contended that the amount of these mortgages and the liberty bonds should be deducted from the total assets for the purpose of ascertaining the taxable value of the shai’es of its capital stock. The same process was had before the assessor and the board of equalization as was had in the assessment for the year 1915, and it resulted adversely to the bank’s claim. An appeal was likewise taken to the district court to review the assessment for the year 1918. The two cases were consolidated.

Upon the trial the district court affirmed the assessment made by the board of equalization. From this judgment the plaintiff appeals.

We think the legal questions presented on this appeal have been settled by the decisions of this court in Nemaha County Bank v. County Board, 103 Neb. 53, and State v. First Nat. Bank, 103 Neb. 280. In the Nemaha County Bank case, as in the case at bar; it was contended that the-amount of certain mortgages, owned by the.bank; in'which the mortgagors agreed to pay the taxes, should be deducted from the total value of the shares of stock for the purpose of determining the value of the shares; for taxation. In that case section 6343, Rev. St. 1913; as amended, Laws 1915, ch. 108, was construed, and it was held that such mortgage securities should not be deducted from the total valuation of the shares of.capital, stock in arriving'at the valuation of each share for taxation.

The case of State v. First Nat. Bank, 103 Neb. 280, presented the question whether certain liberty bonds owned by the bank, and admittedly tax exempt, should be deducted from the total value of the shares of stock for the purpose of determining the value of the- shares of stock in the hands of the stockholders for taxation, and it was held that the bonds could not be deducted. In that case the court reviewed section 6343, Rev. St. 1913, as amended, Laws 1915, ch. 108 (not necessary to be'here set out), and held that the tax contemplated by that section of the statute is a tax upon the shares of stock in the hands of the stockholders, and is not a tax upon the property or assets of the banking corporation. It was clearly pointed out that the shares of stock of the corporation are a distinct entity from the property or assets of the corporation itself.

We are satisfied with the reasoning of these cases, and the construction placed upon section 6343, Rev. St. 1913, as amended, Laws 1915, ch. 108, and are not inclined to disturb the rule therein announced.

The argument is made that the bank became the owner of a part of the mortgages before the amendment of 1915 to section 6343, Rev. St. 1913, became operative, and that the effect of the amendment, if literally enforced, is to impair the obligations of the bank’s contracts. The argu-' ment is founded on a- wrong premise. It assumes that the stockholders are the owners of the mortgages, when in fact the banking corporation, a distinct entity, is the owner. The contract between the bank and the several mortgagors is not disturbed. The stockholderk whose shares are being taxed have no contract relation with the mortgagors.

We conclude that in laying a tax upon the shares of stock in the hands of the stockholders the taxing authorities were not required to deduct the value, of the mortgages owned by the. bank in which the mortgagors agreed to pay the taxes which might be laid against the debt secured by the' mortgages. ' - ■

The judgment of the district court is

Affirmed.