Opinion
No. 33220.
November 28, 1938.
1. TAXATION.
A provision in contract of insolvent national bank's stockholders with committee, to which they had assigned their stock for benefit of another bank taking over insolvent bank's assets and liabilities, that the stockholders should be held harmless from statutory liability as stockholders, did not justify a direct suit by state tax collector against transferee bank for insolvent bank's back taxes even if they were included in the agreement, before the stockholders' liability was established, since the agreement constituted an "indemnity" contract (12 U.S.C.A., sec. 64).
2. INDEMNITY.
A suit may not be brought by creditor of indemnitee against the indemnitor directly until the liability of the indemnitee has been established, an "indemnity" constituting an agreement to save harmless, and not being made for benefit of the creditor.
3. TAXATION.
Where new bank was formed and took over old insolvent bank's assets and liabilities, the new bank could rely on terms of creditor's agreement under which the new bank's liability to pay claims against old bank extended only to those claims which were established against old bank during its receivership, and the new bank was not liable for taxes allegedly owed by the old bank, which were not so established against the old bank during receivership.
4. TAXATION.
A claim of state tax collector against a Mississippi national bank for taxes imposed on shares of stock of national bank, even if enforceable against the bank, would not survive bank's insolvency nor be enforceable against bank's receiver, since assets of the bank could not be taken from its creditor and paid to the tax collector for the benefit of the stockholders.
5. EQUITY.
The refusal to permit state tax collector to amend complaint in suit against transferee bank for taxes assessed against insolvent Mississippi national bank, the liabilities of which the transferee bank had allegedly assumed, to show by amendment that the insolvent bank by course of dealing permitted itself to be assessed upon its shares of stock and paid its assessment therefor for many years, was not error, where the amendment contained cumulative recitals which would not change rules of law governing the case.
APPEAL from the chancery court of Lauderdale county; HON. M.B. MONTGOMERY, Special Chancellor.
J.C. Floyd, of Meridian, for appellant.
After this cause was remanded to the state court by the federal court the complainant filed a motion for authority to amend its bill in certain particulars in order to more fully and more accurately state certain phases of the cause of action. We submit that these amendments should have been allowed.
Section 391 of the Mississippi Code 1930 provides that "amendments shall be allowed in the pleadings and proceedings, on liberal terms, to prevent delay and injustice."
Tishomingo Ins. Co. v. Allen, 76 Miss. 114, 23 So. 305; Greenwood Grocery Co. v. Bennett, 101 Miss. 563, 58 So. 482.
The main point urged by the defendant in its demurrer, and the theory upon which the bill was dismissed by the District Court and upon which the decree of the District Court dismissing the bill was affirmed by the Circuit Court of Appeals, was that the assessments as made in this case were void and, therefore, no taxes ever accrued. Not that the Mississippi statute providing for the taxation of national banks was void, but that the assessments were void in that the assessing officers placed the name of the bank upon the assessment rolls as the owner of the property instead of the names of the various individual shareholders.
It is not a sufficient challenge of the validity of the law to aver that it is improperly administered by those charged with its administration.
Cummings v. Merchants Nat. Bank, 101 U.S. 153, 25 L.Ed. 903.
There is, therefore, a marked distinction between the question thus presented in this cause and that presented in Owensboro Nat. Bank v. Owensboro, 173 U.S. 664, 43 L.Ed. 850, and similar cases, for the question there was whether or not the law imposing the tax was in contravention of the federal statute.
Section 5219 of the Revised Statutes, Section 548, U.S.C.A., Title 28.
The State of Mississippi has elected to pursue the first of the three forms of taxation allowed and taxed the shares by Section 3138, Mississippi Code of 1930.
The proper measure of taxation upon the national banking association shares in Mississippi determined and directed by the legislature as authorized by Section 5219 Revised Statutes, supra, is "par value of the shares augmented by the undivided profits, surplus, or accumulations of any sort constituting part of the assets of the bank . . . But if the shares of such bank or banking association are of less value than par they shall be valued accordingly . . ." in other words the true value of stock.
People v. Comr. of Taxes, 94 U.S. 415, 24 L.Ed. 164; First Nat. Bank of Jackson v. McNeel, 238 Fed. 559; Section 181, Constitution of the State of Mississippi.
The method for determining the value of the shares as provided for in Section 3138 has been upheld by the Mississippi Supreme Court in several cases.
Magnolia Bank v. Pike County, 111 Miss. 857, 72 So. 697; Bank of Commerce v. Adams County, 130 Miss. 37, 93 So. 442; Miller v. Citizens Nat. Bank, 144 Miss. 533, 110 So. 439.
And it has been specifically held by the Supreme Court of Mississippi that Section 3138 does not violate Section 5219, Revised Statutes of U.S.; Selig v. Price, 167 Miss. 612, 142 So. 504.
The contention here made by the defendant, appellee, as to the invalidity of the assessment because made in the name of the bank has been conclusively settled adversely to its contention by the Supreme Court of the United States in the case of First National Bank v. Chehalis County, 166 U.S. 440, 41 L.Ed. 1069.
We are not at all sure that any assessment whatsoever was necessary to the validity of this tax.
Bank v. U.S., 19 Wall. 227, 22 L.Ed. 80; King v. U.S. 25 L.Ed. 373; 3 Cooley on Taxation, (4 Ed.) page 2118; Clement National Bank v. State of Vermont, 231 U.S. 120, 58 L.Ed. 127.
We submit that Section 3138 of the Mississippi Code of 1930 levies the tax; that the assessment return furnished by the bank to the tax assessor for the City of Meridian and Lauderdale County fixed the basis of the assessment, and the only thing left for the taxing districts to do was to fix their various millage rates to be applied to the value as rated by the bank for the computation of the tax.
Carrier Lbr. Mfg. Co. v. Quitman County, 125 So. 416; U.S. v. Philadelphia R.R., 123 U.S. 114, 31 L.Ed. 138; U.S. v. Warrick, 25 Fed. 140; Boody v. Watson, 9 A. 799; I.C. v. Kentucky, 218 U.S. 551, 54 L.Ed. 1147.
The Supreme Court of Mississippi has specifically held that the ownership shown on the assessment roll is immaterial.
Smith v. Cassidy, 75 Miss. 916, 23 So. 427; Powell v. McKee, 81 Miss. 229, 32 So. 919; Carr v. Barton, 162 So. 172.
It does not appear to us that it would require any great degree of perspicacity for anyone to tell that the shares of stock of the First National Bank are the property involved in that entry and that "tax on same" means tax on the shares of stock at the true value computed as provided by Section 3138.
Remembering that the First National Bank individually was not liable primarily by law to taxation on its shares, is it unreasonable to construe the act of making the return to be the act of the persons primarily liable for the tax, the shareholders, acting through their statutory agent?
In fact, there is respectable authority to the effect that the assessment should be made in the bank's name in order to hold it liable for the tax as agent for its shareholders under the statute.
61 C.J. 709, sec. 875; First National Bank of Walla Walla v. Hungate, 62 Fed. 548; Paul v. McGraw, 28 P. 532; State v. Security National Bank, 173 N.W. 885; First National Bank v. Anderson, 192 N.W. 6, 269 U.S. 341, 70 L.Ed. 295; Western Improvement Banking Co. v. Murry, 56 P. 728; Albuquerque v. Perea, 25 P. 776, 147 U.S. 47, 38 L.Ed. 91; City of Yale v. Michigan Ins. Co., 146 N.W. 88; First National Bank of Aberdeen v. County of Chehalis, 166 U.S. 440, 41 L.Ed. 1069.
Many other authorities might be cited to sustain the proposition we are contending for, i.e., that the fact that the assessment is made in the name of the bank does not invalidate the assessment or establish the fact that the tax is anything else than a tax of the shares as permitted by Congress, but it seems that after First National Bank v. Commonwealth of Kentucky, 9 Wall. 353, 19 L.Ed. 701, and First National Bank v. Chehalis County, 166 U.S. 440, 41 L.Ed. 1069, hereinbefore cited, and the provisions of the Mississippi statutes, that it is wholly unnecessary to take up more of the court's time on this point.
There are many cases in the Mississippi Reports where the Supreme Court of Mississippi has approved assessments made, as the ones here involved were made, of the shares of stock directly against a national bank without the addition of "agent" or any other designation after the name of the bank on the rolls.
Robertson v. First National Bank of Greenwood, 115 Miss. 840, 76 So. 687; First National Bank of Biloxi v. Bd. of Suprs., 157 Miss. 197, 127 So. 686, 75 L.Ed. 758; National Bank of Gulfport v. Board, 159 Miss. 62, 132 So. 95; Capital National Bank v. Board, 162 Miss. 658, 139 So. 163; Miller v. Citizens National Bank, 144 Miss. 533, 110 So. 439; Board v. First National Bank of Meridian, 119 Miss. 165, 80 So. 530.
We respectfully submit that the question of validity or invalidity of these assessments is not a proper subject for review in this proceeding, in this court of equity. It is our contention that this court has no jurisdiction to consider or pass upon the validity of an assessment made by the duly constituted taxing authorities of the state and its political subdivisions.
Spencer v. Bablon, 250 Fed. 24; First National Bank of Greenville v. Gildart, 64 F.2d 873; Edward Hines v. Knox, 144 Miss. 560, 108 So. 907; Railroad Co. v. Adams, 73 Miss. 648, 19 So. 91; Town of Louisville v. Armstrong, 113 Miss. 385, 74 So. 285.
It is, of course, true that the defendant has only such defense to, and rights to contest the validity of, the assessments as the old bank or its stockholders would have.
First National Bank v. Bennett, 111 Miss. 26, 71 So. 169; French v. Spencer, 21 How. 228, 16 L.Ed. 97; Toliver v. Great Northern, 187 Fed. 795, 109 C.C.A. 643, 223 U.S. 611, 56 L.Ed. 624.
The bank and its stockholders accepted and enjoyed the protection and benefits of the government provided in anticipation of the taxes due by the assessments.
Selig v. Price, 167 Miss. 612, 142 So. 504; Albuquerque National Bank v. Perea, 25 P. 776, 147 U.S. 47, 37 L.Ed. 91; Fox v. Pearl River Lbr. Co., 80 Miss. 1, 31 So. 583; State v. Board of Assessors, 11 A. 17; Crawford v. McLauren, 83 Miss. 265, 35 So. 209; Powell v. McKee, 81 Miss. 229, 32 So. 919; Miller v. Citizens National Bank, 144 Miss. 533, 110 So. 439.
We say that under a long and unbroken line of authorities in Mississippi, when the assessment here involved was approved by order of the board of supervisors and by order of the municipal board, the matter became res adjudicata, and especially is this true where the person assessed returned the property in the manner in which it was assessed.
Anderson v. Ingersoll, 62 Miss. 73; Yazoo Delta Inv. Co. v. Suddoth, 70 Miss. 116, 12 So. 246; Moore v. Duck Hill, 151 Miss. 840, 119 So. 324; North v. Culpepper, 97 Miss. 703, 53 So. 419; Jones v. Moore, 118 Miss. 68, 79 So. 3; Adams County v. Bank of Commerce in Liquidation, 157 Miss. 249, 128 So. 110; Board v. Peoples Bank, 128 So. 111; Western Union Tel. Co. v. Kennedy, 110 Miss. 73, 69 So. 674.
Whatever immunity or exemption from taxation national banks are entitled to, under the laws of Mississippi it is their duty to present and press such claims for exemption, as statutes allowing exemption from taxation are strictly construed against the exemptionist.
Currie-Finch Co. v. Miller, 123 Miss. 850, 86 So. 579; Greenville Ice Co. v. Greenville, 69 Miss. 86, 10 So. 574; North American, etc., Catholic Diocese v. Havens, 164 Miss. 119, 144 So. 473.
It is our contention that the assessments in this case having become final judgments are subject to the collateral attack here sought to be made upon them.
It may be said that since this is a proceeding on such final judgments in an effort to collect them, the attack, therefore, is not a collateral one. We think, however, there can be no doubt that it is.
Rawlings v. American Oil Co., 173 Miss. 683, 161 So. 851; Martin v. Miller, 103 Miss. 755, 60 So. 722; Yazoo Delta Lbr. Co. v. Eastland, 104 Miss. 553, 61 So. 597; Brooks v. Shelton, 47 Miss. 243; Horn v. Green, 52 Miss. 452; North v. Culpepper, 97 Miss. 730, 53 So. 419; Moore v. Thomas, 95 Miss. 644, 48 So. 1025; Warren County v. Miss. River Ferry Co., 170 Miss. 183, 154 So. 349; Adams v. Clark, 80 Miss. 134, 31 So. 216; Moore v. Duck Hill, 151 Miss. 840, 119 So. 324; Adams v. Clark, 80 Miss. 134, 31 So. 216.
We respectfully submit that the collateral attack here sought to be made by the points urged in the demurrer cannot be entertained by this court, because the defenses are predicated upon a collateral attack in which there are not sufficient errors to afford relief.
People v. Comr. of Taxes, 71 U.S. 244, 18 L.Ed. 344; People v. Weaver, 100 U.S. 542, 25 L.Ed. 706; Board of Albany County v. Stanley, 105 U.S. 310, 26 L.Ed. 1049.
The First National Bank of Meridian wholly failed to file any objections or prosecute any appeals from the orders approving the assessments here involved.
We say that it is the duty of the taxpayer or the person against whom an erroneous assessment for taxes is made, to file objections before the administrative board, and a failure to do so makes the tax binding upon the person assessed, especially would this seem to be true where the taxpayer has returned the property for taxation.
Ex Parte Wimberly, 57 Miss. 437; Gorham Mfg. Co. v. State Tax Commission, 266 U.S. 265, 69 L.Ed. 279; Keokuk Bridge Co. v. Salem, 258 U.S. 110, 66 L.Ed. 496; Palmer v. McMahan, 133 U.S. 660, 33 L.Ed. 772; Singer Sewing Machine Co. v. Benedict, 229 U.S. 481, 57 L.Ed. 1288; Ohio Tax Cases, 232 U.S. 576, 58 L.Ed. 138; Baltimore Steam Packet Co. v. Baltimore, 155 A. 158.
It appears to us to be without doubt that appeal to the circuit court is the exclusive remedy to correct an assessment for taxes in Mississippi in the event the board fails and refuses to make the desired correction.
Reed v. Norman Lbr. Co., 149 Miss. 395, 115 So. 724, 49 Sup. Ct. 14; G. S.I. Ry. v. Draughon, 148 Miss. 269, 114 So. 433; Missouri Pacific Ry. v. Conway, 280 Fed. 401; 2 Cooley on Taxation, (3 Ed.) 1445; 2 Page J. Taxation by Assessment, 2059; 27 Am. Eng. Enc. Law (2 Ed.) 726; Ind. Mfg. Co. v. Koene, 188 U.S. 681, 47 L.Ed. 651; Long v. Norman, 289 Fed. 5.
Section 3140 of the Mississippi Code of 1930 provides that every bank or banking association shall on or before the first day of December of each year pay the amount of taxes due by the assessment, and that for failure to pay such taxes its assets shall be liable to be proceeded against, then dealt with as provided by law in other cases for failure to pay taxes.
First National Bank of Greenville v. Gildart, 64 F.2d 873; Lionberger v. Rowse, 9 Wall. 468, 19 L.Ed. 72; First National Bank v. Chehalis County, 166 U.S. 440, 41 L.Ed. 1069; Merchants M. Natl. Bank, v. Penn., 167 U.S. 461, 42 L.Ed. 236; Citizens National Bank v. Kentucky, 217 U.S. 444, 54 L.Ed. 832; Hannan v. First National Bank, 269 Fed. 529.
The bank by its action consented, in effect, for the assessment to be made in the exact form in which it was made, which amounted to a consent judgment for the amount of the taxes.
Clement National Bank v. State of Vermont, 231 U.S. 118, 58 L.Ed. 157; Citizens Southern Natl. Bank v. City of Atlanta, 53 F.2d 557; Bank of California v. Richardson, 248 U.S. 476, 63 L.Ed. 372; Grenada Bank v. Town of Moorhead, 160 Miss. 163, 133 So. 66; Leavenworth v. Hunter, 150 Miss. 245, 116 So. 593; First National Bank v. Anderson, 269 U.S. 341, 70 L.Ed. 245; McFarland v. Central Natl. Bank, 26 F.2d 890; Boise City Natl. Bank v. Ada County, 37 F.2d 947; State ex rel. Wyatt v. Cantley, 26 S.W.2d 976; Farmers Traders Natl. Bank v. Hoffman, 61 N.W. 418; U.S. v. Erie Ry., 106 U.S. 327, 27 L.Ed. 151.
It appears to us absolutely unnecessary to argue that if the claim was a debt of the old bank, that it was also a debt which the receiver would be liable to pay, for it necessarily follows that if it be true that the First National Bank of Meridian was liable for the tax, then the receiver thereof would be liable therefor, if the claim had been proven to his satisfaction or established in a court of competent jurisdiction. U.S. Revised Statutes, secs. 5234, 5235. We are now, in this proceeding, seeking to establish the claim in a court of competent jurisdiction.
Robinson v. City of Wilmington, 65 Fed. 857.
Under the laws of Mississippi, Sections 3120 and 3121 of the Mississippi Code of 1930 provide that taxes are due on all property within the state as of the first day of January for the ensuing year, and that the tax lien provided by law attaches as of that date, and it is true generally under the laws of Mississippi that taxes are due for the ensuing year from and after the first day of January.
Gloster Lbr. Co. v. Adams County, 163 So. 541.
We submit that when the State of Mississippi and its political subdivisions became the creditor of the First National Bank that it was entitled to receive at least the same treatment as all other creditors, if it was not, in fact, entitled to priority.
Town of Rockingham v. Hood, 169 S.E. 191; Section 3120, Code of 1930; Boston A.R. Co. v. Mercantile Trust Deposit Co., 38 L.R.A. 97; First National Bank v. Commonwealth of Kentucky, 76 U.S. 353, 19 L.Ed. 701.
We take the position that the Mississippi bank taxing statute is a garnishment directly against the bank by operation of law binding the effects of the shareholders in the hands of such bank for the payment of the taxes imposed.
Section 1844, Code of 1930; First National Bank of Greenville v. Gildart, 64 F.2d 873; Cummings v. Merchants Natl. Bank, 101 U.S. 153, 25 L.Ed. 903; Earle v. Penn., 178 U.S. 450, 44 L.Ed. 1146; Earle v. Conway, 178 U.S. 456, 44 L.Ed. 1149; Lewis v. Fidelity Deposit Co., 292 U.S. 559, 78 L.Ed. 1425; Scott v. Armstrong, 146 U.S. 499, 36 L.Ed. 1059; Merrill v. National Bank of Jacksonville, 173 U.S. 131, 43 L.Ed. 640; 28 C.J. 256, sec. 353; McLaghlin v. Swann, 18 How. 217, 15 L.Ed. 357; Herrin v. Warren, 61 Miss. 509; 28 C.J. 254, sec. 351; Holman v. Fisher, 49 Miss. 472; Erwin v. Heath, 50 Miss. 795.
Not only is the claim here sought to be established one which should be paid from the estate of the insolvent bank, but it would appear that it is a claim which would be entitled to priority of payment if a question of priority should become material. And this would seem to be true even if the court should hold that the claim is no longer a tax claim, but that it is now simply a judgment claim against the old bank.
The question of priority, however, seems to be immaterial because, as will be shown by the contract between the receiver and the defendant herein, all creditors of the old bank, unless they have agreed otherwise, received or will receive payment in full of their claim.
Marshall v. New York, 254 U.S. 380, 65 L.Ed. 315; McFarland v. Hurley, 286 Fed. 365; First National Bank v. Ewing, 103 Fed. 168, 179 U.S. 686, 45 L.Ed. 386; Union Trust Co. v. Great Eastern Lbr. Co., 248 Fed. 46; Northern Fin. Corp. v. Byrnes, 5 F.2d 11; Price v. U.S., 269 U.S. 492, 70 L.Ed. 373.
It has been repeatedly held that claims against national banks in receiverships do not have to be presented to the receiver before suit is filed thereon, but may be liquidated in the state courts, or if presented to the receiver and disallowed by him may still be litigated in the state courts.
Bank of Beitel v. Pahquoque Bank, 81 U.S. 383, 20 L.Ed. 840; Denton v. Baker, 79 Fed. 104, 48 U.S. 243.
The failure of the state or any of the political subdivisions to file their claim for taxes in a receivership would not constitute a bar.
Sec. 104, Mississippi Constitution; U.S. v. Kendall, 263 Fed. 126; Sec. 193, Title 12, U.S.C.A., sec. 5235 R.S.; People of New York v. Hopkins, 18 F.2d 731; State of Mississippi v. Joiner, 23 Miss. 500; Adams v. I.C.R.R., 15 So. 640, 71 Miss. 752; Josselyn v. Stone, 28 Miss. 753; Parmilee v. McNutt, 1 S. M. 179; Trust Co. v. Norfolk, 183 Fed. 803, 197 Fed. 737; Texas Pac. v. Manton, 164 U.S. 636, 41 L.Ed. 580; Olcott v. Headrick, 141 U.S. 543, 35 L.Ed. 85; Anderson v. Condict, 93 Fed. 349; Houston v. Crawford, 28 L.R.A. 761; Texas Pacific Ry. v. Johnson, 151 U.S. 81, 38 L.Ed. 81; Texas v. Blum, 184 U.S. 641, 41 L.Ed. 582; Texas v. Gay, 167 U.S. 745, 42 L.Ed. 1209; Central Coal Co. v. Southern National Bank, 34 S.W. 385.
It certainly cannot be said in this case that the State of Mississippi or any of its political subdivisions was a party to the proceedings for the liquidation of the old bank.
White v. Knox, 111 U.S. 784, 28 L.Ed. 603; French v. Spencer, 21 How. 228, 16 L.Ed. 97.
The liability of the defendant, appellee here, by reason of the liability of the old bank, is sought to be established on two points, either of which would be sufficient, the first being that the defendant assumed the liability of the old bank by its contract with the receiver, and second, that the claim followed the assets which were acquired by the defendant, and, therefore, the defendant became liable therefor.
Hatch v. Morsco Holding Co., 50 F.2d 138; Updike v. U.S., 8 F.2d 913; Adams v. Stonewall Co., 80 Miss. 94, 31 So. 544; Northern Pacific Ry. Co. v. Boyd, 228 U.S. 482, 57 L.Ed. 931; Kansas City v. Guardian Trust Co., 240 U.S. 166, 60 L.Ed. 579; Central of Ga. v. Paul, 93 Fed. 879; Alberger Condenser Co. v. United Water Co., 126 P. 1087.
We say that it would not be contrary to equity and good conscience to require the payment of this tax claim by the defendant under the circumstances here, in view of the fact that it was charged with knowledge of the non-payment of the claim when it acquired the property, regardless of its specific contracts hereafter discussed.
Hightower v. American National Bank, 236 U.S. 351, 68 L.Ed. 334.
If the claim upon which this suit is predicated is duly established according to law, which establishment we are now seeking to effect, it comes within the provisions of the contract, Exhibit F to the bill of complaint.
It is the law in Mississippi that when one person conveys property to another and the consideration for the agreement is that the grantee will assume certain obligations of the grantor then the creditor may sue and collect from the grantee.
Sweatman v. Parker, 49 Miss. 19; Lee v. Newman, 55 Miss. 365; Dodge v. Cutrer, 100 Miss. 647, 56 So. 455; Barnes v. Jones, 111 Miss. 337, 71 So. 575; Moore v. Kirkland, 112 Miss. 55, 72 So. 855; Hanson v. Davis, 132 Miss. 81, 95 So. 787.
The liability is covered by the contract because taxes are certainly a statutory liability. They do not arise by agreement or by the common law. Whatever liability there may be against anyone for taxes is created by statute.
Milwaukee County v. White, 80 L.Ed. 155.
The contract does not limit the liability to any particular statutory liability, but says that the stockholder is to be relieved and held harmless from any and all statutory liability. And it appears to us that the only proper interpretation of the contract for the court to make would be that the bank assumed the statutory obligations, if any, of the stockholders.
Although the language of the contract does not say that the liability is assumed by the new bank, it says that the shareholder shall be relieved thereof, and the only way he could be relieved would be for the liability to be paid or assumed to be paid.
Citizens National Bank v. Kentucky, 217 U.S. 444, 54 L.Ed. 832; National Bank v. Boston, 125 U.S. 60, 31 L.Ed. 689.
Wilbourn, Miller Wilbourn and Bozeman, Cameron Bozeman, all of Meridian, for appellee.
Assessment is void as not sufficiently identifying property.
First National Bank of Gulfport v. Adams, 258 U.S. 362, 42 S.Ct. 323, 66 L.Ed. 661; Ward v. Baird, 215 N.W. 163; Weiser National Bank v. Jeffries, 95 P. 23; People v. First National Bank of LaGrange, 184 N.E. 645; Allen v. Bilyeu, 198 P. 208; First National Bank of Leoti v. Fisher, 26 P. 482; Head v. Board of Review, 152 N.W. 600; Farmers Traders Natl. Bank v. Hoffman, 61 N.W. 418.
Shareholders are not personally liable.
George County v. Catlett, 135 So. 217.
The purported assessment against old First National Bank is void under laws of State of Mississippi and of United States.
Adams v. Bank, 108 Miss. 346, 66 So. 407, 123 Miss. 279, 85 So. 308; Home Savings Bank v. Des Moines, 205 U.S. 503, 51 L.Ed. 910; First National Bank v. Chehalis County, 166 U.S. 440, 41 L.Ed. 1069; Ward v. Baird, 215 N.W. 163; State ex rel. Wallace, 48 N.D. 803, 187 N.W. 728; Merchant's State Bank v. McHenry County, 31 N.D. 108, 153 N.W. 386; Owensboro National Bank v. Owensboro, 173 U.S. 664, 19 S.Ct. 537, 43 L.Ed. 850; First National Bank of Gulfport v. Adams, 258 U.S. 362, 42 St. Ct. 323, 66 L.Ed. 661; First National Bank of Guthrie Center v. Anderson, 269 U.S. 341, 46 S.Ct. 135, 70 L.Ed. 295; Section 5219 U.S. Revised Statutes, 12 U.S.C.A., 548; Weiser National Bank v. Jeffreys, 95 P. 23; People v. First National Bank of LaGrange, 184 N.E. 645; Graves County v. First National Bank, 108 Ky. 194, 56 S.W. 16; First National Bank of Leoti v. Fisher, 26 P. 482; Head v. Board of Review, 152 N.W. 600.
Regardless of any questions about the validity of the assessment as against the old bank, neither the receiver nor the assets that passed into his hands upon the insolvency of the old bank were liable for a tax due by shareholders on their shares of stock in the old bank, even if there were any tax due and consequently, appellant cannot recover in this case on any of the contracts upon which he relies and that were made with the new bank in process of liquidation of the old bank by the receiver.
Stapylton v. Thaggard, 91 Fed. 93; First National Bank v. Chehalis County, 166 U.S. 440, 41 L.Ed. 1069; Rosenblatt v. Johnston, 104 U.S. 462; City of Boston v. Beal, 51 Fed. 306; Brown v. French, 80 Fed. 166; City of Charleston v. Middlesex, 109 Mass. 270; Gully v. Bank, 81 F.2d 502; Ward v. Baird, 215 N.W. 163; Taylor v. Hale, 58 S.W.2d 428.
Section 3191 is the complete answer to counsel's insistence that the assessment against the old bank is here res adjudicata.
It is manifest that at any time prior to a voluntary payment of the taxes the old bank might have, notwithstanding the assessment, either enjoined it under Section 420 of the Code of 1930 or applied under Section 3191 of the Code of 1930 to correct the invalid assessment. Either of these rights existed as long as the tax had not been paid. The old bank could never have estopped itself or be bound by the assessment against it until it acquiesced in it by voluntary payment and by failing to enjoin it or to apply to have it vacated prior to payment.
Old bank is not liable on garnishment theory.
Copiah Hardware Co. v. Meteor Motor Car Co., 136 Miss. 274, 101 So. 375; Earl v. Penn., etc., 178 U.S. 450, 44 L.Ed. 1146.
The alleged tax liability did not follow the assets and the appellee is not liable as the transferee.
The appellee bank is neither claimed nor shown to have been either a merger or consolidation with the old bank, nor a continuation thereof. It is an entirely new institution, its entire capital new and its charter new and distinct, and its name different, and its contract here not with the old bank but with the receiver, pursuant to the approval of the Comptroller of the Currency and an order of the District Court of the United States for the Eastern Division of the Southern District of Mississippi. This suit is purely against it upon the theory of an assumption of liability which the court below found not to be true under the pleaded contracts and the allegations of the bill.
As held by the Mississippi Supreme Court, unless a party has been assessed he cannot be delinquent and can owe no tax. No shareholder has been assessed, therefore, no shareholder was or is delinquent, nor did any shareholder owe any debt. Even where a party has been assessed with a tax, if the proceeding is not in rem against the property taxed (and this proceeding is not of that nature), but is one seeking to enforce the personal liability as a debt of the party assessed, then such party is entitled to his day in court, and the assessment, even if valid, is only prima facie against him.
Section 3122, Code of 1930; George County v. Catlett, 135 So. 217; State v. McDonald, 145 So. 508, 164 Miss. 405; Nichey v. State, 145 So. 630, 167 Miss. 650, 146 So. 859.
The shareholders were not made parties.
There is no agreement to pay the taxes sued for, nor anything, and no assumption of liability to anybody, and no indication of the making of a contract for the benefit of any one other than the parties thereto. At most it is an agreement to relieve and hold harmless, and as such purely one of indemnity.
Miller v. Fries, 49 A. 674.
The contract was not made for the benefit of the plaintiff and he may not sue thereon.
Second Natl. Bank of St. Louis v. Grand Lodge of Free and Accepted Masons of the State of Missouri, 98 U.S. 123, 25 L.Ed. 75; Nehalem Timber Logging Co. v. Columbia County, 189 P. 212; Williams v. Triche, 31 So. 926; Cain v. Foote Lbr. Co., 135 So. 769; Puffer Mfg. Co. v. Robertson, 75 So. 804, 112 Miss. 890; Cannonball v. Grasso, 59 S.W.2d 337.
No liability exists as against the defendant to pay any prior tax due by any person on shares of stock simply by virtue of the fact that the legal title thereto has been assigned to the defendant. No personal liability therefor arises.
Anderson v. State, 23 Miss. 459.
There was no error on the part of the court below in its ruling on the proposed amendments to the original bill.
Griffith's Chancery Practice, chapter 18, page 395.
An amendment must not make a new case.
Miazza v. Yerger, 53 Miss. 140; Clark v. Hull, 31 Miss. 524.
Amendents must be consistent with the pleading which they seek to amend.
Griffith's Chancery Practice, sec. 390.
Amendments must be material.
Griffith's Chancery Practice, sections 391 and 398; Cox v. Mortgage Co., 88 Miss. 100, 40 So. 379; I.C.R.R. Co. v. Wales, 171 So. 536, 177 Miss. 562; Section 6996, Code of 1930.
The state tax collector filed his bill in the chancery court to recover from appellee, the First National Bank in Meridian, certain taxes alleged to be due the municipality of Meridian, its separate school district state and county. The cause was removed on application of the bank to the federal district court there upon the pleadings, a judgment was entered in favor of the bank. The tax collector prosecuted an appeal to the Circuit Court of Appeals of the Fifth Circuit, where the case was affirmed. See J.B. Gully, State Tax Collector, v. First National Bank of Meridian, 81 F.2d 502. Thereupon the Supreme Court of the United States granted certiorari limited to the question of jurisdiction, and after considering that question, the Supreme Court of the United States, in Gully v. First Nat. Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70, held that the case had been improperly removed to the federal court and directed that the case be remanded to the state court.
When the order of the Supreme Court of the United States was obeyed, the appellant, Gully, amended his bill, and thereupon a demurrer was sustained thereto. The tax collector declined to amend further, and a decree final was entered for the bank, and the tax collector prosecutes an appeal here.
The bill alleged in broad terms that in April, 1930, the First National Bank of Meridian had returned for assessment its capital stock, etc., to the respective tax assessors of the county and city, and particularly set forth that these assessments had become valid, binding, and final. The bill alleged that on January 13, 1931, the First National Bank of Meridian, hereafter referred to as the "old bank," became and was insolvent and went into the hands of a receiver, that at all times from January 1, 1930, until January 13, 1931, the bank had in its hands sufficient property or assets of the shareholders of the old bank with which to pay or to reimburse itself for taxes paid on the shares of stock, it being the theory that the assessments were against the old bank as the agent of its shareholders, and the old bank had not paid these taxes. The assessments as set forth in the bill as a copy of the rolls of Lauderdale County are as follows:
"Name — Bank, First
"Banks capital stock, surplus and undivided profits, less book value of real estate .......... $540,135.00
"Total Valuation of all Personal Property ...... 540,135.00."
As set forth in the bill, the copy of the assessment roll as to the municipality of Meridian is as follows:
"First National Bank
2600 shares capital stock ...................... $260,000.00 Surplus and Undivided Profits .................. 313,890.00 ___________ $573,890.00 Less Real Estate ....................... 33,700.00 ___________ $540,190.00 Total Value of all Personal Property ............. $540,190.00 Total Tax on same ................................ $ 13,504.75."
The bill alleged that after the old bank had become insolvent and had gone into the hands of the receiver, interested parties proceeded to organize a national bank, named the First National Bank in Meridian, hereafter called the "new bank," and set forth a creditor's agreement, an assignment of the shares of stock by the individual shareholder of the old bank, and an agreement of sale to the new bank executed by the receiver of the old bank. The bill alleged that by virtue of these written agreements, the new bank obligated itself and promised to pay the taxes here involved at all events, and was liable therefor on the written exhibits on contract. As to the assignment of shares to a committee for the benefit of the new bank by the shareholders of the old, the contractual paragraph therein relied upon by the state tax collector is as follows: "That the undersigned be relieved and held harmless from any and all statutory liability as a shareholder of the First National Bank of Meridian, Mississippi."
Insofar as the contract with the receiver is concerned, there is a long preamble in which it is definitely stated that it is a desire of the contracting parties, the new bank, and the receiver to pay all the debts of the old bank, and the new bank was to provide the receiver with money so to do. When they came to contract as to how debts were to be paid, and the obligation assumed by the new bank, that contract was divided into two parts, the first was to provide for the payment of all known creditors of the suspended bank and expenses, and as to the unknown creditors the contract is as follows: "and said purchaser (the new bank) will pay the receiver such further sums, from time to time, during the period of active receivership, as the receiver may deem necessary to meet receivership expenses and to provide for the payment of such unlisted or unknown claims as may be duly established during the period of active receivership." It is conceded that the claim of the tax collector here involved was never presented to the receiver or allowed as a claim, nor was the bank ever called upon by the receiver to pay this claim or provide for its payment. The shareholders of the old bank were not parties to the proceeding, nor was there any allegation that any claim had ever been established on behalf of the taxing authorities against the shareholders on the assessments which we have set forth.
The demurrer to the bill, as well as the contracts and exhibits, are too long to set forth in a statement of the case. We may state certain additional allegations in connection with the points decided.
However, the demurrer challenged the validity of the assessments and alleged that they were absolutely void for the reason that no personal property was so definitely described as to create a lien upon any property situated in the county, or debt against anyone, and, second, that the assessment was void because it was a direct attempt on the part of the assessing authorities to levy an assessment upon the bank as such on its shares of stock, that Section 3138 of the Code of 1930, as to taxation of national banks, did not authorize the assessment, and, if it does, that such assessment violates Section 5219 of United States Revised Statutes, 12 U.S.C.A. Section 548; that the exhibits show that the new bank did not contract with the receiver or the shareholders, to pay this claim for taxes and that it made no such contract with the tax assessor, or with anyone else.
(1) We have determined that it is unnecessary for us to decide in this case as to whether the assessments herein are void in view of the conclusion we have reached, but we have thought it proper to set forth these assessments in order to call the attention of the taxing authorities to the fact that the power to assess shares of stock in a national bank is set forth in Section 3138 and is in the following language, after directing that state banks should be assessed upon their shares of stock or capital stock in detail: "Provided, nevertheless, in case of such bank or banking association existing under the laws of the United States, a precisely similar amount shall be assessed upon and collected from the shareholders thereof at the domicile of the bank as would have been assessed upon and collected from the said bank had it been created under the laws of the state of Mississippi; but each said bank and banking association shall, nevertheless, be liable to pay any taxes as the agent of each of its shareholders, and may pay the same out of their individual profit account, or charge the same to their expense account, or to the account of such shareholder in proportion to their ownership. It will be noted that the assessment by the county assessor contains no evidence in itself of just what the assessment consisted of. We, however, pretermit a decision as to whether these assessments are void, under the various statutes of this state.
(2) As to the contention of the tax collector that the new bank is liable directly to him, as such, because of the agreement with each of the shareholders there can be no merit. The covenant was to relieve and save harmless all statutory liability, and conceding without so deciding that statutory liability here was used in its broad sense covering any liability imposed by any statute, whether taxes or the liability, under 12 U.S.C.A. Section 64, the act of Congress relative to national banks, fixing liability upon a shareholder. We do not think there was an agreement to pay any debt of the shareholder as described therein but only to save harmless in case the shareholder had been held liable. The shareholders are not parties to this suit. Their liability insofar as this bill's allegations are concerned has not been established in such case. The contract is one of indemnity and a suit may not be brought by the creditor of the indemnitee against the indemnitor directly until the liability of the indemnitee has been established. An indemnity is more than a promise to pay; it is an agreement here to save harmless not made for the benefit of the third party, but an agreement strictly between the parties. The liability of the new bank arises exclusively out of its contract and cannot be extended beyond its terms "to save harmless." The indemnity is to do more than pay the debt as in itself the liability indemnified the costs accrued. See William Hoy v. Calvin Hansborough, Freem. Ch. 533, wherein the general rule is stated.
(3) The contract quoted from in the creditor's agreement remanded the new bank's liability to pay those claims which were established against the old bank during the receivership. The claim here involved was not so established and within the strict terms of the contract, which the new bank had a right to make in order to limit and make certain its liability. They did not become liable for this claim. But at all events, the claim here propounded is not one even if the old bank could have been sued and held liable for the taxes here involved because of its action in procuring, as alleged, the assessment to be made, as set forth. When the old bank became insolvent, this claim did not survive against its receiver after it became insolvent. In other words, the assets of the old bank could not be taken from its creditors and paid to or for the benefit of the stockholders. There seems to be no exception to this rule. See Gully v. First National Bank of Meridian, supra, 81 F.2d 506, wherein that court said on the question of estoppel of the old bank in the case at bar: "After insolvency the personal property cannot be taxed in the receiver's hands. Rosenblatt v. Johnston, 104 U.S. 462, 26 L.Ed. 832. To compel the receiver to pay taxes which can lawfully be imposed only upon the shareholders and their shares would be to take money from the creditors to pay obligations due by the shareholders, and is inadmissible. Stapylton v. Thaggard (C.C.A.) 91 F. 93; City of Boston v. Beal (C.C.) 51 F. 306, affirmed (C.C.A.) 55 F. 26; Brown v. French (C.C.) 80 F. 166; Baker v. King County, 17 Wn. 622, 50 P. 481." We think the above authorities answer all the contentions as to the old bank's being estopped and as to the finality of the assessment and that the authorities which appellant cites in support of his view are without exception addressed to actions between the taxing authorities and a national bank as a going concern.
We, therefore, are of the opinion that the court correctly sustained the demurrer to the amended bill.
Some complaint is made by the appellant that he was not permitted to show by an amendment that the old bank, by a course of dealing, permitted itself to be assessed upon its share of stock and paid its assessment theretofore for many years. This would be cumulative recitals and not changing the rules of law governing the case. So there was no error in refusing the amendment.
Affirmed.