NATIONAL BANK OF BALTDIORE V. MAYOR, ETC., OF BALTIMORE.
239
will be presumed to be the owner, notwithstanding the circumstance that the court has judicial notice that he is not the owner, but that the government is. This rule has been maintained from motives of public poliey, and to secure the quiet enjoyment of possessions which are intrusions upon the United States alone. But it would be carrying a presumption against the fact to an absurdity to say that one in possession, who has not acquired the fee from the government,-the true owner,-is entitled to a decree, the practical effect of which is to prohibit a third person from obtaining title by purchase, or by appropriate proceedings under statutes of the United States. The respective claims of conflicting claimants may be asserted in the appropriate tribunals established by the government for that purpose. A decree here in favor of plaintiff would have no effect by way of inducement to the officers of the land department of the United States to issue the patent to plaintiff; and, if we had the power, it would be an illy-advised employment of equity jurisdiction to prevent the defendant from proceeding with his application, 01', worse still, to decide in advance that he had no right on which to base his application." Brandt v. Wheaton, 52 Cal. 433.
In the case at bar the real controversy between the parties manifestly concerns possessory rights, and therefore complainants' remedy, whatever it may be, must rest upon the theory that defendants are wrongfully in possession, and on this theory complainants' remedy is an action at law, not a bill in equity. In addition to the cases already cited, see Lacassagne v. Chapuis, 144 U. S. 119, 12 Sup. Ct. 659. For the reasons and upon the authorities above indicated and cited, I am of opinion that the bill now before me does not state a ease for equitable relief. Numerous other questions have been discussed by the parties in their respective briefs, but the conelusion just announced makes it unnecessary for me to pass upon any of them now. Injunction refused, and restraining order vacated. (February 14, 1899.)
Since the filing of my opinion herein, February 6, 1899, another case-the one cited below-has been brought to my attention, which is directly in point, and supports the conelusions readled by me in said opinion. The decision was rendered by Judge McKenna, then on the circuit bench, now justice of the supreme court, and holds, quoting from the syllabus, as follows: "In federal courts sitting in states where the local statutes have dispensed with possession by complainant as a prerequisite to maintaining the suit, a bill in equity to quiet title to land is demurrable which fails to allege affirmatively either that plaintiff is in possession, 01' that both complainant and defendant are out of possession." Railroad Co. v. Goodrieh, 57 Fed. 879.
NATIONAL BAXI{ OF BALTIMORE v. ),1AYOR, ETC., OF BALTUWRE et al. (CirCUit Court, D. Maryland. )'1arch 10, 1899.)
NATIONAL BANKS-TAXATION-·DJSCRJMINATION.
The fact that evidences of debt and shares of stock in foreign corporations, owned bJ' residents of Maryland, cannot be taxed for county and city purposes at a greater rate than 30 cents per $100 of actual market value, as provided by Act Md. 189ti, c. 143, § 201, does not constitute an
240
92 FEDERAL REPORTER·
.illegal discrimination against national banks. the shares of which might be taxed at a higher rate" within Rev. St,§ 5219, prohibiting the taxation of national banks at a greater rate than is assessed on other moneyed capital in the hands of individual citizens of a state, in the absence of proof that the securities taxed at a less rate belong'ed to a class of investments which directly compete with the business of national banks.
Bernard Carter, Willis & Homer, and George R. Gaither, for complainant. John V. L. Findlay and Leon E. Greenbaum, for defendants. MOHRIS, District Judge. This is a bill in equity praying an injunction to restrain the tax collector of the city of Baltimore from collecting from the complainant, the National Bank of Baltimore, as the city tax on the shares of its stock owned by residents of Baltimore, any sum in excess of 30 cents on the $100 of the market value, as ascertained by the state tax commissioner, which amount the complainant offers to pay. The tax demanded by the city collector is for the year 1897, and is at the rate fixed by the mayor and city council of Baltimore as the rate required for its general municipal purposes, viz. at the rate of $2 in every $100 of the assessed value of the shares belonging to residents of the city. This tax is assessed and demanded, in respect of shares of complainant's stock, by virtue of a portion of section 2 of chapter 120 of the Laws of Maryland of 1896, by which it is enacted: "That all shares or interest In any joint stock company and all shares ot stock in any bank incorporated under the laws of Maryland, and all shares of stock in any national bank located in Maryland, and all shares of any corporation incorporated under the laws of Maryland are to be valued and assessed for the purpose of state, county and municipal taxation to the owner thereof in the county or city in this state in which said owners may respectively reside and the taxable value of such shares is to be ascertained and determined and taxes thereon levied and collected as is now or may be hereafter provided by law."
It is not complained that there is any discrimination either in the valuation or taxation' of the shares of the complainant, or of any of the national banks located in Maryland, as compared with state banks, or as compared with other corporations of any kind incorporated under the laws of Maryland; but the complainant's contention is that there is a discrimination between the rate of tax imposed upon national bank shares, as compared with the rate of tax 0]1 bonds, certificates of indebtedness, and evidences of debt, in whatsoever form, and upon all shares of stock in foreign companies owned by residents of Maryland, as to which class of property section 201 of chapter 143 of the act of 1896 provides that they shall be assessed and valued to the owners thereof at their actual market value, and that upon that valuation there shall be paid the regular rate of taxation for state purposes, but for county or city taxation there shall 1;>e paid only at the rate of 30 cents on each $100, and no more. The contention at the complainant is that the bonds, certificates of indebtedness, and evidences of debt which are thus taxed at 30 cents on the $100 are the securities in which it deals, and in which it invests its capital, and that there are private bankers and other citizens of Maryland who
NATIONAL BANK OF BALTIMORE V. MAYOR, ETC., OF BALTIMORE.
241
have moneyed capital which they employ in the same general business as national banks, and who are taxed only on the securities in which their capital is invested; and that so far as their capital is invested in. evidences of debt, which, under section 201, are taxed only at 30 cents on the $100, there results a discrimination, because the shares of the capital stock of the national banks are taxed for the year 1897, in the city of Baltimore, at the rate of $2 on each $100 of their market value. The act of congress which allows taxation of national bank shares is section 5219 of the Revised Statutes: "Sec. 5219. Nothing hereIn shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the state within which the association is located; but the legislature of each state may determine and direct the manner and place of taxing all the shares of national banking associations located within the state, subject only to two restrictions, that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state, and that the sllares of any national banking association owned by non-residents of any state shall be taxed In the city or town wllere the bank is located, and not elsewhere. Nothing herein shall be construed to exempt the real property of associatlons from either state, county, or municipal taxes, to the same extent, according to its value, as other real property is taxed."
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92 FEDERAL REPORTER.
moneyed capital that comes into competition with the moneyed capital represented by the shares of a national bank, and not the $10,000 ,of bonds; or if a banker buys commercial paper, and with his indorsement rediscounts with a bank, it is not his moneyed capital, but the bank's capital, or its deposits, which he is using. So it may be true that the private bankers of a city are doing a large volume of business, :and at the same time it may be true that the moneyed capital of their own which they are using is insignificant. There is in the testimony no evidence of the amount of capital employed by these private bankers of Maryland in their business. A witness for the complainant .states that, in his judgment, it would, in the aggregate, exceed $10,000,000; but this is confessedly only a guess, based largely upon the rating given to the banking firms of Baltimore city by the reports of the mercantile agencies. These reports, as is well known, are based upon approximations of the whole wealth of all the partners of the firm, as in law all their property is at the risk of their business. 'The bankers themselves who were examined by the complainant were not interrogated as to the capital invested in the banking business carried on by them. One testified that his firm returned to the tax assessors the capital used in their business, and paid the full tax rate upon it; and the tax collector testified that other banking firms did the same. One of the bankers examined by the complainant stated that his firm returned to the assessor the stocks and bonds in which their money was invested at the date of the return; that much of it was the stock of domestic corporations, on which the corporation had paid the full tax, so that it was not subject to ta..'{ in their hands, and, as to the bonds, they paid the 30-cent rate; that the stocks and bonds often amounted to many times their capital, because, as they did hardly any discount business, they invested their deposits in stocks and bonds; that the only way in which they competed with banks was by offering interest to depositors, so as to attract deposits, which they then invested in stocks and bonds; that, if the securities in which they invested their deposits were taxed at the $2 rate, there would be nothing left for them, but that at the 30-cent rate bankers who held secnrities did return them to the assessor. It is to be remembered that banks do not return their depoeits at all, which aggregate often two tmd three times the amount of the capital; so that as to deposits, so far :a8 they are represented by 30-cent securities, on which the tax is paid by private bankers, the banks have the advantage. The proof fails to ilhow to my mind that the capital used by private bankers is of such amount that, if returned for taxation, it would relieve the banks from tlny material disadvantage, or that under any law any considerable amount would ever be placed upon the tax lists. The tax collector testified that after examining several bankers, and taking their affi.(]avits,he was satisfied that they were paying on their capital at the regular city rate, and ceased further investigation, because he was ·satisfied that their assessments were correct. There are two ways in which the banks can be injured by discrimination in taxation: One is that, if otber moneyed capital escapes taxation, the rate imposed upon all the assessed capital is greater; and the other is that if other moneyed capital used in busi-
243
nes!!!, which competes with theirs, escapes taxation, it can make a profit, even if loaned out at a less rate than the banks can afford to loan. As to the first ground, the proof shows that when bonds, evidences of debt, and stocks in foreign corporations, under the law as it stood prior to 1896, were taxed at the full rate, there was only, in the city of Baltimore, a little over $6,000,000 of such property on the tax lists for taxation, while under the present law, under the 30-cent rate, there was assessed for taxation nearly $5U,000,000. The collection of revenue by taxation is a practieal problem, and it would be very unwise for courts to ignore praetical results in the search for a theoretital uniformity. It was beeause of the persistent eomplaint, prior to 1896, that there must be a large amount of securities whieh rhe assessors had failed to get upon the tax lists, and the patent faet -,:hat, if the tax on a 4 per eent. bond amounted to more than half the interest, the capital it represented must, if ever actually taxed at the full rate, be driven from the city, to some place where the law was less exacting, that tIle legislature was led to the enactment of section 201 of chapter 143 of the Laws of 18%. rphis law was the result of years of discussion, and of most serious poWical struggles, and of the final acceptance by the legislatme of the wise suggestions of men of the largest experience in business affairs and finance. It cannot he said, in the light of the experienee of prior years, that if the full tax was imposed upon all bonds, certificates of indebtedness, or evidences of debt, the basis of assessment would be nearly as great as it is now, or that the rate of taxation would be less. Moreover. the discrimination forbidden by section 5219, as construed by the supreme court, does not have referenee to the rate of taxation upon the holders of evidences of loans and securities, if these securities belong to a dass of investments which does not compete \vith the business of national banks. First Nat. Bank of Aberdeen v. Chehalis Co., 166 U. S. 440461, 17 Sup. Ct. 629. The bonds, eertificates of indebtedness, and evidences of debt, which, under section 201 of chapter 143 of the Laws of 1896, are taxed at the 3D-cent rate, if issued by corporations of land, represent the debts of corporations the owners of whose shares are taxed the full rate upon the value of their shares, and so the full rate is paid upon all the property of the corporation, and, if issued by individuals, residents in Maryland, they represent the debts of persons who are taxable upon the full value of their real and personal property, without deduetion for their debts; and presumably the same is true of corporations and individuals foreign to Maryland. So that all that class of property consisting of evidences of debt might be exempt from taxation upon the ground of double taxation, and upon other grounds upon which it has been held that mere evidences of debt may fairly be exempt. It is only moneyed capital, employed, by the persons to whom it belongs, in the business of discounting commercial paper, making loans on collateral security, buying and selling bills of exchange, negotiating loans, and dealing in Eeeurities, and the like operations of the business of banking, which comes in competition with the moneyed capital invested in national banks. As was said by Mr. Justice 1fatthews: "Corporations and Individuals carrying on these operations do come Into competition with the national banks, and capita} in the hands of individuals
244 '
thus employed Is what 'Is Intended to be described by the act of Mercantile Bank v. City of New York, 121 U. S. 13S-15G, 7 Sup. Ct. 820.
The capital so employed is shown by the defendant to have been, with respect to some of the bankers in Baltimore city, assessed and taxed at the full rate. That it is not so with all is not through a defect in the law, or intentional discrimination of the assessors or collectors, but from the inherent difficulties of ascertaining it. The final clause of section 2 of chapter 120 of the Laws of 1896, taxing "all other property of every kind, nature and description within this state," is held by the taxing officers to include the banking capital of private bankers. In the very instructive arguments of the able counsel many points on both sides of this controversy were elaborately and learnedly presented, which it does not seem necessary should be now reviewed in this opinion. The contention that the shares of foreign state banks and other foreign wrporations held by eitizens of Maryland is moneyed capital, which eomes in competition with national banks in Maryland, eannot be maintained, and it would be no illegal discl-imination if the publie policy of the state was to levy no tax at all upon them. Without attempting to extend this opinion to embrace all the points raised in argument or by the pleadings, I hold that the defendants' demurrer to the seventeenth paragraph of the bill must be sustained, and that the eomplainant is not entitled to the relief asked by its bill. UNITED STATES v. BEEBE et aI. (Circuit Court of Appeals, I,'ifth Circuit. February 21, 1800.) No. (;39. JUDGMENTs-GnouNDs FOR SETTING ASIDE IN EQICITY-FnAtTD.
A court of equity will not set aside a judgment rendered by a court of competent jurisdiction, on the ground of fraud, beeause of false statements made by the defendants to the court as to their financial condition. by whieh the eourt was induced to render, and the plaintiff to aecept. a judgment for less than the amount sued for or than was actually due.
Appeal from the Circuit Court of the United States for the Middle District of Alabama. This is an appeal from a decision of the cireuit court of the United Fltates for the Middle district of Alabama, a demurrer to the bill of complainant. The bill was filed by the United States of America, by its attorney general, against E]ugene Beebe and others, alleging that the said Eugene Beebe and Ferris Henshaw were sureties on the official bond of one Francis Widmer, collector of internal revenue of the Second district of Alabama, in the sum of $50,000, conditioned that said 'Vidmer should faithfully perform the duties of said office; that said Widmer did not faithfully perform said duties,but failed to pay over to the United States the sum of $28,158.56, and that said sum is still due, with interest from January 6, 1874; that on the 3dday of June, 1880, separate suits at law were commenced in the circuit court of the United States for the Middle distriet of Alabama against said Eugene Beebe and against 'Villiam T. Hatchett, administrator of the estate of said ]1'e1'1'is Henshaw, for the recovery of the sums for which said Widmer, as collector, was in default; that said suits were continued until February 6, 1885, when judgments were severally entered against said defendants for $100 each and costs, and said Beebe, on the'lst day of July, 1886, paid into the treasury of the United States the sum of $109.85, the amount of the judg-
UNITED STATES V. BEEBE.
245
nwnt and eost8, lJut that the judgment against said Hatchett, as administrator, is due and unpaid. The lJill then proceeds as follows: "That said judgllLPnts were entered under the following circumstanees: That said defendants eame into court, and stated and represented in open court, and they caused to be stated and represented for them, that said Beebe and said Ferris Henshaw were poor men, and that 'said Beebe and the estate of said }1'erris Henshaw were without property out of which the said judgments could be paid and collected. 'That no part of said judgments could be collected by due process of law. That nothing could be made out of them, or either of them, or their estates, by execution, but that, if the court would allow a jury and verdict to be entered against them for one hundred dollars, they, and each of them, would pay said judgments and costs. That no evidence or proof was or had been introduced in said causes, or either of them, and indebtedness of said Beebe and Henshaw to the United States then being twenty-eight thousand one hundred and tifty- ight dollars and fifty-six cents ($28,158.56), and interest, or other large sum, and the statements and representations aforesaid only were before the said circuit court at the time of the entry of said judgments, and no hearing or upon the law 01' the facts im-olved in said cases was ever had in said court; whereupon the court remarked that, unless the district attorney of the United States objected, the causes might be disposed of as suggested aforesaid. Said district attorney did not object, and said judgments for one hundred dollars and costs were entered in each of said causes. That said statements and representations, made all aforesaid, by and on behalf of. and for, said Beebe and said Ferris Henshaw, and the estate of said Ferris Henshlnv, were wholly untrue, and were made to deeeive said court and rnited States attorney, and for the purpose, and with the intent, to defraud the United States. That said court and United States attorney had no authority in law to accept said statements and representations, which were not made under oath, nor in the course of any judicial proceeding, and were not, and were not supported nor verified by, evidence or proofs;' and that said aets of said eourt and United States attorney amounted, in law and in fact, to, and was, ami was intended to be, a naked eompromise of the e1aim and demand of the United States against said Eugene Beebe and FerTis Henshaw, ami the estate of said Ferris lIcnshaw, which said court and United States attomey had no authority, but were inhibited by law. to make, entertain, and eonsummate. That said eourt was without juris<liction and power to determine said causes in the manner aforesaid; and that said alleged judgments for one hundred dollars and costs are null and void ab initio. and of no effect, and be vacated and held for naught in this court of equity."
'V. S. Reese, Jr., for the 'Gnited States. "V. A. Gunter, for appellees Henshaw Heirs:. H. C. Tompkins, for appellees Montgomery Light Co., l\fontgomery I,and & Improvement Co., Southern Cotton Oil Co., Abbie F. Rice, and W. R. "ValleI'. Before McCORMICK, Circuit Judge, and SWAYKE and P.AR L.AXGE, District Judges. AYNE, District Judge (after stating the facts as above). It is e\'ident that this is a suit to vacate, annul, and set aside the judgment of a court, regularly entered, in a matter of which it had jurisdiction, with all the parties before it, on the ground that the said defendants Beebe and Henshaw stated to the court that "they were poor men, and were without property; that nothing could be made out of them by execution; and that these statements were wholly untrue, and were made to deceive the court and United States attorney, and with the intent to defraud the United States." In U. S. v. Throckmorton, 98 U. S. 61, }Ir. Justice Miller announced the estab-
246
lished doctrine on this sUbject to be "that the acts for which a comt of equity will, on account of fraud, 'set aside or annul a judgment or' decree between the same parties, rendered by a court of competent jurisdiction, have relation to frauds extrinsic or collateral to the matter tried by the first court, and not to a fraud in the matter on which the decree was rendered." It is difficult to see upon what theory the judgment in this case can be set aside. The alleged false' statements in the suits brought by the United States on the bond in question were not such as to deceive a person of ordinary care. They could not have deceived the district attorney, who represented the government, either as to the amount due on the bond or as to the property owned by the defendants. They did not in any way prevent the government from showing its cause of action, and taking judgment for the full amount due, if it saw fit to do so. Then, in about 15, months after the entry of said judgment, the governnwd satisfaction of the same by the officers of the treasury department, accepting the $100, with interest, from Beebe. We think the facts of this case bring it under the well-known rule announced in U. S. v., Throckmorton, supra, and the cases following it, and that the judgment below should be affirmed. .
FARMERS' LOAN & TRUST CO. v. STUTTGART & A. R. R. CO. (BARSTOW'S EX'RS, Interveners). (Circuit Court, E. D. Arkansas, W. D. 1. February 21, 1899.)
RAILROADS-IKSOLVENCY AND RIWEIVERSHIP-PHEFERRED LIENS FOIt MATEIUALS.
A guarantor of a debt contracted by a railroad company for rails, who pays the debt, has no greater claim in equity to a lien on the road superior to a prior mortgage than the seller of the rails would have if' unpaid. There is no principle of equity recognized and applied in the foreclosure of railroad mortgages which entitles a debt contracted for materials used in the original construction of a railroad, which has been preViously mortgaged, to preference over the mortgage as a lien on the road.
2. SAME-MATEUIALS USED IN CONSTRUCTION OF ROAD.
8.
SAME.
A purchaser of notes executed by one railroad company cannot establish a lien therefor on the property of another, superior to that of a prior' mortgage, merely because the maker used the proceeds in the construction of the second road.
4.
SAME-TAXES ADVANCED BY AGENT.
One who, at the request of a railroad company, as its agent, pays taxes due on its property, is entitled to a lien thereon for the amount advanced superior to that of a mortgage. ,
This is a hearing on interventions by the executors of Amos C. Barstow, deceased, in a foreclosure suit against the Stuttgart & AI'kansas River Railroad Company, claiming preferential liens on the" property of the defendant, or the proceeds of its sale. J. l\f. & J. G. Taylor, for complainant and interveners. P. O. Dooley, for defendant. John McClure, for receiver.