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decided: May 29, 1922.



Author: Brandeis

[ 259 U.S. Page 297]

 MR. JUSTICE BRANDEIS delivered the opinion of the court.

This suit was brought in the Court of Claims by the Fidelity and Deposit Company of Maryland to recover the sum of $8,300, being the aggregate of amounts paid as bankers' special taxes for the years 1898 to 1901, under § 2 of the Spanish War Revenue Act of June 13, 1898, c. 448, 30 Stat. 448. The company applied on November 22, 1913, for a refund, pursuant to the Act of July 27, 1912, c. 256, 37 Stat. 240, alleging that the taxes had been assessed and collected on plaintiff's capital, but that in fact none of it had been used or employed in the banking business. The application was rejected by the Secretary of the Treasury on April 19, 1917; and this suit was begun on July 25, 1918. The Government insisted that the taxes were legally payable and also that the claim was barred by the two-year statute of limitations. The court dismissed the petition without opinion on authority of Union Trust Co. v. United States, 55 Ct. Clms. 424; and the case is here on appeal. A motion to remand for further findings of fact made here by appellant earlier in this term was denied without prejudice.

[ 259 U.S. Page 298]

     By the Act of 1898 "bankers using or employing a capital not exceeding the sum of twenty-five thousand dollars" were required to pay a special tax of $50; and for every additional $1,000 the further amount of $2. The act provided, among other things, that "in estimating capital surplus shall be included:" and that "every person, firm, or company, and every incorporated or other bank, having a place of business where credits are opened by the deposit or collection of money or currency" subject to check, are to be deemed bankers. The Fidelity Company was unquestionably a banker; but banking was only one of four departments of its business. The others were: (a) the surety business -- that is, acting as surety upon bonds conditioned for the faithful performance of duties by principals; (b) the safe-deposit business -- that is, renting safe-deposit boxes for the safe keeping of valuables; (c) the business of acting as trustee under dond issues of other corporations. Whether the company had used or employed its capital in the banking business, within the meaning of the Act of 1898, is the main question presented.

The tax paid upon capital used or employed in banking was assessed for the year 1898 upon $25,000; for 1899 upon $1,125,000, and for 1900 and 1901 upon $1,500,000. The company claimed that it had not used any of its capital in banking during any of those years; and duly requested the lower court to find as facts that: "The entire business of the banking department was conducted solely on its depositors' money. Neither the capital stock nor surplus of plaintiff company was used or employed by or in the banking department." The court made no specific finding on that subject; and it overruled the motion for a new trial, in the supplement to which the company renewed its application for such findings, and also requested other specific findings in support of them. In the motion made here to remand the case for further findings

[ 259 U.S. Page 299]

     of fact the company requested that the Court of Claims be directed to find from the evidence: (1) Whether or not the banking department used only the funds of its depositors in the conduct of the business of that department; (2) whether or not any of the capital or surplus of the company was actually used or employed in the banking business, and, if so,what amount; and (3) what was the net income of appellant's surety or bonding department during each of the years in question. The court had already found the annual net income of the banking department; and it was asserted that in volume and profits the surety business was far more important than that of banking. If specific findings on these subjects are necessary to a proper determination of the case, it should clearly be remanded for that purpose; since the requests therefor were made seasonably in the lower court and here.

The Government contends that the findings requested are immaterial, because, as a matter of law, all of the capital (and surplus) was used or employed in banking. It argues that the words used and employed are not to be given the same meaning; that all the company's capital was, as matter of law, employed in the banking business, because all of it was, as matter of law, available for use in the banking department; and that all of it must in fact have enhanced the credit of the banking department, even if none of it was actually used in banking and the income of the banking department was derived directly from the investment of its deposits. In other words, the contention is that the act fixes the tax upon the banker "using or employing" a capital; and that a firm, or company, being a banker, can not escape, or reduce, the tax by showing that it is engaged in several lines of business and that, in fact, none, or only a part, of its capital was used specifically in its banking operations.

The findings of fact made by the Court of Claims were these: The Company's capital stock and the surplus were

[ 259 U.S. Page 300]

     each $1,000,000 in 1898.Both were increased from time to time. In 1901 the former was $2,000,000, the latter $2,550,000. All the money derived from the sale of the capital stock and all the money of the surplus were permanently invested in real estate (including the office building at Baltimore in which the company's business was done) and in bonds, stocks and other securities.These investments were referred to and were designated on its books as "Capital Stock Investments." The securities and valuable papers representing them were segregated in a separate compartment of the company's vault in separate envelopes earmarked as capital stock. The financial operations concerning them were kept in a separate set of books distinct from the records of all other business transacted by the company. The business of the banking department was likewise kept separate, physically and as a matter of accounting, from all other business of the company. And the record of its operations was kept in a distinct set of books. The money received from deposits (which in 1901 exceeded $4,000,000) was invested in stocks and bonds which were kept in the vault in separate envelopes earmarked as such. The expenses of each department of the company's business were charged to the separate account of that department payable out of its earning.But physically expenses of the several departments may have been paid from a common fund. A part of the income from each department was maintained as cash and remained uninvested, part of the money being carried by the respective departments as ...

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