RESPONDENT: Michigan Nat. Bank
LOCATION: Huntington National Bank
DOCKET NO.: 155
DECIDED BY: Warren Court (1958-1962)
CITATION: 365 US 467 (1961)
ARGUED: Jan 18, 1961 / Jan 19, 1961
DECIDED: Mar 06, 1961
Facts of the case
Media for Michigan National Bank v. MichiganAudio Transcription for Oral Argument - January 19, 1961 in Michigan National Bank v. Michigan
Audio Transcription for Oral Argument - January 18, 1961 in Michigan National Bank v. Michigan
Number 155, Michigan National Bank et al., Appellants, versus Michigan et al.
Victor W. Klein:
Mr. Chief Justice, may it please the Court.
This is an appeal from a judgment of the Michigan Supreme Court.
The basic question in this case is whether or not, the National Bank Tax Act known as Revised Statute 5219 was violated by the State of Michigan under Act 9 of the Public Acts of 1953, taxing shares of national banks at a rate 13 times greater than the state taxes shares of savings and loan associations.
Now, although Act 9 was enacted in 1953, it relates back to the 1952 taxes.
There had been a tax in effect, the appellant paid that tax some $18,000 and then this Act 9 of 1953 also imposed this new tax of $5.5 per thousand of paid up capital surplus and undivided profits has contrasted with a tax of only 40 cents a thousand on shares of savings and loan associations.
The appellant paid the tax, the additional $49,000 tax under protest took the proper procedure, tried it in front of the Court of Claims in Michigan, then to the Supreme Court and we are now here.
There are other taxes from 1953 to 1959 or 1960 the date in which there are cases pending awaiting the determination of this case.
Before giving even a preliminary outline, I want to point out one thing to the Court that this is not a case of tax immunity or tax avoidance.
This is a tax -- this is a case in which the appellant urges on this Court that under the federal statute, national banks are entitled to be taxed equally but at no greater rate than other moneyed capital which comes into competition with the business of the national banks.
And we say in this case, if that injunction of the federal statute were observed, the State of Michigan would collect additional taxes from savings and loan associations shareholders in the annual amount of $8,000,000 a year.
Now preliminarily, I'd like to point out to the Court that we submit that savings and loan associations are the dominant and principle competitors of national banks in the residential mortgage loan business, that that business is a substantial business.
In the year in question, it was over -- over a half of billion dollars was employed in the State of Michigan by savings and loan in their business, the day over a billion and a half dollars and that type of business, your residential mortgage loan business, is a vital, essential, substantial, important phase of the business of national banks.
In the case of appellant, that residential mortgage loan business amounted to 40% of appellants' total loans, three times more than its commercial loans accounted for 32% of its total income and constituted over 20% of its gross assets.
I gave to that in a preliminary way only.
We'll get into the details.
So, the Court has the proper background.
I should like to point out that in the year 1952 which is the year which -- which we're here concerned, there were 77 national banks operating in the State of Michigan and there were 67 savings and loan associations, about half were domestic Michigan saving and loan associations and the other half federal savings and loan associations.
The Appellant Bank is a national bank which operates in seven cities throughout the State.
They are not large metropolitan cities like Detroit where commercial loans are of greater importance than they are to the out state bank mortgage loans, residential mortgage loans are very important in fact, the most important, I would say operation of the out state national banks.
The Appellant operates in cities like Battle Creek, Michigan population 48,000, Port Huron population 35,000, Lansing 92,000, Saginaw 92,000, Flint 163,000, Grand Rapids 176,000 and then one small community of Marshall 5700.
But they're all medium, small medium modern size cities not comparable to the big city banks although the city banks are now more and more engaged in the residential mortgage.
Now, with that background, we come to the power of the state to tax.
I believe this Court has clearly stated that absent congressional grant of authority of the State, no State has the power to tax national banks or their shares at all, because national banks are governmental agencies instrumentalities actually performing in many respects.
The basic physical policies of the United States Government, and this Court has therefore held that because national banks perform that essential government function, the State of Michigan, no State absent congressional authority would have power to tax either national banks or their shares at all, and you so held in two cases cited in our brief.
One of these banks in the Jackson, Michigan?
Victor W. Klein:
No sir, but one of -- there are five intervening banks sir and one of Jackson Banks did intervene the -- the National Bank of Jackson intervened sir.
The -- in the case of the intervenors was held in advance because the time consumed in preparing this voluminous record and the burden upon us was so great that we elected to defer trial of the intervening cases until the disposition of this case.