ERROR TO THE SUPREME COURT OF THE STATE OF MINNESOTA
White, McKenna, Holmes, Day, Hughes, Van Devanter, Lamar, Pitney
MR. JUSTICE PITNEY delivered the opinion of the court.
This writ of error brings under review a judgment of the Supreme Court of Minnesota (114 Minnesota 95) affirming the judgment of a lower court, in proceedings for the collection of taxes assessed against plaintiff in error for the year 1908. Plaintiff in error is a savings bank, having no capital stock, and was taxable under § 839, R.L. 1905, which provides for ascertaining the surplus remaining after deducting from its assets (other than real estate, which is separately assessed), the amount
of the deposits and of all other accounts payable; the surplus to be taxed as "credits." The Supreme Court of Minnesota held that this section imposes not a franchise but a property tax, and that the surplus of savings banks as thus determined is taxable property. This construction is not questioned here; perhaps is not open to question.
Two Federal questions are raised.
First, the Savings Bank insisted in the state courts, and here renews the insistence, that certain bonds issued by municipalities in Indian Territory and in the Territory of Oklahoma, held by the bank, amounting to about $700,000 in value, should have been omitted from the list of its personal assets, for the reason that bonds of this character are not taxable by the State.
This question, although novel, is to be solved by the application of principles long established.
It was laid down by Mr. Chief Justice Marshall, speaking for this court in M'Culloch v. Maryland, 4 Wheat. 316, 430, 436, that the State could not constitutionally impose taxation upon the operations of a local branch of the United States Bank, because the bank was an agency of the Federal Government, and the States had no power, by taxation or otherwise, to hamper the execution by that government of the powers conferred upon it by the people. The supremacy of the Federal Constitution and the laws made in pursuance thereof, and the entire independence of the General Government from any control by the respective States, were the fundamental grounds of the decision. The principle has never since been departed from, and has often been reasserted and applied. Osborn v. U.S. Bank, 9 Wheat. 738, 859; Home Savings Bank v. Des Moines, 205 U.S. 503, 513; Grether v. Wright, 75 Fed. Rep. 742, 753.
State taxation of national bank shares, as permitted by the act of Congress, without regard to the fact that a
part or the whole of the capital of the bank is invested in national securities which are exempt from taxation (Van Allen v. Assessors, 3 Wall. 573, 583; Bradley v. People, 4 Wall. 459; National Bank v. Commonwealth, 9 Wall. 353, 359), is an apparent, not a real, exception. The same is true of taxes upon the mere property of agencies of the Federal Government. (Thomson v. Pacific Railroad, 9 Wall. 579, 589; Railroad Co. v. Peniston, 18 Wall. 5, 32, 34.) Indeed, these exceptions rest upon distinctions that were recognized in the decision of M'Culloch v. Maryland. Chief Justice Marshall said, in closing the discussion: "This opinion . . . does not extend to a tax paid by the real property of the bank, in common with the other real property within the State, nor to a tax imposed on the interest which the citizens of Maryland may hold in this institution, in common with other property of the same description throughout the State. But this is a tax on the operations of the bank, and is, consequently, a tax on the operation of an instrument employed by the government of the Union to carry its powers into execution. Such a tax must be unconstitutional." For a fuller discussion of the Van Allen Case, see Home Savings Bank v. Des Moines, 205 U.S. 503, 517.
The government of the respective Territories in question was that provided by the act of Congress of May 2, 1890 (26 Stat. 81, c. 182, pp. 81, 93), of which the first 28 sections created a temporary government for the Territory of Oklahoma; while § 29 (p. 93), and subsequent sections established laws for the government of what was thereafter to be known as the Indian Territory, but without conferring general powers of local self-government. To the territorial government of Oklahoma legislative power was granted (§ 6), extending to "all rightful subjects of ...