Warren v. Shook , 23 L. Ed. 421 ( 1876 )

91 U.S. 704 (____)

WARREN ET AL.
v.
SHOOK.

Supreme Court of United States.

Mr. B.K. Phelps for the plaintiffs in error.

Mr. Assistant Attorney-General Edwin B. Smith for the defendant in error.

MR. JUSTICE HUNT delivered the opinion of the court.

The plaintiffs were licensed bankers in the city of New York. They also bought and sold gold and stocks for others upon a commission paid to them for that service. On their own account, they also dealt largely in gold and stocks. They have paid the taxes imposed by the revenue laws upon bankers. The government agents have now imposed upon them, and collected the taxes chargeable by law upon brokers. This includes the tax of one-twentieth of one per cent upon sales made by the plaintiffs on their own account, as well as upon sales made for others. It is to this that the plaintiffs object, and the present action is brought to recover back such taxes.

The questions would seem to be, —

1st, Do the transactions specified make the defendants brokers within the meaning of the revenue laws?

2d, Are licensed bankers, who also do business as brokers, liable to the additional tax imposed upon brokers?

3d, More precisely, are the plaintiffs liable to pay taxes upon sales made on their own account, as well as when made for others?

Sect. 110 of the act to provide internal revenue, &c., approved June 30, 1864 (13 Stat. 277), imposes a duty of one-twenty-fourth of one per cent each month on deposits, one-twenty-fourth of one per cent each month on the capital, one-twelfth of one per cent each month on the circulation, and an additional one-sixth of one per cent on certain specified excess of circulation, to be paid by "any bank, association, company, or corporation, or person engaged in the business of banking, beyond the amount invested in United States bonds."

Sect. 79, subdivision of the same act (13 Stat. 251), provides "that bankers using or employing a capital not exceeding the sum of $50,000 shall pay $100 for each license," and for every additional $1,000 of capital two dollars; 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 be paid or remitted upon draft, check, or order, or where money is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes, or where stocks, bonds, bullion, bills of exchange, or promissory notes, are received for discount or sale, shall be regarded a banker under this act."

The same sect. 79, subd. 9, as amended by the act of March 3, 1865 (13 Stat. 252, 472), provides "that every person, firm, or company, except such as hold a license as a banker, whose business it is, as a broker, to negotiate purchases or sales of stocks, exchange, bullion, coined money, bank-notes, promissory notes, or other securities, for themselves or others, shall be regarded as a broker under this act; provided that any person holding a license as a banker shall not be required to take out a license as a broker;" and it further provides that "brokers shall pay fifty dollars for each license."

The ninety-ninth section of the same act provides (13 Stat. 273) "that all brokers and bankers doing business as brokers shall be subject to pay the following duties, and rates of duties, upon the sales of merchandise, produce, gold and silver, bullion, foreign exchange, uncurrent money, promissory notes, stocks, bonds, and other securities, as hereinafter mentioned, &c.; that is to say, upon all sales, and contracts for sales, of stocks and bonds, one-twentieth of one per centum on the par value thereof; and of gold and silver, bullion and coin, foreign exchange, promissory notes, or other securities, one-twentieth of one per centum on the amount of such sales and of all contracts for sales."

The sections we have quoted furnish satisfactory definitions of the business of a banker and of that of a broker. "Every person, &c., having a place of business where credits are opened by the deposit or collection of money or currency, subject to be paid or remitted upon draft, check, or order, or where money is advanced on stocks, bonds, bullion, bills of exchange, or promissory notes, or where stocks, bonds, bullion, bills of exchange, or promissory notes, are received for discount or sale, shall be regarded as a banker under this act." Sect. 79, subd. 1.

Having a place of business where deposits are received and paid out on checks, and where money is loaned upon security, is the substance of the business of a banker.

By the same section, subd. 9, a broker is defined to be one whose business it is to negotiate purchases or sales of stocks, exchange, bullion, coined money, bank-notes, promissory notes, or other securities, for himself or for others. Ordinarily, the term "broker" is applied to one acting for others; but the part of the definition which speaks of purchases and sales for himself is equally important as that which speaks of sales and purchases for others. All parts of the definition are qualified by the words "whose business it is." Thus, if A.B. has $10,000 which he desires to invest, and purchases United States stock, or State stock, or any other securities, he does not thereby become a broker. Nor if he owns $10,000 of United States stock which he wishes to sell to raise money to pay his debts, or because he is not satisfied with six per cent interest, is he thereby made a broker. It is only when making sales and purchases is his business, his trade, his profession, his means of getting his living, or of making his fortune, that he becomes a broker within the meaning of the statute. Nor is it believed that a sale, by one doing a banking business only, of a security received by him for the repayment of a legitimate loan, would make him a broker, and subject to the tax. This would not be deemed an act of brokerage, either under the statute or upon general principles of law. When it is his business, the statute properly holds all such acts, whether in the name of himself ostensibly or in the name of others, as the acts of a broker. The danger and the facility for evasion of the statute furnish excellent reasons for the adoption of this provision.

The contention of the plaintiffs is, that, because they hold a license as bankers, they are not liable to the duty of one-twentieth of one per centum on sales made on their own account. This is based upon the words of sect. 79, subd. 9, that all persons, &c., except such as hold a license as bankers, shall be liable to this duty on sales made for themselves as well as others, and upon the further suggestion that sect. 99 does not contain the words "for themselves or others." We agree with the statement of Mr. Justice Grier in U.S. v. Fisk, 3 Wall. 445, that the idea of Congress would have been better expressed if the words "for themselves or others" had been inserted in sect. 99, rather than where they are now found. Still we find no difficulty in reaching the conclusion, that the tax in this case was properly imposed.

The intent of Congress to subject to taxation all sales made by those engaged in the business of brokers is plain enough. When it was said (sect. 99) "that all brokers and bankers doing business as brokers shall be subject" to the duties specified, it was intended to encompass the entire class of persons engaged in the business of buying and selling stocks and coin. Brokers were included by name and by definition. Bankers would not so certainly be embraced by the definition given in sect. 79, subd. 1. To meet this possible exception, it was enacted, that, when bankers should do the business of brokers, they should be subject to the duty specified. In this manner, brokers technically, and bankers doing the business of brokers, were made liable to the duty. If the right to tax bankers upon sales made for themselves rested on the seventy-ninth section alone, a plausible argument could be made in the plaintiffs' favor, arising from the words "except such as hold a license as a banker;" but when we read in sect. 99, "that all brokers, and bankers doing business as brokers," shall be subject to the tax, and consider the statutory definition of a broker, the plausibility of the argument ceases.

We have carefully considered the cases of U.S. v. Fisk, 3 Wall. 445, U.S. v. Cutting, id. 441, and Clark v. Gilbert, 5 Blatch. 330, but do not deem it necessary to comment upon them in detail.

Judgment affirmed.