illegally collected under the provisions of sections 3220 and 3689, Revised Statutes, as amended by the Act of February 24, 1919, including the payment of claims accruing prior to July 1, 1920, $12,000,000: Provided, That a report shall be made to Congress of the disbursements hereunder as required by the Act of February 24, 1919." UNDER THE INTERIOR DEPARTMENT (42) Five, three and two per centum fund to States (lands). Cited without definite application, ish County, Wash., v. Pearson (D. C. Everett School Dist. No. 24, Snohom- Wash.) 261 F. 631. § 6799a. [Repealed.] This section, which was paragraph (c) of § 1316 of the Revenue Act of 1918, Act Feb. 24, 1919, c. 18, 40 Stat. 1145, was repealed by § 1400 of the Revenue Act of 1921. See ante, § 6371m. See, also, ante, § 6799. See, also, post, 6799aa. § 6799aa. (Act Nov. 23, 1921, c. 136, § 1317.) Repeal of part of R. S. § 3689; estimate of appropriations to refund illegally assessed or collected revenue taxes. The paragraph of section 3689 of the Revised Statutes, as amended, reading as follows: "Refunding taxes illegally collected (internal revenue): To refund and pay back duties erroneously or illegally assessed or collected under the internal revenue laws," is repealed from and after June 30, 1920; and the Secretary of the Treasury shall submit for the fiscal year 1921, and annually thereafter, an estimate of appropriations to refund and pay back duties or taxes erroneously or illegally assessed or collected under the internalrevenue laws, and to pay judgments, including interest and costs, rendered for taxes or penalties erroneously or illegally assessed or collected under the internal-revenue laws. (42 Stat. 314.) This section is § 1317 of the Revenue Act of 1921, cited above. See, also, ante, §§ 6799, 6799a. § 6802. [Repealed in part.] Reallotment of unexpended balances. -Under Comp. St. § 7445, 6802, any unexpended and unobligated balance of allotment made to any department of the Government from the National Security and Defense appropriation for the fiscal year ending June 30, 1919 (2120) (40 Stat. 635), may be recalled from that department by the President and restored to the parent appropriation and be then reallotted by him to any other department to be used for purposes authorized by the appropriation. 32 Op. Atty. Gen. 359. 6829ee. First Liberty Loan; amount; 6829 (4). Consolidation of liberty § 6816. (R. S. § 3701.) Exemption from taxation. 2. Validity of state laws.-The portion of Gen. St. 1915, § 11163 which provides that where United States bonds have been purchased during the year preceding March 1, a sum shall be listed for taxation as money on hand March 1, computed by dividing the value of the bonds by twelve, and multiplying the quotient by the number of months of the year remaining after deducting the time the bonds were owned, violates the federal statute exempting bonds of the federal government from state taxation. Lantz v. Hanna (Kan.) 207 P. 767. 1. Securities exempt.-The unpaid balance of a debt owing from the United States on fully performed war contracts held not exempt from taxation under this section, but is subject to municipal taxation under Tax Law, § 2 (8), as a debt due from a solvent debtor. People ex rel. Astoria Light, Heat & Power Co. v. Cantor (Sup.) 187 N. Y. S. 467. The effect of this section is that in any scheme of state or municipal taxation government bonds must be eliminated from consideration in any equation to reach the taxable property, or at least when they are included, it compels a deduction as such for the amount of the bonds. City of Waco V. Amicable Life Ins. Co. (Tex. Civ. App.) 230 S. W. 698. 2. Stocks and bonds.-The federal law rendering Liberty bonds and subdivisions of indebtedness exempt from taaxtion by the states and cities is the paramount law, and if there is an impediment to the exercise of the power of the United States in the state Legislature or its administration, the courts will restrain or set aside any attempt to evade. City of Waco v. Amicable Life Ins. Co. (Tex. Civ. App.) 230 S. W. 698. 8. Interest and income from exempt securities.-The tax levied by Act July 1, 1902, § 6, par. 7, as amended by Act April 28, 1904, upon incorporated savings banks, amounting to 4 per cent. of their gross earnings, less the interest paid their depositors, is a franchise tax, computed on the basis of gross earnings, and not a property tax, so that the tax is valid, though a portion of the gross earnings consisted of interest derived from liberty bonds and other securities exempt from taxation. Security Savings & Commercial Bank v. District of Columbia (App. D. C.) 279 F. 185. Cited without definite application, First Nat. Bank of Cincinnati v. Beaman (C. C. A. Ohio) 257 F. 729. §§ 6817-6820. (R. S. §§ 3702-3705.) Bonds issued by District of Columbia. -Bonds issued by the District of Columbia under the acts of Congress of June 20, 1874, and February 20, 1875 (18 Stat. 116, 332), are considered bonds of the United States within the meaning of sections 3702 to 3705 of the Revised Statutes, which provide for relief on account of destroyed or defaced coupon bonds and lost or destroyed registered bonds of the United States. 32 Op. Atty. Gen. 166. Cited without definite application, American Mills Co. v. Hoffman (C. C. A. N. Y.) 275 F. 285. § 6824. (Act June 13, 1898, c. 448, § 32, as amended, Act Aug. 5, 1909, c. 6, § 40, and Act March 3, 1917, c. 159, § 401.) Loans to meet public expenditures; certificates of indebtedness; limitation; counterfeiting. Power of Congress.-Either in time of war or in time of peace, if the exigency of the federal government, in the judgment of Congress, requires the borrowing of money and issuing of bills of credit therefor, Congress has full power so to do, and to issue such bonds, notes, or other obligations of the government, which shall pass from hand to hand, and be negotiable, and have even the quality of legal tender for the payment of debts, as the Act of Congress may prescribe, and Congress may make interim certificates for bonds pass current as negotiable instruments from hand to hand. Security Nat. Bank of Oklahoma City v. People's Bank of Sullivan (Mo.) 230 S. W. 87. § 6829ee. (Act April 24, 1917, c. 4, § 1.) First Liberty Loan; amount; bonds. Interim certificates.-The provision that such bonds should be "in such form and subject to such terms and conditions of issue, etc., as the Secretary of the Treasury may prescribe," gave the Secretary of the Treasury power, as one of the terms and conditions subject to which he might issue such bonds, to first issue interim certificates therefor and make them negotiable. Security Nat. Bank of Oklahoma City v. People's Bank of Sullivan (Mo.) 230 S. W. 87. Interim certificates for Liberty Bonds issued by Secretary of Treasury did not need to comply with state statutes, as to being payable at certain time and in money, in order to be negotiable; it being sufficient that the Secretary of the Treasury used language intended to convey the idea that they were to be negotiable. Id. Interim certificates for Liberty Bonds, providing that, "Upon surrender of this interim certificate, the bearer hereof will be entitled to receive when presented definitive bonds in the amount of dollars, bearing interest from June 15, 1917. This certificate and all rights under and by virtue hereor shall pass by delivery"-were negotiable instruments, and title to bonds called for passed by their delivery without indorsement, as provided therein, the same as a bond or note payable to bearer. Id. A bank indorsing an interim receipt issued by a Federal Reserve Bank to another bank for money deposited by the latter for a United States certificate of indebtedness purchased for one whose name, it was alleged, was forged on the back of the receipt, which it indorsed to her, held not liable to the latter for such receipt or the value thereof, as it was not a negotiable instrument, but merely evidence that the bank to which it was issued had deposited the money for the certificate, while the indorsement of the purchaser's name thereon merely indicated the person for whom it was acting as agent, and even if unauthorized did not affect the fulfillment of its compact. Bowie v. National City Bank of Seattle (Wash.) 210 P. 498. 1 Bona fide purchaser.-In an action by a bank to enjoin federal bank from delivering to defendant bank Liberty Bonds called for by interim certificates in the hands of plaintiff, evidence held to show that plaintiff was a purchaser for value in due course without notice of any defect in the title of its vendors, and therefore the bona fide holder of the certificate in suit. Security Nat. Bank of Oklahoma City v. People's Bank of Sullivan (Mo.) 230 S. W. 87. Defendants, who were stockbrokers, with a department for buying and selling Liberty Bonds, acted in bad faith, within Negotiable Instruments Law, § 95, in purchasing plaintiff's bonds from her 15 year old son, who had stolen them, on his statement that he was in business for himself and owned them, without taking any precautions against fraudulent transactions, where the boy was of an immature, diseased, and degenerate appearance. Morris v. Muir (Mun. Ct.) 181 N. Y. S. 913. Seller of registered negotiable Liberty Bond, who should have known at the time of the sale that the bond had been either lost or stolen, was liable to buyer for purchase price, when it subsequently developed that it had been lost or stolen. Barrett v. Greenhouse (Sup.) 191 N. Y. S. 304. Jurisdiction of court.-In action for loss of Liberty Bond, allegation that bond was of the denomination of $100 and with accrued interest was worth $102 held to give circuit court jurisdiction, though jury found value of bond to be less than $100 where there was no proof tending to show fraud upon the jurisdiction of court. Merchants' Bank of Vandervoort v. Affholter (Ark.) 215 S. W. 648. Bonds received as dividends.-Liberty loan bonds, issued under this act, are subject to income tax when received by a stockholder of a corporation in payment of a corporate dividend. 31 Op. Atty. Gen. 125. Burden of proof.-In an action by a bank to enjoin federal bank from delivering to defendant bank Liberty Bonds called for by interim certificates purchased by plaintiff from others who had feloniously taken them from defendant bank, burden was upon the plaintiff bank to show that it was a purchaser for value in due course, without notice of the defect in the title of its vendors. Security Nat. Bank of Oklahoma City v. People's Bank of Sullivan (Mo.) 230 S. W. 87. § 6829i. (Act April 24, 1917, c. 4, § 8.) Same; appropriation to pay expenses of issue of bonds. Contract for liberty loan posters.Where both plaintiffs design for posters to aid in the sale of liberty bonds and its bid for 500,000 lithographic copies thereof was accepted but about 10 days after delivery the treasury department discovered that the quotation was inaccurate and called upon plaintiff for 500,000 more copies with the correct quotation thereon, there was no implied warranty that the quotation was correct and plaintiff is entitled to recover the contract price for the post ers containing the erroneous quotation. American Lithographic Co. v. U. S., 57 Ct, Cl. 340. Where there was an appropriation for all necessary expenses connected with the sale of Liberty bonds (act of April 24, 1917, 40 Stat. 35, 37), to be expended in the discretion of the Secretary of the Treasury, the latter was not required by section 3786, Revised Statutes, to have all printing and lithographing done at the Government Printing Office. Id. § 6829iii. (Act Sept. 24, 1917, c. 56, § 18, as added, Act March 3, 1919, c. 100, § 1, and amended, Act Nov. 23, 1921, c. 136, § 1401.) United States notes. (a) Authority to issue; amount; forms and denominations; interest; payment and redemption. In addition to the bonds and certificates of indebtedness and war-savings certificates authorized by this Act and amendments thereto, the Secretary of the Treasury, with the approval of the President, is authorized to borrow from time to time on the credit of the United States for the purposes of this Act, to provide for the purchase or redemption of any notes issued hereunder, and to meet public expenditures authorized by law, not exceeding in the aggregate $7,500,000,000 at any one time outstanding and to issue therefor notes of the United States at not less than par in such form or forms and denomination or denominations, containing such terms and conditions, and at such rate or rates of interest, as the Secretary of the Treasury may prescribe, and each series of notes so issued shall be payable at such time not less than one year nor more than five years from the date of its issue as he may prescribe, and may be redeemable before maturity (at the option of the United States) in whole or in part, upon not more than one year's nor less than four months' notice, and under such rules, and regulations and during such period as he may prescribe. (b) Series; exemptions. The notes herein authorized may be issued in any one or more of the following series as the Secretary of the Treasury may prescribe in connection with the issue thereof: (1) Exempt, both as to principal and interest, from all taxation (except estate or inheritance taxes) now or hereafter imposed by the United States, any State, or any of the possessions of the United States, or by any local taxing authority; (2) Exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, any State, or any of the possessions of the United States, or by any local taxing authority, except (a) estate or inheritance taxes, and (b) graduated additional income taxes, commonly known as surtaxes, and excessprofits and war-profits taxes, now or hereafter imposed by the United States, upon the income or profits of individuals, partnerships, associations, or corporations; (3) Exempt, both as to principal and interest, as provided in paragraph (2); and with an additional exemption from the taxes. referred to in clause (b) of such paragraph, of the interest on an amount of such notes the principal of which does not exceed $30,000, owned by any individual, partnership, association, or corporation; or (4) Exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, any State, or any of the possessions of the United States, or by any local taxing authority, except (a) estate or inheritance taxes, and (b) all income, excess-profits, and war-profits taxes, now or hereafter imposed by the United States, upon the income or profits of individuals, partnerships, associations, or corporations. (c) Conversion into other series. If the notes authorized under this section are offered in more than one series bearing the same date of issue, the holder of notes of any such series shall (under such rules and regulations as may be prescribed by the Secretary of the Treasury) have the option of having such notes held by him converted at par into notes of any other such series offered bearing the same date of issue. (d) No circulation privileges; payment in gold coin; "bond" or "bonds" defined. None of the notes authorized by this section shall bear the circulation privilege. The principal and interest thereof shall be payable in United States gold coin of the present standard of value. The word "bond" or "bonds" where it appears in sections 8, 9, 10, 14, and 15 of this Act as amended, and sections 3702, 3703, 3704, and 3705 of the Revised Statutes, and section 5200 of the Revised Statutes as amended, but in such sections only, shall be deemed to include notes issued under this section. (40 Stat. 1309. 42 Stat. 321.) This section was again amended by § 1401 of the Revenue Act of 1921, cited above, by striking out, from paragraph (a) thereof, after the words "on the credit of the United States," the words and figures "for the purposes of this act, and to meet public expenditures authorized by law, not exceeding in the aggregate $7,000,000,000," and by inserting in lieu thereof the words and figures "for the purposes of this act, to provide for the purchase or redemption of any notes issued hereunder, and to meet public expenditures authorized by law, not exceeding $7,500,000,000 at any one time outstanding." For sections 8, 9, and 10 of this act, as amended, referred to in this section. see 1919 Supp. U. S. Comp. St. Ann. Ed. §§ 6612a, 6829m, 6829mm, 68291, 68290, 682900. For R. S. §§ 3702, 3703, 3704, 3705, 5200, also referred to in this section, see U. S. Comp. St. 1916, §§ 6817, 6818, 6819, 6820, and 1919 Supp. U. S. Comp. St. Ann. Ed. § 9761. Notes of Decisions Bona fide purchaser.-A purchaser of negotiable Victory Notes, which had previously been stolen from the owner, is entitled thereto as against the one from whom they were stolen, if he had no notice of the defects in the title. Murray v. Wagner (C. C. A. N. Y.) 277 F. 32. A purchaser of negotiable Victory Notes from one who was in the business of selling such securities is not put on inquiry as to defects in the title to the bonds by knowledge that the broker was selling them for another, since the rule that an agent cannot pass title is subject to exception. |