First National Bank v. City Council of Estherville

Background

A national bank and its shareholders in Estherville, Iowa, appealed after the city board of equalization raised the assessed value of bank shares to $130 per share. The local assessor had valued shares from the bank’s books by adding capital, surplus, and undivided profits, subtracting real estate, and dividing by the number of shares. The bank argued the raised valuation was excessive and unequal. The District Court and the Supreme Court of Iowa upheld the board’s decision.

Reasoning

When the bank later argued in the Iowa Supreme Court that the board’s action violated § 5219 of the United States Revised Statutes on national-bank taxation, the state court refused to consider that point because it had not been raised earlier. The United States Supreme Court explained it lacked jurisdiction to review the state decision because no federal question had been presented and decided in the state courts, and federal claims must be properly raised below. The state courts applied Iowa statutes (§1322 and §1305) to allow assessment based on market value and other information, not only the bank’s statements.

Real world impact

The outcome leaves the higher local tax valuation in place and maintains the state courts’ approach to valuing bank shares. The dismissal is procedural: it does not decide whether § 5219 would forbid such state taxation on the merits, and a federal issue might still be considered if properly raised in state proceedings. The immediate practical effect is on the bank and its shareholders, and on local tax officials who set assessments.