Hampton Associates Ltd. Partnership v. Baltimore County

BLOOM, Judge. This case involves the validity of an excise tax imposed by Baltimore County on a real estate transfer effected by the filing of Articles of Transfer with the State Department of Assessments and Taxation (hereinafter referred to as the Department) in accordance with Title 3, subtitle 1 of the Corporations and Associations article of the Annotated Code of Maryland (1985 Repl.Vol.). Hampton Apartments, Inc., a Maryland corporation, sold real estate located in Baltimore County to Hampton Associates Limited Partnership, the transfer being effected by the filing of Articles of Transfer with the Department. The transferror then filed Articles of Dissolution.

Upon receiving notice of the transaction, Baltimore County made a demand upon the transferror and transferee for payment of a transfer tax in the amount of $44,032, representing 1.6 percent of the stated consideration for the transfer, $2,752,-000. Since that demand did not produce a favorable response, Baltimore County and the director of its Office of Finance brought suit in the Circuit Court for Baltimore County against the surviving directors of Hampton Apartments, Inc., and Hampton Associates Limited Partnership and its general partner, Jeffrey Levitt. The court granted summary judgment in favor of Baltimore County for $44,- ⁵⁵⁴ 032. The defendants 1 paid the judgment and then took this appeal.

Appellants advance several arguments, which fall into two categories: (1) That Baltimore County lacked the power to impose any tax on real estate transfers effected by the filing of Articles of Transfer with the State Department of Assessments and Taxation and (2) alternatively, that if the power to impose such tax exists the County’s failure to comply with statutory notice requirements rendered its attempt to exercise that power null and void. I Before discussing the issues raised by appellants, we must first dispose of appellees’ motion to dismiss the appeal, in which it is asserted that the matter at hand is moot and, in any event, not properly before us because of appellants’ failure to exhaust their administrative remedies. The term “moot” is used to define that class of cases where there is no longer present a justiciable controversy because the issues involved have become academic or dead. Sigma Chi Fraternity v. Regents of the University of Colorado, 258 F.Supp. 515, 523 (D.Colo.1966). “Appellate courts do not sit to give opinions on abstract propositions or moot questions, and appeals which present nothing else for decision are dismissed as a matter of course.” Lloyd v. Board of Supervisors, 206 Md. 36, 39 , 111 A.2d 379 (1954).

A moot case is dismissible by this court under Maryland Rule 1035(b)(8). It is contended by appellees that satisfaction of the judgment by payment has rendered moot the controversy as to the validity of Baltimore County’s transfer tax, thus necessitating dismissal of the appeal. We reject that con ⁵⁵⁵ tention. The mere fact that the judgment has been paid and satisfied does not preclude appellants from seeking restitution on appeal.

The Court of Appeals, in Franzen v. Dubinok, 290 Md. 65 , 427 A.2d 1002 (1981), examined in depth the question of whether a judgment debtor who fully satisfies an award against him thereby forfeits his right to an appeal. The answer, we are told, turns upon “whether the compliance with the judgment is the result of legally sufficient compulsion.” 290 Md. at 69 , 427 A.2d 1002 . After noting a split amongst jurisdictions as to what constitutes “legally sufficient compulsion,” the Court expressly adopted the view of the New York Court of Appeals, which is that a party against whom a judgment has been rendered is not prevented from appealing to this court by the fact that he has paid the judgment, unless such payment was by way of compromise, or with an agreement not to take or pursue on appeal. Id. at 72 , 427 A.2d 1002 , quoting Hayes v. Nourse, 107 N.Y. 577 , 14 N.E. 508 (1887).

In support of this view, the Court of Appeals explained: Not only does the final judgment of a court, by its nature, serve to coerce the party against whom it operates, but in Maryland, it also automatically creates a lien on any real and certain leasehold property once the judgment is properly entered or recorded. 290 Md. at 70-71 , 427 A.2d 1002 . Furthermore, the fact that the appellant failed to obtain a stay or other supersedeas pending appeal is normally held to have no effect on the voluntariness determination, since the obtention of such relief is not generally a prerequisite to an appeal. Id. at 70 , 427 A.2d 1002 . In the instant case, appellants did not make payment by way of settlement or compromise, nor did they in any way agree not to pursue their right of appeal.

Appellants merely complied with a judgment that automatically created ⁵⁵⁶ a lien on their property — a lien that would not be removed or suspended by filing an appeal, but only by its satisfaction in full. Posting of a supersedeas bond, while temporarily suspending the judgment, might well have imposed a substantial additional cost on appellants. Under these circumstances, payment of the judgment is quite properly viewed as involuntary, creating no bar to appellate review and no problem of mootness. Appellees also move for dismissal on the grounds that appellants have failed to exhaust administrative remedies, specifically, those provided by § 215 of article 81, Maryland Annotated Code (1980 Repl.Vol.).

Section 215 allows a taxpayer to file a claim for refund of special taxes erroneously or mistakenly paid to any State, county or municipal agency. The answer to this contention requires no detailed analysis. Appellants did not by-pass an administrative remedy in favor of a judicial one; this suit was initiated by appellees’ filing of a complaint in the circuit court. There is no administrative relief available to appellants from a judgment of the circuit court.

II Turning now to the issue of the extent of Baltimore County’s taxing authority, we begin with § 11-15 of the Baltimore County Code (1978) which provides: (a) The county is hereby authorized to have and exercise, within the limits of the county, in addition to any and all taxing powers heretofore granted by the General Assembly, the power to tax to the same extent as the state has or could exercise such power within the limits of the county as a part of its general taxing power; and to provide by resolution for the imposition, assessment, levy and collection of any tax or taxes authorized by this section; and from time to time to grant exemptions and to modify or repeal existing or future exemptions; provided, however, that any tax on distilled spirits imposed under the authority of this section shall not exceed fifty ⁵⁵⁷ cents ($0.50) per wine gallon of one hundred (100) proof or less and such tax shall expire as of December 31, 1955, but nothing in this section shall be construed to prevent the collection of taxes imposed on alcoholic beverages after such date if such taxes are due and payable on or before December 31, 1955. (b) Provided, that the county shall not have the power to impose any tax upon wines or malt beverages, intangible personal property or upon the subject matter of Annotated Code of Maryland, 1957, sections 135 to 157 of Article 56 (Gasoline Tax); section 81 of Article 66V2 (Motor Vehicle Registration); section 29 of Article 66V2 (Titling Tax); sections 181 to 190 of Article 56 and section 273 of Article 81 (Motor Vehicle Taxation); section 9 (32) of Article 81 (Class A and Class D Motor Vehicles); sections 279 to 323 of Article 81 (Tax on Incomes); Article 78B (Horse racing and Pari-Mutuel Betting); sections 194 and 195 of Article 81 (Bonus Tax); sections 197 to 201 of Article 81 (Tax on Franchise to be a Corporation); sections 129 and 130 of Article 23 (Recording Corporate Papers); section 128 of Article 81 (Deposits of Savings Banks); sections 135 to 143 of Article 81 (Insurance Premiums); sections 149 to 193 of Article 81 (Inheritances); Article 62A (Estate Tax); or section 144 of Article 81 (Tax on Commissions of Executors and Administrators); nothing in this section shall be construed to authorize the county to impose a tax upon the gross receipts of any person in the county; provided, however, that county in taxing the receipts, from motor vehicle operations, may only tax receipts from operations of motor vehicles having a permit or permits from the Public Service Commission of Maryland authorizing both the taking on and discharging of passengers at more than one point within the county and/or the transportation of passengers between two (2) or more points within the county. (c) On or after June 1, 1953, no tax shall be levied or imposed by the county pursuant to any of the provisions ⁵⁵⁸ of this section unless the levy or imposition of the tax is advertised for three (3) consecutive weeks in two (2) newspapers published in the county and having a general circulation in the county. After such advertising, a public hearing shall be held concerning the levy and imposition of such tax.

The provisions of this section shall not apply to any tax levied and imposed prior to June 1, 1953. Enacted by the Maryland Legislature as a public local law, this statute, Chapter 769 of the Laws of 1953, endowed the Baltimore County Commissioners, as predecessors to the County Council, with concurrent power to tax to the same extent as the State has or could exercise within the limits of the County as a part of its general taxing power, subject to specific limitations not applicable to this case. Pursuant to the broad delegation of taxing authority contained in § 11-15, the County Council in 1964 enacted Tax Resolution # 6, levying a special tax upon the transfer of any estate of inheritance or freehold or any estate longer than seven years, at the rate of V2 of 1 percent of the value of the property transferred. This law has been amended from time to time, most notably in 1968 and again in 1983 when the rate of taxation was increased to 1.6 percent.

It is currently codified at § 11-74, Baltimore County Code (1978). Appellants correctly point out that the reach of Baltimore County’s power to tax is strictly limited by the terms of § ll-15(a) to events occurring within the County. Appellants argue that since the transfer in question was effected by the filing of Articles of Transfer with the Department in Baltimore City the County overstepped the bounds of its authority, rendering the tax assessed against Hampton Associates null and void. This argument has as its premise the notion that the transfer tax is imposed on the very act of filing and recording Articles of Transfer in the office of the Department, an erroneous notion that appellants repeat throughout their argument.

While it is true that a transfer of corporate assets becomes effective upon acceptance of Articles of Transfer by the Department, Md. Corps. & ⁵⁵⁹ Ass’ns Code Ann. § 3-113 (1985); see also Clerk of the Circuit Court v. Chesapeake Bay Shores, Inc., 271 Md. 627 , 319 A.2d 811 (1974), a tax on such a transaction goes to the underlying transfer of property and not to the act of filing. Documentation of the transfer, while legally significant, is not the object of the tax. Section 3-113 of the Maryland Corporations and Associations Code speaks in terms of the time of filing: [A] consolidation, merger, share exchange, or transfer of assets is effective as of the latter of: (1) The time the Department accepts the articles of consolidation, merger, share exchange, or transfer for the record; or (2) The time established under the articles not to exceed 30 days after the articles are accepted for the record. This indicates that the provision making a transfer effective by the filing of certain documents is in the nature of a recordation statute.

In Vournas v. Montgomery County, 53 Md.App. 243 , 452 A.2d 1263 (1982), aff'd 300 Md. 123 , 476 A.2d 705 (1984) this court upheld an excise tax imposed by Montgomery County on the transfer of farmland to an agency of the United States government even though the transfer was involuntary by reason of condemnation. That transfer documents were locally recorded was not in dispute. The court focused its attention on the character of the transfer and specifically on the question of whether the involuntary nature of the transfer should preclude application of the tax. Implicit in that decision is the principle that it is the conveyance of real estate from one party to another that is the taxable event; recordation is an incidental event to which recordation fees, as distinct from taxes, may apply.

We believe that the scope of § 11-74 is broad enough to cover the real estate transfer here in question. The fact that the filing of Articles of Transfer took place in Baltimore City is of no moment since the act of recordation is distinct from the taxable event of transfer. ⁵⁶⁰ Ill Appellants rely heavily upon § ll-15(b) of the Baltimore County Code (1978), which states that the County shall have no power to impose any tax upon the subject matter of §§ 129 and 130 of article 23, Maryland Code Annotated (1957). Those provisions of former article 23, currently codified as §§ 1-204 and 1-203, respectively, of the Maryland Corporations and Associations Code, set out a schedule of filing and recordation fees and procedures to be followed when depositing corporate documents with the Department. Appellants urge a very broad interpretation of the “subject matter” of these provisions.

Relying again on the erroneous assumption that filing of Articles of Transfer is