Maryland Tube & Iron Works v. West End Improvement Co.

Pearce, J., delivered the opinion of the Court. The bill was filed in this case Sept. 19th, 1892, by the appellant against the appellee for the specific performance of an agreement to convey land, made in writing between the appellee on the one part, and O. C. Knipe and others, on the other part, who subsequently assigned all their interest in said agreement to the appellant, with the consent as it alleges of the appellee. The appellee answered the bill, admitting the execution of the agreement, but alleging various defences to the bill,, among which is a denial of the existence of the appellant as duly incorporated under the laws of Maryland, and a denial of its right to maintain this suit, by reason of its failure to comply with the provisions of chapter 536 of the Acts of' 1890. The general replication was filed and a mass of testimony was taken, and the bill was dismissed by the Court below (Judge Stake) on the ground that the appellant had no legal existence as a corporation and was therefore not entitled to maintain the suit.

Under the agreed statement of facts upon which this appeal was brought into this Court, the sole question for review is the right of the appellant to maintain this suit without having first paid the tax of one-eighth of one per cent, on the capital stock of the company in the manner provided by the Act of 1890, ch. 536. The statement of facts admits that both the appellant and the ²⁰⁹ appellee are incorporated in Washington County under the laws of Maryland, and that the agreement sought to be enforced is correctly set forth in the record. It also admits that at the'time the bill was filed the appellant had not paid, and had not been notified to pay, the first instalment of bonus as per ch. 536 of 1890, but that it did on the 18th of May, 1893, pay the same to the Comptroller of the State. The record does not show the date when this statement of facts was made or filed, but the reference therein to the opinion of the Court dismissing the bill, which was filed June is^ 1897, shows it was made and filed after that date.

This is only important to show that the admission of appellants’ due incorporation, can only be regarded as an admission of incorporation at that date—June, 1897. It will thus be seen the question before the Court is a narrow one. In the answer, the agreed statement of facts, and in the opinion of the Court below, as well as in the argument in this Court, the case was regarded as depending wholly upon the construction of ch. 536 of 1890, and if this were the fact, there would be less difficulty in reaching a satisfactory conclusion. But the Act of 1894, ch.. 114, deals with the same precise subject-matter, and if it can be said it does not repeal the Act of 1890, it yet materially changes the law applicable to cases arising under the Act of 1890—and we are required to consider and construe the Act of 1894.

It will be seen that the titles of these Acts are in precisely the same words, except that the Act ot 1890 is “An Act to add a (one) new section to Art. 81 of the Code * * * to be designated as section Eighty-eight A,” while the Act of 1894 is “An Act to add six new sections to Art. 81 of the Code, to be designated assertions Eighty-eight F, G, H, I, J,” and that the word “corporation ” is used in the title of the latter Act where the word “ company ” is used in the title of the former. The Act of 1894 specifically provides that no corporation incorporated, prior to the date of the passage of that Act, shall in any manner, by that Act, be relieved or released from the pay ²¹⁰ ment of any bonus due under the Act of 1890, and this proviso, taken in connection with the repealing clause in section 2 of that Act, clearly indicates the legislative purpose to repeal the future operation of the Act of 1890, while saving all remedies and results by- reason of the non-payment of any bonus by any corporation, incorporated prior to the passage of that Act. It should be noted here that ch. 244 of 1890 adds five new sections to Art. 81 of the Code, to ■come in after section 88, and to be designated as sections 88 A, B, C, D and E. These sections deal only with taxes on the assessed value of the shares of capital stock of corporations, and not with the bonus tax. Then came ch. 536 of 1890, which added one new section to Art. 81, to come in after section 88, and to be designated 88 A, so that under these two Acts, there were two sections each designated 88 A. It is thus made evident that the draftsman of ch. 114 of 1894, with these two Acts of 1890 before him and intending to avoid the existing confusion arising from the designating of two sections as 88 A, designed to repeal the Act of 1890, ch. 536, and to substitute section 88 F of the Act of 1894 for section 88 A of the Act of ch. 536 of 1890, leaving sections 88 A, B, C, D and E of ch. 244 of 1890 to stand in their regular order of precedence.

Montel v. Consolidated Coal Co., 39 Md. 171, 174 . The appellant was incorporated prior to May 18th, 1893, since it paid the first instalment of bonus tax on- that date, but it appears from an examination of the Act of 1894 that the proceeding prescribed therein for the recovery of the bonus tax upon corporations, and the provisions setting forth the result of non-payment, are applicable as well to corporations created before, as after the passage of that Act, and that if there is anything to be found in that Act not contained in the Act of 1890, which would sustain the appellant’s right to maintain this suit, it is entitled to the benefit thereof. Comparing ch. 244 of 1890 with ch. 114 of 1894, it is evident that the draftsman of the Act of 1894, overlooking the true theory and design of the Act of 1890, ²¹¹ ch. 536, or deliberately intending to alter its true theory and design, substantially provided the same remedy and procedure for the recovery of the bonus tax, as was by ch. 244 of 1890, provided for the recovery of the tax upon the assessed value of capital stock, and it is now urged by the appellant, since the oral argument, that as the Act of 1894 subjects the corporation to suit by the State for the recovery of this bonus tax, it necessarily follows that the corporation has a legal existence for all purposes and therefore full capacity to sue. But with this contention, however plausible and forcible the argument at first blush, we are not able, after full and careful consideration, to agree ; and we are of opinion that if the appellant would be held incapable of maintaining this suit under the Act of 1890, it must be so held under the Act of 1894.

To hold otherwise, and to hold as the appellant urges, that this Act recognizes a corporation which has not paid the bonus tax when due, as an existing, moving, active corporation for all purposes, would be to strike with absolute nullity the plain and imperative language of section Eighty-eight F, which declares that no such corporation shall have or exercise any corporate powers until such bonus has been paid. It is settled law that charters or statutes conferring franchises on a corporation are to be construed in favor of the public rather than the corporation, and to gratify this rule where the charter, as here, is under a certificate, the general law is to be read into the certificate. Every word, phrase or sentence doubtful or ambiguous, is to be interpreted in favor of the State. Thompson in his work on Corporations, sec. 5650, says: “The rule is simple.

That which the company may do by its charter, it may do. Beyond that, its acts are illegal.” In Roland Park Co. v. The State, 80 Md. 448 , the Act of 1890, ch. 536, and the Act of 1894, ch. 114, were considered on another point; and it was said: “What we have to do is to discover the legislative intention, and to give it, when ascertained in accordance with established rules, full and complete effect * * * and this intent may be ²¹² gathered not merely from the language of the enactment, but also from the causes or necessity which prompted its passage. A result which may flow from one construction or another of a statute, is always a potent factor, and is sometimes in and of itself conclusive as to the correct solution of the question as to it's meaning.” One result which might follow the establishment of appellants' contention would be that corporations defaulting under this Act, might not only continue in the full exercise of the prohibited powers for two years after such default, but might before the expiration of that period, dispose of all their property and leave the State a barren judgment for this bonus. Such a result could not have been within the legislative contemplation, and ought not to be permitted if it can be avoided by any sound construction of the whole Act.

It is a cardinal rule of construction that where one part of a statute is susceptible of two constructions, and the language of another part is clear and definite, and is consistent with one of such constructions and opposed to the other, that construction which will render all clauses of the statute harmonious, must be adopted. Magruder v. Carroll, 4 Md. 348 -349; Alexander v. Worthington, 5 Md. 472 . Sections 88 F and H must be construed together, and by so doing section 88 F must be taken to prohibit generally the having or exercising of any corporate powers, before payment of the bonus—which would include generally suits by or against the corporation—and the office of section 88 H is merely an exception withdrawing from the general purview and operation of section 88 F the particular suit authorized for the recovery of the bonus tax by section 88 H. Every corporation is the mere creature of the State, and where neither its charter, nor any statute restricts the powers through which it maintains itself and responds to the discharge of its obligations, it may be conceded that the right to sue and the liability to respond to a suit, are correlative, but the State which creates the corporation is sovereign, and while withholding from the corpora ²¹³ tion, or suspending the right to sue before compliance with a revenue measure, as the price of the exercise by it of corporate powers, may clearly, if it see fit, subject such corporation to suit by the State for non-compliance with such condition precedent; and we think the Court below correctly and clearly stated the law when it said : “ The effect of the law is to hold in abeyance the right and remedy of the suing corporation. ” And we are of opinion that this proposition is as clear under the provisions of ch. 114 of 1894, as it is under ch. 536 of 1890. The appellant contended that the validity of its incorporation is conceded in the agreed statement of facts, but even if this would affect the result, we do not so understand the concession.

It is expressly denied in the answer, and the agreed statement of facts was .entered into after payment of the bonus, when its corporate power to sue was no longer held in abeyance, and when the right to sue was complete under the statute. The next contention of the appellant is, that the question of corporate power cannot be raised collaterally, or in any way except by a direct proceeding by the State to