Mayor of Baltimore v. Gibbs

Bond, C. J., delivered the opinion of the Court. The constitutionality of a tax imposed by Baltimore City on the interest of a resident receiving income during life from intangible property held in trust in another state is contested in this case, and the facts are presented in an agreed statement. The tax has been imposed under section 8(h) of article 81 of the Code, as revised by the Act of 1929 (Code [Supp. 1929], art. 81, sec. 1 et seq.), chapter 226: “In case intangible personal property shall ho held by any non-resident of this State in trust for any resident of this State, ³⁶⁶ the value of the interest therein of such resident of this State shall be subject to' tax as if such beneficiary were the legal owner.” The appellee, the beneficiary and receiver of the income, having’ failed to pay the tax, the city filed a suit at law to collect it, in accordance with sections 145 to 150 of the same article, and the controversy was submitted to the court sitting- without a jury, upon the agreed statement and appropriate prayers for declarations of the law as contended for on one side and the other. The court in its rulings on the prayers adopted the conclusions contended for by the defendant, and verdict and judgment in her favor followed.

The city appeals. Anne R. Gibbs, a resident of Baltimore Oity, having become entitled to the corpus of a trust fund previously held by'á trust company in Pittsburgh, Pennsylvania, and to the corpus of another, smaller fund previously held in trust.in Maryland, consolidated the funds of the two estates, and in 1915 and 1920 conveyed them to- the trust company in Pittsburgh, upon trust to pay her the income during her life, with remainders over, subject to- a reservation to herself of a right to withdraw amounts of principal within limits. All assets of the trust are, therefore, held in Pennsylvania. They consist mainly of mortgages and mortgage certificates secured by Pennsylvania real estate, and include a comparatively small amount in bonds and cash.

The total aggregate value in 1929 was estimated at $49,211.27, and in 1930 at $49,-241.02. Personal property taxes on these amounts were paid by the trustee to the State of Pennsylvania, in accordance with the laws of that State. The income of the life beneficiary from the trust in 1929 was $2,587.29. Eor the years 1930 and 1931 the Mayor and Oity Council of Baltimore levied a personal property tax on the interest of the appellee valued, at a five per cent, capitalization of the 1929 income, taking it as a life annuity.

Given the income of $2,587.29, then by means of a figure .in a table for valuing annuities according to the ages and expectancies of'the annuitants, a valuation of $26,810 was reached, and the interest of the ³⁶⁷ appellee was assessed and taxed as intangible property of the value of $35,810. There is a preliminary question whether the appellee’s contest of the levy has come too late, and that question is to be answered by construction of the provisions of the general tax revision statute of 1929, chapter 226, revising and recodifying article 81 of the Code. Sections 183, 184, 186 and 188 provide a proceeding for such a contest to be initiated by the owner, by appeal, first, to the State Tax Commission, and then to the Circuit Court for the appropriate county or the Baltimore City Court, and finally to this court. And the appellant urges that failure of the appellee to avail herself of the remedy so provided must be held to foreclose all contest by her, on the principle that the State may provide one remedy for taxpayer’s and confine them to it.

Baltimore Steam Packel Co. v. Baltimore, 161 Md. 9, 18 , 155 A. 158 ; First Nat. Bank of Greeley v. Commissioners Weld County, 264 U. S. 450, 453 , 44 S. Ct. 385 , 68 L. Ed. 784; Gorham Mfg. Co. v. State Tax Commission, 266 U. S. 265 , 45 S. Ct. 80 , 69 L. Ed. 279 . But, granting the force of this principle, is the owner or taxpayer so confined to the one remedy of appeal by her, under the statutes as now revised?

Section 150 of the new provisions (Code, Supp. 1929) for suit by the collecting officers provides that: “In any such action the certificate of the authority charged with the collection of the tax, that is, the Comptroller of the Treasury, collector of any county and/or city, showing the amount of tax due with all penalties and interest shall be prima facie evidence to entitle the plaintiff to judgment for the amount of such tax, penalty and interest and shall cast upon the defendant the' burden of proving that the assessment was not legally made cr that the tax has been paid or any other sufficient defense.”' And the defendant has contended that the general statement of a burden to be met by “any other sufficient defense” must bo intended to- afford the owner of property taxed a second opportunity for raising a constitutional objection. With that contention this court agrees, because defense on invalidity not ³⁶⁸ concerned with procedure in the assessment or making of the tax would seem to refer necessarily to a violation of some constitutional or statutory limitation. No construction which would exclude defense on that ground appears to be permissible. Baltimore v. Home Credit Co., 165 Md. 57 , 167 A. 552 .

The constitutional objections are that the Fourteenth Amendment of the United States Constitution is violated by a denial of due process o£ law in double taxation by the two states of the same property, and a denial of equal protection of the laws in an imposition of the tax on the interest of a life beneficiary when the trust fund is held in another state, but not when it is. held in the same state. On the objection that there is. double taxation by the states of the same intangible property, the. court has been referred to the several relevant decisions of the United States Supreme Court. Maguire v. Trefry, 152 U. S. 12 , 40 S. Ct. 417 , 64 L. Ed. 739 ; Brooke v. Norfolk, 277 U. S. 27 , 48 S. Ct. 422 , 72 L. Ed. 767 ; Safe Deposit & Trust Co. v. Virginia, 280 U. S. 83 , 50 S. Ct. 59 , 74 L. Ed. 180 ; Farmers’ Loan & Trust Co. v. Minnesota, 280 U. S. 204 , 50 S. Ct. 98 , 74 L. Ed. 371 ; Baldwin v. Missouri, 281 U. S. 586 , 50 S. Ct. 436 , 74 L. Ed. 1056 ; Beidler v. South Carolina Tax Commission, 282 U. S. 1 , 51 S. Ct. 54 , 75 L. Ed. 131 ; Lawrence v. State Tax Commission, 286 U. S. 276 , 52 S. Ct. 556 , 76 L. Ed. 1102 ; and Burnet v. Brooks, U. S. 378, 53 S. Ct. 457 , 77 L. Ed. 844 . And the decision of this court must, of course, be controlled by the determinations of that court so far as they have gone.

The State Tax Commission, in a reasoned opinion quoted by counsel in this case; although conceding the jurisdiction of the state of the situs to levy such a tax, inferred that double taxation of corpus of intangibles had never been held to violate the Fourteenth Amendment, and concluded that it could not be so held because of some consequences that could not be accepted, such as prevention of the taxation of mortgages or bonds held within the state and secured by property outside the state, or of shares of stock held by residents' in foreign corpora- ³⁶⁹ lions {lie property of which is out, of the state. But it is the understanding of this court that the Supreme Court has now definitely deduced from the Fourteenth Amendment what it has described as a “rule of immunity from taxation by more chan one state,” for intangibles as well as for tangibles. “The rule of immunity from taxation by more than one state, deducible from the decisions in respect of these various and distinct kinds of property, is broader than the applications thus far made of it.” First Nat. Bank v. Maine, 284 U. S. 312, 326 , 52 S. Ct, 174, 176 , 76 L. Ed. 313 . “These decisions established that proper regard for the relation of the states in our system required that the property under consideration should bo