Mayor of Baltimore v. State

Schmucker, delivered the opinion of the Court. These are cross-appeals from a judgment, in assumpsit, of •the Superior Court of Bultimore City, in favor of the State of Maryland against the city of Baltimore for a portion of the State’ tax on city loans or stock for the year 1902. The city voluntarily paid the greater part of the tax for the year, but refused to pay the portion involved in this suit, upon the .ground that it was not liable therefor because the holders of the stock on which it was claimed to be due were exempt from taxation thereon. The case was tried without a jury before Sharp, J., who found a verdict in favor of the State for ³ $20,266.72, the amount of the plaintiff’s claim without interest, and entered judgment thereon.

The contention of the city is that it is not primarily liable for the State tax on its loans or stock, that being an obligation of the holders of the stock, but it is liable for the payment of the tax, if at all, only because it has bound itself by ordinance to pay all such tax for which the holders of the stock may be legally liable. It insists that, as its liability is only secondary, it cannot be required to pay the tax on any city stock held by national banks and corporations created by this State, which pay State taxes on their capital stock, or by savings banks, which ’pay State taxes on their deposits, and are therefore not required to pay such taxes on the city stock held by them. The city makes the further and more radical contention that under existing laws none of the holders of city stock are liable for or can be made to pay State tax on their holdings. It insists that secs. 89 to 93 of Art. 81 of the Code of 1888 and secs. 151 to 154 of the City Charter, under which the taxes for 1902 are claimed to be due, are unconstitutional and void because, while they provide the machinery for the payment of the tax, they make no provision for the assessment of the stock or for notice and an opportunity to be heard.

The ground of the State’s appeal is the failure of the Court below to allow it interest on the overdue taxes for which it was allowed to recover; the judgment having been rendered for the amount of the taxes without interest. We will consider the questions thus presented by the record in the order in which we have stated them and will then pass upon the action of the learned Judge, before whom the case was tried below, upon the prayers submitted to him, at the trial. The primary obligation to pay the State tax upon the funded debt or stock of the city is undoubtedly that of its holders as is the like obligation of the holders of other species of property. But the duty of the city to retain the amount of the tax from the interest due on the stock and pay it over to ⁴ the State does not arise solely or chiefly from its agreement with the stockholder to do so contained in the ordinance.

Sec; 91 of Art. 81 of the Code of 1888 requires the city through its Register to pay the tax for the holders of the stock and directs the collection of it from them by the city by deducting it from the interest due and payable thereon to them. The city’s contractual obligation to the holders of its stock to pay the tax for them without requiring reimbursement on their part rests upon the promise or agreement contained in its ordinances, but its obligation to the State to make the payment to it is a direct and statutory one imposed by sec. 91. The State has not only the power to tax all of the property within its borders but it has the power to prescribe the method and provide the instrumentalities necessary and proper for the collection of the taxes. Faust v. Building Assn., 84 Md. 192 ; Hull v. Southern Development Co., 89 Md. 8 ; Monticello Co. v. Baltimore, 90 Md. 426-7; American Coal Co. v. Co. Commrs., 59 Md. 197 .

In striking analogy to the method prescribed by law for the collection of the State tax now under consideration is the one which has for many years been employed by the State in collecting the tax due by the holders of shares of the capital stock of banks or other corporations created by this State or doing business therein, from such bank or corporation. The method adopted by the State under secs. 214 to 224 of Art. 81 of the Code, of requiring the payment of the tax, due from the owner of distilled spirits, to be paid by the distiller or the proprietor of the bonded warehouse in which such spirits may be stored is of a similar character. These two methods of taxation have been fully considered by this Court and held to be both reasonable and lawful. It has also been held.by us that the duty and obligation of the corporation or distiller or bonded warehouse owner to pay the tax thus imposed upon them respectively by statute may be enforced by the State in a proper action at law.

American Coal Co. v. Co. Commrs., 59 Md. 198 ; Hull v. Southern Development Co., supra; Monticello v. Baltimore, supra; Fowble v. Kemp, 92 Md. 638 . By parity ⁵ of reasoning the obligation imposed, by sec. 89 to 93 of Art. 81 of the Code of 1888, upon the city of Baltimore to pay the State tax due from the holders of city loans on stock, must be held to be a direct statutory obligation for the breach of which an action at law such as the one now before us may be maintained. . The city cannot escape responsibility for the payment of the taxes sued for in this case upon the ground that the owners of the stock on which the tax is due are exempt from taxation thereon within the meaning of sec. 90 of Art. 81 of the Code of 1888. The holders of this stock are State or' National Banks or other incorporated institutions chartered by this State or doing business therein or savings banks.

It is only necessary to properly understand the system adopted by the State for the collection of the tax imposed by it upon the holders of the capital stock of corporations of the character mentioned to see that the corporations are not exempt from taxation on city stock held by them. Under the system of taxing property held by banks and other .corporations, except savings banks, provided for in secs. 84 et seq. of Art. 81 of the Code of 1888, all of the property, of every kind, real and personal, of the corporation is in effect made to pay its just share of taxes and the corporation is exempted from taxation on none of it. As a matter of j ustice and convenience, the State, instead of levying the tax directly upon the property of the corporation, imposes it upon the holders of the capital stock who are the real owners of both the corporation and its property, and it adopts the value of the capital stock as the true measure of the value of the corporate property. The tax is required to be paid by the corporation which is for the sake of convenience made the agent of the State for its collection.

Under such a system it cannot in any true sense be said that the corporation is exempt from taxation on any city stock of which it may from time to time happen to be the holder. The State having thus required incorporated companies to pay to it directly the State tax due from the holders of their ⁶ capital stock and having also required the city through the Register to make direct payment into the State treasury of the State tax due from the holders of city stock or loans, it became necessary in order to prevent double taxation to make provision for the exclusion of those classes of securities from the ordinary assessments of property for taxation in the city and the several counties, so far as the State tax was concerned. Accordingly we find in sec. 96 the following enactment: “The public debt of this State, stock loans of the city of Baltimore, the capital stock, bonds, certificates or other evidences of debt, bearing interest issued by incorporated companies or institutions of this State shall be excluded from the assessment in the several counties and the city of Baltimore, so far as relates to the State tax, the payment of said tax thereon being hereinbefore provided for." A slightly different method has been adopted by the State with reference to the State tax payable by savings banks. From the nature of the business conducted by banks of that description, which do not ordinarily have any capital stock, the entire assets of the institution must be represented by the total amount of its deposits invested and uninvested.

Hence the State has adopted the policy of imposing on savings banks a tax of one-fourth of one per cent on the whole amount of their deposits without any deduction for the portion, if any, of the deposits invested in property which is non-taxable or on which some other persons or corporations are required by the laws of this State to pay taxes, but providing that such other persons or corporations shall not be entitled to exemption by reason of the ownership of the property by a savings bank. Sec. 86 and 86A of Art. 81, Code of 1888. Westminster v. Westminster Savings Bank, 92 Md. 62 . The express provisions of sec. 86A, that nothing in the law relating to taxation of savings banks shall be construed as granting exemption from taxation to any property taxable under the laws of this State by reason or on account of its ownership by a savings bank, furnishes a complete answer to the contention of the city that its stock held by such institutions is exempt from ⁷ taxation.

We have not referred to the provisions of the law relating to the taxation of the real estate and capital stock of such savings banks as own real estate or have capital stock because we do not deem them pertinent to the issue now under consideration. We now come to the contention of the city that secs. 89 to 93 of the Code of 1888 and secs. 151 to 154 of the Baltimore City Charter are unconstitutional and void because, although they contain full provisions for the payment of taxes levied under them upon city stock, they make no provision for the assessment of the stock or for notice and an opportunity to be heard. Strictly speaking the only person who is entitled to raise this objection is the holder of the stock who is the person taxed. If he is satisfied with the method in which the tax has been imposed upon him, the city, which in this connection acts merely as the agent of the State for collecting the tax, cannot object to the action of its principal in levying it.

Assuming however, for the purposes of this opinion, that the objection has been made by one entitled to raise it and that the question thus presented is properly before us, let us inquire whether the law in