Monticello Distilling Co. v. Mayor of Baltimore

McSherry, C. J., delivered the opinion of the Court. By the Act of 1892, ch. 704, the General Assembly directed all distilled spirits in this State to be valued and assessed for purposes of State and county taxation. The method prescribed for ascertaining and fixing that valuation differs from the ordinary mode pursued in relation to other tangible personal property. The Act requires every distiller and every owner or proprietor of a bonded or other warehouse in which distilled spirits are stored, and every person or corporation» having custody of such spirits, to make report to the State Tax Commissioner on the first day of January in each and every year, of all the distilled spirits on hand at such date.

The Tax Commissioner upon receiving such report is authorized to fix the value of the spirits for the purpose of taxation ; and it is made his duty to transmit, without delay, a copy of that valuation to the Appeal Tax Court of Baltimore City, if the distillery be located in the city, or to the County Commissioners of the County in which the distillery may be situated ; and “ upon the valuation and return so made,” the Mayor and City Council of Baltimore, and the County Commissioners respectively ” are “ directed and required in making their annual levies ” to impose the State and the city or the county tax. If the spirits are owned by other persons than the distiller or the warehouseman he is still required to pay the tax thereon ; but by the eighth section of the Act he ⁴²⁴ is given a lien on the spirits covered by the tax which he may pay for the person to whom the spirits belong. It is provided by sec. 4 that the distiller and warehouseman shall make quarterly reports to the Tax Commissioner showing all deliveries of distilled spirits from his custody and care, and he is required to pay to the proper officer the State and city or county tax on the spirits so delivered, though by the proviso to sec. 2 it is declared " that the same distilled spirits shall not be taxed twice for the same year.” The appellant is a New Jersey corporation whose distillery is located in Baltimore. Upon the returns made by it, the State Tax Commissioner valued the distilled spirits in its possession at eight dollars per barrel, and upon that valuation the taxes, for the recovery of which this suit was brought, were levied against the company.

Of the large number of barrels of spirits included in the returns, comparatively few belonged to the company ; by far the larger portion were owned by persons who were unknown to the company. The evidence of these persons’ ownership were certificates issued by the company. These warehouse certificates pass by delivery and after they leave the possession of the warehouseman or the distiller he can with difficulty, if he can at all, keep trace of them. The taxes levied by the Mayor and City Council of Baltimore on the valuation made by the State Tax Commissioner were not paid by the appellant.

This suit was then instituted to recover them, and the distillery company resisted payment upon several grounds. The case was tried before the Judge of the City Court without the aid of a jury, and resulted in a judgment against the company for the amount of the taxes claimed by the city. From that judgment this appeal was taken. It is insisted on the part of the appellant that the whole scheme of the Act of 1892 is vicious.

The Act is assailed because it lays a tax upon property and not upon the owner of the property; because, further, it compels a person and a corporation not owning the spirits to pay the tax ⁴²⁵ due by the unknown owner of them ; and finally, because, in failing to make provision for the distiller or warehouseman to be heard either before a valuation is fixed upon the spirits by the Tax Commissioner, or after such valuation but before the imposition and collection of the' tax, the Act deprives the party charged with the tax of that due process of law without which, in some form, no valid judgment can be rendered by any tribunal at all. Whilst there is a great deal of loose and inexact phraseology employed in many of the tax laws, it is not to be construed critically with a view to defeat the enactments, but it must be interpreted liberally so as to uphold them. This Act of i8g2 was not very artificially drawn, but its meaning and purpose are sufficiently manifest. Its title declares that it is an Act to provide for a tax on distilled spirits.

Taxes of the kind here dealt with are, under Art. 15 of our Declaration of Rights, levied not on things but on the owners of things ; and the value of the things owned fixes the measure of the owner’s liability to contribute in taxes towards the support of the government. This is an axiom of political economy no less than a fundamental provision of our organic law. Appeal Tax Court v. Patterson, 50 Md. 366 ; U. S. Elec. Power & Light Co. v. State, 79 Md. 63 .

It cannot, therefore, be assumed that the Legislature deliberately intended to disregard this principle and to place the tax on the spirits and not on the owners of them. “ Every person in the State,” says the 15th Art. of the Declaration of Rights, “ or person holding property therein, ought to contribute his proportion of public taxes for the support of the government, according to his actual worth in real and personal property.” It is the individual, then, who is in the State, or who holds property therein, that is liable to taxation. He may be out of the State—he may be a non-resident—but if he has property situated here, he is as much bound to contribute to the support of the government, according to the value of that property, as though he were permanently domiciled within the limits oí ⁴²⁶ the Commonwealth. Whatever the language of the statute may be, it must bend to this paramount law ; and it must be read as in harmony with it. The purpose of the Act obviously was to raise a revenue from the owners of a class of property which up to the time of the adoption of the statute now before us had not been reckoned in the assessments upon its owners ; and the peculiar nature of the property itself, the known difficulty in tracing its ownership and the ease and facility with which the title to it was transferable, were all vital elements to be considered in devising a scheme for subjecting the persons who owned, had possession of or controlled these distilled spirits, to the obligation of contributing their just share of the public burden.

Though the language employed, like that used in many of the other assessment laws, if read literally would indicate an intention to impose the tax on the property and not on the owner of it, that is not its meaning when considered in connection with the settled policy of Maryland as announced in the Declaration of Rights. We hold, then, that the tax is upon the owner of the spirits and not specifically on the spirits. As the distiller or the warehouseman is the individual through and from whom the title passes to others by means of certificates which he, and he alone, issues, it is no hardship to require him to pay the tax upon all spirits in his possession, reserving to him a lien for his advances ; nor is it an unreasonable or' an unlawful legislative requirement. It is no hardship because it is always in the distiller's or the warehouseman’s power to immediately reimburse himself the taxes advanced for the unknown owner, and he may do this by selling enough of that owner’s spirits for the purpose—the statute give him that right and the purchaser of the warehouse certificate is chargeable with knowledge of what the statute provides.

The distiller or the warehouseman may enforce his lien as soon as he pays the tax due by the owner, and he is under no obligation or necessity to delay longer than his own wishes or convenience may sug ⁴²⁷ gest or dictate. The requirement that the distiller shall pay the tax for the owner is neither unreasonable nor unlawful, because it simply makes him the agent of the State to collect for the State, precisely as a corporation is made an agent to collect from its stockholders the tax due by them on the stock wdiich they hold. The legislation of 1892 with respect to distilled spirits is, in this particular, identical with the provisions of the Code relating to the tax on shares of stock, and these latter have been upheld by this Court as valid enactments. Casualty Ins.

Co. case, 82 Md. 564 ; Am. Coal Co. v. Co. Coms., 59 Md. 197 . Nor is there a double tax imposed by the Act. It was contended that a double tax was imposed, because by sec. -2 the distiller is required to pay a tax measured by the value of all spirits in store' on January the first, and he is also obliged by secs. 4 and 5 to pay quarterly a tax upon the value of all spirits removed from the warehouse during the preceding three months.

But as it might readily occur that spirits would be placed in bond after the report of January had been made, and would be removed before the following January, they would, if this did happen, escape valuation and the owner of them would escape taxation. To prevent this the provisions of secs. 4 and 5 were drafted, and when -those sections are read in connection with the proviso of sec. 2, which prohibits a collection of the tax twice in the same year, it becomes quite apparent that secs. 4 and 5 have relation only to spirits placed in bond after the date of the January report, and which, therefore, are not included in that report. We now come to the remaining question, which does not seem to have been presented to the Court below, as the learned and careful Judge who decided the case makes no allusion to that question in his admirable and lucid opinion. The question is this: Does the Act of 1892 deprive the owner of distilled spirits of due process of law by reason of its failure to provide him a hearing of some sort as to the valuation of his property for the purposes of taxation ? ⁴²⁸ Personal notice is not necessary.

It is sufficient if notice be given by a law designating the time and place where parties may contest the justice of the valuation. But notice and an opportunity to be heard are essential to the validity of every assessment. “ The Legislature can no more arbitraily impose an assessment for which property may be taken and sold than it can render a judgment against a person without a hearing. It is a rule founded on the first principles of natural justice, older than written constitutions, that a citizen shall not be deprived of his life, liberty or property without an opportunity to be heard in defence of his rights; and the constitutional provision that no person shall be deprived of these without due process of law has its foundation in this rule.” Stuart v. Palmer, 74 N. Y. 183 ; Ulman v. M. & C. C., 72 Md. 593 . This fundamental and inflexible principle underlies not only all judicial but all executive and administrative proceedings which may deprive a citizen of life, liberty or property; and consequently it is applicable, in its full force, to the method by which each individual’s property is valued to fix the basis of his liability for the payment of taxes.

Co. Com. v. Union Mining Co., 61 Md. 545 ; Co. Com. v. Winand, 77 Md. 522 ; Meyers & Houseman v. Co. Com., 83 Md. 385 ; Pittsbg. & Ry. Co. v. Backus, 154 U. S. 421 ; Merch. & Manuf. Nat. Bk. v. Penna., 167 U. S. 461 and cases therein cited.

This doctrine was not questioned by the learned counsel for the city; but he insisted that there were other provisions of law which could be invoked to rescue the Act of 1892 from condemnation on the ground we are now considering. Let us see whether this is so. Confessedly the Act of 1892 itself contains no provision by or under which the