MURRAY, ETC. v. Comptroller of Treasury

Oppenheimer, J., delivered the opinion of the Court. Maryland’s statutory exemption from state, county and city-taxation of structures used exclusively for public worship and any parsonage and grounds appurtenant thereto is attacked as. violative of the Declaration of Rights of the Maryland Constitution and of the First and Fourteenth Amendments to the Constitution of the United States. The question is raised by a taxpayers’ suit filed by Mrs. Murray as trustee and Mrs. Mays, as taxpayers and citizens of Maryland, on their own behalf and on behalf of all other taxpayers similarly situated, in the Circuit Court No. 2 of Baltimore City. Mr. and Mrs. LemoinCree, residents of and taxpayers in Frederick County, and Free-thought Society of America, an Ohio corporation which owns, real estate in Baltimore City, were permitted to intervene as additional parties plaintiff.

The defendants are the Comptroller of the Treasury of Maryland, the State Director of Assessments and Taxation, the Supervisor of Assessments of Baltimore City and the Director of Assessments for Baltimore City. The court below permitted five religious bodies to intervene as. parties defendant: the Roman Catholic Archbishop of Baltimore, the Convention of the Protestant Episcopal Church in The Diocese of Maryland, the United Christian Citizens, Incorporated, Temple Emanuel of Baltimore, and the Maryland Synod of the Lutheran Church in America. ³⁸⁸ The statute attacked as unconstitutional is Code (1965 Repl. Vol.) Art. 81, Section 9(4) which reads as follows: “§9. -Exemptions. The following shall be exempt from assessment and from State, county and city taxation in this State, each and all of which exemptions shall be strictly construed: * * * “(4) Churches, parsonages, etc.—Houses and buildings used exclusively for, public worship, and the furniture contained therein, and any parsonage used in connection therewith, and the grounds appurtenant to such houses, buildings and parsonages and necessary for the respective uses thereof.” At the time the suit was filed, there were 57 items of exempt property set forth in Section 9, including the buildings and grounds of hospitals, charitable institutions, educational and literary institutions, nonpolitical clubs and Boy and Girl Scouts. 1 Mrs. Murray, one of the original plaintiffs, 2 and Mr. Cree, an intervening plaintiff, are atheists.

Mrs. Murray as trustee and Mrs. Mays, the original plaintiffs, own property in Baltimore City on which, in 1964, they paid taxes of $353.50. Mr. Cree is a Research Analyst in Micro-biology at Fort Detrich, in Frederick County. He and his wife own about two acres of land in that county upon which they paid taxes, in 1964, to the county and State of Maryland in the amount of $40. The Free-thought Society of America, Inc. publishes the “American Atheist”, a monthly magazine.

It owns a building in Baltimore upon which taxes were paid, in 1964, in the amount of $350.09. The plaintiffs-appellants contend that the exemptions granted under Subsection 9(4) of tire Maryland statute violate Ar- ³⁸⁹ tides 15, 23 and 36 of the Maryland Declaration of Rights; that they are in violation of the Equal Protection Clause of the Fourteenth Amendment to the federal Constitution; and are in violation of the First Amendment to the Constitution made applicable to the states through the Fourteenth. The defendantsappellees maintain that the exemptions are constitutional under both the Maryland Declaration of Rights and the federal Constitution. The appellee Temple Emanuel contended below and contends here that the taxation of property used for worship would unconstitutionally abridge the free exercise of religion protected by the First Amendment.

The Maryland Synod of the Lutheran Church joins in this contention in this appeal. All of the appellees contend further that the appellants do not have standing to bring the suit. At the hearing below, it was shown that the records of Baltimore City indicate the total assessable basis of the city for 1964 as follows: All taxable real property........ $2,263,708,768.00 All tax exempt property ........ 578,997,400.00 The approximate total assessments exempt from taxation in the City in the levy for 1964 under the statutory provision here involved were as follows : Protestant ...................... $41,031,430 Roman Catholic ................. 31,339,880 Jewish ......................... 6,136,510 The Chancellor found that the total assessed value of real estate in Baltimore City exempt from taxation under Article 81 Section 9 is over 20% of the total assessed value of all real estate in Baltimore. The exemption under the subsection here involved is approximately 2.8% of the total assessed value of all Baltimore City real estate and approximately 13 J4% of the total assessed value of tax exempt real estate in the City.

The state tax rate, levied to protect the bond issues of the State, is fifteen cents for $100 of assessed value. It was agreed that the Roman Catholic Archbishop of Baltimore is a corporation having title to various properties of the Roman Catholic Church of Baltimore City, including 163 parishes or mission churches with an aggregate value of Diocesan ³⁹⁰ properties in excess of $2,000,000. The Maryland Synod of the Lutheran Church owns property in Baltimore City in excess of $13,600,000. Temple Emanuel is a Reform Jewish Congregation whose synagogue is in Baltimore City.

At the hearing, Mr. John G. Arthur, Director of the Department of Assessments of Baltimore City, who has been with that department for 38 years, testified for the appellants. His testimony as to applying the statutory exemption was summarized by Judge Barnes as follows: “In applying this exemption, Mr. Arthur and the City Department of Assessments have given the words ‘public worship’ a comprehensive interpretation. Houses, buildings and appurtenant lands used for teaching or contemplating the beliefs of any philosophical system regardless of whether that philosophical system includes a belief in a Supreme Being, are considered to be exempt under Section 9(4) and such exemptions are granted in the regular course of administering the tax laws. For example, the property used by the Baltimore Ethical Culture Society which does not teach any belief in a Supreme Being, but which confines its teachings to moral and ethical standards and educational purposes has been exempted under Section 9(4).

Property used by Buddhist organizations for their religious teachings are exempted. The Philosophical College of Occult Science has had its property exempted under Section 9(4). Over objection and subject to exception, Mr. Arthur testified that after having heard Mr. Cree describe his philosophical system, if application were made, the property of the Free-thought Society would be granted an exemption under Section 9(4).” The Chancellor also found that the real property of churches not used for houses of worship and parsonages, but held for other use and for future construction of church edifices, is subject to real estate taxation to the same extent as similar property held by private persons. At the conclusion of the case below, Judge Barnes, in a com ³⁹¹ prehensive opinion, found that the plaintiffs-appellants had standing to sue but that the statutory exemption here involved did not violate the Maryland Declaration of Rights or the federal Constitution.

In this appeal from his decision, we shall first consider the standing of the appellants to sue, then the questions raised under the Maryland Declaration of Rights and, finally, the issues under the federal Constitution. The Appellants’ Standing to Sue In Maryland, taxpayers have standing to bring suit to challenge the constitutionality of a statute when the statute as applied increases their taxes. McKaig v. Mayor and City Council of Cumberland, 208 Md. 95, 102-103, 106, 108 , 116 A. 2d 384 (1955) and cases therein cited. If the taxpayers cannot show a pecuniary loss or that the statute results in increased taxes to them, they have no standing to challenge it.

Citizens Comm. v. County Comm’rs. of Anne Arundel County, 233 Md. 398, 401-405 , 197 A. 2d 108 (1964) and cases therein cited. A class suit is here involved. Under Section 9(4) over $78 million dollars of real estate is exempted from taxation out of a total assessment basis of Baltimore City of over $2 billion. The class of taxpayers represented by the appellants, other than the Crees, would pay less real estate taxes to the City if the exemption were not in effect.

The property owners who pay real estate taxes to the state, represented by all the appellants, would pay less taxes to the state if the exempted property were taxed. The appellees rely on statements in Citizens Committee that the appellants there had failed to show any special damage or loss peculiar to themselves as taxpayers or otherwise, and that, to have standing, the persons who bring the suit must show a special interest in the subject matter distinct from that of the general public. In Citizens Committee, the appellants had filed suit as citizens and taxpayers to challenge the constitutionality of local laws and resolutions authorizing the operation of gambling devices in Anne Arundel County. The Court found it evident that the taxpayers would be damaged by a discontinuance of the program rather than a continuance of it.

Here, the converse is true. The appellees further contend that, even if the appellants have ³⁹² standing to sue under the Maryland law, they lack standing under the federal law to attack the constitutionality of the statute under the federal Constitution. We do not agree. When the validity of a state statute is attacked in a state court, it is the duty of that court to determine all the constitutional issues involved, federal as well as state.

If the statute is held valid under the state law, but invalid under the federal Constitution, the state court must give the complainants the relief they pray. The appellants have elected to raise the federal Constitutional questions in a state court, as they had the right to do. If they have standing under the law of Maryland to bring the suit, it is irrelevant that the result might have been different had the action been instituted in a federal court. The appellants had standing to bring the suit in Maryland courts, and, in their suit, to raise any constitutional question in respect of the statute, state or federal.

The Provisions of the Maryland Declaration of Rights The appellants contend that the subsection of the statute is unconstitutional under Articles 15, 23 and 36 of the Maryland Declaration of Rights. Article 15 provides that all taxes for the support of the state and local governments shall be uniform. Article 23 states that no man shall be deprived of life, liberty or property except by the law of the land, which, this Court has held, is the equivalent of due process of law. Article 36 deals with religious freedom; it provides, in part, that no person ought to be compelled to maintain or contribute to maintain any place of worship or any ministry.

This Court has consistently recognized the power of the legislature to grant full exemptions from taxation when reasonable and for a public purpose. State Tax Com’n. v. Gales, 222 Md. 543, 548-550 , 161 A. 2d 676 (1960) and authorities therein cited. When made for such a purpose and uniformly applied, the exemption does not violate Article 15 of the Declaration of Rights (even before the 1915 amendment when uniformity was required with regard to assessment as well as with regard to tax rates) or due process of law under Article 23. National Can Corp. v. Tax Com’n., 220 Md. 418 , 153 A. 2d 287 (1959); State Tax Com’n. v. Gales, supra.

See also Armco Steel Corp. ³⁹³ v. State Dept. of Assessments and Taxation, 236 Md. 168, 175-176 , 202 A. 2d 741 (1964). Williams v. Mayor and City Council of Baltimore, 289 U. S. 36, 41 (1933) involved the validity of a Maryland statute under which the property of a particular railroad was made exempt from taxation. The cities of Baltimore and Annapolis challenged the validity of the exemption. The District Court upheld the validity of the statutory exemption, the Circuit Court reversed, and the Supreme Court reversed the Circuit Court.

In delivering the Supreme Court’s opinion, Mr. Justice Cardozo held that the municipal corporations, being creations of the state, were without standing to invoke the protection of the federal Constitution but that the statute was valid under Article 15 of the Maryland Declaration of Rights. He said: “The courts of Maryland hold that the rule of uniformity established by these provisions does not forbid the creation of reasonable exemptions in furtherance of the public good * * * It does not even prohibit an exemption in favor of an individual as distinguished from one for the benefit of the members of a class. All that it exacts in respect of the narrower exemption is the presense of a relation, fairly discernible, between the good of the individual and the good of the community.” General tax exemptions for property dedicated to religious uses have long been regarded in Maryland as reasonable and for a public purpose. The Chancellor succinctly gave the history of tax exemption of houses of worship in Maryland as follows: “An exemption from taxation similar to that granted by Section 9(4) has existed in Maryland since the State began the general taxation of real estate by the Act of 1797, Chapter 89, passed on January 20, 1798.

The exemption in that Act was: ‘except property belonging to the State or the United States, houses for public worship, burying grounds * * This basic exemption has continued in each tax statute adopted in Maryland since the original Act of 1797, Chapter 89 until the present time.” ³⁹⁴ Concurrently with this continuous exemption, Maryland has had in effect another measure, Article 38 of the Declaration of Rights, directed to the separation of church and state. That Article requires the sanction of the General Assembly for any gift, sale or devise of land “for the support or benefit of any Religious Sect, Order or Denomination * * *; except always, any sale, gift, lease or devise of any quantity of land, not exceeding five acres, * * *” for a house of worship, a parsonage, or burying ground. In Vmsant v. Roberts, 3 Md. 119, 128-29 (1852), the Court considered the purpose of this Article. Judge Mason, for the Court, said: “The 34th section of the Bill of Rights is analogous to the British statutes of mortmain, which were introduced to check or prevent ecclesiastics from accumulating in perpetuity, in mortua manu, or hands that never die, the lands or property of the kingdom, and thereby withdrawing them from public and feudal charges.

This provision in our Bill of Rights, was designed for the protection or benefit of the people of Maryland from similar evils, * * *” In 1948, by constitutional amendment, Article 38 was changed so as not to require the sanction of the General Assembly to a gift, sale or devise to a religious organization, but the legislature was given the right to require such sanction by statute. While the ownership of land by a religious organization has been consistently circumscribed by constitutional provision, therefore, gifts or devises for houses of worship and parsonages have been permitted, in the same Article, without legislative sanction. Baltimore City v. Starr Church, 106 Md. 281, 286 , 67 Atl. 261 (1907) held that a special act of the legislature granting exemption for a specific property owned by a church of one denomination was unconstitutional, because it violated Article 15 of the Declaration of Rights and Article III, Section 33 of the Maryland Constitution. However, Judge Rogers, for the Court, had this to say as to the validity of the statutory exemption from taxation of houses used for public worship: ³⁹⁵ “It will not be denied at this late day that the Legislature has the power, within reasonable limits, to exempt certain species or classes of property from taxation, when the public interests so require.

This is actually done in the case of houses used exclusively for public worship, and the grounds appurtenant thereto, in the case of graveyards and cemeteries, and in the case of hospitals, asylums and benevolent institutions. (Code, 1904, Art. 81, sec. 4). The validity of provisions of this kind is too well established to be now questioned. But it will be perceived in these cases all the property of the class indicated is exempted.

The Legislature does not exempt some houses of public worship and tax others. It does not exempt some graveyards and cemeteries, some hospitals, and then tax other properties of exactly the same kind. It does not arbitrarily say that this particular house of public worship shall be exempt, but that one shall be taxed. On the contrary, all property falling within any one of the classes mentioned in Sec. 4, is exempt.

There is therefore no arbitrary discrimination between different properties of the same kind, but all are treated alike.” Occasionally a dictum, when it strikes a note resonant with accepted legal principle, becomes as important as the actual decision. This has been the case in Starr. The statement quoted has been cited with approval as late as State Tax Com’m. v. Gales, supra. The exemption here involved violates no provision of the Maryland Declaration of Rights.

The Equal Protection Clause of the Fourteenth Amendment The appellants contend that by the exemption here involved, the State of Maryland has deprived them of the equal protection of the law guaranteed by the Fourteenth Amendment and that the criterion for the distinction is discriminatory and not justifiable under the Amendment. The Supreme Court has repeatedly held that state exemptions of a class from taxation not clearly unreasonable do not infringe the equal protection clause. In Carmichael v. Southern ³⁹⁶ Coal & Coke Co., 301 U. S. 495, 509 (1937), Mr. Justice Stone said, for the Court: “It is inherent in the exercise of the power to tax that a state be free to select the subjects of taxation and to grant exemptions. Neither due process nor equal protection imposes upon a state any rigid rule of equality of taxation * * * This Court has repeatedly held that inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation.” In Gibbons v. District of Columbia, 116 U. S. 404, 407-08 (1886), Archbishop Gibbons had appealed from a decree dismissing his bill in equity which claimed that the assessment and tax on lots owned by a Catholic church in the City of Washington were in violation of an Act of Congress which exempted from taxation church buildings and grounds actually occupied by such buildings.

A similar exemption had been in effect under authority delegated by Congress as early as 1802. The lots in question, the Court found on the uncontroverted facts, were unnecessary for the enjoyment of the church and were to be sold or leased. The Court held that, under the circumstances, the lots were not exempt from taxation. However, Mr. Justice Gray, in delivering the Court’s opinion, said that the power of Congress functioning as a local legislature for the District of Columbia to levy taxes for District purposes only “in like manner as the legislature of a State may tax the people of a State for State purposes” was clear and that “[i]n the exercise of this power, Congress, like any