Parlett v. Dugan

Boyd, J., delivered the opinion of the Court. This appeal was taken from a pro forma order of the Circuit Court of Baltimore City sustaining a demurrer to the petitions of John F. Parlett, collector of State and city taxes for Baltimore, and of John M. D. Heald, trustee, which asked the Court to require Ferdinand C. Dugan, trustee of George C. Nicholas, to pay certain State and dty taxes out of funds in his hands. The two petitions were consolidated by order of the Court. They allege that on the first day of October, 1867, a certain lot of ground on Postoffice avenue, in the city of Baltimore, was leased for the term of ninety-nine years at the annual rent of $990, payable quarterly, free and clear of all deductions for taxes, etc., and the lease contains a covenant on the part of the lessee, his assigns, etc., to pay the taxes.

The reversionary interest became vested in the petitioner, Heald, in trust for certain children of Adaline Spurrier, and on the 28th day of 'November, 1893, George C. Nicholas became the owner of the leasehold interest. On the 18th day of May, 1895, Nicholas assigned to Mary N. Forman an undivided half interest in the leasehold, and on the 24th day of May, 1896, he executed to the appellee a general deed of assignment of all his property in trust for the benefit of his creditors. On the first day of May, 1896,.at the instance of Mary N. Forman, a receiver was appointed to take charge of the leasehold property, collect the rents and pay ⁴⁰⁹ the charges thereon until the further order of the Court. The receiver had' in hand when the petitions were filed $812.15, whilst the ground rent due October first, 1896, amounted to $815, and the State and city taxes for 1894, 1895 and 1896 were still unpaid — amounting to $1,428.68 for the three years.

The appellee refused to enter into possession of Nicholas’ interest in said leasehold property and rejected it “ as being without benefit to his trust estate.” The petitions further allege that the appellee had in hand funds of the estate of Nicholas far more than sufficient to pay the taxes. The question intended to be raised is, whether under these circnmstances the State and city taxes on the leasehold property must be paid out of the funds in the hands of the trustee, which were received from other parts of the estate ? It is conceded that the taxes for 1896 cannot be collected by this proceeding, but those for 1894 amount to $498.09 and for 1895 to $460.96, and the appellants claim that they should be paid. Although at the time of the assignment Nicholas only owned a one-half interest in the property, there is nothing in the record to show when the levy for 1895 was made, and therefore we do not know whether Mary N. Forman was the owner of the half interest then or whether she became such after the levy.

Nor is there anything to show from what the fund in the hands of the trustee was derived, although we presume from the argument of counsel that most, if not all, of it was from collections or the proceeds of sales of personal property. By section 47 of Art. 81 of the Code all State, county and municipal taxes are made liens on the real estate of the party indebted from the time they are levied, but they are not made liens on personal property. Although the Legislature has broad powers in making taxes liens either on the property taxed or other property, they are not liens merely because they are taxes, but must be expressly made so by legislation. The Legislature of the State has given taxes priority over other debts in a number of instances.

Administrators are ⁴¹⁰ required by section 65 of Art. 81 of the Code to pay all taxes due by their decedents as preferred debts, to the exclusion of all others, except funeral expenses. By section 64 of that Article when a sale of either real or personal property was made by any ministerial officer, under judicial process or otherwise, all sums due and in arrears for taxes from the party whose property was sold were required to be first paid and satisfied, but by the Act of 1892, chapter 518, that section was so amended as to only require the taxes on the particular property sold to be paid out of the proceeds of sale. Section 15 of Art. 47, amended by the Act of 1896, chapter 184, in giving priority to certain wages and- salaries expressly reserved from the effect of the preference all proper and legitimate costs, expenses, taxes, etc. But there is no statute which makes the taxes now in controversy a lien on the fund in the hands of the trustee, nor is there any statute which expressly gives them priority over other' claims in the distribution of that fund. It is contended, however, that, at least so far as the State taxes are concerned, the priority in no wise depends upon a lien in favor of the State, but it is by virtue of its prerogative right derived from the common law entitling her to be first paid, excepting only where some antecedent lien stands in the way.

It is true that it has' been the settled law of Maryland for many years that such a right does ordinarily exist in favor of the State. In the case of State v Bank, 6 G. & J. 226 , Chief Judge Buchanan, in delivering the opinion of the Court, gave as a reason why this should be so that “ the government of the State is established for the good of the whole and can only be supported by means of its revenues ; which revenues the good of the whole requires to be protected. And as it can only act by its agents, who, no .matter how vigilant, cannot always be present to protect its rights, a priority in the payment of its debts (which must always be of a public nature) is necessary to enable it to accomplish the ends of its institution.” • But if it be conceded that the State has such priority in the distribution of ⁴¹¹ all of an insolvent’s estate, and if that doctrine be extended so far as to include the