State Tax Commission v. Allied Mortgage Companies

Parke, J., delivered the opinion of the Court. In the exercise of its original jurisdiction, the State Tax Commission of Maryland held that the Allied Mortgage Companies, Inc., a corporation under the provisions of the incorporation law of the State of Maryland, and there engaged in corporate activities, is an’ ordinary business corporation for the purpose of taxation. Article 81, section 186(c), of the Code (Supp. 1935). On appeal to the Circuit Court No. 2 of Baltimore City, this classification was adjudged error, and the corporation was determined to be a mortgage corporation, and as such to be taxed.

From the order so holding, the State Tax Commission of Maryland has appealed. The question is whether, within the meaning of the statute, the corporation is an. “ordinary business” or “mortgage” corporation for the imposition of taxes under the revenue laws of the State. In the exercise of its prerogative the General Assembly of Maryland has selected and classified the subjects of taxation, and imposed different rates on the respective classes. No questions of equality and uniformity are raised, and it is not claimed that the classification is unreasonable or arbitrary.

Grossfeld v. Baughman, 148 Md. 330 , 129 A. 370 ; Consolidated Gas & Elec. Co. v. Baltimore, 105 Md. 43 , 65 A. 628 . ³⁵⁹ The problem is one of definition and of application. All private corporations are expected to be assessed for taxes under general laws, unless they are expressly exempt by law. Cooley on Taxation (4th Ed.) sec. 791; Germania v. State, 7 Md. 1 ; Baltimore, C. & A. Ry.

Co. v. Wicomico County, 93 Md. 113 , 48 A. 853 . Code (1935 Suppl.) art. 81, sec. 2 (5). As used in article 81, entitled “Revenue and Taxes,” the phrase “ordinary business corporation” is defined by the statutory declaration that the words “shall mean any corporation having a capital stock except” a list of specified corporations which are engaged in certain designated businesses. Thus the definition is accomplished by employing general terms to create a class, which is composed of all corporations having a capital stock except such of these corporations as are by particular mention and description excluded.

The specifically eliminated corporations are numerous and embrace designated kinds of corporations which operate as public carriers, and public utilities, and in certain fields of finance and insurance. Among the corporations expressly excluded this collocation occurs: “building or homestead associations, state, national and savings banks, finance corporations, or savings or moneyed corporations.” Code (Supp. 1935) art. 81, sec. 2, subsec. (9), as amended by chapter 225 of the Acts of 1937. By the next succeeding subsection (10) the words “finance corporations” are defined.

The statute enacts that “The phrase ‘finance corporation’ shall include finance, credit, investment banking, investment trust, mortgage and commercial banking corporations, and any corporation other than banks or trust companies substantially competing with national banks in this State.” Supra. It follows that since “mortgage * * * corporations” are within the meaning of “finance corporations,” the statutory law has by enumeration expressly excluded mortgage corporations from the technical class of “ordinary business corporations” for the purposes of taxation. The term “mortgage corporations” is not further defined. Nor ³⁶⁰ is its signification affected by limitations of context or description.

The words are in common use, and there is nothing to indicate that they are intended to express a technical meaning or that, if effect be given according to their ordinary and familiar sense, the clear intention of the Legislature would be defeated. In such circumstances, the rule of construction is that words in a statute are to be taken in their commonly understood signification. Parkinson v. State, 14 Md. 184, 196 . The importance of a proper classification grows out of a difference in the taxes imposed.

The annual franchise tax is imposed on “ordinary business corporations,” but not on a mortgage corporation. Furthermore, an ordinary business corporation is taxed as an individual directly on its personal property, while another than ordinary business corporation is taxed on its capital stock. Code, (Supp. 1935), art. 81, secs. 136, 6 (2), 6 (7), 7 (15) and (16). The-term “mortgage corporations” plainly means those whose business is with mortgages, which necessarily implies the power of investment of funds by the corporations in loans whose payment is