Appeal Tax Court of Baltimore City v. Rice

• Decision Date: 30 January 1879
• Citation: 50 Md. 302
• Parties: APPEAL TAX COURT of Baltimore City v. ISAAC RICE APPEAL TAX COURT of Baltimore City v. John S. Jackson. APPEAL TAX COURT of Baltimore City v. Charles W. Janson. APPEAL TAX COURT of Baltimore City v. Elijah Milbourne. APPEAL TAX COURT of Baltimore City v. Hamilton Clark. APPEAL TAX COURT of Baltimore City v. James Robert Marley.
• Court: Maryland Court of Appeals

50 Md. 302

APPEAL TAX COURT of Baltimore City v. ISAAC RICE

APPEAL TAX COURT of Baltimore City v. John S. Jackson.

APPEAL TAX COURT of Baltimore City v. Charles W. Janson.

APPEAL TAX COURT of Baltimore City v. Elijah Milbourne.

APPEAL TAX COURT of Baltimore City v. Hamilton Clark.

APPEAL TAX COURT of Baltimore City v. James Robert Marley.

Court of Appeals of Maryland

January 30, 1879

The causes were argued before BARTOL, C.J., MILLER, ALVEY and ROBINSON, JJ.

A Leo Knott, State's Attorney for Baltimore City, and Charles J. M. Gwinn, Attorney General, for the appellant.

A building or homestead association or land company is a corporation possessing general powers to acquire and deal with property of any description which it may deem necessary to enable it to carry on its operations, and to promote the objects for which it was created. It is fully recognized by the Acts under which it is organized as the owner, in its corporate character, of its franchises, and of the property in which its capital is invested. 1868, ch. 471, sec. 48.

The holders of shares in building or homestead associations have agreed to pay for such shares by instalments, (1868, ch. 471 sec. 84,) and have secured the payments of the unpaid instalments and their other dues as members by a mortgage upon real or leasehold property, or by hypothecation of their shares of stock. 1868, ch. 471, sec. 88. These mortgages do not secure the payment of any debt, but do indemnify the corporation against any default on the part of the members in any of certain specified duties of membership. Robertson v. Am. Homestead Asso. 10 Md. 409; Shannon v. Build Asso. 36 Md. 394-396; Lester v. Log Cabin Asso. 38 Md. 118-120; Williar v. Balto. Butchers Loan Asso. 45 Md. 562.

The holders of shares in associations or companies organized for the purpose of dealing in land, have paid in whole or in part for the stock which they hold, and if credit was given for any portion of the amount due, have secured such sum by the hypothecation of their shares, and by giving a mortgage upon real or personal property. 1872, ch. 178, sec. 92. These associations do not belong to this class of companies.

The holders of shares in any such association or company are not as the owners of such shares, proprietors of any part of the corporate property. They are the holders of properties which are wholly distinct from the property owned by the corporation. Reg. v. Arnaud, 9 Ad. & Ell. N. S. 806 817; Watson v. Spratley, 10 Exch. 235, 238; Cesena Sul. Co. v. Nicholson, L. R. 1 Exch. Div. 451; McCulloch v. Maryland, 4 Wheat. 436; Dartmouth College v. Woodward, 4 Wheat. 700, 701; Gordon v. Appeal Tax Court, 3 How. 150; Van Allen v. Assessors, 3 Wall. 584; Delaware Railroad Tax Case, 18 Wall. 229, 231; Farrington v. Tennessee, 95 U.S. 686, 687, 691; Dewing v. Perdicaries, 96 U.S. 196.

The holder of a share in such association or company cannot dispose of any part of a mortgage debt or other security in which the capital of the corporation is invested. If he desires to terminate his connection with the corporation, in the manner usually prescribed in such associations, he is not entitled to receive a part of the assets of the corporation proportioned to his ownership of its stock, but is, on the contrary, entitled only to receive a sum of money proportioned to his ownership of such stock. A transaction of this kind imports nothing more than a purchase by the corporation of the shares of stock of the member who withdraws, which leaves the corporation the owner, not only of the corporate property, but also of the shares of stock of which it has become possessed by purchase.

The shares of stock in such corporation are in nowise affected by the situs of the real and leasehold property belonging to the corporation, or by the location of its principal office. They are intangible properties which have no other situs except the domicile of their owner.

The property of which such association or company is possessed may be real estate, or real and leasehold estate having a fixed situs in the City of Baltimore. The character of the property thus held does not determine the character of the shares of stock in such corporation. Whatever may be the nature of the property of the corporation, its shares of stock are personal property. Shelford on Joint Stock Companies, 147; Myers v. Peregal, 2 De G. M. & G. 618, 621; Hilton v. Giraud, 1 De Gex & Smale, 83; Ashton v. Langdale, 4 De Gex & Smale, 402; Taylor v. Linley, 2 De G., F. & J. 84; Hayter v. Tucker, 4 K. & J. 243; Sparling v. Parker, 9 Beav. 450; Walker v. Milne, 11 Beav. 507; Williams' Pers. Prop. 8, and note 1.

The theory of the individual interest of shareholders in the property of a corporation is utterly without foundation. It was attempted to be maintained by counsel in Calcutta Jute Mills Co. v. Nicholson, L. R. 1 Exch. Div. 443; but Chief Baron Kelly, in disposing of that part of the argument, said: "You cannot divide a company as you can a partnership consisting of several partners. You cannot say that four thousand pounds of this money belongs to Cesena shareholders, five hundred pounds to French shareholders, and five hundred pounds only to English shareholders." Cesena Sulphur Co. v. Nicholson, L. R. 1 Exch. Div. 451. The whole capital is the property of the corporation, and not the property of a partnership. Ib. 451; Huddleston, B. 456, 457.

The shareholder may, for a valuable consideration, dispose of his shares, but such transfer does not diminish the amount of the corporate property. The corporation may, for a valuable consideration, alienate a portion of its property, but such sale does not divest the shareholder of any portion of his property.

If the property owned by the corporation be, in its essential nature, different from the property owned by the shareholders in such corporation, the single circumstance that particular property owned by the corporation is exempted from taxation, cannot avail to exempt its shares of stock from taxation in the hands of the owners of such stock. Emory v. State, 41 Md. 58. The immunity engrafted upon such particular property enured directly to the advantage of the corporation holding such property by lessening the charges upon its revenue, and indirectly to the advantage of the shareholder by giving him the chance of a larger dividend upon his shares. These were consequences which the Legislature must have foreseen and intended. It certainly could neither have foreseen nor intended that the exemption of mortgages from taxation would be claimed as operating not only to exempt from taxation such mortgages in the possession of their corporate owner, but also to exempt the shares of stock in such corporation owned by individual citizens from taxation as their property.

The appellees claim that the shares of stock owned by them are exempted from taxation, because the capital of the respective associations in which they hold such shares, is invested in securities exempted from taxation. Now, mortgages are not the only securities which enjoy this advantage. There are certain descriptions of State bonds upon which the same immunity is engrafted; and the bonds of the United States are not subject to taxation by this State. Is it true that a corporation having a capital stock divided into shares which cannot claim that its property, or shares of stock, are exempted from taxation by any express provision in its charter, may, in any year, by investing its whole capital in State bonds, which are exempted from taxation, or in United States bonds, relieve its shares of stock from taxation so long as such investment may continue?

Is it true that any such corporation may, in any year, by investing a part of its capital stock in such exempted securities, claim a proportionate reduction in the taxable value of its shares of stock?

Is it true that any corporation which is the holder of a mortgage exempted from taxation, may, in any year, claim a proportionate reduction in the taxable value of its shares of stock?

If the pretensions of the appellee are well founded, all these claims may be justly made by corporations whose capital is invested, in any year, in whole or in part, in such securities. Such pretensions are not well founded.

The case of Balto. v. R. R. Co. 6 Gill, 294, 295, 296 cannot be accounted as an authority adverse to the authorities upon which the appellant relies. It may be true that, under the rulings in that case, the shares of stock of a corporation represent the franchises and real and personal property of a corporation; and that when such shares are exempted from taxation, the real and personal property and franchises of the corporation are likewise exempted from taxation. But, if the converse of this proposition could be held to be true, it is clear, that if the real and personal property belonging to a corporation be exempted from taxation, and its franchises are not exempted from taxation, all the property represented by its shares of stock is not exempted from taxation; and the shares of stock, therefore, cannot be held to be wholly exempted from taxation. The franchises of the corporations in which the appellees are shareholders are not exempted from taxation; and as the shares of stock, therefore, of these corporations cannot be held to be wholly exempted from taxation, and the duty of ascertaining the taxable values of such shares, and of assessing and collecting the taxes thereon, necessarily rests in the discretion of the Legislature, (State v. Sterling, 20 Md. 516, 517,) it must be assumed that the Legislature, in directing shares of stock in such corporations to be assessed at their market value, determined that the value of the franchises of corporations, whose...