Clarke v. Union Trust Co. of Dist. of Col.

• Decision Date: 14 January 1949
• Docket Number: 64.
• Parties: CLARKE v. UNION TRUST CO. OF DISTRICT OF COLUMBIA.
• Court: Maryland Court of Appeals

63 A.2d 635

192 Md. 127

CLARKE v. UNION TRUST CO. OF DISTRICT OF COLUMBIA.

No. 64.

Court of Appeals of Maryland

January 14, 1949

Appeal from Circuit Court for Montgomery County; Charles W Woodward, Chief Judge, and Stedman Prescott and Patrick M Schnauffer, Judges.

Proceeding between Walter C. Clarke, register of Wills for Montgomery county and the Union Trust Company of the District of Columbia, a corporation, Executor of the estate of Edward L Morrison, deceased. From a decree ordering that the amount devised under the will of deceased to the Shriner's Hospital for crippled children is exempt from the Maryland Collateral Inheritance Tax, the Register of Wills appeals.

Reversed and remanded for passage of a decree as set forth in the opinion.

Richard W. Case, Asst. Atty. Gen. (Hall Hammond, Atty. Gen. and Joseph D. Buscher, Sp. Asst. Atty. Gen., on the brief), for appellant.

Jo V. Morgan, of Bethesda (Robert P. Smith, of Washington, D. C., on the brief), for appellee.

Before MARBURY, C.J., and DELAPLAINE, COLLINS, HENDERSON and EMORY H. NILES, of the Supreme Bench of Baltimore City, Specially Assigned, JJ.

COLLINS Judge.

This is an appeal by Walter C. Clarke, Register of Wills for Montgomery County, appellant, from a decree of the Circuit Court for Montgomery County ordering that $117,033.57, devised under the will of Edward L. Morrison to the Shriners' Hospital for Crippled Children, hereinafter known as the Shriners' Hospital, is exempt from the Maryland Collateral Inheritance Tax imposed by Article 81, Section 110, of the Annotated Code of Maryland, 1943 Supplement.

The facts of the case were stipulated and agreed to by counsel for the respective parties and are substantially as follows. Edward L. Morrison died testate, a resident of Montgomery County on August 14, 1946. Under his Last Will and Testament he devised specific bequests to his widow. He also devised the rest and residue of his estate in trust for the benefit of his widow for her life and upon her death said residue was to be paid free of the trust to Shriners' Hospital. The widow renounced the will and elected to take her legal share in all the property of the decedent. The Shriners' Hospital then became and is entitled to receive one half of decedent's net estate. The amount which it is entitled to receive is $117,033.57, upon which the appellant claims there is due and payable inheritance tax of seven and one half percent, or $8,777.44.

Shriners' Hospital is a non-profit corporation, organized under the laws of the State of Colorado. It has no capital stock and no profits inure to the benefit of any person. The purpose for which this hospital is organized follows. 'To maintain, control, conduct and superintend any and all charities, benevolences and Shriners Hospitals for Crippled Children established, maintained, owned and controlled by this Corporation, or which may now or hereafter be established by Shriners Hospitals for Crippled Children or any subsidiary or affiliated corporation thereof.'

This corporation maintains twelve hospitals in the Continental United States, one in Hawaii, two in Canada, and one in Mexico. One hospital is located in Philadelphia which serves crippled children who are residents of the District of Columbia, Virginia, West Virginia, Maryland, New Jersey, Pennsylvania, and New York. These hospitals furnish medical and surgical treatment for children. There is no charge exacted ro received from any child treated in these hospitals or from the parent, guardian, or any other person. Only such children who cannot afford other treatment are received in these hospitals. This corporation receives no contributions from any state or subdivision thereof but is maintained by voluntary contributions made by Shriners and other charitable minded persons throughout the country.

During the years 1936 to 1945 and through September, 1946, the total number of children treated at the hospital in Philadelphia was 2,031. Of this number ninety-six were from the State of Maryland. Of the children treated, the ninety-six from Maryland were .0473 of the total number of children treated. Although not stipulated, it appears that within the last ten years two tenths of one percent of all the money spent by this corporation was spent on Maryland children.

The Shriners' Hospital, a separate corporation, is an affiliate of the Imperial Council of the Ancient Arabic Order of the Nobles of the Mystic Shrine for North America, a benevolent and fraternal corporation existing under the laws of the State of Iowa, and hereinafter called the Shrine. The officers and directors of Shriners' Hospital and the Shrine are the same with the exception that the former has two officers, namely, chairman of the board of trustees and assistant secretary, which the latter does not have. There are two temples or units of the Shrine in Maryland, one located in Baltimore and the other located in Cumberland. It is the policy of the Shrine that each of the members constitutes himself a committee of one to report to his temple the discovery of any crippled child who may be classified as an orthopedic case. When such a report is made, the matter is referred to a special committee of the temple which investigates the matter and if certain requirements are met, including the inability of the parents or family to pay for medical attention, and an examination by a medical unit or committee of the respective Shrine temple, the child is admitted to the Shriners' Hospital in Philadelphia. If the parent of any child admitted to the Hospital is financially unable to visit the crippled child in Philadelphia the temple, upon application of the parent, furnishes to such parent the necessary financial assistance and transportation to the Hospital in Philadelphia.

The defendant below, appellee here, the Union Trust Company of the District of Columbia, a corporation, executor of the estate of Edward L. Morrison, deceased, has not yet paid any inheritance tax on the said sum of $117,033.57 claiming that such tax is not payable. From a decree of the Circuit Court for Montgomery County signed by two judges, (Judge Prescott filing a dissenting opinion), upholding the contention of the appellee, the appellant appeals here, contending that the inheritance tax is due.

Article 81, Section 110, of the 1943 Supplement of the Annotated Code of Maryland, providing for inheritance tax also contains the following provision: 'And provided further that nothing in this section shall apply to property passing, in trust or otherwise, to or for the use of a corporation, trust or community chest, fund, or foundation, created or organized under the law of the United States or of any State or territory or possession of the United States, organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, a substantial part or all of the activities and work of which are carried on in the State of Maryland, and no part of the net earnings of which inures to the benefit of any private shareholder or individual.' (Italics supplied here.)

The question for our decision therefore is whether a substantial part or all of the activities and work of the Shriners' Hospital are carried on in the State of Maryland. We will first consider the question whether any part of the activities and work of the Shirines' Hospital is carried on in Maryland. On this question the appellee cites a number of cases. The case of Layman Foundation v. City of Louisville, 232 Ky. 259, 22 S.W.2d 622, involved the claim of a religious and educational institution incorporated in Tennessee to exemption from taxation under an ordinance exempting religious and educational institutions in Louisville, Kentucky. It was found that although the taxpayer was an educational institution, the institution's income was devoted entirely to its work in Tennessee and no service was rendered to the people of Kentucky. Basing its ruling on the principle that taxation is the rule and exemption the exception and immunity from sharing the common burden is allowed only to those who perform duties which the State itself is obligated to discharge, the claim for exemption was denied.

The case of State v. Holcomb, 85 Kan. 178, 116 P. 251, 50 L.R.A.,N.S., 243, Ann.Cas.1912D, 800, involved a statute of the State of Kansas which excluded from taxation, among other things, property used exclusively for municipal purposes. Kansas City, Missouri, built a water works plant in the State of Kansas, which was owned exclusively by Kansas City, Missouri, and used exclusively for public purposes in Kansas City, Missouri. The Kansas court, finding that the maintenance of the water works did not inure to the benefit of the people of Kansas or to any municipality therein denied the exemption.

In the case of Jackson v. Phillips, and others, 14 Allen Mass., 539, at page 556, in discussing the definition of a legal charity, the court said the follwing: 'A charity, in the legal sense, may be more fully defined as a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds or hearts under the influence of education or religion, by relieving their bodies from disease, suffering...