Emory v. State

• Decision Date: 01 July 1874
• Citation: 41 Md. 38
• Parties: JOHN B. EMORY, President of THE MONUMENTAL FIRE INSURANCE COMPANY OF BALTIMORE v. THE STATE OF MARYLAND.
• Court: Maryland Court of Appeals

41 Md. 38

JOHN B. EMORY, President of THE MONUMENTAL FIRE INSURANCE COMPANY OF BALTIMORE v. THE STATE OF MARYLAND.

Court of Appeals of Maryland

July 1, 1874

APPEAL from the Superior Court of Baltimore City.

The opinion of this Court, together with the following opinion of Judge DOBBIN of the Superior Court, furnish a sufficient statement of the case:

This is an application for a mandamus to compel the respondent, as President of the Monumental Fire Insurance Company of Baltimore, to pay to the State Treasurer the State taxes levied upon the capital stock of that Company for the years 1870, 1871 and 1872.

The application is resisted upon the following grounds:

1. That John B. Emory was not the President of the Company when these taxes accrued, but became so only on March 4, 1873.

2. That the 93rd section of the 81st Article of the Code, by which taxes, such as those claimed in this case, were made payable to the Treasurer of the State, was repealed by the Act of 1872, ch. 419, and that the taxes of 1870 and 1871, if payable at all, are not now payable to the State Treasurer directly, but to the City Collector.

3. That the Act of 1870, chap. 422, by which a tax of one-fourth of one cent is imposed, changes the subject of taxation from capital stock, to the value of capital stock, and that this new subject of taxation was not included in section 93 of Article 81, and the taxes thereon are therefore, not payable to the State Treasurer directly, but to the collector of the city, and by him to the Treasurer.

4. That the capital of this Company is for the most part invested in mortgages, which are by express law not subject to tax, and that therefore, that portion so invested should not be taxed since such tax, it is claimed, would be in effect a tax upon mortgages, and as the mortgaged property pays a tax, the tax upon the capital so invested would be a double tax.

These defences will be considered in their order.

1. The 93rd section of Article 81st, and the amendment made by the Act of 1872, chap. 419, impose the duty of paying these taxes upon the president, cashier, or other proper officer, and is intended to reach the funds of the Company in the hands of such officers, without reference to the individual who may for the time being, be in office. The taxes are assessed upon the capital stock of the Company, and the "president cashier, or other proper officer," is only the conduit through which the money is to flow from the Company to the State. Through this official channel for the time being, all taxes must come, whether they accrued during the incumbency of the present holder of the office, or of any previous one. The present officer, John B. Emory, is supposed to have received all the assets of the Company charged with the payment of all liabilities due by the Company, and in virtue of such provision, control and duty, he is amenable to the process of this Court.

If this be not so, who is to pay the State taxes levied upon the shares of stock of a corporation? No other mode than through the agency of these officers is provided by law, and if the proposition contended for be true, then the easiest mode of evading taxation, would be to change the officer as soon as the taxes fall in arrear.

2. When the Code was adopted, the 81st Article, imposed the State tax upon the par value of the shares of stock of corporations, and put upon the officers of the corporation the duties prescribed in section 93. In 1872 the Legislature determined to change this basis of taxation, to the market value of the shares of stock, but it was not intended to change, in any respect, the mode of payment into the Treasury of the State, and they passed the Act of that year, chap. 419, to effect this amendment. The constitution of the State (Art. 3, sec. 29,) enacts that the General Assembly, in amending any Article or section of the Code of Laws of this State, shall enact the same as the said Article or section would read when amended; so that for the purpose of this amendment, the old section had to be repealed, in order that the amended section should take its place. But such a repeal, for such a purpose, cannot be said to repeal that part of the law which it was obviously not the intention of the Legislature to alter, and which re-appears, in the same form, in the substituted section. That provision must be taken to stand as it did before, except that, for more verbal harmony, the new amendment and the old provision are incorporated in a new section, and that substituted for the former one. In this view there was no repeal of the duty of the officers of the corporation to pay the taxes directly to the Treasurer of the State, the same duty being retained in the amended section as it stood in the abrogated one.

3. The revenue laws of Maryland, in so far as they impose taxes on capital invested in corporate enterprises, mean always to act upon the same subject of taxation, that is, the shares of stock by which such capital is represented. Prior to the Act of 1872, chap. 419, the taxes were levied upon the par value of such shares, and afterwards, by the provisions of that Act, they were levied upon the market value of such shares. The subject being the same in both cases though the rate is changed, the duty of the officers of the corporation, both under the 93rd section of the 81st Article of the Code as it originally stood, and the amended section as it now stands, is the same, that is, to pay directly to the Treasurer of the State.

4. This Company was originally a Fire Insurance Company, and now, by an amendment to its charter, it has had conferred upon it enlarged powers. In no part of its charter, however, is it to be found that it is to be free from any burthen of taxation which would apply to any other corporation lending its money to those who would borrow it. Confessedly, if it lent its money, being part of its capital, upon the mere personal obligation of the borrower, such capital so loaned, could not be claimed to be exempt from taxation. So also, if it lent its money upon the credit of one who is the known owner of houses and lands, and whose claim to be so trusted is based upon the liability of those houses and lands to be sold to pay his debts, the capital so lent would be still liable to be taxed in the shares of stock by which it is represented. How then can it alter this liability to taxation, if the Company instead of relying upon the general security afforded by the ownership of property by their debtor, shall choose to take a specific security upon this same property by way of mortgage? The exemption of mortgages from taxation, when the thing mortgaged is a house, should no more exempt the corporate capital lent upon it than when the same capital is lent upon other descriptions of property not subject to taxation. Take the case of a loan by this same Company to a manufacturer, upon the security of the goods of his manufacture in his own hands. Such goods are exempt from taxation, but there would seem to be no good reason why money so lent should therefore be relieved from taxation. The fallacy seems to consist in treating such a transaction as an investment by which the nature of the corporate capital is changed, and the absolute ownership of something else is acquired instead. But such is not the effect of a loan on mortgage.

The mortgagee is still the owner of the money and the mortgagor of the thing mortgaged, the money being subject to the use of the mortgagor during the currency of the loan, and the thing mortgaged subject to liability to be sold to repay the loan. There is no change then, in the capital of a company so disposed of, and if liable to taxation before a loan, though on mortgage, it will continue so afterwards.

The policy of the revenue laws of Maryland is to make every description of property, real and personal, the subject of fair and equal taxation. In doing this, difficulty is encountered in the floating and unstable nature of some kinds of property, as cash in circulation, for example, and even the most careful enumeration of the subjects of taxation sometimes fails to accomplish the desired object. But when money assumes the form of aggregated capital to be embarked in corporate enterprises, then the result is more easily attained by levying the tax upon the shares of stock which represent such capital.

In such case, care must be taken to avoid the evil of double taxation, since this capital may be invested in some of the things which are already taxed, and if the capital so invested is taxed as shares of stock, and the things in which it is invested is also specifically taxed, it is a double taxation. This is guarded against by the 3rd section of the 81st Article of the Code, by providing that when a corporation whose capital stock is made subject to taxation becomes the owner of such things, they and not the capital stock, shall be exempt from taxation. Under this provision, if the mortgages held by this Company were not already exempt from taxation by the Act of 1870, ch. 394, they would be exempt by the force of it.

In considering this subject, there must always be kept in view the distinction which the taxing laws clearly made when mortgages were taxed, between the mortgage which represented the money loaned, and the property pledged for its repayment. Both were subjected to taxation because the two together represented twice the value of either singly. Taxes upon both, therefore, were not liable to the objection of being double taxation upon the same subject-matter, because each tax was in fact the proper proportionate tax which the thing it was levied upon ought to bear.

I find nothing then, in any of the reasons alleged, why this mandamus should not issue, and I now order it...