Grand Lodge of Maryland, K.P., v. City of Baltimore

• Decision Date: 25 June 1929
• Docket Number: 35,36.
• Citation: 146 A. 744,157 Md. 542
• Parties: GRAND LODGE OF MARYLAND, K. P., ET AL. v. MAYOR AND CITY COUNCIL OF BALTIMORE ET AL. (TWO CASES).
• Court: Maryland Court of Appeals

146 A. 744

157 Md. 542

GRAND LODGE OF MARYLAND, K. P., ET AL. v. MAYOR AND CITY COUNCIL OF BALTIMORE ET AL. (TWO CASES).

Nos. 35, 36.

Court of Appeals of Maryland

June 25, 1929

Appeal from Baltimore City Court; Charles F. Stein, Judge.

Proceedings between the Grand Lodge of Maryland, Knights of Pythias, a body corporate, and others, and the Mayor and City Council of Baltimore and others. From adverse orders, the former appeal. Affirmed.

Argued before BOND, C.J., and ADKINS, OFFUTT, DIGGES, and PARKE, JJ.

Benjamin H. McKindless, of Baltimore, for appellants.

Herbert Levy, Asst. Atty. Gen., and Simon E. Sobeloff, Deputy City Sol., of Baltimore (Thomas H. Robinson, Atty. Gen., and A Walter Kraus, City Sol., of Baltimore, on the brief), for appellees.

PARKE J.

In the two appeals presented by the record, the petitioners and appellants are the Grand Lodge of Maryland, Knights of Pythias, and the Maryland Pythian Castle Building Commission of Baltimore City, which are two corporations of this state. The first of these will be called the Grand Lodge and the second the building commission. The appellees are the mayor and city council of Baltimore and the state tax commission. The principal question is whether the undisputed facts bring the petitioners within the exemption from taxation created by section 4 of article 81 of Code Pub. Gen. Laws 1924 providing that: "The provisions of this sub-title shall not apply to * * * buildings, equipments and furniture of hospitals, asylums, charitable or benevolent institutions or to the grounds appurtenant thereto in any city or incorporated town of this State which are necessary to the respective uses thereof."

The Grand Lodge was incorporated in 1881 for benevolent and charitable purposes and for the general supervision and control of all subordinate lodges of the order in the state of Maryland. In 1926, the articles of incorporation were amended so that its corporate powers were enlarged to embrace any lawful act or thing which may be appropriate to promote and attain the objects and purposes for which the corporation was formed. The Grand Lodge has no capital stock, and obtains its funds from dues, fees, contributions, and gifts, and it has always had its office and corporate seat in Baltimore.

At a session of the members of the Grand Lodge of the Knights of Pythias of Maryland in April, 1906, a resolution was adopted authorizing the purchase of a suitable site in Baltimore and the erection thereon of a building for the use and benefit of the Grand Lodge; and delegating to a designated building commission the necessary powers to begin, finance, and complete the project; and requiring the conveyance of the real estate purchased to the corporation here called the Grand Lodge. The resolution was comprehensive in its provisions, but these need not be set forth. It will be sufficient to note that the resolution also provided that the original property, at the corner of Gay and Lexington streets in Baltimore, which was then occupied by the Grand Lodge, was to be sold in the discretion of the building commission and the proceeds applied towards the erection of the new building. And, finally, the resolution directed the commission to incorporate, if necessary, more effectually to accomplish its object. Accordingly, in December, 1906, the members of the building commission incorporated under the name of the Maryland Pythian Castle Building Commission.

The certificate of the new corporation certified: (1) That the operations of the corporation were to be carried on in the state of Maryland, and that its principal office was in Baltimore; (2) that the aggregate of the capital stock was $50,000 divided into shares of the par value of $10 a share and (3) that the corporation was formed for the purpose of buying, selling, mortgaging, leasing, improving, disposing of, or otherwise dealing in land in the state, and for the loan of money on real and personal property, and also for the purpose of a homestead or building association. It is obvious that the corporate powers obtained went beyond the contemplation of the resolution. However, the corporation issued but two outstanding shares of its stock to two of its incorporators; and confined its corporate activities, during a period of some 16 or 17 years, to the raising of funds, the receipt of the per capita tax levied upon the members of the order, sold the old site of the original Grand Lodge building, purchased the new location, and was conveyed the fee-simple title thereto by four deeds bearing date May 2, June 7, September 20, 1916, and January 18, 1917, respectively, collected the revenue therefrom, and paid the taxes thereon until and inclusive of the year 1926, when construction of the new building was begun.

The building commission had the lot at the corner of Charles and Preston streets cleared of its improvements, and in June, 1926, awarded the contract for the erection of the new building within one year, but the contractor failed to complete the work until January, 1928.

For the purpose of securing necessary funds, the building commission borrowed $300,000 of the Savings Bank of Baltimore, which it secured on February 25, 1927, by a first mortgage lien on the new lot; and on June 1, 1927, the building commission obtained an additional loan of $150,000 of the Safe Deposit & Trust Company of Baltimore, which it secured by a second mortgage lien on the same property. The Grand Lodge united in the execution of both of these mortgages as a guarantor of the payment of the principal and interest of the mortgage debts and of the due performance of the convenants of the mortgagor. On February 18, 1928, the building commission delivered possession of the premises to the Grand Lodge; and on March 20, 1928, it conveyed the property, subject to these two mortgage liens, to the Grand Lodge. Since this conveyance to the Grand Lodge, the building commission has been dormant, having no corporate affairs except of a formal character.

The building erected was not occupied by the Grand Lodge until March, 1928. The floor space of the first and second floors is 10,000 square feet; and 7,932 square feet of the first floor is appropriated by two storerooms; and fourteen offices occupy 8,339 square feet of the second story. All the remainder of the building is dedicated to the use of the Grand Lodge. The anticipated yearly rentals from the storerooms and the offices are $25,000.

The substance of these facts is that, when the assessments and levies were respectively made for the tax years of 1927 and 1928, the fee-simple title and possession of the land in Baltimore city was in the building commission upon the active trust that it, among other duties, would purchase the site and erect and complete thereon a building, which, together with its site, would be necessary to the use of the Grand Lodge, a charitable and benevolent institution of Baltimore; and, after fulfilling this part of its trust, would, in further performance of its trust, deliver possession, and convey the premises to the Grand Lodge clear and discharged of the trust. The question, therefore, is, Was the land assessable for the tax years of 1927 and 1928 to the trustee, which was in actual possession, and the owner of the legal title to the land in fee simple; or to the cestui que trust or equitable owner, whose right to the enjoyment of possession and to be granted an absolute title had not ripened?

The general rule is that, unless otherwise prescribed by statute the trustee as the owner of the legal estate would be assessed with the value of the land. As stated in Cooley on Taxation (4th Ed.) § 1097: "By the owner of property for the purpose of assessment is meant the legal, and not the equitable, owner; therefore trustees having the legal title are properly assessed." Ibid, § 1103; Perry on Trusts (7th Ed.) § 331. This rule is commended by its utility, simplicity, and universality; and so makes for the certain and prompt collection of taxes upon real estate. Hill v. Williams, 104 Md. 595, 603, 604, 65 A. 413. Although it is not so with respect to personal property (Code Pub. Gen. Laws 1924, art. 81, § 226), there is no statute affecting the application of the rule to real estate, and the various sections of the revenue law of the state that relate to the imposition of taxes upon real estate are consistent with the...