James Clark Distilling Co. v. City of Cumberland

• Decision Date: 18 June 1902
• Parties: JAMES CLARK DISTILLING CO. v. MAYOR, ETC., OF CITY OF CUMBERLAND.
• Court: Maryland Court of Appeals

52 A. 661

95 Md. 468

JAMES CLARK DISTILLING CO. v. MAYOR, ETC., OF CITY OF CUMBERLAND.

Court of Appeals of Maryland

June 18, 1902

Appeal from circuit court, Allegany county; Edward Stake, Judge.

Action by the mayor and city council of the city of Cumberland, to the use of Carl C. Hetzel, against the James Clark Distilling Company. From a judgment in favor of plaintiffs, defendant appeals. Reversed.

Argued before McSHERRY, C.J., and FOWLER, BRISCOE, BOYD, PAGE PEARCE, SCHMUCKER, and JONES, JJ.

James A. McHenry and Benjamin A. Richmond, for appellant.

Albert A. Doub and Wm. C. Devecmon, for appellees.

McSHERRY C.J.

This suit was brought by the city of Cumberland against the James Clark Distilling Company, a body corporate, to recover the amount of municipal taxes due by the shareholders of the company to the municipality on the shares of stock held by such of the shareholders as are residents of the city. There are several questions involved, and they arise, some on demurrers by the defendant to four of the counts of the declaration, others on demurrers by the plaintiff to some of the pleas, and the remaining ones on exceptions to the admissibility or evidence and on rulings made on the prayers presented for instructions to the jury. These questions may be classified as follows: First, whether the municipality has, under its charter, authority to increase an assessment once made, unless there is a general new assessment of all property within the city; secondly, whether a notice of such increase given to the corporation is a valid notice to the shareholders, within the requirement which declares that no assessment and the increase of no assessment previously made shall be lawful, unless the party charged is afforded an opportunity to be heard; thirdly, whether the assessment was an assessment against the company or against the shareholders; fourthly, whether the assessment was legal inasmuch as the greater part of the value of the stock was represented by distilled spirits, which the act of 1892 (chapter 704) requires to be valued as personal property, and prohibits from being included in the assessment of the capital stock; fifthly, whether the third prayer of the plaintiff should have been granted because at variance with the eleventh count of the declaration.

The facts which give rise to, and the statutory provisions which concern, these several questions are, in brief outline, as follows: The James Clark Distilling Company is a body corporate, having a capital stock of 1,000 shares, each of the par value of $100. In the year 1898 the stock was valued for the purposes of taxation by the state tax commissioner under sections 132 and 141 of article 81 of the Code, and the value placed upon each share was $20. Under section 141, as amended by Acts 1896, c. 120, it is made the duty of the state tax commissioner to furnish to the county commissioners of each county in which the shareholders of a corporation reside a statement of the valuation put by him on the stock, and, unless that valuation is changed on appeal from his decision by the comptroller of the state treasury and the treasurer, the state, county, and municipal taxes are levied thereon; but, if the valuation made by the tax commissioner is changed on appeal, then the taxes are levied upon the valuation made by the comptroller and the treasurer. By section 1, art. 81, Code, as re-enacted by Acts 1896, c. 120, it is provided that "all state and county taxes and all municipal taxes shall be levied upon the assessments made in conformity with the provisions of this article, and in conformity with all laws relating to revenue and taxes and not embraced in this article." In section 141, as amended by the act of 1896, it is declared that "all county or municipal taxes assessed upon said respective taxable value of such respective shares of stock *** shall be collected," etc. The meaning of these sections as applied to the taxes in question is obvious. In terms they distinctly declare that municipal taxes shall be levied upon assessments made in pursuance of the provisions of article 81 of the Code. There is no method of making assessments of shares of stock for the purposes of taxation of any kind, other than the mode above pointed out as prescribed by sections 132 and 141; and it consequently follows that the valuation of such shares so made by the tax commissioner, or on appeal from him by the comptroller and treasurer, is the only valuation upon which municipal taxes can be levied. This being so, no municipality in the state can place upon shares of stock which the tax commissioner is required to assess any valuation different from that which has been fixed by that officer or by the comptroller and treasurer on appeal from him. There can therefore be no such thing as an independent valuation of such shares of stock by a municipality. The assessment when made by the tax commissioner, or by the comptroller and treasurer, is made for the municipal, no less than for the state and county, taxation. This being so, it becomes the simple duty of the county commissioners and the several municipalities to place upon the assessment books the valuations thus made, and to charge each shareholder at that valuation with the number of shares owned by him. Section 141, as frequently interpreted by this court, requires that the shareholders shall be assessed with the shares so valued, though the company is burdened with the duty to pay the tax, which when paid it is permitted to charge to the account of the shareholder for whom it is paid. Hull v. Development Co., 89 Md. 9, 42 A. 943; United States Electric Power & Light Co. v. State, 79 Md. 70, 28 A. 768; American Coal Co. v. Allegany County Com'rs, 59 Md. 197.

For several years the assessment of the appellant company's stock stood at the sum of $20,000, and the city taxes were regularly paid thereon by the company, but in 1900 the state tax commissioner increased the valuation to $90,000. He made a return of that valuation to the county commissioners of Allegany county, and the municipal authorities procured from the office of the county commissioners a copy of that valuation, and placed it on the city books. The assessment as it originally stood and as it now stands on the tax books of the city is in the following form:

------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Assestment. Balance. Balance. Balance. ------------------------------------------------------------------------------- Clark, the James Dis.Co. 1898"99 1889"1900 1900"1901 Capital stock, 1,000 shares, at $20.....................$20,000 Stockholders. No. shares. James Clark..................666 John Keating................334 $20,000 20,000 90,000 -------------------------------------------------------------------------------

After the increased valuation had been made and had been entered on the city books, a notice was delivered to the president of the company in these words: "Cumberland, Md., July 28th, 1900. Mr. The Jas. Clark Distilling Co., Baltimore Street: You are hereby notified that under and by virtue of section 59 of the city charter of Cumberland we have assessed your property liable to taxation in said city as follows: The assessed valuation of the capital stock according to the state tax commissioner's report has been increased to $90,000. If you desire to appeal from this assessment, you must appear before the committee on appeals,"--and the time and place are then named. No attention was paid to the notice, and the assessment at $90,000 remained unchanged in the city books, and the municipal levy of 90 cents on the $100 was made in July. The company had in the meantime appealed from the valuation fixed by the tax commissioner, and the assessment of $90,000 was reduced by the comptroller and treasurer to $75,000, and that reduction was duly certified to the county commissioners. Demand was made upon the company by the city for the amount of the tax on the whole capital stock at a valuation of $90,000, the company refused to pay, and this suit was brought. Nine hundred and ninety-seven shares of the whole 1,000 are held by two persons, both of whom reside in Cumberland. The trial of the case resulted in a verdict and judgment in favor of the city for the tax on 997 shares of the capital stock at the valuation of $90 per share, and from that judgment this appeal was taken.

The first of the five questions heretofore mentioned as being presented by the record is raised by the defendant's demurrer to the eighth count of the declaration, by the plaintiff's demurrer to the fourth plea, and by the defendant's eighth...