James Corry v. Mayor and Council of Baltimork

• Citation: 196 U.S. 466,25 S.Ct. 297,49 L.Ed. 556
• Decision Date: 20 February 1905
• Docket Number: No. 86,86
• Parties: JAMES C. CORRY, Plff. in Err. , v. MAYOR AND COUNCIL OF BALTIMORK et al
• Court: United States Supreme Court

196 U.S. 466

25 S.Ct. 297

49 L.Ed. 556

JAMES C. CORRY, Plff. in Err.,

v MAYOR AND COUNCIL OF BALTIMORK et al.

No. 86.

Argued December 8, 9, 1904.

Decided February 20, 1905.

The New York & Baltimore Transportation Line was chartered in 1847 by the general assembly of Maryland, and it still exists by virtue of an extension in 1876 of its charter. At all times the corporation has maintained its principal office in the city of Baltimore.

James C. Corry, a resident and citizen of Pennsylvania, acquired 150 shares of the stock of the transportation line, having a face value of $20 per share.

The 150 shares standing in Corry's name, as stated, were assessed for the years 1899 and 1900 for state and the municipal taxes of the city of Baltimore, the total taxes being $43.27 for the year 1899 and $36.49 for the year 1900. Conformably to the laws of Maryland, payment of said taxes was demanded of the transportation company. To restrain compliance with this demand, Corry commenced the present suit, making defendants to the bill of complaint the mayor and council of Baltimore, the treasurer of the eity, the treasurer of the state, and the transportation company. The relief prayed was based on averments that the laws of Maryland under which the taxes were levied were repugnant to the state and Federal Constitutions, upon grounds specified in the bill. A decree was entered sustaining general demu rers, interposed by the various defendants, and dismissing the bill. This was affirmed by the court of appeals of Maryland. 96 Md. 310, 53 Atl. 942.

William P. Maulsby and Edwin G. Baetjer for plaintiff in error.

[Argument of Counsel from pages 467-469 intentionally omitted] Messrs.Albert C. Ritchie and W. Cabell Bruce for defendants in error.

[Argument of Counsel from pages 469-471 intentionally omitted] Mr. Justice White, after making the foregoing statement, delivered the opinion of the court:

The subjects and methods of taxation of property within the state of Maryland are regulated generally by article 81 of the Code of Public General Laws of that state.

A tax for state purposes and one for local purposes is laid upon all property. In each year the officers of domestic corporations are required to furnish information respecting the value of the shares of stock in such corporations to the state tax commissioner, who determines the aggregate value thereof, deducts therefrom the assessed value of the real estate owned by the corporation, and the quotient, obtained by dividing the remainder by the total number of shares of stock, is treated as the taxable value of each share, subject, however, to correction on appeal to the state comptroller and state treasurer after notice to the corporation of the valuation fixed by the tax commissioner. The rate of the state tax is determined by the general assembly, and that for municipal purposes in Baltimore is fixed by the mayor and council of that city. The levy on property in Baltimore, both for state and city purposes, is made by the municipal authorities. In case of stock in Maryland corporations owned by nonresidents the statutes declare that the situs of such stock, for the purpose of taxation, shall be at the principal office of the corporation in Maryland, and such shares are there assessed at their value to the owners. The statutes undoubtedly impose upon a Maryland corporation the duty of paying for and on account of the owners the taxes assessed in respect of the shares, and compel such payment without reference to the dividends, giving to the corporation a lien upon the shares of stock, and entitling the corporation, when it pays the taxes, to proceed by a personal action to recover the amount paid. Dugan v. Baltimore, 1 Gill & J. 499, 502; Baltimore v. Howard, 6 Harr. & J. 383, 394; American Coal Co. v. Allegany County, 59 Md. 197; Hull v. Southern Development Co. 89 Md. 8, 11, 42 Atl. 943.

The Maryland decisions have also settled that the tax is on the stockholder personalally, because of his ownership of the stock, and is not on the stock in rem or on the corporation. The Maryland doctrine on the subject is shown by the opinion of the court of appeals of Maryland in United States Electric Power & Light. Co. v. State, 79 Md. 63, 28 Atl. 768, where the court said (p. 70, Atl. p. 768):

'But the tax is not a tax upon the stock or upon the corporation, but upon the owners of the shares of stock, though the officers of the corporation are made the agents of the state for the collection of the state tax. It is not material what assets of other property make up the value of the shares. Those shares are property, and, under existing laws, are taxable property. They belong to the stockholders respectively and individually, and when, for the sake of convenience in collecting the tax thereon, the corporation pays the state tax upon these shares into the state treasury, it pays the tax, not upon the company's own property, nor for the company, but upon the property of each stockholder, and for each stockholder respectively, by whom the company is entitled to be reimbursed. Hence, when the owner of the shares is taxed on account of his ownership, and the tax is paid for him by the company, the tax is not levied upon or collected from the corporation at all.'

See, also, Hull v. Southern Development Co. 89 Md. 8, 11, 4 Atl. 943.

Substantially similar laws for the taxing of stock in Maryland corporations were in force in Maryland at the time of the incorporation of the transportation company, and have been in force ever since.

All the claims of Federal right here asserted are embraced in and will be disposed of by passing on two propositions, which we shall consider separately.

The first proposition is that, as the authority of the state of Maryland to tax is limited by the effect of the 14th Amendment to the Constitution of the United States to persons and property within the jurisdiction of the state, and as the tax in question was not in rem against the stock, but was in personam against the owner, the power attempted to be exercised, as it imposed a personal liability, was wanting in due process of law.

The court of appeals of Maryland disposed of this contention by deciding that it was in the power of the state of Maryland to fix, for the purposes of taxation, the situs of stock in domestic corporations held by a nonresident. It also held that, as such corporations were created by the state, and were subject to its regulating authority, it was within its power to impose, as a condition to the right to acquire stock in such corporations, the duty of paying the taxes assessed on the stock, and, moreover, that the state might compel the corporation to pay such taxes on behalf of the stockholder, and confer upon the corporation a right of action to obtain reimbursement from a stockholder when the payment was made. The court, in its opinion in this case, did not expressly elaborate the foregoing considerations, but contented itself by referring to previous decisions by it made. Among the cases so referred to was the case of American Coal Co. v. Allegany County, 59 Md. 185, 193, where it was said:

'The appellant is a Maryland corporation, deriving its existence and all its powers and franchises from this state. And such being the case, it is settled that the sovereign power of taxation extends to everything which exists by the authority of the state, or which is introduced by its permission, except where such power is expressly, or by necessary implication, excluded. The separate shares of the capital stock of the corporation are authorized to be issued by the charter derived from the state, and are subject to its control in respect to the right of taxation, and every person taking such shares, whether resident or nonresident of the state, must take them subject to such state power and jurisdiction over them. Hence, the state may give the shares of stock held by individual stockholders a special or particular situs for purposes of taxation, and may provide special modes for the collection of the tax levied thereon.'

That it was rightly determined that it was within the power of the state to fix, for the purposes of taxation, the situs of stock in a domestic corporation, whether held by residents or nonresidents, is so conclusively settled by the prior adjudications of this court that the subject is not open for discussion. Indeed, it was conceded in the argument at bar that no question was made on this subject. The whole contention is that, albeit the situs of the stock was in the state of Maryland for the purposes of taxation, it was nevertheless beyond the power of the state to...