National Can Corp. v. State Tax Commission of Md.

• Decision Date: 01 September 1959
• Docket Number: No. 29,29
• Citation: 153 A.2d 287,220 Md. 418
• Parties: NATIONAL CAN CORPORATION v. STATE TAX COMMISSION OF MARYLAND. ,
• Court: Maryland Court of Appeals

Page 418

220 Md. 418

153 A.2d 287

NATIONAL CAN CORPORATION v. STATE TAX COMMISSION OF MARYLAND.

No. 29, Sept. Term, 1959.

Court of Appeals of Maryland.

July 9, 1959.

Herbert M. Brune and M. William Adelson, Baltimore, for appellant.

John Martin Jones, Jr., Asst. Atty. Gen. (C. Ferdinand Sybert, Atty. Gen., on the brief), for appellee.

Before BRUNE, C. J., and HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ.

BRUNE, Chief Judge.

The appellant, National Can Company, (National) seeks to set aside the assessment for the year 1957 of its tangible personal property, consisting of furniture, fixtures and equipment, manufactured products and raw material, tools and machinery used for manufacturing, and tools and machinery not used for manufacturing. The aggregate assessed value of such property is somewhat in excess of $5,200,000, the great bulk of it being placed upon manufactured products and raw material (over $3,737,000) and tools and machinery used for manufacturing ($1,432,000). The assessments were made by the appellee, the State Tax Commission (the Commission). The case turns upon the validity of Chapter 73 of the Acts of 1958 (the Act), which the trial court upheld.

The Act begins with nine recitals: (1) a reference to the decision by this Court of the case of Sears, Roebuck & Co. v. State Tax Commission, 214 Md. 550, 136 A.2d 567; (2) a summary of the holding therein--that real property and stock in business have been classified alike by the General Assembly for assessment purposes and that the same allowance for inflation must be made in respect of stock in business as in respect of real property; (3) that Article 15 of the Maryland Declaration of Rights empowers the General Assembly to provide for the separate assessment of land and the classification and sub-classification of personal property; (4) that 'it is the intention of the General Assembly to classify real property separate and distinct from personal property, and to separately sub-classify certain classes of personal property for assessment purposes, to the end that an allowance for inflation may be made in respect to real property, but not in respect to personal property;' (5) that 'it is the belief of the General Assembly that the natural and inherent differences between real and personal property, and the peculiarities of certain classes of personal property require and justify separate classification and sub-classification for assessment purposes as aforesaid, and require and justify the making of an allowance for inflation in respect to real estate assessments but not in respect to personal property assessments;' (6) that 'the State will lose substantial revenues as the result of the Sears Roebuck decision unless remedial legislation is enacted and made retroactive to January 1, 1957;' (7) that 'the great majority of taxpayers have paid taxes upon stock in business without protest for the year 1957, leaving only a small number of protesting taxpayers to whom the Sears Roebuck decision will be applicable unless remedial legislation is made retroactive;' (8) that 'it is the belief of the General Assembly that fundamental concepts of fairness and equality require that the protesting taxpayers be accorded the same tax treatment as those taxpayers who have paid taxes upon stock in business without protest, to the end that no undue advantage will accrue to the protesting taxpayers who had not paid their taxes at the time of the filing and publication of the Sears Roebuck decision on or about November 22, 1957;' and (9) that 'it is the intent of the General Assembly of Maryland to effectuate the policy of the State Tax Commission and of other taxing authorities of this State as it existed prior to the decision in the Sears case, this policy being to allow for inflationary factors in the assessment of real estate but not to allow for such inflationary factors in the assessment of personal property'.

The operative provisions of the Act undertake to carry into effect the purposes and intent of the General Assembly as expressed in the above preamble clauses numbered (4) to (9), inclusive. Accordingly, the Act, insofar as here pertinent, amends or adds to the pre-existing law by providing, in brief, 'effective as of January 1, 1957': (a) for the separate classification for taxation of real and personal property, with a separate sub-classification under the latter of 'stock in business' (inventory); (b) for the determination of the 'full cash value' of real estate by deducting from its 'current value * * * allowance for inflation, if in fact inflation exists'; (c) for the determination of the full cash value of personal property, as its 'current value without any allowance for inflation'; (d) for the determination of the 'fair average value' of a 'stock in business' by taking the 'cost or market value [thereof], whichever is lower, without any allowance for inflation'; (e) for immunity from prosecution or penalty for any violation of the Act which occurred prior to its passage; and (f) for the separability of the provisions of the Act. The Act was passed as an emergency measure to take effect from the date of its passage, and it was approved on April 4, 1958. It was clearly intended to reverse the result of the Sears case for 1957 and subsequent years.

This case is a sequel to the Sears case, supra, 214 Md. 550, 136 A.2d 567. There this Court held that, under the then existing law, the assessment practice of the State Tax Commission of making a deduction from the 'full cash value' of real estate in order to allow for the effect of inflation, but of refusing to make any such deduction from the 'full cash value' of personal property (consisting of stock in trade) constituted a discrimination against the owner of such personal property, from which the owner was entitled to relief by having his assessment reduced. At the times of the assessments involved in the Sears case Code (1957), Art. 81, Sec. 14 ¹ provided (in part) that '[e]xcept as hereinafter provided, all property directed in this article to be assessed, shall be assessed at the full cash value thereof on the date of finality.' A special method of determining the fair cash value of the stock in trade of persons engaged in manufacturing of commercial business was prescribed by Sec. 15 (Sec. 14 in 1951). This was based upon the average value of inventory for the twelve months preceding the date of finality.

Before proceeding further it seems well to state that the Sears case did not determine that Article 15 of the Maryland Declaration of Rights required uniformity of treatment of real estate and personal property for tax purposes. No such question was involved in the case. It was there held that under the applicable statutory provisions the Legislature had put real estate and inventories on the same footing for tax purposes, and that a practice of the Commission which gave to the former more favorable treatment than to the latter as to assessments and therefore (because the tax rates per dollar of assessed value were the same) also gave to owners of real estate more favorable treatment as to the amount of taxes on property of equal value, was invalid. It was further held that under the Equal Protection Clause of the Fourteenth Amendment to the Constitution of the United States, the owner of personal property was entitled to have his assessment reduced to the same level as that applicable to real estate.

The challenges to the validity of the Act are based upon the following grounds: first, that it sets up an unfair and discriminatory basis for the assessment of real and personal property, which (a) is not authorized by the provisions for classification of property contained in Article 15 of the Maryland Declaration of Rights and which (b) is prohibited by the Fourteenth Amendment to the Constitution of the United States; second, that it is an invalid attempt to delegate legislative power to the Commission, since it sets up no standards whatever by which the Commission is to be guided in making an allowance for inflation in assessing real estate and thereby nullifies the sole basis ordered for differentiation between real and personal property; and third, that its retroactive provisions are unconstitutional as a violation of due process under Article 23 of the Maryland Declaration of Rights and under the Fourteenth Amendment to the Constitution of the United States.

The first attack is two-pronged, but its two branches are so closely related as to make it desirable to treat them together so as to avoid unnecessary repetition.

The power to classify property for purposes of taxation was conferred by the amendment to Article 15 of the Maryland Declaration of Rights which was proposed by Ch. 390 of the Acts of 1914 and ratified November 2, 1915. Prior to that amendment, taxes were required under Article 15 to be apportioned in accordance with the actual worth of the taxpayer in real or personal property. This necessarily meant uniformity of assessment as well as uniformity of tax rates. See an article by H. H. Walker Lewis, Esq., 'Maryland Tax Articles,' 13 Maryland L.Rev. 83, at 105; State v. Cumberland & Penna. R. Co., 40 Md. 22; Schley v. Montgomery County Com'rs, 106 Md. 407, 67 A. 250. The history of Article 15 is traced by Lewis and is also traced in a very full opinion of the then Attorney General, now Judge Hammond, and of Robert M. Thomas, Esq. then an Assistant Attorney General, reported in 37 Ops.Atty.Gen. 424 (1952). See especially at pages 426-433 and the cases therein cited. We shall not undertake to review this history at length in this opinion.

In the Constitution of 1867, as originally adopted, Article 15 contained a provision that 'every person in the State, or person holding property therein, ought to contribute his proportion of public taxes for the support of the Government, according to his actual worth in real or personal property'. This was omitted by the 19...