State Tax Commission v. Allied Mortg. Cos., Inc.

• Decision Date: 16 November 1938
• Docket Number: 26.
• Citation: State Tax Commission v. Allied Mortg. Cos., Inc., 2 A.2d 399, 175 Md. 357 (Md. 1938)
• Parties: STATE TAX COMMISSION v. ALLIED MORTGAGE COS., Inc.
• Court: Maryland Court of Appeals

2 A.2d 399

175 Md. 357

STATE TAX COMMISSION v. ALLIED MORTGAGE COS., Inc.

No. 26.

Court of Appeals of Maryland

November 16, 1938

Appeal from Circuit Court No. 2 of Baltimore City; Samuel K. Dennis Judge.

Proceeding by the Allied Mortgage Companies, Inc., to review a decision of the State Tax Commission of Maryland determining that the corporation was an ordinary business corporation for the purpose of taxation. From an order of the circuit court determining that the corporation was a mortgage corporation for taxation purposes, the State Tax Commission of Maryland appeals.

Affirmed and remanded.

William L. Henderson, Asst. Atty. Gen. (Herbert R O.'Conor, Atty. Gen., on the brief), for appellant.

Charles McHenry Howard, of Baltimore (H. H. Walker Lewis, of Baltimore, on the brief), for appellee.

Argued before BOND, C.J., and URNER, OFFUTT, PARKE, MITCHELL SHEHAN, and JOHNSON, JJ.

PARKE Judge.

In the exercise of its original jurisdiction, the State Tax Commission of Maryland held that the Allied Mortgage Companies, Inc., a corporation under the provisions of the incorporation law of the State of Maryland, and there engaged in corporate activities, is an ordinary business corporation for the purpose of taxation. Art. 81, Section 186(c), of the Code Supp.1935. On appeal to the Circuit Court No. 2 of Baltimore City, this classification was adjudged error, and the corporation was determined to be a mortgage corporation and as such to be taxed. From the order so holding, the State Tax Commission of Maryland has appealed.

The question is whether, within the meaning of the statute, the corporation is an 'ordinary business' or 'mortgage' corporation for the imposition of taxes under the revenue laws of the State. In the exercise of its prerogative the General Assembly of Maryland has selected and classified the subjects of taxation, and imposed different rates on the respective classes. No questions of equity and uniformity are raised, and it is not claimed that the classification is unreasonable or arbitrary. Grossfeld v. Baughman, 148 Md. 330, 129 A. 370; Consolidated Gas and Electric Co. of Baltimore City v. Baltimore, 105 Md. 43, 65 A. 628, 121 Am.St.Rep. 553.

The problem is one of definition and of application.

All private corporations are expected to be assessed for taxes under general laws, unless they are expressly exempt by law. Cooley on Taxation (4th Ed.) sec. 791; Germania v. State, 7 Md. 1; Baltimore, C. & A. Ry. Co. v. Com'rs of Wicomico County, 93 Md. 113, 48 A. 853. Code (1935 Suppl.) Art. 81, sec. 2(5).

As used in Article 81, entitled 'Revenue and Taxes', the phrase 'ordinary business corporation' is defined by the statutory declaration that the words 'shall mean any corporation having a capital stock, except' a list of specified corporations which are engaged in certain designated businesses. Thus the definition is accomplished by employing general terms to create a class which is composed of all corporations having a capital stock except such of these corporations as are by particular mention and description excluded. The specifically eliminated corporations are numerous and embrace designated kinds of corporations which operate as public carriers, and public utilities and in certain fields of finance and insurance. Among the corporations expressly excluded this collocation occurs: 'building or homestead associations, state, national and savings banks, finance corporations, or savings or moneyed corporations.' Code, 1935 Supplement, Art. 81, Section 2, Subsection (9), as amended by Chapter 225 of the Acts of 1937.

By the next succeeding Subsection (10) the words 'finance corporations' are defined. The statute enacts that 'The phrase 'finance corporation' shall include finance, credit, investment banking, investment trust, mortgage and commercial banking corporations, and any corporation other than banks or trust companies substantially competing with national banks in this State.' Supra.

It follows that since 'mortgage * * * corporations' are within the meaning of 'finance corporations,' the statutory law has by enumeration expressly excluded mortgage corporations from the technical class of 'ordinary business corporations' for the purposes of taxation. The term 'mortgage corporations' is not further defined. Nor is its signification affected by limitations of context or description. The words are in common use, and there is nothing to indicate that they are intended to express a technical meaning or that, if effect be given according to their ordinary and familiar sense, the clear intention of the legislature would be defeated. In such circumstances, the rule of construction is that words in a statute are to be taken in their commonly understood signification. Parkinson v. State, 14 Md. 184, 196, 74 Am.Dec. 522.

The importance of a proper classification grows out of a difference in the taxes imposed. The annual franchise tax is imposed on 'ordinary business corporations', but not on a mortgage corporation. Furthermore, an ordinary business corporation is taxed as an individual directly on its personal property while an other than ordinary business corporation is taxed on its capital stock. Code, 1935 Supplement, Art. 81, Section 136; Sections 6(2), 6(7), 7(15) and (16).

The term 'mortgage corporations' are plainly those whose business is with mortgages which necessarily implies the power of investment of funds by the corporations in loans whose payment is secured by property conveyed by an instrument which creates a mortgage lien. Whether the mortgage loan and mortgage instrument be to the...