State v. Sterling

• Decision Date: 27 January 1864
• Citation: 20 Md. 502
• Parties: STATE OF MARYLAND v. ARCHIBALD STERLING, SEN'R, PRESIDENT OF THE SAVINGS BANK OF BALTO.
• Court: Maryland Court of Appeals

20 Md. 502

STATE OF MARYLAND v. ARCHIBALD STERLING, SEN'R, PRESIDENT OF THE SAVINGS BANK OF BALTO.

Court of Appeals of Maryland.

January 27, 1864

APPEAL from the Superior Court of Baltimore City:

This was an application for a mandamus to compel the defendant to pay to the State Treasurer a tax of twenty-five cents on every hundred dollars worth of deposits in the Savings Bank of Baltimore, on the first of July 1862. By the supplement to the Code, Article 81, page 64, it is enacted that the Mayor & City Council of Baltimore, in the year 1862, and annually thereafter, shall impose a tax for the use of the State, of twenty-five cents on every hundred dollars worth of assessable property within its jurisdiction according to the valuation thereof. By the 95th section of same Article it is provided, that " the President of any Savings Bank which shall receive deposits and give certificates therefor, bearing interest, shall furnish to the Comptroller on the first day of July in each year, the aggregate amount of deposits in such corporation, and shall pay to the Treasurer on said day, out of the interest due to the depositors, the State tax on said certificates." The amount of deposits returned by the defendant as in the Savings Bank of Baltimore, and bearing interest on the first day of July 1862, was $4,340,820.40, and it is claimed by the petition that the defendant must pay one-quarter of one per cent. on that amount as the State tax on the Savings Bank of Baltimore for the year 1862.

In his answer to the application for a mandamus, the defendant assigned the following reasons why the writ should not be granted.

1. That the aggregate amount returned to the Comptroller includes deposits which did not bear interest on the first day of July.

Assuming the fact to be as alleged, the return should be corrected. The State claims to tax only interest-bearing deposits.

2. That the deposits in the bank are liable to assessment, as other descriptions of property made subject to taxation. And that the State tax, like local taxes, is to be imposed on such assessed value. No assessment, it is said, has been made of those deposits, and therefore, no State tax is payable thereon.

3. That the bank has invested a large part of the deposits in bonds of the United States. Those bonds are not liable to taxation as moneyed securities. And they are not to be taxed indirectly, under pretext of levying a tax on the moneys invested in the purchase thereof.

4. That other portions of the deposits have been invested in the purchase of State bonds, the tax on which has been retained out of the interest accrued thereon, and bank stocks, upon which the bank has already been compelled to pay the State tax, and ought not to pay a second tax on the amount of deposits thus invested.

5. That the amount returned includes deposits made by persons who are exempt by law from taxation, to wit: persons whose deposits are less than fifty dollars, and charitable corporations whose deposits do not exceed fifteen thousand dollars.

The Court below, (MARTIN, J.,) dismissed the petition and filed with his order the following opinion:

" I think that the Legislature must be regarded, by the adoption of the 95th section of the 81st Article of the Code to have made a legislative assessment of the value of the deposits remaining in the Savings Bank of Baltimore, on the 1st of July 1862, and reported to the Comptroller as amounting to $4,340,820.40, treating the deposits as equivalent to their nominal value. That an assessment of this description is within the verge and scope of the legislative power cannot be disputed. They may, in all cases, do directly that which they have the right to accomplish through the instrumentality of agents. State vs. Mayhew, 2 Gill, 477. The valuation of the deposits are then to be considered as assessed by the Legislature, at their nominal value.

It appears, however, from the answer of the respondent, that a larger portion of the deposits, constituting in part the aggregate amount as reported to the Comptroller, consisted of investments made by the Savings Bank in the bonds of the United States; and the question is, whether the deposits thus invested, are liable to be taxed, upon the true construction of the 95th section of the 81st Article of the Code? I think not. Those are instrumentalities created by the General Government for the purpose of executing its constitutional and acknowledged powers, and are not subject to taxation by the State.

The States have no right by taxation or otherwise, to paralyze, or even to retard, impede, burden, or in any manner control the operations of the constitutional laws enacted by Congress to carry into effect the powers vested in the National Government. 4 Wheaton, 316. 2 Peters, 440. The right to tax involves the power to destroy, and if the doctrine could be maintained that the States have the authority to tax the bonds and stocks of the United States, and thus prevent or impede the sale of these national moneyed securities, the consequences would be so mischievous as to be almost beyond calculation.

It is therefore evident beyond the possibility of dispute, that if these investments had been made by the individual depositors directly, or not through the instrumentality of the Savings Bank as their agent, the bonds would have been exempt from taxation by the State. The Legislature in adopting the 95th section of the 81st Article of the Code, as framed by those who prepared it, must be supposed to have been perfectly aware of the respective rights of the National and State Governments, in reference to the power of taxation, and that the Savings Banks, under their charters, invested the deposits placed from time to time under their control, only as the agents or trustees of the beneficiaries by whom the money was deposited, and it is, I think, perfectly clear, that funds so invested by an agent or trustee occupying the position of the Savings Bank in relation to its depositors, is to be considered as an investment virtually, and, for all practical purposes, as an investment by the depositor himself.

The Legislature is to be assumed to have so understood the relation of these parties, and that the 95th section is to be so interpreted, as impliedly excluding from taxation, by the State, those investments.

The claim asserted by the State to recover from the Savings Bank by means of a mandamus, which seeks only to accomplish what would perhaps have been within the reach of an action of assumpsit, the tax which has already been retained by the State out of the interest which has accrued on the State bonds, in which a portion of these deposits have been invested, cannot be maintained.

This tax has already been paid. It is in the coffers of the State. The State appears in Court as an individual suitor, and the demand is repelled by the doctrine of estoppel. The investments made by the Savings Bank of their deposits in the bank and gas stocks, stand in the same predicament; those shares have been already taxed in the hands of those respective institutions, and the tax has been paid to the State. The State cannot recover it again. It would subject the depositors to a double tax, an injustice always condemned and which is never to be tolerated. 2 Gill, 477. 5 Gill, 236.

It appears from the return, that among the depositors there are persons whose deposits are less than fifty dollars, and charitable corporations whose deposits do not exceed fifteen thousand dollars, who claim to be exempt from taxation under the 4th and 5th sections of the 81st Article of the Code. And the question on this branch of the case, which has been earnestly disputed, is, whether it is incumbent on the Savings Bank as the agent and trustee of the depositors, to show affirmatively that the person proposed to be exempted, has not been assessed to the value of fifty dollars, and that the charitable institution sought to be protected, does not own property to a greater value than fifteen thousand dollars.

After a careful consideration of this question, I am clear in my opinion, that if the State seeks to impose a tax upon an individual depositor, upon the ground that he is worth in assessable property more than fifty dollars, this fact it is incumbent upon the State to establish by an ascertained assessment and valuation through the agency of the local tribunals, as other assessments are ascertained, here there is no legtslative valuation. And when the State claims that the depositor possesses taxable and assessable property, ultra the fifty dollars, that fact must be ascertained through the ordinary agencies for assessment. The same principle controls the case of the charitable institutions.

I understand that in reference to all those sums that did not bear interest on the first of July 1862, as not having been deposited for four months, there is no controversy, and for the reasons which have been stated in this opinion, the petition for a mandamus in this case is dismissed."

From the order dismissing the petition the petitioner appealed.

The cause was argued before BARTOL, GOLDSBOROUGH and COCHRAN, J. Thos. S. Alexander and Thos. Donaldson, for the appellant, argued:

1st. That the basis of taxation established by the Code with reference to the capital or property of a Savings Bank, is the nominal value of the deposits thereof, bearing interest on a certain day annually. The return to be made to the Comptroller is to be of the aggregate amount of deposits, as shown by the books of the bank, and the tax is to be paid on the aggregate amount thus returned. Code, Art. 81, sec. 95.

2. That this basis is not inconsistent with Art. 13 of the Declaration of Rights, which declares that every person in the State,...