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dent stockholder in a domestic corporation | city, the treasurer of the state, and the by the imposition, under Md. Code Pub. Gen. transportation company. The relief prayed Laws, art. 81, as a condition of such owner
was based on averments that the laws of ship, of a personal liability for the taxes upon his stock, to be enforced by a personal Maryland under which the taxes were levied action brought against him by the corpora were repugnant to the state and Federal tion to recover the amount of the tax which Constitutions, upon grounds specified in the it is compelled to pay on his behalf.
bill. A decree was entered sustaining gen2. Lack of any provision for notice to a non eral demurrers, interposed by the various
resident stockholder in a domestic corpora defendants, and dismissing the bill. This tion of the assessment of taxes on his stock, or for opportunity for contest by him as to was affirmed by the court of appeals of the correctness of the valuation, does not Maryland. 96 Md. 310, 53 Atl. 942. render invalid, as denying due process of law, so much of Md. Code Pub. Gen. Laws, Messrs. William P. Maulsby and Edart. 81, as imposes upon him, as a condi-win G. Baetjer for plaintiff in error. tion of such ownership, a personal liability
Messrs. Albert C. Ritchie and W. Cafor the taxes upon his stock, to be enforced by a personal action brought against bell Bruce for defendants in error. him by the corporation to
the amount of the tax which is com- Mr. Justice White, after making the pelled to pay on his behalf, since that foregoing statement, delivered the opinion statute is construed by the state courts as of the court: constituting the corporation in legal effect the agent of the stockholders, to receive no
The subjects and methods of taxation of tice and to represent them in proceedings for property within the state of Maryland are the correction of the assessment.
regulated generally by article 81 of the Code
of Public General Laws of that state. [No. 86.]
A tax for state purposes and one for local
purposes is laid upon all property. In each Argu December 8, 9, 1904. Decided Feb. year the officers of domestic corporations are ruary 20, 1905.
required to furnish information respecting
the value of the shares of stock in such corN ERROR to the Court of Appeals of the porations to the state tax commissioner, who
State of Maryland to review a judgment determines the aggregate value thereof, dewhich affirmed a judgment of the Circuit ducts therefrom the assessed value of the Court of Baltimore City, in that State, sus- real estate owned by the corporation, and taining demurrers to, and dismissing, a bill the quotient, obtained by dividing the reto enjoin the collection of a tax on a non- mainder by the total number of shares of resident stockholder in a domestic corpora- stock, is treated as the taxable value of tion. Affirmed.
each share, subject, however, to correction See same case below, 96 Md. 310, 53 Atl. on appeal to the state comptroller and state 942.
treasurer after notice to the corporation of
the valuation fixed by the tax commissioner. Statement by Mr. Justice White:
The rate of the state tax is determined by The New York & Baltimore Transporta- the general assembly, and that for municition Line was chartered in 1847 by the gen- pal purposes in Baltimore is fixed by the eral assembly of Maryland, and it still exists mayor and council of that city. The levy by virtue of an extension in 1876 of its on property in Baltimore, both for state and charter. At all times the corporation has city purposes, is made by the municipal aumaintained its principal office in the city of thorities. In case of stock in Maryland corBaltimore.
porations owned by nonresidents the statJames C. Corry, a resident and citizen of utes declare that the situs of such stock, Pennsylvania, acquired 150 shares of the for the purpose of taxation, shall be at the stock of the transportation line, having a principal office of the corporation in Maryface value of $20 per share.
land, and such shares are there assessed at The 150 shares standing in Corry's name, their value to the owners. The statutes unas stated, were assessed for the years 1899 doubtedly impose upon a Maryland corporaand 1900 for state and the municipal taxes tion the duty of paying for and on account of the city of Baltimore, the total taxes be- of the owners the taxes assessed in respect ing $43.27 for the year 1899 and $36.49 for of the shares, and compel such payment the year 1900. Conformably to the laws of without reference to the dividends, giving Maryland, payment of said taxes was de- to the corporation a lien upon the shares manded of the transportation company. To of stock, and entitling the corporation, when restrain compliance with this demand, Corry it pays the taxes, to proceed by a personal commenced the present suit, making defend action to recover the amount paid. Dugan ants to the bill of complaint the mayor and v. Baltimore, 1 Gill & J. 499, 502; Baltimore council of Baltimore, the treasurer of the 'v. Howard, 6 Harr. & J. 383, 394; American Coal Co. v. Allegany County, 59 Md. 197; | porations were created by the state, and were Hull v. Southern Development Co. 89 Md. subject to its regulating authority, it was 8, 11, 42 Atl. 943.
within its power to impose, as a condition The Maryland decisions have also settled to the right to acquire stock in such corpothat the tax is on the stockholder personal-rations, the duty of paying the taxes asally, because of his ownership of the stock, sessed on the stock, and, moreover, that the and is not on the stock in rem or on the state might compel the corporation to pay corporation. The Maryland doctrine on the such taxes on behalf of the stockholder, and subject is shown by the opinion of the court confer upon the corporation a right of action of appeals of Maryland in United States to obtain reimbursement from a stockholder Electric Power & Light. Co. v. State, 79 when the payment was made. The court, Md. 63, 28 Atl. 768, where the court said in its opinion in this case, did not expressly (p. 70, Atl. p. 768):
elaborate the foregoing considerations, but "But the tax is not a tax upon the stock contented itself by referring to previous deor upon the corporation, but upon the own- cisions by it made. Among the cases so reers of the shares of stock, though the officers ferred to was the case of American Coal Co. of the corporation are made the agents of v. Allegany County, 59 Md. 185, 193, where the state for the collection of the state tax. it was said: It is not material what assets of other prop- “The appellant is a Maryland corporation, erty make up the value of the shares. Those deriving its existence and all its powers and shares are property, and, under existing franchises from this state. And such being laws, are taxable property. They belong to the case, it is settled that the sovereign the stockholders respectively and individu- power of taxation extends to everything ally, and when, for the sake of convenience which exists by the authority of the state, in collecting the tax thereon, the corporation or which is introduced by its permission, pays the state tax upon these shares into except where such power is expressly, or by the state treasury, it pays the tax, not upon necessary implication, excluded. The sepathe company's own property, nor for the rate shares of the capital stock of the corpocompany, but upon the property of each ration are authorized to be issued by the stockholder, and for each stockholder re- charter derived from the state, and are subspectively, by whom the company is entitled ject to its control in respect to the right of to be reimbursed. Hence, when the owner of taxation, and every person taking such the shares is taxed on account of his owner- shares, whether resident or nonresident of ship, and the tax is paid for him by the the state, must take them subject to such company, the tax is not levied upon or col- state power and jurisdiction over them. lected from the corporation at all.”
Hence, the state may give the shares of stock See, also, Hull v. Southern Development held hy individual stockholders a special or Co. 89 Md. 8, 11, 4 Atl. 943.
particular situs for purposes of taxation, Substantially similar laws for the taxing and may provide special modes for the colof stock in Maryland corporations were in lection of the tax levied thereon.” force in Maryland at the time of the incor- That it was rightly determined that it poration of the transportation company, and was within the power of the state to fix, for have been in force ever since.
the purposes of taxation, the situs of stock All the claims of Federal right here as- in a domestic corporation, whether held by serted are embraced in and will be disposed residents or nonresidents, is so conclusively of by passing on two propositions, which we settled by the prior adjudications of this shall consider separately.
court that the subject is not open for discusThe first proposition is that, as the au- sion. Indeed, it was conceded in the arguthority of the state of Maryland to tax is ment at bar that no question was made on limited by the effect of the 14th Amendment this subject. The whole contention is that, to the Constitution of the United States to albeit the situs of the stock was in the state persons and property within the jurisdiction of Maryland for the purposes of taxation, of the state, and as the tax in question was it was nevertheless beyond the power of the not in rem against the stock, but was in state to personally tax the nonresident personam against the owner, the power at- owner for and on account of the ownership tempted to be exercised, as it imposed a per- of the stock, and to compel the corporation sonal liability, was wanting in due process to pay, and confer upon it the right to proof law.
ceed by a personal action against the stockThe court of appeals of Maryland dis- holder in case the corporation did pay. Reposed of this contention by deciding that it iterated in various forms of expression, the was in the power of the state of Maryland argument is this: that as the situs of the to fix, for the purposes of taxation, the situs stock within the state was the sole source of of stock in domestic corporations held by a the jurisdiction of the state to tax, the taxanonresident. It also held that, as such cor- ' tion must be confined to an assessment in rem against the stock, with a remedy for en-scription or charter contract of the subforcement confined to the sale of the thing ject.” taxed, and hence without the right to com- In substance, the contention is that the pel the corporation to pay, or to give it, conceded principle has no application to when it did pay, a personal action against taxation by a state of shares of stock in a the owner.
corporation created by it, because, by the But these contentions are also in effect Constitution of the United States, the states long since foreclosed by decisions of this are limited as to taxation to persons and court. First Nat. Bank v. Kentucky, 9 things within their jurisdiction, and may Wall. 353, 19 L. ed. 701; Tappan v. Mer- not, therefore, impose upon a nonresident, by chants' Nat. Bank, 19 Wall. 490, 22 L. ed. reason of his property within the state, a 189. In First Nat. Bank v. Kentucky personal obligation to pay a tax. By the (pp. 361, 362, L. ed. p. 703,) it was said: operation, therefore, of the Constitution of
"If the state cannot require of the bank the United States, it is argued the states are to pay the tax on the shares of its stock, it restrained from aflixing, as a condition to must be because the Constitution of the the ownership of stock in their domestic United States, or some act of Congress, corporations by nonresidents, a personal liaforbids it.
bility for taxes upon such stock, since the
right of the nonresident to own property in “If the state of Kentucky had a claim the respective states is protected by the Conagainst a stockholder of the bank who was stitution of the United States, and may not a nonresident of the state, it could undoubt. be impaired by subjecting such ownership edly collect the claim by legal proceeding, to a personal liability for taxation. But in which the bank could be attached or gar- the contention takes for granted the very nisheed, and made to pay the debt out of issue involved. The principle upheld by the the means of its shareholders under its con- rulings of this court to which we have retrol. This is, in effect, what the law of ferred, concerning the taxation by the states Kentucky does in regard to the tax of the of stock in national banks, is that the sovstate on the bank shares."
ereignty which creates a corporation has the And it was further observed (p. 363, L. incidental right to impose reasonable regulaed. p. 704):
tions concerning the ownership of stock “The mode under consideration is the one therein, and that a regulation establishing which Congress itself has adopted in col- the situs of stock for the purpose of taxalecting its tax on dividends, and on the in- tion, and compelling the corporation to pay come arising from bonds of corporations. the tax on behalf of the shareholder, is not It is the only mode which, certainly and unreasonable regulation. Applying this without loss, secures the payment of the principle, it follows that a regulation of that tax on all the shares, resident or nonresi- character, prescribed by a state, in creating dent; and, as we have already stated, it is a corporation, is not an exercise of the taxthe mode which experience has justified in ing power of the state over persons and the New England states as the most con- things not subject to its jurisdiction. And venient and proper, in regard to the numer- we think, moreover, that the authority so ous wealthy corporations of those states.” possessed by the state carries with it the
But it is insisted that these rulings con- power to endow the corporation with a right cerned taxation by the states of the shares of recovery against the stockholder for the of stock in national banks, under the provi- tax which it may have paid on his besions of the national banking act, and are half. Certainly, the exercise of such a therefore not applicable. The contention power is no broader than the well-recognized is thus expressed :
right of a state to affix to the holding of “This act forms a part of the charter of stock in a domestic corporation a liability the national banks, and provides for this on a nonresident as well as a resident stockliability. Charters can and frequently do holder in personam, in favor of the ordiundoubtedly provide for a personal liability nary creditors of the corporation. Flash v. of stockholders in various forms; the liabil. Conn, 109 U. S. 371, 27 L. ed. 966, 3 Sup. ity to creditors of the corporation is one Ct. Rep. 263; Whitman v. National Bank, of the common illustrations, and the lia- 176 U. S. 559, 44 L. ed. 587, 20 Sup. Ct. bility may be thus imposed for a tax as well Rep. 477; Nashua Sav. Bank v. Angloas for any other debt or obligation. The American Land Mortg. & A. Co. 189 U. S. court therefore held [in the Tappan Case, 221, 230, 47 L. ed. 782, 786, 23 Sup. Ct. Rep. page 500] that under the national banking 517, and cases cited; Platt v. Wilmot, 193 act the shareholders were liable, because U. S. 602, 612, 48 L. ed. 809, 813, 24 Sup. that act 'made it the law of the property' Ct. Rep. 542. The liability arose, not out of the taxing Whilst it is true that the liability of the power of the sovereign, but from the sub- ' nonresident stockholder in the case before us, as enforced by the laws of Maryland, | appeal, it would be simply impossible to fix was not directly expressed in the charter of annually a valuation on shares of capital. the corporation, it nevertheless existed in The policy of the law is to treat the corpothe general laws of the state at the time the ration not merely as tax collector after the corporation was created, and, be this as it tax has been levied, but to deal with it as may, certainly existed at the time of the ex- the representative of the shareholders in retension of the charter. This is particularly spect to the assessment of the shares, and the case, since the Constitution of Mary-when notice has been given to the corporaland, for many years prior to the extension tion, and it has the right to be heard on apof the charter of the transportation com- peal, notice is thereby given to the sharepany contained the reserved right to alter, holders, and they are accorded a hearing. amend, and repeal. From all the foregoing This is so in every instance where the asit resulted that the provisions of the gen- sessment is made by the state tax commiseral laws and of the Constitution of Mary- sioner, because the revenue laws throughout land were as much a part of the charter as if treat the corporation as the representative expressly embodied therein. Nor can this of the shareholders, and as no official other conclusion be escaped by the contention that, than the tax commissioner has power to asas the provisions of the statute imposing on sess capital stock, no notice other than the
, nonresident stockholders in domestic corpo-one given by him is necessary; and, as no rations a liability for taxes on their stock notice other than the one given by him is violated the Constitution of the United necessary, a notice by the municipality to States, therfore such unconstitutional re- each shareholder is not requisite." quirements cannot be treated as having been If a tax was expressly imposed upon the incorporated in the charter, for this argu- corporation, the stockholders, though interment amounts only to reasserting the erro ested in the preservation of the assets of the neous proposition which we have already corporation, could not be heard to object passed upon.
that the statute did not provide for notice Having disposed of the first proposition to them of the making of the assessment. we come to consider the second, which is The condition attached by the Maryland law that the legislation of the state of Mary to the acquisition of stock in its domestic land is repugnant to the Constitution of the corporations, that the stockholders, for the United States, because of the omission to di-purpose of notice of the assessment of the rectly require the giving of notice to the stock and proceedings for the correction of nonresident stockholder of assessments on the valuation thereof, shall be represented his stock, and opportunity for contest by by the corporation, is not, in our opinion. him as to the correctness of the valuation an arbitrary and unreasonable one, when it fixed by the taxing officers. The highest is borne in mind that the corporation, court of the state of Maryland has construed through its officers, is, by the voluntary act the statutory provisions in question as, in of the stockholders, constituted their agent, legal effect, constituting the corporation the and vested with the control and manageagent of the stockholders to receive notice ment of all the corporate property,—that and to represent them in proceedings for the which gives value to the shares of stock, and correction of an assessment. Thus, in James in respect to which the taxes are but mere Clark Distilling Co. v. Cumberland, 95 Md. incidents in the conduct of the business of 468, 52 Atl. 661, the court said (p. 475, Atl. the corporation. The possibility that the
, p. 663):
state taxing officials may abuse their power, “A notice to each shareholder is unnec
and fix an arbitrary and unjust valuation essary, because the corporation represents of the shares, and that the officers of the the shareholders. The officers of the corpo-corporation may be recreant in the perform
, ration are required by the Code to make an annual return to the state tax commissioner, ance of the duty to contest such assessments, annual return to the state tax commissioner, does not militate against the existence of and upon the information disclosed by that does not militate against the existence of return the valuation of the capital stock the power to require the numerous stockis placed each year. If the valuation is not holders of a corporation chartered by the satisfactory, an appeal may be taken by the state, particularly those resident without corporation for the shareholders. An oppor- the state, to be represented in proceedings tunity is thus afforded for the shareholders before the taxing officials through the to be heard through the corporation, and agency of the corporation. that gratifies all the requirements of law.
As we conclude that the legislation of the If each and every shareholder in the great state of Maryland in question does not connumber of companies throughout the state travene the due process clause of the 14th had a right to insist upon a notice before Amendment to the Constitution of the an assessment of his shares could be made, United States, the judgment of the Court of and if each were given a separate right of Appeals of Maryland is affirmed.
(197 U. S. 1)
and recover possession of certain parcels of
real estate, alleged to be portions of its WILLIAM S. ELY, Marvin Arnold, Julia right of way in that county. Arnold et al. (No. 102.)
The complaint alleged that plaintiff was
the owner and entitled to a strip of land, NORTHERN PACIFIC RAILWAY COM- 400 feet wide, on which defendants had PANY, Plff. in Err.,
wrongfully entered. Some of the defendants
were defaulted. Separate answers were inWILLIAM S. ELY et al. (No. 88.)
terposed by others, separate trials had, sepa
rate verdicts rendered, and bill of exceptions Error to state court -formality of writ of granted. As to one defendant, the case was error-description of judgment-adverse submitted to the court for trial, and findings
of fact and conclusions of law were made possession of railroad right of way.
and filed. 1. A writ of error to a state court, which in- A single decree was rendered in favor of
correctly states the date of the judgment in contesting defendants, from which the rail.
gress to the Northern Pacific Railroad Com- The opinion of that court was filed June
case of Northern P. R. Co. v. Townsend, 190 cept so far as the land so adversely held was
U. S. 267, 47 L. ed. 1044, 23 Sup. Ct. Rep. so situated that a conveyance from the grantee company or its successor would have been 671, was decided. May 28, 1903, the railway confirmed by the act of April 28, 1904, vali- company was allowed a writ of error from dating such conveyances of the right of way this court, the judgment of the state suas should not diminish it to a less width than preme court being described as entered June 100 feet on each side of the center of the 29, 1901. The case was docketed July 23, main track.
1903, and is now numbered 88. June 30 a [Nos. 102, 88.]
second writ of error was taken out and filed
below, the papers correctly describing the Submitted December 15, 1904. Decided Feb- judgment as entered July 30, 1901, and was ruary 20, 1905.
docketed here August 13, 1903, and is now
numbered 102. WO WRITS OF ERROR to the
for leave to amend the
view a judgment which affirmed a judgment ment might be correctly given, and that
The facts on which the state supreme
"It may be conceded, we think, that the The facts are stated in the opinion.
right of way which embraces the land in disMessrs. C. W. Bunn and James B. pute was granted to the Northern Pacific Kerr for plaintiff in error.
Railroad Company by act of Congress in Messrs. Harold Preston, William E. 1864, and that, to the title to the right of Cullen, F. T. Post, and Samuel R. Stern for way thus granted to the Northern Pacific defendants in error.
Railroad Company, the Northern Pacific
Railway Company has succeeded. It may Mr. Chief Justice Fuller delivered the also be conceded, for the purposes of this opinion of the court:
case, that the Northern Pacific Railway This was a suit brought by the Northern Company has complied with all the terms Pacific Railway Company, successor to the and provisions of the act of Congress aforeNorthern Pacific Railroad Company, in the said, and has constructed its railroad superior court of the county of Spokane, through the whole of the line of road bestate of Washington, against a large num-'tween the points named in the granting act;