114 A. 717 | Md. | 1921
The Commerce Trust Company of Baltimore City had a capital stock consisting of 10,000 shares, of which 9,685 were transferred to T. Edward Hambleton of Baltimore County, William G. Baker, Jr., and Virginius G. Dunnington of Baltimore City, trustees under a voting trust agreement, dated June 12, 1919. There is some difference in the statements in the briefs as to the exact number of the 9,685 shares which are held by non-residents of the State — that of the Attorney General stating that there were 3,551 and that of the appellee that there were 3,590 shares — but that is immaterial for the purposes of this opinion. The shares were valued by the State Tax Commission at $62.50 each, and it passed the following order:
"In Re Commerce Trust Company:
"It is, this 15th day of September, 1920, ordered by the State Tax Commission, that the distribution of the assessment of the shares of the Commerce Trust Company for 1920 be corrected, and that the assessment on said shares be entered and certified to the respective localities of the residences of the respective shareholders, and that, so far as the 9,685 shares standing in the names of voting trustees are concerned, the same be *671 treated as the taxable property of the shareholders represented by said voting trustees, and not of the voting trustees.
"(Sgd.) Oscar Leser, "(Sgd.) J. Enos Ray, "Commissioners."
On the 13th of October, 1920, the County Commissioners of Baltimore County filed in the Circuit Court for that county an "appeal from the State Tax Commission." The petition quotes the above order of the State Tax Commission, alleges that Baltimore County was entitled to one-third of the aggregate assessment represented by the 9,685 shares and also 50 other shares at $62.50 per share, but that the commission had only certified to that county for the year 1920 the sum of $2,812.50, being for 45 shares.
The case was set for hearing and on November 6, 1920, the Attorney General, representing the State Tax Commission, filed a motion to dismiss the appeal, the principal reason assigned therefor being that the County Commissioners had no right of appeal. On the 18th of February, 1921, the Circuit Court passed an order dismissing that motion, reversing the order of the State Tax Commission, and directing it to pass an order correcting the distribution of the assessment of the shares of the Commerce Trust Company "and that the assessment on shares be entered and certified by the State Tax Commission to the places of residence of the respective shareholders and that so far as the assessment representing the 9,685 shares of capital stock of said company standing in the name of the three trustees is concerned, one-third of the total amount represented by 9,685 shares shall be certified to the respective place of residence of each trustee." From that order this appeal was taken. The questions presented are: First — As to the right of the County Commissioners of Baltimore County to appeal; second — Whether the residences of the voting trustees or of the owners of the shares transferred to them fix the situs for the taxation of such shares. *672
1. The State Tax Commission was created by the Act of 1914, Chapter 841, and large powers were conferred on it. The act provided for the appointment by the commission of a supervisor of assessments in each county of the State and in Baltimore City, abolished the office of State Tax Commissioner, and all of the duties imposed on him or powers given him devolved upon the State Tax Commission.
The provisions for appeal by that Act are contained in what are now Sections 239 and 245 of Article 81 of the Code. It is clear that the right to take this appeal cannot be sustained under Section 239, as it provides that "any taxpayer, taxpayers or city, town or village may demand a hearing before the County Commissioners or Appeal Tax Court of Baltimore City, as to the assessment of any property or any unit of tax value," and that "any taxpayer, taxpayers or city, town or village having been assessed by the order of the County Commissioners or Appeal Tax Court of Baltimore City, as hereinbefore provided, may appeal to the State Tax Commission; or the supervisor may appeal from any decision," but, of course, it could not have been intended to give the County Commissioners the right of appeal from their own order, and it did not give them an appeal from the State Tax Commission. The third paragraph of that section, in providing that "there shall be an appeal to court on questions of law only from decisions of the State Tax Commission," etc., cannot properly be construed, as contended by the appellee, to mean that there could be appeals on all questions of law, regardless of by whom they were taken, as it had provided in a previous paragraph by whom appeals could be taken.
It is likewise clear that Section 245 does not authorize the county commissioners to appeal to court from the action of the State Tax Commission, as the Act of 1910, Chapter 430, referred to in that section, only provides that "any person or persons, or corporation claiming to be aggrieved because of any assessment made by county commissioners of any one of the counties of this State, or because of the failure to reduce or abate an existing assessment, may, by petition, appeal," *673 etc. If "any person or persons or corporation" takes an appeal from the county commissioners to the Circuit Court, then an appeal to this Court can be taken by the petitioner or petitioners or by the county commissioners. Now, by virtue of the provision in Section 245, that the State Tax Commission shall be substituted for the court, the appeal is to that commission, instead of the Circuit Court, but there is no authority given in that section, or any other that we have found, for an original appeal by the county commissioners to the State Tax Commission, and there is no appeal by them provided for from the action of that commission. Under the Act of 1908, Chapter 167 (Section 18 of Article 81) the original appeal in Baltimore was from the Appeal Tax Court of Baltimore, and hence the Mayor and City Council was given the right of appeal, as well as any person or persons or corporation claiming to be aggrieved by the action of the Appeal Tax Court.
The appellee, after contending that the last paragraph of Section 239 is unlimited, and provides for appeals from a decision of the State Tax Commission as regards any assessment or question of law, and arguing from that that the county commissioners could appeal, said in its brief: "This contention of the appellee and the view of the Judge below are borne out by all of the cases in the Court of Appeals from action of the State Tax Commission," and cited Baltimore v. Ches. Pot. Tel.Co.,
It will thus be seen that in each of those cases the question originally arose at the instance of a taxpayer, but there is nothing in any of them or other cases decided by this Court, or in the statutes, which authorizes the county commissioners of a county to take an appeal from the action of the State Tax Commission in such a matter as this. Under our decision in theHyattsville case the corporation and the shareholders, so far as they are affected, can apply to the State Tax *675 Commission to correct an error in an assessment or apportionment and can appeal from its decision on questions of law, or the supervisor of assessments could apparently do so under Section 236, but if the county commissioners have reason to believe that an apportionment of the shares of stock assessed by the State Tax Commission is not authorized by law and injuriously affects the county they represent, they must adopt some other proceeding to have the question tested, as no appeal by them is provided in such a case.
In addition to what we have said, the record does not disclose that there was an application by the County Commissioners of Baltimore County to the State Tax Commission to change or correct the apportionment. The mere fact that Mr. Girdwood appears for the county commissioners, as one of the attorneys in this appeal, is not sufficient to enable us to assume that it did apply to the State Tax Commission. The appeal was taken by Mr. Burke, described in the petition for appeal as attorney for the county commissioners, and his name is also in the brief with Mr. Girdwood, but in the correspondence in the record, while it does not definitely appear whom he represented, it is indicated that Mr. Girdwood was representing the trust company, which might have sought relief in court. On request of the commission he furnished the list of stockholders of the trust company and the form of the voting agreement, and also wrote to the commission correcting information given as to the residences of the trustees named in the voting trust at the time the trust company reported its list of stockholders. While the proceedings before the State Tax Commission are informal, it would be more than "informal" to permit a party who had never made any complaint, or applied to the State Tax Commission for the correction of a supposed error, to take an appeal from its action, in the absence of some statute authorizing such a proceeding. So without pursuing this question further, we are of the opinion that the lower court should have dismissed the appeal of the county commissioners. *676
2. Although we have reached the conclusion above announced, as the question was fully argued and it is important that it be decided without unnecessary delay, we will determine whether the State Tax Commission was right in passing the order of the 15th of September, 1920. There has been some conflict between the decisions of different jurisdictions as to the validity of voting trusts — although it has generally been held that they are notper se unlawful, and the differences between the courts have for the most part arisen by reason of the purposes for which they were formed. In this State we have a statute on the subject which is now Section 102 of Article 23 of the Code.
The agreement in this case provided, amongst other things, that the stock was to be transferred to and registered in the names of the trustees upon the books of the company, and they were to receive and hold a certificate or certificates therefor in their own names; that the trustees were to issue to each stockholder signing the agreement and depositing his stock, a certificate to that effect, which certificate should set forth the number of shares so deposited, be assignable by endorsement and delivery and substantially in the form therein set out; that the trustees were to collect and receive the dividends and to distribute them to the registered holders of the voting trust certificates; that they were to vote the stock deposited at all meetings of the corporation and for all purposes; that the trust should continue for a period of three years from the date of the agreement; that upon the expiration of the three years, or when for any reason the agreement was terminable, they were to re-transfer and deliver the shares of stock to the holders of the voting trust certificates; that the trustees were to be held personally responsible only for the failure to use good faith in the performance of their duties and that the agreement should be terminated at any time by the action of any two of the trustees, or by the vote of the holders of the voting trust certificates representing at least seventy-five per cent. of all the shares deposited. *677
It will be seen by reference to it that our statute provides that a stockholder may transfer his stock to any person or persons "for the purpose of vesting in him or them the right to vote thereon, for a time not exceeding five years," and that the statute does not even speak of them as trustees, but as "transferee or transferees." The certificates to be issued to the stockholders by the trustees begin by saying: "This is to certify that * * * * is the owner of * * * shares of the capital stock of the Commerce Trust Company," etc. They are assignable by endorsement and delivery, and on the back there is a form similar to the one for assigning shares of stock.
These voting trustees have no power to sell the stock, and only hold it for three years, if not sooner terminated, and when terminated they are to retransfer and deliver the shares to the holders of the voting trust certificates. The original shareholders not only have the beneficial interest in the shares, but they have the certificate issued by the trustees, which they can sell or use as they please. The certificates can be transferred just as the original certificates could be, excepting they are transferable on the books of the voting trustees, instead of on those of the company. It is a wholly different trust from such as was being considered in Latrobe v.Baltimore,
But we are of the opinion that the State Tax Commission was correct as to all the shares held by the voting trustees. It is true that neither Section 2 nor Section 162, which provide that shares of stock shall be assessed to the owners of shares of stock in the county or city where they reside, say who shall be regarded as the "owner" as between a trustee and his cestui quetrust, but it is manifest that the object of the Legislature was to give the counties and municipalities the benefit of the taxation of the shares of stock to the extent that they were enjoyed by residents of the respective counties and municipalities. The general principle that when property is held by trustees they shall pay the tax was recognized in this State, and it resulted in determining the situs for taxation inLatrobe's case, on the theory that, as the trustee was the holder of the legal title, he was the holder of the property who was called upon to pay the tax under the Fifteenth Article *679
of the Bill of Rights. But as pointed out by JUDGE SCHMUCKER inBaltimore v. Safe Deposit Co., supra, when the question came before the court in Tyson v. State,
Now when the corporation pays the tax on shares of stock and then charges the stockholders with it — really acting as collector — there is no more danger, if as much, of losing any of the taxes, because assessed to the cestui que trust, instead of to the trustee, in ordinary cases of trust, and in case of such a voting trust as we have before us, the real owner is the original stockholder, or his assignee of the certificate. We have been referred to no case directly on the question here involved, but that of U.S. Ind. Tel. Co. v. O'Grady,
There are many reasons why the appointment of voting trustees should not have the effect held by the lower court. There is danger of stockholders selecting such trustees with reference to taxation in a particular county. It is not an unheard of thing for people to change their residences by reason of the taxable basis being lower in the county to which they move than where they had been living, and if stockholders of a corporation can change the situs of taxation by the selection of a trustee or trustees in a voting trust, the probabilities are that it will be done for the purpose of getting lower taxes. Then it is not right that the stockholder should still have all the rights he ever had in shares of stock, except to vote, and not pay the taxes where he lives but receive the protection of the local government. Other reasons might be given, but the fundamental one on which we rely is that, as between such a trustee and the stockholders who unite in naming him in a voting trust, the stockholder should be regarded and treated, for the purposes of taxation, as the owner, and his residence should determine the situs of his shares of stock. The policy of this State, as shown by some *681 statutes which have been passed and by our decisions, as well as the justice and right of the matter, fully justify us in that conclusion. If voting trust agreements can affect and control such questions as the situs of the property for the purposes of taxation, there would probably be renewed opposition to such trusts.
As we referred above more specifically to shares in the voting trust which belonged to residents, it may be well to add that we are equally convinced that the State Tax Commission was correct as to all held by the voting trustees. Our conclusion is that, as the owners of the certificates issued by those trustees are the real and substantial owners of the shares, and not the voting trustees, within the meaning of the tax laws, the term "owners," as used in Section 162 of Article 81, and other sections, is equally as applicable to non-resident holders of the certificates as to resident holders, and hence the provision in Section 162, that the shares of stock held by non-residents shall for county and municipal purposes be valued to the owners thereof in the county or city in which the corporation is situated, must be held to mean the non-resident holders of these certificates issued by the voting trustees.
It follows that the order of the lower court must be reversed.
Order reversed, the appellee to pay the costs.
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