[196 U.S. 466, 467] The New York & Baltimore Transportation Line was chartered in 1847 by the general assembly of Maryland, and it still exists by virtue of an extension in 1876 of its charter. At all times the corporation has maintained its principal office in the city of Baltimore.
James C. Corry, a resident and citizen of Pennsylvania, acquired 150 shares of the stock of the transportation line, having a face value of $20 per share.
The 150 shares standing in Corry's name, as stated, were assessed for the years 1899 and 1900 for state and the municipal taxes of the city of Baltimore, the total taxes being $43.27 for the year 1899 and $36.49 for the year 1900. Conformably to the laws of Maryland, payment of said taxes was demanded of the transportation company. To restrain compliance with this demand, Corry commenced the present suit, making defendants to the bill of complaint the mayor and council of Baltimore, the treasurer of the eity, the treasurer of the state, and the transportation company. The relief prayed was based on averments that the laws of Maryland under which the taxes were levied were repugnant to the state and Federal Constitutions, upon grounds specified in the bill. A decree was entered sustaining general demu rers, interposed by the various defendants, and dismissing the bill. This was affirmed by the court of appeals of Maryland. 96 Md. 310, 53 Atl. 942.
William P. Maulsby and Edwin G. Baetjer for plaintiff in error.
[196 U.S. 466, 469] Messrs.Albert C. Ritchie and W. Cabell Bruce for defendants in error.
Mr. Justice White, after making the foregoing statement, delivered the opinion of the court:
The subjects and methods of taxation of property within the state of Maryland are regulated generally by article 81 of the Code of Public General Laws of that state.
A tax for state purposes and one for local purposes is laid upon all property. In each year the officers of domestic corporations are required to furnish information respecting the value of the shares of stock in such corporations to the state tax commissioner, who determines the aggregate value thereof, deducts therefrom the assessed value of the real estate owned by the corporation, and the quotient, obtained by dividing [196 U.S. 466, 472] the remainder by the total number of shares of stock, is treated as the taxable value of each share, subject, however, to correction on appeal to the state comptroller and state treasurer after notice to the corporation of the valuation fixed by the tax commissioner. The rate of the state tax is determined by the general assembly, and that for municipal purposes in Baltimore is fixed by the mayor and council of that city. The levy on property in Baltimore, both for state and city purposes, is made by the municipal authorities. In case of stock in Maryland corporations owned by nonresidents the statutes declare that the situs of such stock, for the purpose of taxation, shall be at the principal office of the corporation in Maryland, and such shares are there assessed at their value to the owners. The statutes undoubtedly impose upon a Maryland corporation the duty of paying for and on account of the owners the taxes assessed in respect of the shares, and compel such payment without reference to the dividends, giving to the corporation a lien upon the shares of stock, and entitling the corporation, when it pays the taxes, to proceed by a personal action to recover the amount paid. Dugan v. Baltimore, 1 Gill & J. 499, 502; Baltimore v. Howard, 6 Harr. & J. 383, 394; American Coal Co. v. Allegany County, 59 Md. 197; Hull v. Southern Development Co. 89 Md. 8, 11, 42 Atl. 943.
The Maryland decisions have also settled that the tax is on the stockholder personalally, because of his ownership of the stock, and is not on the stock in rem or on the corporation. The Maryland doctrine on the subject is shown by the opinion of the court of appeals of Maryland in United States Electric Power & Light. Co. v. State, 79 Md. 63, 28 Atl. 768, where the court said (p. 70, Atl. p. 768):
See, also, Hull v. Southern Development Co. 89 Md. 8, 11, 4 Atl. 943.
Substantially similar laws for the taxing of stock in Maryland corporations were in force in Maryland at the time of the incorporation of the transportation company, and have been in force ever since.
All the claims of Federal right here asserted are embraced in and will be disposed of by passing on two propositions, which we shall consider separately.
The first proposition is that, as the authority of the state of Maryland to tax is limited by the effect of the 14th Amendment to the Constitution of the United States to persons and property within the jurisdiction of the state, and as the tax in question was not in rem against the stock, but was in personam against the owner, the power attempted to be exercised, as it imposed a personal liability, was wanting in due process of law.
The court of appeals of Maryland disposed of this contention by deciding that it was in the power of the state of Maryland to fix, for the purposes of taxation, the situs of stock in domestic corporations held by a nonresident. It also held that, as such corporations were created by the state, and were subject to its regulating authority, it was within its power to impose, as a condition to the right to acquire stock in such corporations, the duty of paying the taxes assessed on the [196 U.S. 466, 474] stock, and, moreover, that the state might compel the corporation to pay such taxes on behalf of the stockholder, and confer upon the corporation a right of action to obtain reimbursement from a stockholder when the payment was made. The court, in its opinion in this case, did not expressly elaborate the foregoing considerations, but contented itself by referring to previous decisions by it made. Among the cases so referred to was the case of American Coal Co. v. Allegany County, 59 Md. 185, 193, where it was said:
That it was rightly determined that it was within the power of the state to fix, for the purposes of taxation, the situs of stock in a domestic corporation, whether held by residents or nonresidents, is so conclusively settled by the prior adjudications of this court that the subject is not open for discussion. Indeed, it was conceded in the argument at bar that no question was made on this subject. The whole contention is that, albeit the situs of the stock was in the state of Maryland for the purposes of taxation, it was nevertheless beyond the power of the state to personally tax the nonresident owner for and on account of the ownership of the stock, and to compel the [196 U.S. 466, 475] corporation to pay, and confer upon it the right to proceed by a personal action against the stockholder in case the corporation did pay. Reiterated in various forms of expression, the argument is this: that as the situs of the stock within the state was the sole source of the jurisdiction of the state to tax, the taxation must be confined to an assessment in rem against the stock, with a remedy for enforcement confined to the sale of the thing taxed, and hence without the right to compel the corporation to pay, or to give it, when it did pay, a personal action against the owner.
But these contentions are also in effect long since foreclosed by decisions of this court. First Nat. Bank v. Kentucky, 9 Wall. 353, 19 L. ed. 701; Tappan v. Merchants' Nat. Bank, 19 Wall. 490, 22 L. ed. 189. In First Nat. Bank v. Kentucky (pp. 361, 362, L. ed. p. 703,) it was said:
... * *
And it was further observed (p. 363, L. ed. p. 704):
In substance, the contention is that the conceded principle has no application to taxation by a state of shares of stock in a corporation created by it, because, by the Constitution of the United States, the states are limited as to taxation to persons and things within their jurisdiction, and may not, therefore, impose upon a nonresident, by reason of his property within the state, a personal obligation to pay a tax. By the operation, therefore, of the Constitution of the United States, it is argued the states are restrained from affixing, as a condition to the ownership of stock in their domestic corporations by nonresidents, a personal liability for taxes upon such stock, since the right of the nonresident to own property in the respective states is protected by the Constitution of the United States, and may not be impaired by subjecting such ownership to a personal liability for taxation. But the contention takes for granted the very issue involved. The principle upheld by the rulings of this court to which we have referred, concerning the taxation by the states of stock in national banks, is that the sovereignty which creates a corporation has the incidental right to impose reasonable regulations [196 U.S. 466, 477] concerning the ownership of stock therein, and that a regulation establishing the situs of stock for the purpose of taxation, and compelling the corporation to pay the tax on behalf of the shareholder, is not unreasonable regulation. Applying this principle, it follows that a regulation of that character, prescribed by a state, in creating a corporation, is not an exercise of the taxing power of the state over persons and things not subject to its jurisdiction. And we think, moreover, that the authority so possessed by the state carries with it the power to endow the corporation with a right of recovery against the stockholder for the tax which it may have paid on his behalf. Certainly, the exercise of such a power is no broader than the well-recognized right of a state to affix to the holding of stock in a domestic corporation a liability on a nonresident as well as a resident stockholder in personam, in favor of the ordinary creditors of the corporation. Flash v. Conn, 109 U.S. 371 , 27 L. ed. 966, 3 Sup. Ct. Rep. 263; Whitman v. National Bank, 176 U.S. 559 , 44 L. ed. 587, 20 Sup. Ct. Rep. 477; Nashua Sav. Bank v. Anglo-American Land Mortg. & A. Co. 189 U.S. 221, 230 , 47 S. L. ed. 782, 786, 23 Sup. Ct. Rep. 517, and cases cited; Platt v. Wilmot, 193 U.S. 602, 612 , 48 S. L. ed. 809, 813, 24 Sup. Ct. Rep. 542.
Whilst it is true that the liability of the nonresident stockholder in the case before us, as enforced by the laws of Maryland, was not directly expressed in the charter of the corporation, it nevertheless existed in the general laws of the state at the time the corporation was created, and, be this as it may, certainly existed at the time of the extension of the charter. This is particularly the case, since the Constitution of Maryland, for many years prior to the extension of the charter of the transportation company contained the reserved right to alter, amend, and repeal. From all the foregoing it resulted that the provisions of the general laws and of the Constitution of Maryland were as much a part of the charter as if expressly embodied therein. Nor can this conclusion be escaped by the contention that, as the provisions of the statute imposing on nonresident stockholders in domestic corporations a liability for taxes on their stock violated the Constitution of the United [196 U.S. 466, 478] States, therefore such unconstitutional requirements cannot be treated as having been incorporated in the charter, for this argument amounts only to reasserting the erroneous proposition which we have already passed upon.
Having disposed of the first proposition we come to consider the second, which is that the legislation of the state of Maryland is repugnant to the Constitution of the United States, because of the commission to directly require the giving of notice to the nonresident stockholder of assessments on his stock, and opportunity for contest by him as to the correctness of the valuation fixed by the taxing officers. The highest court of the state of Maryland has construed the statutory provisions in question as, in legal effect, constituting the corporation the agent of the stockholders to receive notice and to represent them in proceedings for the correction of an assessment. Thus, in James Clark Distilling Co. v. Cumberland, 95 Md. 468, 52 Atl. 661, the court said (p. 475, Atl. p. 663):
If a tax was expressly imposed upon the corporation, the stockholders, though interested in the preservation of the assets of the corporation, could not be heard to object that the statute did not provide for notice to them of the making of the assessment. The condition attached by the Maryland law to the acquisition of stock in its domestic corporations, that the stockholders, for the purpose of notice of the assessment of the stock and proceedings for the correction of the valuation thereof, shall be represented by the corporation, is not, in our opinion, an arbitrary and unreasonable one, when it is borne in mind that the corporation, through its officers, is, by the voluntary act of the stockholders, constituted their agent, and vested with the control and management of all the corporate property,-that which gives value to the shares of stock, and in respect to which the taxes are but mere incidents in the conduct of the business of the corporation. The possibility that the state taxing officials may abuse their power, and fix an arbitrary and unjust valuation of the shares, and that the officers of the corporation may be recreant in the performance of the duty to contest such assessments, does not militate against the existence of the power to require the numerous stockholders of a corporation chartered by the state, particularly those resident without the state, to be represented in proceedings before the taxing officials through the agency of the corporation.
As we conclude that the legislation of the state of Maryland [196 U.S. 466, 480] in question does not contravene the due process clause of the 14th Amendment to the Constitution of the United States, the judgment of the Court of Appeals of Maryland is affirmed.