Argument for Plaintiff in Error.

196 U. S.

204; McCulloch v. Maryland, 4 Wheat. 316, 429; State Tax on Foreign Held Bonds, 19 Wall. 319; Baltimore v. Hussey, 67 Maryland, 112; Coe v. Errol, 116 U. S. 517, 524; Fargo v. Hart, 193 U. S. 490, 500; Commonwealth v. Standard Oil Co., 101 Pa. St. 119; Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196, 208; St. Louis v. Ferry Co., 11 Wall. 423; New York City v. McLean, 170 N. Y. 374, 387; Tappan v. Bank, 19 Wall. 490, distinguished, and see County v. So. Pac. R. R. Co., 15 Fed. Rep. 753; Cooley on Const. Lim. 3.

A State cannot require a non-resident's personal subjection to its sovereignty. Pennoyer v. Neff, 95 U. S. 733; Paul v. Virginia, 8 Wall. 168, 180; Carfield v. Coryell, 4 Wash. C. C. 380; Slaughter House Cases, 16 Wall. 30, 76.

The capital stock tax is a tax in personam on the stockholder, not a tax in rem on his share.

For distinction between these two classes of taxes see Leigh v. Green, 193 U. S. 79, 90. It is of special importance only as to non-resident stockholders. As to character of its taxes Maryland differs from every State of the Union. 27 Am. &, Eng. Ency. Law, 632; Code of Maryland, 1888, 1903, Art. 81, §§ 2, 90, 150-162; Art. 15 Decl. of Rights.

The method of ascertaining the taxes on the shares of a corporation is never correct and always errs on the side of the excess. There is no relation between the actual and assessed value of the shares. Bank v. Commonwealth, 9 Wall. 353. Under the method of assessment the tax is not one on the shares but on the owner. Houston v. New Orleans, 119 U. S. 265, 276; Stapleton v. Haggard, 91 Fed. Rep. 93. It is also recoverable in assumpsit and is not a tax on the corporation. The tax is levied without due process of law. It has never been decided what due process requires as to taxation. Turpin v. Lemon, 187 U. S. 51; Glidden v. Harrington, 189 U. S. 255. But see Cooley on Taxation, 363; Railroad Tax Cases, 13 Fed. Rep. 752, under which opportunity to the person taxed to question the validity or amount of the tax is requisite.

196 U.S.

Argument for Defendants in Error.

The notice need not be personal, but it may be by publication, or a statute may give notice by fixing the time and place of hearing. W. & St. Peters L. Co. v. Minnesota, 159 U. S. 526, 536; Merchants' Bank v. Pennsylvania, 167 U. S. 461, 466; Pittsburg Ry. v. Backus, 154 U. S. 421, 425. The time and place for hearing must be in some way prescribed. Railroad Tax Cases, 92 U. S. 575, 610; Plamer v. McMahon, 133 U. S. 669; Hagar v. Reclam. Dist., 111 U. S. 701, 710; Monticello Co. v. Baltimore, 90 Maryland, 416, 428.

The Maryland statute does not afford these opportunities. It only gives the corporation and not the shareholders the right to be heard. Clark Distilling Co. v. Cumberland, 95 Maryland, 468, 475.

The elements of such opportunity or due process, are Federal questions on which the Supreme Court would not consider the decision of the state court conclusive. State Bank v. Knopp, 16 How. 391; Wright v. Nagle, 101 U. S. 793; McCullough v. Virginia, 172 U. S. 109.

The corporation is not really the agent for the stockholder as held by the state court. Cook on Stockholders, § 11. The whole tax is a mere nullity, as ultra vires and void. It is twofold and not provided for by law. Pennoyer v. Neff, 95 U. S. 714.

Whether the State has the right to exercise the powers; or whether the exercise is ultra vires; whether it has the power to so tax a non-resident; whether the tribute exacted by its revenue laws is taxation or spoliation, is a Federal question. Dewey v. Des Moines, 173 U. S. 193, 201; Louisville Ferry Co. v. Kentucky, 188 U. S. 385; Fargo v. Hart, 193 U. S. 490; State Tax on Foreign Held Bonds, 15 Wall. 300; Santa Clara v. So. Pac. R. R., 18 Fed. Rep. 385.

Mr. Albert C. Ritchie, with whom Mr. W. Cabell Bruce was on the brief, for defendants in error:

The tax statute has been construed and upheld by the. Maryland courts.

Argument for Defendants in Error.

196 U. S.

A State has the power to fix the situs of shares of stock held in its corporations by non-residents of the State, at the place in the State where the corporation has its principal office, and to provide for the taxation of such non-resident stockholders on account of their shares at such place, and no right granted or secured by the Constitution of the United States is violated thereby.

This court will not set aside the Maryland statutes here in question, unless they encroach upon legitimate national authority or violate some right granted or secured by the Constitution of the United States. Lake Erie R. R. Co. v. Pennsylvania, 153 U. S. 628, 641; Kirtland v. Hotchkiss, 100 U. S. 490, 498.

The only question before this court, is the power and authority of the State to declare that Maryland is the situs for purposes of taxation of stock in Maryland corporations held by non-residents and that such stock shall be there taxed. If the State possesses this power, its right to exercise it is in no way affected by the fact that the non-resident stockholder may or may not be taxed upon his stock in the State of his domicile. Blackstone v. Miller, 188 U. S. 189, 205, and cases cited.

Movable personal property is always subject to taxation in the State where it is situated. Coè v. Errol, 116 U. S. 517 Am. Refrigerator Co. v. Hall, 174 U. S. 70; Union Refrigerator Co. v. Lynch, 177 U. S. 149. Shares of stock, however, are personal property of an intangible nature. They represent property invested in the corporation, which should pay its share of the expenses of the State. The corporation derives its existence from the State creating it. Its shares are authorized to be issued by, and are subject to, the control of the laws of the State and can be subjected to taxation by the State. Bank v. Commonwealth, 9 Wall. 353, 361; Tappan v. Merchants' Bank, 19 Wall. 490; New Orleans v. Stempel, 175 U. S. 309, 320; Bristol v. Washington County, 177 U. S. 133, 144; St. Albans v. National Car Co., 57 Vermont, 68; Pullman Co.

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v. Pennsylvania, 141 U. S. 18, 22; Adam's Express Co. v. Ohio, 166 U. S. 185, 224; Loan Society v. Multonomah County, 169 U. S. 421; Travellers Ins. Co. v. Connecticut, 185 U. S. 364; State Tax on Foreign Held Bonds, 15 Wall. 300, distinguished, see Matter of Bronson, 150 N. Y. 1. The tax cannot impair the obligation of any contract. See also Delaware R. R. Tax Case, 18 Wall. 206; Murray v. Charleston, 96. U. S. 432; Kirtland v. Hotchkiss, 100 U. S. 491; Erie R. R. Co. v. Pennsylvania 153 U. S. 628.


Although the laws of Maryland make no provision for notice to the individual stockholders of a Maryland corporation, or for any opportunity to be heard by them, upon the' question of the valuation of their stock for purposes of taxation, yet ample provision is made for notice to, and an opportunity to be heard by, the corporation itself, and inasmuch as the corporation, under the Maryland system of taxation, acts for and as the representative of the stockholders, the Maryland statute. gratifies the requirement of due process of law. Turpin v. Lemon, 187 U. S. 51, 58; Glidden v. Harrington, 189 U. S. 255, 258; Bank v. Pennsylvania, 187 U. S. 461, 466; Am. Casualty Co. Case, 82 Maryland, 535; Clark Distilling Co. v. Cumberland, 95 Maryland, 468, 474.

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

Opinion of the Court.

196 U. S. 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 non-residents 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. Mayor of Baltimore, 1 G. & J. 499, 502; Mayor &c. v. Howard, 6 H. & J. 383, 394; American Coal Co. v. Allegany Co. Comrs., 59 Maryland, 185; Hull v. Southern Development Co., 89 Maryland, 8, 11.

The Maryland decisions have also settled that the tax is on the stockholder personally 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 Company v. State, 79 Maryland, 63, where the court said (p. 70):

"But the tax is not a tax upon the stock or upon the corporation, but upon the owners of the shares of stock, though the officers of the corporation are made the agents of the State for the collection of the state tax. It is not material what assets or other property make up the value of the shares.

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