Jurisdictional Statement — National Can Corp. v. State Tax Comm'n of Md.

Supreme Court brief1960

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- Supreme Court of the United States

s OcToBeR TERM, 1959

No: . o. 564

———

NATIONAL CAN CORPORATION,

. Appellant.

VS.”

dahlias TAX COMMISSION OF MARYLAND,

On APPEAL FROM THE COURT OF APPEALS OF MARYLAND

JURISDICTIONAL STATEMENT

~ Herpert M. Beaune.’

1225 Mathieson. Building.

Baltimore 2, Maryland.

—M. WiiuraM ApELson,

1035 Mathieson Building.

. Baltimore 2, Maryland:

° ee ._ Attorneys for Appellant.

The Daily Record Co, Baltimore 3, Md.

——_—

INDEX

OPINIONS BELOW

JURISDICTION

STATUTE INVOLVED

QUESTIONS PRESENTED

™ r-veneies ;

Is the separate assessment classification of

Maryland real property and personal property, ~ |

provided by-Chapter 73, Laws of are, =

1958, reasonable? ,

Does the direction of said. _— 73 to admin-

-istrative officials to make an allowance for a

general and undefined “inflation” solely in real

property assessments, prescribe a sufficiently.

definite standard to satisfy the Due Process

Clause of the Fourteenth Amendment?

Is Appellant, a personal.property taxpayer, en-

titled to challenge an assessment system which

discriminates ‘in favor of real property tax-

ances Only to them, when nullification of the

gate would require the same assessment

» for both real and personal property?

Is th» retroactive provision of Chapter 73 valid?

STATEMENT OF THE CASE

' How the Federal Questions are Presented

THE QUESTIONS ARE‘SUBSTANTIAL

General property taxation is the foundation of,

most State tax systems. Therefore, this Court's

decision upon the new and novel Maryland.

finite “inftati n” altow- ES ee eae

8-10

10-15

statutory approach to the problen, may well

have significance in many other states. Specifi--

_ 1. The first question: is octinenatea because it

CONCLUSION

involves the validity of separate assessment

classification of two physically ‘different

types of property, for the ‘sole purpose of a

discriminatory allowance to only one type.

of property based on a factor which affects

both types of property _

————

which must be used in tax legislation

. The third question is substantial, because, in

denying the Appellant’s right as a personal

property taxpayer to question a system of

taxation that discriminates, without valid

legislative basis or standard, in favor of real

PAGE

; The_second- question is substantial because -

- it involves the definiteness of the standards

11-12

property taxpayers, the Maryland Court’ .-

_ contradicts and renders uncertain the rule

of Hillsborough Township -v: Cromwell and

similar cases

. The fourth question is substantial because

this Court has never directly passed on the

validity of retroactive general property tax

legislation, or the method of application of

the “recent transactions” rule thereto

APPENDIX A: '

1. Chapter 73, Laws of Maryland, 1958

APPENDIX B:

_1. Memorandum and Order a Circuit Court No.

2 of Baltimore City,

12-14

14-15

"15-16 >

17-24

25-27

ili

- 2. Opinion and dissenting opinion of Maryland

’ Court of Appeals, National Can Corporation

v. State Tax Commission 27-54

-3. Opinion of Maryland Court of Appeals, Sears,

- Roebuck & Co.'v. State Tax Commission’ |. 5462

APPENDIX C: Tne eae —

1. Mandate of the Court of Appeals “ Maryland.

in the present case . 63

TABLE OF CITATIONS | | °

- Cases

Allied. Stores of Ohio, Inc. v. Bowers, 358 US. 522 “10

Burstyn, ‘Inc. v. Wilson, 343 'U. S. 495 © : 11

_ Citizens National Bank v. Kentucky, 217 U.S. 443 | 14

City of Seattle v. Kelleher, 195 U.S. 351 15

Connally v. General Construction Co., 269 U.S. 385° 11

Hillsborough Township. v. Cromwell, 326 US.

PAGF °

620, : 0+. 3,4,5,13,14,15

Maryland Theatrical Corp. v. Brennan, 180 Md. 377,

» 24 A.2d 911 11

“Natiorial Can Corporation v. State Tax Commission ° .

\of Ma ane, 220 Md. 418, 153 A. 24287 _ 2,7,9,11,

Philip hae Inc. v. Leis. 239 US. 207 14-15

Sears, Roebuek & Co:\v. State Tax Commission, 214

Md. 550, 136 A. 2d 567 -5, 6; 7, 8, 11

Sioux ied Bridge Co. v. Dakota County, °260 U-S.

Staub v. City of, Baxley, 395 U.S. 313 ‘ 11

‘- Sunday Lake Iron Co. v. Wakefield, 247 US.350 3,12

Welch v. Henry, 305 US. 1384 = 3, 4,14; 15, 16°

_ jes

Constitution

ny ers ; ma " > PAGE

Fourteenth Amendment, United States ‘Constitu- _

‘tion - 3, 4, 8, 10, 11, 12, 13, 15

Statutes , a a.

Article 81 of the Annotated Code of Maryland ( (. 1957

0. ): a 3

Section 13(b): fo chin 8 Pie a. Seas

_ Section 14 (formerly Section 13) neers 5

' Section 259(b) (formerly Section 255(b) ) ae.

Article 81 of the Annotated Code of Maryland (Cum.

Supp. 1959):

_. Section13(a) aa? iad

Chapter 73, ie of { Maryland; 1958 >, 8,4,5,6, 8, 9,

| 10,12, 14,15

Chapter 757, ail of Maryland, 1959 | =

United States Code, Title 28, Section 1257(2) _

IN THE

Supreme Court of the United States.

Ocroper TERM, 1959

No. ne ae

NATIONAL CAN CORPORATION,

Appellant,

VS.

STATE TAX ‘COMMISSION OF MARYLAND,

/; 3 . | as , Appellee. .

-/:

On APPEAL FROM THE COURT OF APPEALS OF MARYLAND ‘

JURISDICTIONAL STATEMENT

Appellant, appeals from the mandate and final decree of

the Maryland Court of Appeals, entered on July 9, 1959,

affirming a decree of the Circuit Court No. 2 of Baltimore

City, which dismissed its:appeal from an assessment of

personal property for general property taxation made by

the State Tax Commission, and submits this Statement to

show that the Supreme Court of the United States has

jurisdiction of the appeal and that substantial questions are ~

presented.

OPINIONS BELOW

“The opinion of the Maryland Court of Appeals is ré

_printed in Appendix B. It is reported as National “Can Cor-

poration v. Stage Tax Commission of Maryland, 220 Md.

418, 153 A. 2d 287. The opinion of the Circuit Court No. 2

of Baltimore City is reprinted. in Appendix. B, but is un- |

published.

ada ev ie _ JURISDICTION °

(i) The proceeding was initiated as an appeal from the

action of the State Tax Commission of Maryland in making

-an assessment of personal property for general property

taxation.' It was brought. in the Circuit Court No. 2 of

Baltimore City, pursuant to the then Section 255(b) of .

Article 81 of the Annotated Code of Maryland (1951 edi-

tion), which is now Section 259(b).of Article 81 of the

'. Annotated Code of Maryland (1957 edition), After dis-

missal of: this appeal, Appellant, under the aforesaid stat-

ute, invoked its right of further — to the Maryland

Court of Appeals. _ a ,

(ii) The final docvee of the ‘eit Court of Appeals

' was filed on July 9, 1959. honey of. appeal to the United

' States Supreme Court was filed in the-Maryland Court: of

-Appeals on October 6, 1959. ”

(iii) Jurisdiction on this ee is | conferred by 28

—US.C. £8¢. 1257(2)- sO? os,

' The State Tax Commission (now the State Department of Assess-

ments and Taxation “by virtue of Chapter 757, Laws of: Maryland,

1959) exercises original jurisdiction in the assessment of ali cor-

porate personal property, but assessyients of pefsonal property owned

by individuals and partnerships, and of all réal property, are ‘made

by assessors in the various slocai sub- divisions. Article 81 of the

Annotated Code of Marvland (1957 ed.), sec. 13(b), and Cum.

Supp. (1959 ed.), sec. 13 (a). fr. 4 &

ry . : .

. $ 3 oe

. ” s

(iy) ‘Cases sustaining the jurisdiction of the Court are:

‘Hillsborough Township v. Cromwell, 326 US.

.620;”

Sioux City Bridge Co. v. Dakota County, . 260

US. 441;

Sunday Lake Iron Co. v. Wakefield, 247 U.S: 350;

Welch v. — 305 US. 134..

* STATUTE INVOLVED ies ee

* This case solely involves the validity of Chapter 73, Laws

of Maryland, 1958, pages ‘247-252. . This Act, because of

its length, is set forth in Appendix A. ;

QUESTIONS. PRESENTED .

1. In the assessment of Maryland real. property and

. personal property for géneral property taxation, is. the

bald. declaration that these two broad classes of property

constitute separate clasges, as provided in Chapter 73 of

the. Laws of Maryland, 1958, with “inflation” required to be

disregarded in the yaluation of personal property, but —

allowed as a “discount factor in. valuing real property, -a

_ reasonable and valid tlassification of property for purposes

‘ of assessment for. general property taxation, under the

Equal Protection Clause of. the Fourteenth Amendment to :

the Constitution of the United States”

2 Does the direction: of Chapter 73 of the Laws of ~~

'.. Maryland, 1958, that only in the assesment of real prop-

erty, an allowance, be made for a wholly general and un-

defined “inflation”, constitute. a standard for guidan7e of

* administrative officials sufficiently definite to satisfy . the

requirements of the Due Process. Clause of the Fourteenth

. Amendment to the Constitution of the United ae for a

_ valid delegation of legislative power? é-

* »

4°:

"x 3. -Is.the Appellang, as a. personal property taxpayer,

_ entitled to complain of the aforesaid unconstitutionality,

. under the Due Process Clause, of such statutory allowance

“for an indefinite “inflation” granted to real property tax-

payers, when the nullification ofthe % exeruall allowance

results in a requirement that both. réal ‘and personal prop-

erty be assessed on the same basi8, and consequently en-

~ titles: ‘Appellant te demand that'its personal ‘property as-

sessment be reduced to the existing devalued level for

real property,: under the: Equal Protection Clause of the

Fourteenth Amendment to the United States Constitution

-and the doctrine of such cases as Hillsborough cies atti

~ v. Cromwell, 326 U.S. 620?

4. In the light of th “recent. transactions” limitation,

. necessary for retroactive tax legislation to satisfy the Due

Process requirements of the Fourteenth Amendment to the

ay United States Constitution, under the rule’ of Welch -v.

Henry, 305 U.S: 134, does the retroactive provision of C.ap-

ter 73 of the Acts of 1958, enacted April 4, 1958, render.ng |

it. applicable to sustain an over-assessment of the taxpayer's

avérage monthly inventories held from January to Decem- ©

ber, 1956. there being an intervening general legislative

session in 1957, result in the taking of. td er’s property

without due preeee of law?

STATEMENT OF THE CASE /

‘Fora number of years prior to 1957, Maryland law and

~ custem dictated the assessment of tangible personal prop- _

erty for general property taxation at its full ‘eash value.

Inventories. the principal item involved in this appeal,

were taken, at cost or market, whichever was lower. The

same legal requirement of full cash value in assessments of

iP real ‘property. was ignored in favor of a practice through-

‘ out the different)Mary land political sub-divisions of assess-

ing such real’ property at varying percentages of its full

- cash value. In the case of Sears, Roebuck & Co. v. State

Tax Commission, 214 Md..550, 136 A. 2d 567, (reprinted in

Appendix B), decided November 22, 1957, the Maryland ~

Court of Appeals held.that this discriminatory method of

assessing real. and personal property had no legal basis,

in view. of the Meryland statute requiring assessment of

both real and tangible personal. property at “full cash _

value” (Section 14 of Article 81 of the Annotated Code of

Maryland (1957 edition) , which was Section 13 in the 1951

edition). The case was remanded for a reduction of the

taxpayer’s tangible personal property assessments to the

level of the real property assessments, following the’ rule

of Hillsborough Township v. Cromwell, supra.

, Shortly before the Sears decision was announced, the

Appellee, following its aforesaid discriminatory practice,

entered a final assessment against Appellant for the year

1957, measured by its. personal praperty holdings during

the. year. 1956. Subsequent to the Sears decision, Appel-

lant filed its appeal to the Circuit Court Nu 2 of Baltimore

City, upon which no action was taken until after the en-

actment on. April 4, 1958, of Chapter 73° of the’ Laws of

Maryland, 1958, (hereinafter reférred to as Chapter” 73).

Retroactive to January 1, 1957, Chapter 73 attempted to

legalize the aforegoing discriminatory assessing practices

of the Commission, through separate classification of ‘real _

and personal property. Although a general legislative |

session had intervened in 1957, at which no action was

taken, Chapter 73 sought to. validate retrospectively the ,

1957 assessment against’ Appellant, which had been invali-

. dated by the Sears decision.

-Chapter 73 continued the requittenent that both real.

- and tangible pen property be assessed at their “full

6 -

cash value.” In: the case of real property, however, “full -

cash value” was defined to mean “current value less an

allowance for inflation,” while in the case of personal

-property, it was defined to mean “current value without

any allowance for inflation.” “Inflation” is not defined in

the act in any ‘manrer, nor measured from any base period.

The following trial testimony of the Secretary of the

State Tax Commission, appearing at pages 22-23 of the

Record Ex@act,” filed in the Court of Appeals, makes it

clear that real and personal property assessments for the

year "1957 were determined in accordance with the same

discriminatory = which were condemned in the

Sears case:

~“Q. All I am _— at, Mr. Ward, is this; in your

direct examination by Mr.: Waters you testified, I be

lieve, that as a result of the prior practices before the

decision in the Sears,’ Roebuck case, real estate was

assessed at approximately 60‘: , that is in.some places

its current sale value, where as personal property

* was assessed at its full market value; is that correct?

_ A. That is correct. And if you did what the Court of

Appeals supposedly did in each case, and if we had to

make the devaluation factor in personal property to

‘the extent of 40°. , it would amount to that loss of

revenue.

“Q. And doing it under Chapter 73 of the ‘ine of

1958, that is still the practice of the Commission, in

otier words Chapter 73 purports to legalize what had

been previously the practice? A. Yes. we propose

to continue to assess real estate at its full cash value -

with allowance for inflation, if any exists, and also .

with allowance for abnormalities, and with personal

property we plan,.on inventories we plan to assess

at cost or market. whichever is lower, without _ anv

regard for inflationary influences.

* The Recotd Kxtract is he peinatter referred to as EF.

ead

_ “(The Court) In other words; Chapter 73 puts a |

stamp of approval on your former practice, that is

_ what you are saying.

.““(The . Witness ) “That's right, that is what I am

saying.

“Q. In other words, Mr. Ward, _— you say is true

before the Sears, Roebuck decision and also true now

under Chapter 73 applied to the assessments for the

year 1957. Assessme. ts for the year 1957 were made

in the ‘same manner as you have just described? A.

That is correct.” ae , ‘

' Reviewing this record, the Shinitii Court of Appeals

- commented that “this case is a sequel to the Sears case”

(page 423 of 220 Md., 290 of 153 A. 2d). In the Sears case

the assessment practices of the Commission were somewhat

more fully described, as indicated by the Maryland Court's

opinion in that case, from which the following is quoted

(214 Md. at pages 554-5, 136 A. 2d at page 569):

With respect to real estate, the Comrhission

eo has directed its assessors to deduct amounts resulting _

from inflationary influences from the value of the

properties to be assessed. This deduction reduces the ~

value of real estate for tax purposes below its current.

value. No similar deduction is made in the case of

assessment of stock in trade. In assessing inventories

inflationary influences as such are not considered. In-

stead the assessment is at cost or market, whichever

is lower. In the assessment of such inventories ab-

normalities, such as pilferage, are considered in arriv-

ing at cost or market. The level of the aforegoing as- -

‘ sessments to current value is the direct result of the

policies and practices of the Commission which by

'_/ law is required to supervise all assessment of real prop- _

erty within this State. Various studies had been’ made

as to the level of assessments.to current values of real

estate in the counties and in Baltimore City. These

studies varv in scope and in method. However, thev

\ - .sustain the same factual conclusion that the ratios of

assessments to current values of real estate in Mary- .

land ranged from twenty-five per centum to sixty per

centum at the aoe this case was heard by the Com-

mission.’

How'The Federal Questions Are Presented

In the present case; after Appellant received final notice

of assessment from the State Tax Commission, an appeal. ;

was seasonably taken. to.the Circuit Court of Baltimore

City, as provided by- statute, on December 6, 1957. At that

time the Sears case had been decided, but Chapter 73 had

mot yet been enacted. The Constitutional issues were

raised by the following portion of the petition (E. 5),

couched in the identical language successfully used ~ the

Petitioner in the Sears case:

' - “(e) The assessment unlawfully discriminates |

against your Petitioner by reason of the fact that the

State Tax Commission in making the assessment used

a method which was calculated to value your Peti-

_tioner’s stock in business’ and tools and machinery in-

excess of their full cash value, with the result that

such method of assessment was and is unlawful, and

in violation of the Fourteenth Amendment to the

Federal Constitution and Article 15 of the Declaration

of —— of the Constitution of mer yene. a .

‘Chapter 73 was passed before the trial of the action, ‘and

consequently, at the trial, the question of constitutionality

of that act under both the Maryland Constitution and the

Fourteenth Amendment to the United.States Constitution

was fully argued and briefed by both sides. The trial judge:

made this clear in his Memorandum and Order ( Appendix

B), filed April 8, 1959, where he said: eM

“This is an appeal from an assessment Of the per-

sonal property of National Can Corporation for ‘the

year 1957, made by the State Tax Commission of

Maryland in the exercise of its original jurisdiction.

It raises the question of the constitutionality: of Chap-

ter 73 of the Laws of Maryland of 1958.

“The ground for this appeal is that- Chapter 73 is

unconstitutional and void, both in substance and to

the extent that it was made to apply retroactively to

J the your 1957. |

. - ae * a

“This Court finds that Chapter 73 of the ‘Laws of

Maryland, 1958, insofar as it authorizes the separate

classification of real property and personal property,.

is valid and constitutional both under the Maryland

Constitution and: the Federal. Constitution. .

; “Petitioner argues separately that Chapter 73. can-

‘not be applied retroactively to January 1, 1957, and

to,that extent is unconstitutional. Here also, the pre-

amble to the Act gives the reasons the Legislature

made the statute retroactive. In the main, the Legis-

lature sought to avoid a substantial loss of revenue

by the State.”

Federal constitutional questions were briefed and fully

argued before the Maryland Court of Appeals. They are

discussed at length in its opinion, 220 Md. 418, 153 A. 2d

287. The contention that the classification in Chapter 73

. is invalid is discussed at pages 429-435 of 220 Md., and

294-297 of 153 A. 2d; the contention that the absence of

standards to guide the Commission in making an allowance _

for inflation makes the act invalid is discussed at pages —

435-436. of 220 Md., and 297-298 of 153 A. 2d; and the con-

‘tention that Appellant is entitled to a reduction of its

taxes to the level of the real property taxes is discussed

at pages 436-438 of 220 Md:, and 298-299 of 153° A. 2d. The

question. of retroactivity is discussed “at pages 438-442 of

220 Md., and 299-301, of 153 A. 2d. Furthermore, the dis-

senting -opinion of Judge Henderson, at pages 442-447 of

- 220 Md.. and 301-304 of 153 A. 2d. is based entirely on Fed-

eral Constitutional grounds, since he accepts the opinion

of the majority that Chapter 73 does not vio late any state——

eee

- constitutional provision: —— ie let “y

THE QUESTIONS ARE SUBSTANTIAL .-

- This case’ raises substantial federal questions in the

field of state property taxation, which should be decided

by this Court; not enly because of the situation in Mary-

land, but for the guidance’ of other states* faced with simi-

‘lar problems in the classification of property for taxation.

for the following reasons:

e Separate Classification of Real and Personal iii

sara An “Inflation” Allowance

to the Former. .

The Maryland. Legislature. in. passing Chapter 73, and

the Maryland Court of Appeals, in upholding it, assumed

that the separate classification of real property and tangi-

ble personal property is valid in all cases. In this case.

however, the classification was not based on differences

between real property and tangible personal property.

It was made solely to diseriminate. in favor of real prop-

erty taxpayers, by giving only to them, an allowance -for

inflation. although it is a factor affecting the value of

_ both real and personal property. As this Court said during

the last term, in Allied Stores of Ohio, Inc. -v. Bowers.

358 U.S. 522, at page 527: ’

“But there is a point beyond which the State can-

not go without violating the Equal Protection Clause.

The State must, proceed upon a rational basis and

may not resort to a classification that is -palpably

arbitrary. The rule often has been stated to be that the

classification ‘must rest upon some ground of differ-

ence having a fair and substantial relation to the ob-

ai of the legislation’ (Cases cited). -

‘

“Chi apter 73 in its: references to “inflation” appears to be unique,

and té have no counter-part in anv other state property tax legislation,

. a . e . .

—_

--2-—Inflation” an‘ Invalid Standard for

Reducing Assessments. | )

As pointed out above, Chapter 73 would impose an un-

reasonable discrimination against the owners of tangible

personal property, even if “inflation” were properly de-

fined in the act. However, “inflation” ‘is undefined. The |

statute sets up no base year, no index, anf no guide or

standard whatever for administrative officials in deter-

mining the amount of deduction. for the favored real

_ estate. The uncontrolled discretion granted assessors per:

- mits a virtually unlimited allowance i in reducing real prop-

erty valuations under the — of this act. The con-

science and mood of the individual assessor is substituted

for more definite, objective guides. The requirements

that statutes be definite and understandable, and that

power. should not be. delegated to administrative officials

without a definite standard, are requirements of the Four-

teenth Amendment which are fundamental in all fields of

law, Connally v. General Construction Co., 269 U.S. 385;

Burstyn, Inc: v. Wilson, 343 U.S. 495: Staub v. City of

Baxley 355 U.S. 313, and particularly so in taxation. Mary-

lind Theatrical Corp. v. Brennan, 180 Md. 377, 24 A. 2d

911. . °. :

The arbitrary and capricious nature of the Maryland

practice is clearly described in the dissenting opinion of

‘Judge Henderson in this case at pages 445-447 of 220 Md.,

303-304 of 153 A. 2d. The use of “inflation” in this statute

can be given meaning only by reference to the practices

of the Commission which were condemned as intentionally

arbitrary and discriminatory by the Maryland Court in

the Sears case, supra. The question is.whether the tax-

payer has been deprived of equal protection of the laws

by State action. and: it is immaterial ‘that the discrimina- |

: es me 6-00 000

— re. :

OR he ~ meri yg

tory State action is now. authorized by the legislature,

whereas formerly it was taken by administrative Officials

without authorization. As this court said in Sunday Lake

Iron Co. v. Wakefield. 247 U.S: 350, 352:

“The purpose of the equal. protection clause of the

Fourteenth Amendment is to secure every person |

' within the State's jurisdiction against intentional and

arbitrary: discrimination, whether occasioned by ex- °

press terms of @ statute or by its improper execution

through duly constituted agents. And it must be re-

garded as settled that intentional systematic under-

valuation by-state officials of other taxable property

in the same class contravenes the constitutional —

» of one taxed upon the full.value of his property.”

If the attempted classification is inval' 1, because based

on a vague and indefinite standard, or for any other rea-

son, the quotation above is clearly applicable.

3. Standing of Personal Property Taxpayer to Complain of

Discrimination Through Invalid ° ‘Inflation” Allowances

to Real Property Owners. |

At page 436 of 220 Md., and.297 of 153 A. 2d, the majority

of the Maryland Court assumes in this case, without decid-

ing. that the vagueness ‘of the standard of “inflation”

renders the provision for a reduction in the real property

taxes invalid, but concludes that, as a personal property

taxpuyer, Appellant is’ without standing to. complain of

such invalidity pertaining to real property assessments.

‘It is the position of Appellant. as it was of the dissenting

judge, that it is necessary to decide whether “inflation” is

a valid standard. If it is not, the separability clause of

‘Chapter 73 will not save the classification, since there is.

then no valid, or even colcrable, statutory authority for a

reduction in real property. assessments, which is denied

personal property assessments. As Judge.Henderson said,

13 |

in dissent, at pages 444-445. of 220 Md., pages 302-303 of

153 A. 2d: .. =

“The argument that the legislature would have

passed the Act with the subsection as to real estate

omitted, and hence that the Act is saved by the separa-

_ bility clause, seems untenable. The declared purpose:

was to continue the disparity. If both real and personal

property were tc continue to be assessed according to

the same standard of full cash value, there would have

deen no occasion to amend the pre-existing law. The

yice found in the Sears case was. that the State Tax

Commission. had deliberately undervalued, or per-

mitted the undervaluation, of-real estate. If statutory

authority for the practice is stricken down, we are

just where we were before, unless the Sears case is to

be overruled. If Sears is overruled we are faced with

‘the question of the Fourteenth Amendment. ;

“The majority opinion seems to hold, however, that

the. difference in treatment can be supported on the

ground that real estate and personal property are now

placed in different classes. But such ‘classification’, to

my mind, is wholly illusory if, as the'Court assumes,

real'and personal property are to be taxed at the same

rate and upon the same assessable basis. If real and

personal property-are required to be treated alike for

tax purposes, a mere legislative declaration that they —

are different in other respects is meaningless. The com-

plaint that they are not treated alike in practice goes

to the heart of the matter and raises again the question

decided in the Sears case.’

The taxpayer here, as an owher of: personal’ property

which is assessed at its full cash value as‘ provided by

statute, has standing to raise the question of discrimination,

under the Equal Protection Clause of the Fourteenth

Amendment, where owners of real. property are given more

favorable treatment because cf an unconstitutional statute.

Hillsborough Township v. Cromwell, supra. The position |

| taken by the Maryland of, at pages 436-438 of 220 Md.,

and’ 298-299 of 153 A. 2d, ‘and criticized in the dissenting :

opinion, contradicts and undermines the position taken

by this Court in the line of cases which culminated in the .

Hillsborough Township case, supra. An affirmance:of the

decision of the Maryland Court in the instant case would

throw doubt on the clear expressions of this Court as ‘to

the obligation of the State itself to achieve equality, even,

if necessary, by reduction of an otherwise valid assessment, an

and would introduce an element of uncertainty into what

is now a settled rule of constitutional law. “%

4. ‘Retroactive ‘Application of Chapter 73. |

. This Court has never directly passed on the validity of

retroactive’ general property tax legislation.. The leading

case in this Court, on the general subject of retroactive

taxation, is Welch v. Henry, 305 U.S. 134, involving an

income tax enacted as an emérgency measure because of

depression exigencies.

‘The instant case involves a different quedtion — the

validity of a retroactive general property tax, dating back

to a period prior to the statutory date of finality; ‘the law he-

ing enacted after this litigation had been started.. Although

a dictum in Welch v. Henry, supra, comments on the

validity of a retroactive general property tax, \(subject

presumably to the “recent transactions” rule Yecognized

’ in that case), the cases cited in support of the statement

did not refer to the general property tax.,Qn the contrary,

‘as Mr. Justice Roberts made clear in his dissent (305 U.S.

at ». 159), the authorities relied upon deal with taxation

of omitted property (Citizens National Bank v. Kentucky,

217 US. 443), and special benefit assessments (Philip

Wagner, Inc. v. Leser, 239 U.S. 207; = 4 Seattle v. Kelle- ;

her, 195 U.S: 351).

Moreover, since the assessment of taxpayer’s monthly

inventories held during the year 1956 was affected by the ©

retroactive application of Chapter 73, enacted in 1958, such

retrospective operation reached back into the past to an — |

-extent not permitted in Welch v. Henry, supra. It was there

held that action is valid if. taken at the next general legisla-

tive session. In the instant casé there tas such a general

sessicn whith convened in January, 1957, but no action

was taken until the following year, when Chapter 73 was’

enacted on April 4, 1958.

It is, of importance for the guidance of state legislatures

, general that this Court Should settle the limits of per-

ute anode in the field of general property taxa-

tion, in a case where such a tax, enacted during a normal

period where there was no necessity ad emergency State

action, is directly involved. ,

CONCLUSION

It is submitted that the decision of the ‘Maryland Court

of Appeals fails to recognize the limitations imposed by the

Equal Protection Clause of the Fourteenth Amendment

upon the State’s power to ‘classify property for the pur-

poses of. taxation; fails to recognize the Due’ Process re-

quirement of the. Fourteenth Amendment for a definite

Standard for the guidance of administrative officials; fails, .

to reccgnize the obligation on the State under the Equal

Protection Clause of the Fourteenth Amendment and the

doctrine of Hillsborough Township v. Cromwell, supra,

to provide’a remedy for the taxpayer whose property is

assessed at full value where other property. which should

similarly be assessed at full value; is nevertheless syste-

16 tons

- matically underassessed ; and permits retroactive applica- |

* tion of an act levying a property tax beyond the iimits per-

mitted by the Due Process Clause of the Fourteenth Amend-

ment and the doctrine of Welch v. Henry, supra. |

_ From the foregoing, it is respectfully submitted. that

- the questitns presented by this appeal are substantial and >

.of great public importance since the general property tax

is the foundation of most local tax systems. |

wes

. Respectfully submitted,

. Hersert’M. BRUNE, .

* - 1225 Mathieson Building,

_ Baltimore 2, sear yan,

M. WILLIAM ADELSON,

a 3 1085 Mathieson Building,

Baltimore 2, Maryland,

a for ‘ecu

n .

APPENDIX A

CHAPTER 73, LAWS OF MARYLAND, 1958.*

(House Bill 28),

_ AN ACT TO REPEAL AND RE-ENACT, WITH AMEND-

‘MENTS, EFFECTIVE JANUARY 1, 1957, SECTION 6

OF ARTICLE 81 OF THE ANNOTATED CODE OF

MARYLAND (1957 EDITION), TITLE “REVENUE

AND TAXES”, SUB-TITLE: “CLASSIFICATION OF

» TAXES”; TO REPEAL SECTION 14 OF SAID ARTICLE,

SUB-TITLE “METHOD OF ASSESSMENT,” AND TO

ENACT A NEW SECTION 14 TO,STAND IN .THE ©

PLACE OF THE SECTION SO REPEALED; AND TO

REPEAL AND RE-ENACT, WITH AMENDMENTS,

. SECTIONS 15 AND 23 OF. SAID/ ARTICLE, SUB-TITLE

“Method of’ Assessment”, providing for the separate

classification of real and personal property, and the sub-

classification of personal pfoperty for assessment pur- —

poses; and providing further that real property shall be

* Italics indicate néw matter added to existing law.

~ [Brackets] indicate matter stricken from existing law

~ CAPITALS indicate 2mendments to bill.

sities indicates matter stricken ent of hill,

-e

_assessed at full cash value on the date of finality, and that

‘ the term full cash value as applied to real property as-

sessments shall mean ‘current value less an allowance

for-inflation; and providing further that personal property

shall be assessed at full cash:value.on the date of finality, ©

and that the term full cash value as applied to personal

_ property shall mean current.v alue without any allowance

_ for inflation; and providing further that for the purposes

- ot assessing stock in business, the term fair average Value

shall mean cost or market value, whichever is lower,

without any allowance for inflation; and providing fur-

‘ther that distilled spirits shall be valued and assessed

at fair value, and that the term fair value shall mean

eost or market value, whichever is lower, without any

_ allowance for inflation; and to provide that no person,

firm, or corporation shall be subject to criminal prose-

cution as a result of the retroactive nature of this Act.

Wabens. the Court of -Appeals of Maryland has recently

decided the case af Seais Roebuck and Company v. State

.Tax Commission of Maryland, docketed as No. 28 in the

September ,Term of said Court, and reported as 136 A. 2d’

, 967; and

- WHEREAS, ‘by the t terms of said decision, the Court of -

Appeals has held‘that real property and stock in business

have been classified alike by the General Assembly for’

_ assessment purposes; ahd that under such circumstances,

’. the same allowance must be made for inflation in respect

to stock in. business as is 3 made "i in ~— to real property;

. and Ss

Wurneas. Article 15 of the iaiovtiina Declaration of

. ‘Rights confers uporr the’ General Assembly the right to

- provide dor the separate assessment of land and classifica-

tion and sub-classification of personal property as it hone

'y,deem proper; and )

. Wuerras, it is-the, intention of the General Assembly

to classify real’ property separa -and distinct from per-

sonal ‘property, ‘and to separately sub-classify «certain

classes of personal property for ‘assessment purposes, to’

. e

19 . ;

‘ ‘the end: that an allowance for inflation may be made in

respect to real property, but not in respect to personal prop-

-erty; and

WHEREAS, it is the belief of the GeneraleAssembly that .

the natural arid inherent differences between real and per-

‘sonal property, and’ the peculiarities of certain classes of |

personal property require and justify separate classifica-

tion and sub-classification for assessment purposes as afore-

said, and require and justify the making of an allowance

for inflation in respect to real estate assessments but not

in respect te personal property assessments; and

__ Whereas, the State will lose substantial revenues as the

result of the Sears Roebuck decision unless remedial legis- —

lation is enacted and made retroactive to commaty 1, 1957;

and

Wuereas, the: great majority of taxpayers have paid

taxés upon stock in business without protest for the year

1957, leaving only a small number of protesting taxpayers:

to whom the. Sears Roebuck decision will be applicable

unless remedial legislation is made retroactive; aid AND

WHEREAS, it is the belief of the General Assembly that

fundamental concepts of fairness and equality require that

the protesting taxpayers be accorded the same tax treat-

ment as those taxpayers. who have paid taxes upon stock in

business without protest, to the end that no undue -ad-

vantage will accrue to the protesting taxpayers-who had

not paid their taxes at the time of the filing and publica-

tion of the Sears Roebuck decision on or about November

22, 1957; therefore: AND

WHEREAS, IT IS THE INTENT OF \THE GENERAL

ASSEMBLY OF MARYLAND TO EFFECTUATE THE

. POLICY OF THE STATE TAX COMMISSION AND OF

OTHER TAXING AUTHORITIES OF THIS STATE AS

IT EXISTED PRIOR-TO THE DECISION IN THE SEARS °

CASE, THIS POLICY BEING TO ALLOW. FOR INFLA-

TIONARY FACTORS IN THE ASSESSMENT OF REAL

‘ESTATE BUT NOT TO ALLOW FOR SUCH INFLA-

° .

. %

—— ® . &

‘TIONARY FACTORS IN THE ASSESSMENT OF PER-

SONAL PROPERTY; NOW THEREFORE |

Section 1. Be it enacted by the General Assembly of

Maryland, That, effective as of January 1, 1957, Sec-

tion 6 6 of Article 81 of the Annotated Code of Mary-

land (1964 1957 Ed.), title ‘Revenue and Taxes”. sub-

title “Classification of Taxes”, be and the same is here-

by repealed and re-enacted, with amendments. to read

as follows: : s

5-6. The taxes imposed by this Article shall .be dit

vided into (1) ordinary taxes, and (2) special taxes.

Direct taxes imposed.in respect of real or personal

property shall be ordinary taxes; provided, however,

that real and personal property shall be separately

_ classified, and personal property separately. sub-

~ classified for. assessment — Special taxes shall.

include:

(a) Tax on deposits of wnvtnde: banks.

(b) Gross receipts tax.

(ce) Tax on commissions of executors and admin-

_ trators.

'. (d) Inheritance tax.

(e) Bonus tax on corporations.

-(f£) Tax on franchise to be a corporation. .

- (g) Franchise tax on foreign corporations.

(h) Income Tax.

_ Sec. 2. And be it further enacted, That, effective as

of January 1, 1957, Section 48 14 of Article 81 of the

Annotated Code of Maryland (1957 Sepp. EDITION)

title “Revenue and Taxes”, sub-title ‘“Method of Assess-

ment” be and the same is hereby repealed and that a

new Secettem with three mtb-seettoms be ame: it is

——

‘* | dt

(a}tb}-and +e} te folew immediately afterSection .

—-12-ef-said—Artiele—and to read -asfolows: TION 14°

BE AND THE SAME IS HEREBY ENACTED IN LIEU

THEREOF, TO STAND IN THE PLACE OF THE SEC- .

TIQN SO REPEALED AND TO READ AS FOLLOWS:

13. 14. (a) (Classification) Real and personal property

shall be separately classiged, and personal property

separately sub-classified for assessment purposes. The |

following shall be separately sub-classfied for the

purposes of. personal, property assessments:

(1) Stock in business. -

(2). Distilled spirits. ,

(3) All other personal property directed in this *

’ Article to be assessed. :

(b) (Method of ene as hereinafter

provided:

(1) All real aveipatity directed in this Article to be

assessed, shall be assessed at the full cash

value thereof on the- date of finality. The

term full cash value as used in this sub-

section shall mean current value less an al-

lowance for inflation, if in fact inflation exists.

(2) All personal property: directed in this Article

to be assessed, shall be assessed at the full

cash value thereof on the date of finality.

The term full cash value .as used in this sub-

section shall mean current value without any

allowance for inflation.

‘3). All operating property of veltrents, public utili-

ties, and contract carriers, and all shares. -

of stock of domestic corporations, AND

NATIONAL BANKS, the shares of which are

subject to taxation by this Article. and .

- capital stock of foreign finance -corporati

directed in this Article to be assessed. shall be

assessed in accordance with the provisions of

Sections 15, 19 and 20,. respectively, of this

Article, subject, however, to the provisions of

' Section 8 hereof. To the extent that the per-

sonal property of the classes of tarpayers men-

tioned in this sub-section is subject to taxation

by this Article, said personal property shall be

assessed in accordance with the provisions of

sub-section (2) hereof. |

- thereafter made, shall continue in force from year to ~

year until changed pen to the provisions of this

Article

Sec. 3. And be it further enacted, That, effective as

of January 1, 1957, Sections t4 15 and 22 23 of Article 81

of the otated Code of Maryland (495t-Bd-and 1957

Supp3 (1957 EDITION), title “Revenue and Taxes”,

sub-title “Method of Assessment”, be and the same are

hereby repealed and re-enacted, with amendments, to

read as follows: :

i 15. (a) The ei in business of every person, firm

or corporation engaged in any manufacturing or com-

mercial business in this State shall be valued and

assessed to the owner thereof on the date of finality as

its fair average value for the twelve months pre

ceding the date of finality ((,)) . ‘The term fair

average value as used in this Section shall mean cost or

market value, whichever is lower, without any allow-

ance for inflation. ((but)) In the. computation of the

fair average value of the stock in business of regis-

tered motor vehicle dealers, the value of used motor

‘vehicles, titled in Maryland and taken in trade by

such dealers as partial payments on the purchase of

other motor vehicles, shall be excluded.

».(b) Provided, however, that for municipal taxa-

tion in the City of Frederick such stock in business

‘ shall be assessed at seventy-five’ per centum (75‘: )

of such fair average value for the twelve: months

preceding the date of finality.

amount of fifteen hundred dollars ($1,500.00) in value

of the stock in trade, or one-quarter of the value of all

the stock in trade, whichever is thé greater figure,

shall be entirely exempt from assessment and taxation;

and the remainder, if any, then shall be assessed and

taxed at seventy-five per centum (75%) of such fair

average value for the twelve months preceding the

date of finality. a oa

(d) For the purpose of county taxation in Alle

gany, Anne Arundel, Baltimore, Calvert, Caroline, Car-

_ roll, Cecil, Frederick, Garrett, Harford, Howard, Kent,

Montgomery, Prince George’s, Queen Anne’s, Somer-:

set, Talbot, Wicomico.and Worcester counties and the

City ‘of Annapolis, such stock in business shall be

assessed at sixty per centum (60%) of such fair

average value for the twelve months preceding the

date of finality.

_ e) Provided further,. however, that any person,

firm or corporation who shall take advantage of the

provisions of -this section ‘shall not be allowed the .

exemption in the percentage of the total assessed

valuation which is provided by Section 8, subsection

(24) of this article.

22. 23. For the purpose of the assessment and collec-

tion ((or)).of ord’aary taxes on distilled spirits, it is -

hereby: made the duty of each distiller, and of every

owner or proprietor of a bonded or other warehouse,

> in which distilled spirits are stored and of every per-

son or corporation having custody -of such spirits to.

make report to the State Tax Commission on or before

the fifteenth day of March in each and every year of all

the distilled spirits on hand as of the first-day of

January preceding, and the tax for the ensuing year

from the said first day of January shall be levied and

paid on the amount of distilled spirits so in: hand as

representing the taxable distilled spirits for such

year ((;).), and said spirits. shall be valued and as-

sessed at fair value. The term fair value as used in

this séction shall mean cost or market value, which-

ever is lower, without any allowance for ,inflation. .

Provided, however, ‘that the same distilled spirits

shall not be taxed twice for the same year.

Sec. 4. And be it further enacted, That no person;

firm or corporation shall be. subject to criminal prose-

‘ cution or criminal penalties because of any violation of -

’ the provisions of these sections which occurred prior

. to the passage of this Act.

Sec. 5. And be it further snndted, That. if any one

or more sections, clauses, sentences, words or parts of

this Act shall for ‘any reason be questioned in any

court, and shall be adjudged unconstitutional or in-

valid, such judgment shall not effect, impair or in-

validate the remaining provisions hereof but shall be

confined in its operation to the specific.provisions so ~

held unconstitutional or’ invalid, and the inapplica-

bility or invalidity of any section, clause or provésion . .

of this Act in any one or more instances shall not be

taken to affect or prejudice in any way its appli-

cability or validity in any other instance.

Sec. 6... And be it further enacted, That this Act

is hereby declared to be an.emergency measure/and

is necessary for the immediate preservation-of the public —

health and safety and having been passed by a yea_

and nay vote, supported by: three-fifths of all the

members elected to each of the two Houses of the

‘General Assembly of Maryland, the same shall take

effect from the date of its passage.

Approved April 4, 1958. °

ow we awe ores

— et ee

_APPENDIX B

Opinions BELOW

In. the Circuit Court No. 2 of Baltimore City

rere

_ National Can Corporation wy

vs.

Cornelius P. Mundy, Owen E. Hitchins and John

Wood Logan, Constituting the State Tax*

Commission of Maryland. |

MEMORANDUM AND ORDER

This is an appeal from an assessment of the personal .

property of National Can Corporation for the year 1957

made. by the State Tax Commission of. Maryland in the .

exercise of its original jurisdiction: It raises the question

of the ee of — 73 of the Laws of Mary-

land_of 1958. !

The ground for this a is that en aeen 72 is un-

constitutional and void, both in substance and to the extent

that it was made to apply retroactively to the- year 1957.

In Sears, Roebuck & Co. v. State Tar Commission of

Maryland, 214 Md. 550, 136 A. 2d 567 (1957). the Court of

Appeals ‘held that under the’ statute then in. effect real

property and stock in business had been classified alike

by the Marvland: Legislature for assessment purposes, and

‘therefore, since the State Tax’ Commission made allow-:

ances for inflation in assessing real property. it was re-

quired to ma:.e the same allowances in ‘assessing stock .

in business.

_ Chapter 73 of the Laws of 1958 was one as a result -

of the Sears Roebuck decision.. and as the preamble’ to

the Act recites. was intended “to effectuate the — ‘of

the State Tax Commission . . . as it existed prior to the.de-

_cision in the Sears case.” .

The right of the General Assembly to provide for sepa-

rate classification of real property and personal property ©

is clearly established by the amendment of November 2,

1915. of Article 15 of the Declaration of Rights of Mary-

land. The history of Article 15 is set forth in 37 Op. Atty.

Gen. 424 (1952). The constitutional requirement is met

_when there is a proper classification and uniformity within

each classification, This Court finds that Chapter 73 of

the Laws of Maryland, 1958, insofar as it authorizes the

separate classification of real property and personal prop-

erty. is valid and constitutional both under the marytond

Constitution and the Federal Constitution. :

Petitioner argues separately that Chapter 73 canrot be

applied retroactively to January 1, 1957, and to that extent

is unconstitutiona!. More also, the preamble to the Act

gives the reasons the Legislature made the statute retro-

active. In the main, the Legislature sought to avoid a sub-

stantial loss of revenue by the State. ; ‘

The leading Maryland case regarding the constitutional

validity of retroactive legislation is Comptroller v. Glenn L.

Martin Co., 216 Md. 235 (1958). In that case. the Court of:

Appeals struck own a statute. which sought to make

amendments to the Sales and Use Tax Acts retroactively

effective for a period of ten years. However, as the Court

of Appeals noted, not all retroactive statutes are invalid.

Diamond Match Co. v. State Tax Commission, 175 Md. 234.

200 A. 365. Chief Judge Brisne. in his opinion in the Martin

-case, reviewed the decisions on tax’ statutes which were

“made retroactively effective. I find that’ Chapter 73 falls

within the permissible limits of retroactive tax legislation.

-The factual situation in the instant case is far different

. from that in the Martin case where, the Legislature at-

tempted to tax transactions — long before the

tax was in existence. .

For the, above reasons. the Court finds that the assess-_

ment entered against Petitidner by the State Tax Commis-

Filed: April 8, 1959

sion ‘is valid and correct; and it is hereby Orpgrep, -Ap-

. JUDGED, and DecreEp by the Circuit Court No,2 of Balti-

more City. this 8th. day of April. 1959, t he appeal of

-National Can Corporation be and it is hereby dismissed,

with costs:

/s' JOSEPH L. CARTER,

Judge.

In the Court of Appeals of Maryland — |

(No. 29, September Term, 1959, - finns

- Reported in 220 Md. 418, 153, A. 2d 287

National Can Cosporation

State ‘Tax ‘Commission of Maryland

Decided July 9, 1959 .

'. Motion for stay of execution of mandate filed August 5,

1959. granted and order signed, September 1, 1959.

Appeal from Circuit- Court No. 2 of Baltimore City

(CARTER, J.). P

- Appeal by National Can Cameos: to — Court

No. 2 of Baltimore City from a final assessment of the State

Tax Commission. From an order dismissing the appeal,

National Can Corporation appeals. ; :

Order affirmed. with costs.

The cause was argued before Brune, C. J.,.and HeENDER-

SON, Hammond, Prescott and Horney,. JJ.

Brune, C.J., delivered the opinion of the Court.

- Pe si

The appellant, National Can Company, ( National) seeks

to set aside the assessment for the year 1957 of its tangible

personal property, consisting of. furniture, fixtures and

equipment, manufactured products and raw material, tools

and machinery used for manufacturing, and tools and.

machinery not used for manufacturing. The aggregate as-

sessed value of such: property is somewhat in excess of

$5,200,000, the great bulk of it being placed upon manu-

factured products and raw material (over $3,737.000) and

tools and machinery used for manufacturing ($1,432,000).

The assessments were made by the appellee, the State Tax

Commission -(the Commission). The case turns upon the

validity of Chapter 73 of the Acts of 1958 (the Act), which

the trial court upheld.

The Act begins with nine ‘iin (1) a reference to the

decision by this Court of the case of Sears, Roebuck & Co.

v. State Tax Commission (214 Md: 550). 136 A. 2d 567; (2) |

a summary of the holding therein — that real property

and stock in, business have been classified alike by the.

General Assembly for assessment. purposes and that the

same allowance for inflation must be made in. respect of

stock in business as in respect of real property: (3) that

Article 15 of the Maryland Declaration of Rights empowers

the General Assembly to provide for the separate assess-'

ment of land and the classification and sub-classification

of personal property; (4) that “it is the intention of the

-’ General Assembly to classify real property separate and

distinct from personal property. and to separately sub-

classify certain classes of personal property for assessment

purposes, to the end that an allowance for inflation may be

, made in respect to real property, but not in respect to. ~

personal property;” (5) that “it is the belief of the General

_ Assembly that the natural and inherent differences be-

-tween real and personal property, and the. peculiarities of

certain classes of personal’ property ‘require and justify

separate classification and sub-classification for assessment

purposes as.aforesaid, and require and justify the making of

an allowance for inflation in respect to real estate assess-

ments but not in respect to personal property assessments:”

(6) that “the State will lose substantial revenues as the

It of the Sears Roebuck decision unless remedial legis-

lation is enacted and made retroactive to January 1,.1957;"

(7) that “the great majority of taxpayers have paid taxes

upon stock in business without protest for the year 1957,

leaving only a small number of protesting taxpayers to

‘whom the Sears Roebuck decision will be applicable un-

' less remedial legislation is made retroactive;” (8)- that

“it is the belief of the General Assembly that fundamental

concepts of fairness and equality require that the pro-

testing taxpayers be accorded the same tax treatment as

those taxpayers who have paid taxes ‘upon stock in busi-

ness: without protest,:to the end that no undue advantage

_ will accrue to the protesting taxpayers who had not paid

their taxes at the time of the filing and publication of the

Sears Roebuck decision on or about November 22, 1957;”

and (9) that.“it is the intent of the General Assembly

of Maryland to effectuate the policy of the State.Tax Com-

mission and of other taxing.authorities of this. State as it

existed prior to the decision in the Sears case, this policy

- being to allow for‘inflationary factors in the assessment

of real estate but not to allow for such inflationary ae “Ol

in the assessment of persona! property”. X\

The operative. provisions of the Act undertake. to carry,

into effect the purposes and intent of the General Assembly

as expressed:in the above preamble clauses numbered (4)

* to-(9), inclusive. Accordingly, the Act, insofar as here

. pertinent, amends or adds to the pre-existing law by pro-

. viding, in brief, “effective as of January 1, 1957”: (a) for

the separate classification for taxation of real and personal

property, with a separate sub-classification urider the latter

of “stock in business” (inventory); (b) for the determina-

tion of the “full cash value” of real estate by deducting

from its “current value * * * an allowance for inflation, if ”

in fact inflation exists”; (c) for the determination of the

full cash value of personal property, as its “current value

without any pt ce for inflation”; (d) for the deter- -

mination of the “fair average value” of a “stock in busi-

ness” by taking the “cost or market.value {thereof}? which-

ever is lower. without any allowance for inflation” 2 fe)

for immunity from prosecution or penalty for any viola-

tion of the Act which occurred prior to its passage; and -

(f) for the separability of the provisions of the Act. The

Act ‘was .passed as an emergency measure to take effect

from the date of its passage, and it was approved o il

4, 1958. It was clearly intended to reverse the result

the Sears case for 1957,and subsequent years. —

This case is a sequel to the Sears case, supra, 214 Md. 550,

136 A. 2d 567. There. this Court held that, unfer the then

existing law, the assessment practice of the State Tax

Commission of making a deduction from the “full cash

value” of real estate in order to allow for the effect of in-

flation, but of refusing to make any such deduction from

the “full cash’ value” of personal property (consisting of

stock in trade) constituted a discrimination against the

owner of such personal property, from which the owner

was entitled to relief by having his assessrnent reduced.

- At the times of the assessments involved in the Sears case

Code (1957), Art. 81, Sec. 14! -provided (in part) that, |

“le]xcept as hereinafter provided,'all property “directed in

this article to be assessed, shall be assessed at the full

- cash value thereof on the date of finality.” A special method °

of determining the fair cash value of the stock: in trade of

persons\engaged in manufacturing or commercial business

was prescribed by Sec. 15 (Sec. 14 in 1951). This was based

upon the average value of inventory for the twelve: months

preceding the date of finality. = * a

Before proceeding further it s seems well to state that the

Sears case did not determine # Article 15 of the. Mary-

land Declaration of Rights required: uniformity of treat-

ment of real: estate and personal property for tax purposes.

No such question ‘was involved in the case. It was there

Held: that under the applicable statutory’ provisions _ the

Legislature had put real estate and i inv ventories on the same

wa Nag /

1 References to’ section numbers i in this opinion are to those of the »

1957 Edition of the-Code, or amendments thereto; and, unless other-

“wise specified, references simply ta section numbers are to sections

of Art. SLof the Code. Sec. 14 of the 1957-Fdition was See 13 (a)

of the 195] dition. .

roel i

footing for tax purposes, ‘and that a practice of the Cum-

_ mission which gave to the former more favorable treat-

ment than to the latter as to assessments! and therefore »

(because the tax rates per dollar of assessed value were

the same) also gave to owners of real estate more favor-

able treatment as to the amount of taxes on property of

equal value, was invalid. It was further held that under

the Equal, Protection Clause of the Fourteenth. Amend-

- meht to the Constitution of the United States, the owner

ta.

- States. in

of personal property was entitled to have his assessment

~ reduced to-the same level as that applicable to real estate.

The challenges to the validity of the Act are based upon

the following grounds: first, that it sets up an unfair and

discriminatory basis for the assessment of real and personal

property, which (a) is not authorized by the provisions for

classification of property contained in Article 15 of the:

Maryland Declaration of Rights and which ‘(b) is pro-

hibited by the Fourteenth Amendment to the Constitution

of the United States; second, that it is an invalid attempt

to delegate legislative power to the.Commission, since it

sets up no standards whatever by which the Commission

is to be guided in making an allowance for inflation’ in

assessing real estate and thereby nullifies the sole basis

‘ordered for differentiation between real and personal prop-

erty, and third, that its retroactive provisions are un-

constitutional as a violation of due process under Article

we of the Maryland opus of Rights and under the

durteenth Amendment to the Constitution of the United

. a }

The first attack is two-pronged, but: its two branches are

so closely related as to make it desirable to treat them to-

. - gether so as to avoid unriecessary repetition. ~

The power to classify property for purposes of taxation

was conferred by the amendment to Article 15 of the

Maryland Declaration of Rights which was proposed by

Ch. 390 of the Acts of 1914 and ratified November 2, 1915.

Prior to that amendment, taxes were required under

Article 15 to be apportioned in:accordance with the actual

Rarase Yi

—,

weetk of the Nexpayer j in real or siileadeas property. ‘This

necessarily: meant - uniformity of assessment as well as uni- ~

- formity of tax rates? See an article by H..H, Walker |

Lewis, Esq., “Maryland Tax Articles,” 13 Maryland L. Rev.

83, at 105; State v: C erland, & Penn. R.R. Ca, 40 Md.

22; Schley, v..Montgom county, 106 Md. 407, 67 A. 250.

The history of Article 15 is“traced by Lewis and is also

traced in a very fufif opinion of then Attorney General,

nov’ Judge Hammond, and of Robert\M. Thomas, Esq.,then

an Assistant: Attorney General, reported. i in 37 Ops. Att’y

Gen. 424 (1952). See especially pages 426-433 and the cases

therein cited. We shall not undertake to review. this his-

tory at léngth in this Spinion. i

or person holding property therein, ought to contribute his

proportion..of public taxes, for the support of the govern-

ment, according to his actual worth in real or personal -

. property”. This was omitted by the 1915 amendment,

In th he Constitution of 1867, as originally adopted Article:

15 contained a ‘provision that “every person‘in the State,

which substituted the provision “that the General Assem- .

bly shall, by ‘uniform rules, provide for separate assess-

ment of ‘land’ and: classification and subclassifications of

improvements on land and personal ‘property, as it may

deem proper; and atl taxes thereafter provided to be levied

by the State for the support of the general State Govern-

ment, and by the Counties and by the City of ‘Baltimore

for their respective purposes, shall be uniform as to land

‘within the taxing district, and uniform within the elass

or subclass.gf improvements on land and personal property:

which‘ the réspective taxing powers may have directed to

be subjected to the tax levy”. The Article still concludes

with the provision “yet fines, duties or taxes may justly

be Amposed, or laid with a political view for the good

government: and benefit of the community.” This last

clause is not involved in the present case, vy |

Susquehanna Power Co. u. State Tax Comm. 159 Md.

334. 151 A. 29. makes it clear that the obligation of owners -

of property within the State to pay taxes thereon continues

to exist. notw ithstanding the’ amendment. and is ee

, d ’

\ .

ae oh, iy Rg as by

ee \ »

_ 33

in the provisions with regard to uniformity within classes

or subclasses: We find, however, no implication in that

‘ease of a continued constitutional obligation under Article

- 15 that taxes must’ be uniform as between different classes

of property. Cf. Wells v. Hyattsville, 77 Md. 125, 26 .A. 357,

‘decided in 1893, in: whieh it was. held that a local Act im-

posing a tax on feal estate, but barring a tax on personal

property, for town purposes was unconstitutional under

‘ Article 15. as it then stood. : } :

In Oursler.v. Tawes, 178 Md. 471, 13 A. 2d 763, this Court

held that Article 15 did not bar income taxes at different

rates on ordinary income and on investment income.- This

case is of especial significance here because, although the

Court considered it doubtful whether an income tax was-a

property tax; it’ was held that it was controlled by the

same basic principles which govern either excise or prop- .

erty taxation. (178 Md. 482.) In rejecting the taxpayers’

argument based upon alleged unwarranted discrimination .

this Court ‘said. (178 Md. 484-485): “In some cases, it is .

‘ submitted that sources of income accruing from property |

of one classification are subjected to a greater tax burden

than‘are sources of income derived from property pertain-

ing'to another and separate classification. And it is argued

that for that reason’ the effect of the act is to impose an.

arbitrary and discriminatory tax upon some’ taxpayers

as compared with the tax burden which it places upon

others. This situation, however, arises not as between

taxpayers ‘whose sources of income or situations are simi-

lar in that. they accrue from property of like classification

‘ under the act: but arises in cases ‘Where the. Sources of

income accrue from property of separate and distinct

classifications under the act.” This sgems to be a clear

indication. that taxes can be different as between different

classes of property; “| "Ye

- See also County Comm'rs of Anne Arundel County v.

English. 182 Md. 514, 35 A. 2d 135, which récognized that

there can be a reasonable classification for tax purposes,

‘but Struck down the assessment’ there involved as being °

- discriminatory. ary

1 Cooley, Taxation, (4th Ed.j, § 281,,p. 596, states:

“* * * [I]n those states where all property neéd not. be

taxed, a classification of property as real and personal,

and the taxing of one and not the other, has been upheld. ~

Maryland has long granted or permitted exeniptions: in

favor of religious or charitable organizations and other ex-

emptions believed to be in the. public interest, such as

those from local or State taxation, or both, of raw mate

rials and inventory in the hands of manufacturers and .

manufacturing machinery and equipment. Indeed, it was

the repeal of such exemptions in Baltimore City which pre-

-cipitated the present controversy. Cf. Kimball-Tyler Co.

v. City of Baltimore, 214 Md. 86, 133 A. 2d 433. National

was a party toa suit covered by that case.

In footnote 25 to § 292, op. cit., Cooley says: “If there is

a general power to classify, no good reason is apparent why

different rates hon: 4 not be imposed on real and personal

' property as constituting | separate classes.” See Klein .v.

Bd. of Supervisors, 282 U.S. 19, 24: Waring v. City of Sa-

vannah, 60 Ga. 93, 98; Wadhams & Co. v. State Tax Comm.,

273 P. 2d 440 Ore.) ; Hilger v. Moore, 182 P. 477 ( Mont.).

A like rule has been applied to variations in assessments

of different classes of property.. Rees v. City of Erie, 90 A.

58 (Pa.), involving different percentages applied to land

and to improvements... Kentucky Finance Co. v. McCord.

290 S:W. 2d 481 (Ky.), 100% of full cash value on intan-

gible personal property. 29.7'7 on réal estate.

Inf Marvland. a totally different basis of taxation of intan- .

gible personal property long prevailed — the so-called 30-

mill tax on stocks, bonds and other securities. Its repeal

and replacement by the income tax on:investment income

. shows the interrelation which may exist between property

taxes and ince me taxes *

* Former. Se Oscar Leser, for ‘many years a member of the

Appeal Tax Court of Baltimore and, later of the State Tax Com-

- mission, has stated that prior to the 1915 amendment «if Article 15

ethe 30-mG1T tax w: is ee one , though it was never challenged.

See Lewis, of. ¢ 13 Md. TE. Rev. 100, citing Proceedings of

— facturers long antedate the LOLS amendment

The Attorney General's opinion above referred to (37.

Ops. Att’y Gen. 424) dealt directly with a statute .which

provided for the assessment of inventories in two counties

. for local purposes at 75‘: of the fair average value thereof

during the year preceding the date of finality. In discussing

the question: the opinion (p. 434) ‘referred ‘to 1. Cooley,

op. cit., § 298 and quoted a footnote stating that “Ordinarily,

_ it would seem, a classification whereby one’ class of. prop- —

erty would be valued at a higher or lower percentage of

real value. than other. property, conceding the power to

classify. in a proper case, would ordinarily be an unreason-

able classification and therefore invalid.” The Attorney Gen-

eral commented: “This is almost the equivalent of saying

the power does not exist.” We agree with this comment.

At page 436 of the above opinion, the Attorney General

made. the following further comment, with which we also

agree: i

“Moreover, inasmuch as the final tax is the product

of the rate and an assessment of valuation, there would.

‘seem to be little logic from the standpoint of. practical

results in denying the Legislature the power to classify

for purposes of valuation and assessment when it al-

ready has the power to classify as to rates. The trend, -

such as it is, seems to be toward increased powers of .

classification for all purposes, particularly where the

Constitution requires uniformity only within the class

or sub-class of property.”

We, therefore, find it unnecessary to rest our decision

with regard to the power of the General Assembly to

. ‘classify upon the parrow ground of the statement in Rogan

- », County Commissioners of Calvert County. 194 Md. 299.,.

309. 71 A. 2d 47, 51 (which cited 4 similar statement in

Leser v. Lowenstein, 129 Md. 244, 250, 98. A. 712), to the

effect that the requirement of Article 15 that taxes shall

- be uniform as to land within the taxing district, “refers to

levies of taxes and not to assessments.” The test which

we deem appropriate is the reasonableness of the classifica-

tion rather than the’ method by which a difference in the

amount of taxes is effected — whether by a difference in

percentage of assessment or by a difference in the rate

of taxation applicable to the respective classes. Cf. Lewis,

op. cit., 13 Md. L. Rev. 103-107, where he questions the .

statement as made in the Rogan case on the ground that:

- it has been lifted out of the context in which it was made

in the Leser case and was thereby givena destructive eff ect :

as to the uniformity which should be required.

Our present Article-15 requires that a classification be

uniform within a class, and this Court struck down as

arbitrary a classification under our Income Tax’ Law in

Blaustein v. Tax Comm. 176 Md. 423, 4 A. 2d 861, where

there was no real difference between income from certain.

trust estates which ‘was taxed and income from others

. which was not. '

Turning_now to the Equal Protection Clause of the Four-

teenth Amendment, it is well settled that this Clause does .

not prevent.a State from making a reasonable classifica- -

tion for tax, purposes and taxing different classes -differ-

ently. Michigan Central R.R. Co. v. Powers, 201 U.S, 245:

Kentucky’ Union Co. v. Kentucky, 219 U.S. 140; North-

‘ western Mutual Life Ins. Co. v. Wisconsin, 247 U.S. 132:

Nashville, C. & St. L. Ry. v. Browning. 310 US. 362; 1

Cooley, Taxation, (4th Ed.), § 332, p. 705..

- In the very recent case of Allied Stores of Ohio, Inc. v.

Bowers, 358 U.S. 522 (1959), the Supreme Court has re

viewed many cases dealing with classification for purposes

of state taxation of several kinds and has restated some of

the rules with regard to the application ‘thereto of the

Equal Protection Clause of the Fourteenth Amendment.

The Court points out that this clause ‘imposes no iron

rule of equality, prohibiting the flexibility ‘and varietv

that are appropriate to reasonable schemes of state tax-

_ ation.” (358 U.S. at page 526.) The Court further says

(p. 527): “But there is a point. beyond which the State

cannot go without violating the Equal Protection Clause.

The State must proceed upon a rational basis and may

not resort to a lassification yhet is palpablv arbitrary.

The rule often has been stated. to be that the classification

‘must rest upon some ground of difference having a fair

and substantial relation to the object of .the legislation.’

[Cases cited.] ‘If the selection or classification is neither

capricious nor arbitrary, and rests upon some reasonable

consideration of difference or policy, there is no denial

of the equal protection of the,law.’ Brown-Forman Co. v.

Kentucky, 217 U.S. 563, 573; State Board of Tax Comm'rs

v. Jackson, 283 U.S. 527; 537. That a statute may discrim-

inafe in favor of a certain class does not render it arbitrary

if the discrimination is founded upon a reasonable distinc-

tion, or difference in state policy. American Sugar Ref:

Co. v. Louisiana, 179 U.S. 89; Stebbins v. Riley, 268 U.S.

137, 142.” |

The Brown-Forman case upheld a tax on distillers and

rectifiers of blended spirits, though the state imposed no

corresponding tax on distillers or rectifiers of straight

spirits. In the Jackson case a progressive tax on chain

stores based upon the number of units was.upheld. In the

American Sugar Refining case a tax on persons or corpora- .

tions engaged in the business of refining sugar and mo-

lasses was upheld, notwithstanding an exemption in favor’

_of planters and farmers. grinding and refining their own

sugar and molasses. In Stebbins v. Riley, supra, a state

inheritance tax was. upheld which prohibited the deduc-

tion of the amount of the Federal Estate.Tax in arriving

at the amount of the state tax, even though such disallow-

ance resulted in equalities in some instances.

Equality within a class is essential under the Equal Pro- -

tection Clause, but equality between different classes is not

_required.- Kentucky Railroad Tax. Cases, 115 U.S. 321,

Magoun v. Illinois Trust & Savings Bank, 170 U.S. 283;

Michigan Central R.R. Co. v. Powers. supra, Hart Refiner-—

ies v. Harmon, 278 U.S. 499.

The Supreme Court has also said that the Equal Pro-

tection Clause does not require that a state tax all pursuits

or all property that may legitimately be taxed. Connolly _

v. Union Sewer Pipe Co., 184 US, 540,* 562. ‘That Court..

has held that if a state taxes wholesale dealers in certain

' Specified articles, it need not impose a like occupation tax

upon wholesale dealers. in other articles. Southwestern

- Oil Co. v..Texas, 217 U.S. 114. *

Our next problem is whether or not, urider established

rules, the particular classification here made is valid .inder

Article 15 of the Maryland Declaration of Rights and under

the Equal Protection Clause of the Fourteenth Amendment.

The Supreme Court has repeatedly stated that under the

Equal Protection Clause real property and personal prop- -

erty may be differently taxed. Bell’s Gap R. Co. v. Pennsyl-

vania, 134 U.S. 232, 237; Home ‘Ins. Co. v. New York. 134

U.S. 594, 606; American Sugar Refining Co. v. Louisiana,

supra; Southwestern Oil Co. v. Texas, supra: Stebbins v. |

‘Riley, supra; Ohio Oil Co. v. Conway, 281 U.S. 146, 149.

In none of these cases: was this the actual holding of the

case, but the general principle appears from these. nu-

merous statements to be fully accepted as well settled

law), See also, 1 Cooley, Taration, § 281, above cited: as

to taxation of one class of property and not the other; 51

Am. Jur., Taxation, § 194; 84 C.J.S., Taxation: $ 26: Ken-

tucky Finance Co. v. McCord, supra. |

These authorities are, we think, sufficient to sustain

different treatment of real and personal property for pur- -

poses of. assessment for’ taxation. We shall not, however.

rest our decision on this phase of the case solely on that

general ground: !

We ‘have already set forth the declarations of the Legis-

lature in the preambles to the Act. Those numbered above -

as (4), (5) and (9) seem of particular pertinence in. this

aspect of the case, and the operative provisions of the Act’

are in accord with the intent and belief therein set forth.

It is not incumbent upon the- Legislature to state its rea-

sons, motives or policies for adopting a tax classification —

(Southwestern Oil Co. v. Texas, supra; Allied Stores ine

Ohio v. Bowers, supra), insofar as the Equal Protection

Clause is concerned; but if it does so, State action may he’. _

_tested sole]v on the basis of the purpose declared. Wheel-

ing Steel Corp. ' v. Glander, 337 US. 562, commented ‘upon

and distinguished in the Allied Stores case.

The preamble of the Act (Par. (5)) speaks of the in-—

herent differences between. real and personal property

and the peculiarities of certain classes of personal prop-

erty (first) as requiring and justifying separate classi-

fication and sub-classification for assessment purposes and

(second) as requiring and justifving the making of an

‘allowance for inflation with respect to real estate, but

not persynal property. Other recitals show, we think, that

inflation ‘at least prompted.the adoption. of the statute.

_ Yet, after we give careful consideration to that fact. and ;

if we accept the appellant's contention that there must be

some difference it the impact of inflation as between real

estate and tangible personal property to support the. dif-

ference in treatment here accorded. we cannot say that the

legislative classification based upon the finding stated in

preamble. clause (5). supra.. is unsustainable. There is a

strong presumption in favor of the validity of a legislative

finding. As was said by Chief Judge Markell, speaking for

this Court in Dundalk Liquor Co. v. Tawes, 201 Md. 58, 62,

92 A. 2d 560: “An invalid act cannot be made valid by a~

‘preface of generalities’ in the form of a legislative decla-

ration of purpose. Schechter Poultry Corporation v. United

States, 295 U.S. 495. 537, 55 S. Ct: 837, 79 L. Ed. 1570. But

if a legislative declaration is not demonstrably unirue or

_ meaningless, and if true, would support the validity of the

‘act. the courts must accept the judgment of: the legisla-

ture and cannot substitute a contrary judgment of their

own.” See also Mt. Vernon- Woodberry Cotton Duck _*

Frankfort Marine. ctc.. Insurance Co.. 111 Md. 561,

A. 105.

It is true that in the Sears case. this Court recognized.

what was not. indeed, contested. that inflation had affected

sales prices of real estate as well as of iriventories. That. -

however, is not an end of the matter for the impact may

be. and. in. effect./has been declared by the Legislature to

he, different as between real property and personal prop-

erty. Only a relatively small portion-of the’ total amount

of real property is, we believe, in the nature of the stock

in trade of developers of real estate dealers, and only a

relatively small portion is used for the purpose of manu- .

facturing goods for sale, which goods are themselves di-

rectly. affected by inflationary prices. Most real estate is

not held for sale or for manufacturing purposes. . Perhaps

it would be desirable to classify properties so held -sepa-

rately from, say. residential real estate not held for sale.

But to say that there is no difference, so far as the impact

of inflation is concerned, between real estate in general.

on the one hand, and tangible personal property consisting

of inventory and tools and machinery used for manufac-

turing, on the other hand, would be to make the tail wag

the dog. So to hold would, we think. amount to a substi-

tution of the judgment of this Court for that of the Legis-

lature, without any adequate evidence to show that the

classification. made by the Legislature was without any

reasonable foundation. The burden rests upon one attack- °

ing the constitutionality of an Act to show such lack. Sals-

_ burg v. State, 201 Md. 212,94 A. 2d 280, affd. 346 U.S. 545:.

Allied American Mutual’ Fire Ins. Co. v. Commissioner of

Motor Vehicles, 219 Md. 607. 150’ A. 2d 421; Dundalk Liquor

Co. v. Tawes, supra; Mt. Vernon:Woodberry Cotto Duck

Co.’v. Frankfort Marine, etc.. Insurance Co., supra: ‘Robey

v. Broersma, 181 Md. 325, 329, 26 A. 2d 820: Tai!rbaum v.

‘Pantexr Mfg. Co.. 204 Md. 360. 370, 104 A. 2d 813.

As to the relative impact of inflation upon real property

and tangible personal property, we may note that under

our present tax laws ahd exemptions from taxation (as

to the latter of which see Secs. 9 (12) and 9 (17) of Art.

81), generally speaking. taxable personal property is held

or used for manufacturing. mercantile or other business

_ purposes. As we have noted above, real estate. to a verv

considerable extent, is not. Inventories are held for sale

‘or resale in the hope and expectation of a quick turnover.

- By reason of the limitation of the assessable value of in-

‘ventories under Sec..15 (a) to cost or market, whichever .

is lower, the owner is ordinarily protected taxwise against

any inflationary rise in prices after he has become the.

value.

4l.

owner of the property. No ccrresponding protection is

built into the statute for other types of tangible personal

property, but even such other types of property are usually

held for a considerably shorter time than real estate, be-

cause they’ wear out or become obsolete more” rapidly.

They are generally subject to fairly rapid rates of de-

preciation under income tax laws as compared with im-

provements to.real estate, and land is not subject’ to de-

preciation at all in an accounting sense: Of course, de-

preciation allowances give a tax benefit under income tax

laws. In the overall picture of taxation the owner of -tan-

gible personal prcperty held for business purposes’ thus

receives a greater deduction in any given year from gross

income in arriving at his net income ‘subject to taxation

than does the owner of real property of equal original

Even though the owner of tangible personal property

Held: for business purposesmay fare worse taxwise than

. the owner of real estate, this alone does not nullify a cfassi-

fication based upon the two different types of property.

Insofar as our Article 15 of the Declaration of Rights is

- concerned, as we have already pointed out,\there would

seem to be little point in providing for different classi-

fications of property if different tax trgatment could not

. be accorded to the actyally different classes. Insofar as

the question of discrimination and the Fourteenth Aimiend-

ment is concerned, Allied Stores of Ohio v. Bowers, supra..

seems decisive. There the Court said (358 US. at'528), as

we have already noted, that the fact that “a statute may

discriminate in favor of a cértain class does not render

it arbitrary if the discrimination is founded upon a reason-

- able distinction, or difference in state policy”, and further

that “a classification. though discriminatory, is not arbi-

trary nor violative of the Equal Protection Clause of the

Fourteenth Amendment if any state of facts reasonably .

can be conceived that would sustain it.” The similarity

of the grablem of reasonable classification under a state

constitution like pur-Article 15 and under the Equa! Pro-

tection Clause of the Fourteenth Amendment. is apparent

49°

and was noted in State Board of Tax Comm’rs v. Jackson,

supra, /283 U.S. at 542.

In the present case we think, as we have indicated above,

that a state of facts can reasonably be conceived which

. would support the classification, and we, therefore find no

violation of either Article 15 of the Maryland Declaration

of Rights or of the Equal Protection Clause of the-Four-

teenth Amendment to the Constitution ° of the\ United

States. —

We.turn now to National's enhutien that the absence

of standards to guide the Commission in making an allow-

‘ance for inflation is fatal to the validity of the Act. The

language of the Act requiring that an allowance for infla’ -

tion be made in the case of real estate is certaifily. very

general in terms. However, the Act refers in its preambles

to the Sears case and to the prior assessing practices of

the Commission and of other taxing authorities with re-

‘gard to 0 making an allowance for inflation in the case of |

real estate and not making it in the case of personal. prop-.

‘erty. That such a practice existed was recognized in the

Sears case* and that it was sufficiently definite to be capable

of ascertainment, at least for the year 1957, was implicit

in the’ remand of the case for further proceedings which

were to be for the purpose of reducing Sears’ inventory

assessment to the same level as that.of real estate. Stich

reduction was.the point to-which Hillsborough Township :

"_v. Cromwell, 326 U.S. 620, was cited in the Sears case. The

evidence in this case indicates that the usual. deduction

which had been allowed for inflation in the case of real

estate was approximately 40°. It is to be presumed that

‘ the General Assembly was familiar with this practice when —

it stated its inténtion to effectuate the policy of the Com-

mission and of other taxing authorities and adopted an‘

ar carry that intention into effect.

- ® Some pyactice ects assessment of: .real estate at less than

full vical - value has been used by the Commission in the past. See

Rogan v./Co. Comnirs, supra. And.a hybrid system of valuing® im-

prevem Ats to real estate, based upon age, was ‘upheld in State Tar »

C ies Rrandt Cahinet Ww orks, 202 Md. §33, 7 A. 2 290

J a

We find it unnecessary, however, to pass upon any ques- |

tion based upon the vagueness of the statute az regards

real estate. If we assume, without deciding, that the ab-

sence or vagueness of the standards set up renders the pro-

vision for such an allowance invalid, we think that the

separability clause woul@,co me into operation. This would

Teave the provision for* Sxcation of personal property at

full cash value in full force and effect. The appellant con-

tends that since the provision for allowing a deduction

in real estate assessments on account of inflation must fall,

- then; giving effect: to the separability clause, real estate is

(still) assessable at full cash value, and we are back at

the same place as in.the Sears case. ns

We do not think that this result follows. On: the con-

trary, we think that a reading of the whole Act, including

the preambles, indicates that the General Assembly in-

tended to exercise its power of classification as one objec-

tive in itself, dnd that this is true. notwithstanding that

inflatiofiary influences affecting real estate and the decision

in the Sears case doubtless prompted its action. It seems

clear that: the Legislature intended to tax personal prop-

erty at full value, just as it intended to tax real property

at less. There seems little reason why the possible failure

of the latter objective because of inadequate guides as to

how to effect it, should defeat the former. There is no

room to infer that the Legislature inténded to treat both

- alike. Here the Legislature could hardly have made it

plainer that it intended to classify real estate and personal

property separately for tax purposes and to treat them

differently. An intention to treat them alike was the foun-

dation of the Sears decision; under the present Act that

intention no longer exists.

In the light of w ‘hat we have just ‘said, if we assume that

the provision for an allowance on account of inflation for

real estate is invalid for vagueness or lack of standards,

we cannot say that the General Assembly would not have

_ adopted the Act ‘at all, and specifically the provisions for

-classification. if it had known that this provision would

be stricken down: nor can we say that it is so interwoven

with the entire Act that the provisions fot different classi-

fication cannot stand without it. Therefore, we think that

the provisions as to.personal property should stand and the

separability clause and the presumption ch it creates

should be given effect. Fidelity & Guaranty Fire Corp. v.

. State Tax Comm., 172 Md. 652, 193 A. 164;. Oursler v.

\ Tawes, supra;,Md. Unemployment Comp. Bd. ‘v. Albrecht, ©

\183 Md. 87, 36 A. 2d 666. See also Bd. of Co. Comm’rs of

_ .Prince George’s Co. v. Donohoe (No. 257, Sept. Term, 1958),

220. Md. 362, 152 A: 2d 555. Cf. Heubeck v. City of Balti-

‘more, 205 Md. 203, 107 A. 2d 99; City of Baltimore v. A. S.

Abell Co., 218 Md. 273, 289-290, 145 A.2d 111.

Accordingly, we should no longer have a difference

within the’same class as between National, a personal prop-

. erty taxpayer, and real estate taxpayers; but any inequality

which there ntay be is between different classes. As we

have held above, real property and personal property may

- be differently classified ‘and taxed, without any require-

ment for equality between them. Accordingly, we think,

National is in no position to complain. .

There is no obligation resting on the State under the

- Fourteenth Amendment\to tax other classes. See Connolly.

v. Union Sewer Pipe Co.;, Southwestern Oil Co. v. Te-xas..

both cited above, and the-cases upholding different taxation *

of different classes of property. See also Chagleston Fed-

eral Savings & Loan Assoc. v. Alderson, 324 U.S. 182, 191, ,

in which it is said that the Equal: ‘Protection Clause does .

not prohibit inequality in taxation “which is‘ not, shown

to’ be thesresult of. intentional or systematic undervalua-

tion of some but not all of the tax! property in a single

class.” (Italics supplied. )

Any invalidity. of the inflation allowance provisions af-_

fecting real estate of which a real property taxpayer might

complain because of alleged inequality of assessments does °

not give a taxpayer not affected by the provisioris com-

plained of standing to maintain a suit to’ ‘upset them.

‘ Roberts & Schaefer Co. v. Emmerson, 271 U.S. 50, 54: Sea-

board Commercial Corp. v. State Tax’Comm.., 181 Md. 234.

239, 29 A. 2d 294; Atkinson v. Sapperstein, 191 Md. 301,

{

3 /

6 5

309, 60 A. 2d 737; Hess v. Mullaney. 213 F. 2d 635; People

vy. Southwestern Bell Tel. Co., 36 N.E. 2d 362 (Ill. Sup.

Ct). In the last mentioned case, it:was held that there was

no violation of uniformity of taxation where the assess- -

ment of one kind of property (real.estate) was reduced -

and that of another (personal property) was not.

The appellant's last contention is that the Act is invalid :

as applied to 1957 assessments ‘because, as to them. it is

retroactive. A ; :

The subject of retroactive taxes was considered at some

length in Comptroller v. Martin, 216 Md. 935, 140 A. 2d

288, in which retroactive sales gnd use tdxes having a

‘backward reach of three to six years as to the transactions

there invélyed was held invalid. That case, however, rec-

ognized the often stated rule that a taxis not necessarily.

invalid because it is retroactive, citing Diamond Match

Co. v. State Tax Comm., 175 Md. 234, 200 A. 365; Leser v.

Wagner, 120 Md. 671, 87 A. 1040, affd, sub nom: Wagner v. .

Baltimore, 239 U:S. 207; ana Weg ey 305 U.S. 134.

The first generat group of caSes discussed in the Martin

case in which retroactive taxes have been upheld are the

so-called ratification cases. Trobably the leading case.

among them is United States v: Heinszen & Co., 206 US.:

370. In speaking of this case, we there said: “It upheld

an Act of Coneress.which validated customs duties pre

viously imposed under Presidential, rather than Congres- ”

established the lack of ppwer to impose such duties with-

out the authorization of Congress. The case was rested

squarely upon ratifieation of the acts of an agent done

without prior authority from the principal. The Heinszen_

case was followed in Tiaco v. Forbes, 228 U.S. 549, and in

Rafferty v. Smith, Bell & Co., 257 U.S. 226. In Tiaco v.

Forbes, 228 U.S. at 556, Mr. Justice Holmes thus stated’ the

ratification Goctrine: ‘|I|t generally is recognized —_—"-..*

g .._where the act originally purports to be done in the name

and by the authority of the state, a defect in that authority

may be cured by the subsequent adoption of the act. The

ne ty,

person who has assumed to represent

..of the superior power ‘is given the berfefit of the represen-

fate if it turns out that his asgymption was correct.

‘Gases cited.]'”

At this point it ‘seems appropriate to state thit the Act,

- is not, in our estimation, an attempt ata legislative. re-

versal of a judicial decjsion. It is, rather, an attempt. to

~supply legislative authority previously lacking: Sée Wash-

ington Suburban Sanitary Commission v. Noel. 155 Md.

427, 142 A.'634, where .the Legislature. ratified an assess-

ment for a public improvement which had _ previously

by the ‘act originally au zing the assessment.

« been held invalid autora a lack of the notice required

The Noel: case is clearly a case of ratification. So, ‘we | oe

' think, is the present: ease. In the Martin case, the pre

ambles of the statute (which, as noted, did not constitute

parts of its operative provisions ) undertook to declare what

- the intent of the General Assembly had “always” béen as

‘ to certain definitions and that the uniform administrative

interpretatidn and enforcement had always: been in con-

_formity “with the provisions'of this Act.” It.was pointed

will and person oA

out that these recitals did not amount to.a legislative at-_

‘tempt to reverse prior decisions of this-Court contrary

to these declarations, that’if it were such an ‘attempt it

‘would be ineffectual (citing Article 8 of the Declaration

of Rights; Crane v. Meginnis, 1 Gill & J. 463, 476; and other

_ cases), and that the pertinent operative parts of the statute

there involved did not undertake to ratify anything. but |

to add retroactively a new definition to the Retail Sales ia

’ Tax Act and ( similarly) to amend ‘a provision of the Use

Tax Act. Thesé changes, which had the effect of bringing

transactions not previously’ taxed- within the ambit of.

taxation, were held to constitute new. Ghactments, not rati-

fication (216 Md. 245, 249).

In the instant case the intention to ratify ‘is clear, pe

though the word#ratify” is not used, and the words of the’

operative portion-of the statute are apt to accomplish that ,

purpose. Ifis true, as helrt+in the Martin case andin Gibson.

v. State, 204 Md. 423, 104-A. 2d 800, that a preamble is not —

“an operative part of a statute. It may, however, some-

times be resorted toin aid of the interpretation of a stat-

ute.s Hammond v. Lancaster, 194 Md. 462, 71 A. 2d 474,

~ Ham'mond v: Frankfeld, 194 Md. 487, 71 A. 2d 482. An

existing practice as to the assessment of property long

taxed was recognized and was adopted retroactively by

the enactment in the*case before usS. |

In one respect the case is stronger for ratification than

_ was the Heinszen case. This is that there was here a statute

in force which authorized the taxation of the property in =

question, but in Heinszen there was not. . The difficulty in

Sears stemmed from an administrative practice which was

céntrdry to the requirements of the statute; but, even so,

some assessment was proper. This, we think, is clear from

the decision in Sears to remand for the reduction of the

assessment; ctherwise the tax would have been held

‘wholly invalid. | 3 is

The ratification here involved is, we think, indistinguish-

able in principle from that upheld in the Noel case. It also

‘seems to be supported by Leonardo v. Bggrd- of County

~Comm’rs of St. Mary’s County, 214 Md. 287, 134 A. 2d 284,

~ where the General Assembly ratified an invalid statute

providing: for the establishment ‘of a. special taxing dis: —

trict for erosion prevention work, though there had been

no levy of taxes prior to the validating act.

National contends that no retroactive ad valorem tax —

‘has ever been upheld. The Commission controverts this

and cites a number of cases in support of its position.

‘ Among the cases ‘so cited we find Chicago, R. I. & P., Ry.

Co. v. Streepy, 211 lowa 1334, 236 N.W. 24, and Whitlock

». Hawkins, 105 Va. 242. 53 S.E. 401, quite in point. In

each the state legislature passed a retroactive; curative

act for the imposition of ordinary real estate taxes, which,

_ wwe take it, were ad palurem taxes. In ‘the Iowa case the.

original statute was held unconstitutional because of a

defect in the title; in the Virginia tase the original statpte

was held unconstitutional because it had not. received the,

requisite majority cf votes needed for an act of its type’

in the legislature. ae SEES y

We ‘see nothing peculiar to.an ad valorem tax. which

would call for the application of a different rule from that

applicable to some other types of retroactive taxes, such

as benefit assessments,

As was said in the Streepy case: “As to the contention

that the Legislature had no power to.pass.a retroactive

legalizing act, the law is that, if the Legislature possessed

the power in the first place to authorize the levy and col-

‘lection of the taxes in question, then it had the power.

by retrospective act, to cure any defect which may have

obtained in the assessment and callection of such a tax.”

In the Whitlock case the Supreme Court of Appeals of

Virginia said: “It is not claimed that there is any inhibition

in the Constitution of the State of Virginia upon the pas-

sage of retrospective laws by the Legislature. The au-

thorities we have cited abundantly show that such laws —

are not repugnant to the Constitution of the United States.

unless they partake of the nature of ex post facto laws, or

- impair the obligation of a contract; or. since the adaption

of the Fourteenth Amendment. deprive a citizen of prop-

erty without due process of law. |

“From these propositions a® fourth qualification is de-

duced, which is really a corollary from them. and that is.

that the curative act can only be effectual to do that which

the Legislature would have been competent to provide

for end require to be dorie by a law prospective in ifs

operation.” ;

_ We think that the Act in this case meets the tests stated

in the Whitlock case. en

A tax on imports is in at least one sense an ad valorem

tax. though it is not a general property tax. Hence. the

Heinszen case also seems to be against the appellant's .can-

tention that a retroactive ad valorem tax cannot be valid:’

Other cases cited by the appellee which tend to support

its contention on this point are: Kentucky Union Co. vr.

Kentucky, supra: Rafferty v. Smith, Bell &-Co., supra

‘tax on value of exports!; Wooley v. Hendri¢hson. +73

: NJL. 14, 62 A. 278 (validation of taxes for school pur-

poses); People ». New York Central R.R. Co., 282 Ill. ll.

118 N:E. 462 ‘curative act in 1917 to validate 1916 levy

for schools); Ricardo v. Ambrose, 211 F. 2d 212 (C.A., 3rd).

In the Kentucky Union case retroactive real estate taxes

for the years 1901 to 1905. inclusive, were imposed by a-.

Kentucky statute passed in 1906. It was held, citing League

v. Texas, 184 U.S. 156. that “Laws of a retroactive nature,

imposing taxes or providing remedies for their assessment

and collection’ and not impairing vested rights, are not

forbidden by the Federal Constitution.” (219 U.S. 152-153.)

- The fact that the appellant had instituted suit to have its’

assessment declared invalid prior'to the time of adoption

of the curative statute does not give it any vested right.

United States v. Heinszen & Co., supra; Mattingly v. Dis-

~ trict of Columbia, 97 U.S. 687; Chicago, R. I. & P. Ry: Co. -

v. Streepy, supra, 211 Iowa at 1342. ie ae \ |

In view of our holding that this case is one of ratification,

the “recent transactions’’ rule referred to in the Martin

ease does not seem of importance. if\it is; indeed, applicable

at all; nor do we find any violation of it. Perhaps the-most

stringent statement of that rule is to be’found in Common-

wealth v. Budd Co.; 379 Pa. 159, 108 A. 2d 563, where it

was said ( 108 A. 2d 569) that: “Following Welch v. Henry,

+ we.decide that a tax may not be retroactively applied be-

"yond ‘the year of the general legislative session imme-

diately preceding that. of its auuest: to provide other-

wise constitutes a denial of due process.” Wheeler v.

Commissioner of Internal Revenue, 143 F. 2d 162 (C.C.A.,

- 9th’. reversed on other greunds, 324 U.S. 542, adopts the’

same view of Welch v. Henry as did the Budd case. Welch

vr. Henry. supra. 305 U.S, 144. does not. however, impose

‘such a limitation; it merely upheld a tax not excceding it.

Here the date of finality was. January 1. 1957, (Kimball-

‘Puler Co. v. City of Baltimore, supra), which would fall

even within the rule of the’ Budd case, though we do not

“hold here. any more than we did in the Martin case. that

that case expresses the uttermost limit of retroactivity of

avtax statute under the recent transactions rule. a Laas

. . 50

In iii iis with the din views, the order of the

trial court will be affirmed.

Order affirmed, with costs.

HENDERSON, J., filed the following dissenting opinion. |

The majority opinion properly observes that this case is

a sequel to the-case of Sears, Roebuck v. State.Tax Comm,

_ 214 Md. 550. It was there held that an assessment practice

of the Tax Commission, which gave more favorable treat-

‘ment to the owners of real property than to the owners of

personal property, was invalid, and that an owner of per-

sonal property had standing, under’ the equal protection

clause of the Fourteenth Amendment, to raise the question

of discrimination, citing Hillsborough Township v. Crom-

well, 326 U.S..620. Moreover, this Court held the taxpayer °

was entitled to have its assessment reduced to the lower

level accorded to others, although in earlier cases it had .

been indicated that its only remedy would be to require the

taxing authorities to raise the level of the assessments of

‘others. To this extent, it would seem that this Court felt

constrained in the Sears case to modify or reverse the rule

laid down in Baltimore Steam -Packet Co. v. Baltimore,

161 Md. 9, 21. See also Board of County Comm’rs of A. A.

Co. v. Buch, 190 Md. 394, 399. For a discussion of the effect _

of the Hillsborough case, see Hellerstein, Judicial Review —

of Property Tax Assessments, 14 Tax 'L. Rev., 327, 344

.et seq.. Citing particularly the case of Baldwin Construction

Co. v. Essex County Bd. of Tax., 108 A. 2d 598 (N.J., 1954),

which drastically altered .the assessment procedures in

New Jersey.

The State Tax Commission was then aia with the al.

ternatives of either raising all assessments to the level of

full cash value prescribed by the statute, or reducing the

assessments of personal property. It did neither. Instead, |

it sought legislative approval of its prior practice in the

guise of classification. The question presented is whether

the statute validly accomplishes its avowed purpose, de-

clared in a recital to be “to mectnate the policy of the -

' State Tax Commission and of other taxing authorities of

' this State as’ it existed prior to the decision in the Sears

case, this policy being to allow for inflationary factors in

the assessment of real property but not to allow for such

inflationary factors in the assessment of personal property.”

_Arecital is not law, although it may be looked to as bearing

. upon legislative intent: The key language of the enact-

ment is‘found-in subsection 14(b)(1) which defines “full

eash value’, as applied to real estate, as “current value

less an allowance for infation, if in fact inflation exists”.

Subsection-14( b).(2) defines “full cash value”, as applied to

personal property, as “current value without any allow-

ance for inflation”. :

I would agree that he present Article 15 of our Declara-

tion of Rights does not require that there be uniformity in

- the tax rates applicable to the various classes of property

therein mentioned. For present purposes I may assume

that the legislature itself may validly accord to some kinds

of property exemptions or deductions not accorded to prop-

. érty in another class or subclass. Statutes in some states

which themselves fix the percentage of assessment values .

have been sustained, when uniform as to class, apd , ‘where

_staté constitutions permit. But the majority opinion does

not attempt to meet the objection, raised on this appeal,

that the vague and general reference to “inflation” is an

invalid delegation of legislative power to an administrative

~ agency,and that, if delegable.at all, the power is controlled

by no ascertainable or intelligible guides or standards.

Instead, the majority opinion assumes the invalidity of the

Act, as regards real estate, and holds that even if subsection

A4(b)(1) were deleted from the Act, the appellant cannot .

complain of being taxed at “current value without any.

allowance for inflation”, wher the statute, as modified, re- .

quires that real, estate to be taxed in the same_manne*:.

I think the conclusion is unsound for several reasons.

- The argument that. the legislature would have pass +d

the Act with the subsection as to real estate omitted, and - ~

hence that the Act-is saved by the separability clause,

seems untenable. The declared purpose was to continue

7 .

, _ :

. . + ¢ .

. ; ; ”

the disparity. If both real and personal pfoperty were to

continue to be assessed according tathe same standard of

full cash value, there would have been’ no occasion to

amend the pre-existing law. The vice found in the Sears

case was that the State Tax Commission had deliberately

undervalued, or permitted the undervaluation, of real

‘estate. If statutory authority for the practice is stricken

down, we are just where we were before, unless the Sears

case is to be overruled. If Sears is overruled we dre faced

with the question of the Fourteenth Amendment.

The majority opinion seems to hold, however, that the

difference in, treatment can be supported on the ground that

real estate and personal property are now. placed in dif-

ferent classes. But such “classification”, to my mind, is

_ wholly illusory if, as the Court assumes, real and personal

property are to be taxed at the same rate and upon the

same assessable basis. If real and personal property are

required to be treated alike for tax purposes, a mere legis- .

lative declaration that they are different in other respects .

is meaningless. The complaint that they are not treated

alike in practice goes to the heart of the matter. and raises

again the question decided i in the Sears case.

I revert to the question as to the validity of subsection 14 .

(b) (1), left unanswered in the. majority opinion for

reasons which I think are unsound. The: term, “inflation”. - |

is not defined in the Act, and accordingly the word must be |

taken ‘in its common or popular meaning. Although econo-

mists may differ as to its causes, such as the pressure for

wage increases, governmental policies, and the expansion

of money supply and credit, the term in its popular sense

connotes the decline in the purchasing power of the dollar,

coincident to the general rise in prices, which has been

continuous, though not constant in rate. at least since 1939.

_ the year of the outbreak of the second World War. It is

sometimes measured by the so-called “cost of living” index.

Of course. the amount of inflation, or the price level: at any

given time depends upon the initial or base time or year

with which it is comipared. A directive to the taxing

euthorities to make * ‘an allowance for inflation, if in fact

‘inflation exists’, sets up no guide or standard. The amount

to be allowed would depend in each case upon the point of

reference, which is not designated. Inflation exists both

a$ regards rea] and personal property. Its amount depends

on the arbitrary selection of a previous price level. As

I see it, the legislative directive is an open ‘invitation to the

"taxing authorities to reduce assessments on real estate to

whatever percentage of full cash value they please, This

- was precisely the vice we found in thé Sears case. The

directive supplies no point of reference, and hence leaves

‘the matter to the uncéntrolled. discretion of the .taxing

authorities, without any objective standard at all.

The appellee. argues that the standard in- regard to in-

flation is no more vague:than that of full cash value itself.

I cannot agree. The latter term, over the years, has ac-

quired a rather definite meaning. An accepted test is cur-

rent market value, based on a compilation of comparative

‘sales, to. determine a value based on the present conditions

as reflected in the market place. No doubt, much must

@ left to the honest judgment of the assessors. Valuation -

ig not an exact science. Actual sales prices should be

evaluated to determine whether they are normal.or forced

according to the test laid down bX the courts cf a willing |

buyer and a willing seller. The particular property should

also be considered in the light of its age, size, desirability,

potential uses, and other factors. -Appraisals may take into

account. original cost and reproduction cost; in some

‘ instances, a capitalization of income. Still, the tests are

valuation cf property at some undisclosed and arbitrary

percentage of full cash value. ;

The record in the instant case does not disclose what

yardstick was applied by the State Tax Commission to the

aesessment of real propérty. It is conceded that it applied

the test of full cash value to personal property. The Secre-

tary to the Commission testified that “roughly speaking. —

real estate was assessed at 60‘. of the assessed value”.

There was no.eTort to justify the-end result in terms of

- “inflation”. or to exnlain the basis fer its selection of that,

e ieee

‘ 54° ;

average figure. I cannot see how a deliberate undervalua-

tion of this sort can be other than arbitrary and capricious.

It is simply an example of the unsound assessment practice

of “trending back”, which seeks to solve the problem by

' selecting a supposedly “normal” base year, in the hope that

seems vain in the light of the experience of the past twenty

years. The result is to shift the'tax burden from one-class

to another, or from one group to another, without any

o objective’standard, making it difficult, if not impossible, for _

any taxpayer to successfully challenge his own assessment, -

by proving that others are more favored. For a discussion:

_ of the problem, see’the extensive note‘on Tax Assessments

of Real Property in 68 Yale L.J. 335. See* also Johnson,

Should Property Be Asxessed at Full Current Value? 7

- Journal Of Taxation, 316. For the reasons stated I think the

appellant is entitled to the relief indicated in the Sears

‘case, to which it would clearly have been entitled in the

absence of the retroactive statute under consideration. Cf.

Cromwell v. Jackson, 188 Md. 8, 29: State v. Rice, 115 Md. in

317 «327:

~« In the Court of Appeals of Maryland

(No. 28, September Term, 1957) _

Sears, Roebuck.& Company

State Tax Commission Of Maryland

_ Decided Noveinber 22, 1957

Reported in 214 Md. 550, 136 A. 2d 567 -

ks Appéal from the, Circuit Court No. 2 of Baltimore City |

(CULLEN, J.).

Petition of appeal by Sears, Roebuck & Company, a

‘New York corporation, from an assessment’ made by the

State Tax Commission of Maryland on its stock in trade”

From an order affirming the assessment of the Commission,

petitioner, appeals.

Reversed, with costs, and case remanded for furthér pro:

ceedings.

The cause was argued before Brune, C. J., dnd CoL.ins,

Hammonp and Prescott, J.J.

~ COLLINS, J., delivered the opinion of the Court. sy

"This is an appeal by Sears, Roebuck and Company, '

(Sears), appellant, from an assessment made by the State |

-Tax Commission of Maryland, (Commission), appellee, on

its stock in trade. Sears.appealed to Circuit Qourt No. 2 -

- Baltimore City. From an order of that court affirming

assessment of the inicio Sears appeals here-

The statutory. provisions under consideration in this case

are Code, 1951, Article 81 |

“13. (a) Except as. hereinafter provided, all prop-

erty directed in this Article to be assessed, shall be

assessed at the full cash ‘value thereof on the date

vf finality.* * *” (Italics suppjied).

“14. The stock in business of every person, firm .

or corporation engaged in any manufacturing or com-

mercial business in this State shall be valued and

assessed to the owner thereof on the date of finality °

at its fair average value for the twelve months pre-

ceding the date of finality,* * *. ‘Providéd, however,

that for county taxation in Anné Arundel County

and Frederick County, and for municipal taxation in

the City of Frederick such stock in business shall be

assessed at seventy-five per centum (75‘:) of such

- _ fair average value for the twelve months preceding the

+ date of finality.”

“930. The jurisdiction, supervision, powers and

duties of the State Tax Commission herein created

and established shall extend under this Article: * * *

mi _ 3

“(7) To formulate, whenever the Commission shall

deem it practicable, standards or units for the assess-

ments of various kinds of property, and to igsue in-

ey structions to local supervisors of assessments in regard | =

ae thereto and to require, the use thereof. To confer with

County Commissioners and the Appeal Tax Court of

. Baltimore City and visit each county as often as neces- '

sary.” ;

Sears owns and operates on stores in Allegany, Auee

Arundel, Cecil, Dorchester, Frederick, Montgomery, Wash- -

ington and Wicomico Counties, and in Baltimore City. It |

calculates the cost ‘of its merchandise for the purposes of

Maryland tangible personal property taxes by means

_ The facts! which follow are contained in an agreed st

“ment of Undisputed Facts, pursuant to Rule 828 g of -

__-* land Rules of Procedure. The Commission, by virtue f the.

. authority conferredupon it by the General Assembly \j

-. °.* * .. quired to supervise the asSgssments of all property in‘the

, counties and cities of this State so-that all taxable property

Shall be entered upon the assessment rolls and equalized

i between: persons, firms and corporations. In Maryland real

property is valued for assessment purposes by the Super-

visors of. Assessments of the counties and Baltimore’ City.

The personal property of corporations, including stock in

” \eesidie is valfied for assessment purposes by assessors who

are members of the staff of the Commission. Both of these

groups of assessors. gre subject to the eontrol and super-

vision of the Commission.

As abcve stated, it is provided by Code, 1951, Article 81,

. f Séction 13 (a), that all property shall be assessed at its-full

cash value on the date of finality. The Supervisors in fhe —

P ‘various counties and in Baltiniore City have been instructed

q by the Commission to assess all taxable property: in this.

State at its full cash value. There is no statutory definition

in Marvland of the term “full cash value”. It is: agreed

that: “The administrative definition of the term ‘full cash

‘value’ which has been adopted by the Commission” with

e- :

‘57

respect to real property, however, is an entirely different

_ F* concept from the Commission’s definition of that term-as

. applied to stock in trade owned by corporations. With

respect to real estate, the Commission has directed its

assessors to deduct amounts resulting from inflationary

influences from the value of the properties to be assessed.

This deduction reduces the value of real estate for tax

purposes below its current value. No similar deduction is

, made in the case of assessment of. stock in trade.” In

assessing inventories inflationary influences as such are

not considered. Instead the assessment is at cost or market, °

abnormalities, such as pilferage. are considered in arriving

- at cost or market. The level of the aforegoing assessments |

to current value ig the direct result of the policies and

practices of the Commission which by law is required to-

_ supervise all assessment of real property within this State.

Various studies had been made as to thé level of assess-

Baltimore City. These studies vary in.scope and in method.

However, they sustain the same factual conclusion that the

ratios of assessments. to current values of real estate in

Maryland ranged from twe ty-five per centum to sixty per-

centum at the time thiscas g swas-heard by the Commission.

The business of the. appellant is selling goods ‘at retail,

and to conduct such business it-had a large stcck of personal .

property in its inventory which was assessed for property

taxes by the Commission at its current value, that is,.cost .

or market, whichever was lgwer. The Commission, in as-

sessing Sears’ stock in trade. made no allowance for the

- impact of inflation, which it allowed in assessing real estate\

As inflation increased the value of real estate, it likewise

caused an increase in the value of Sears’ inventories.2 The

rise in,the levels of department store inventorygprices was

similar to the rise in other composite price series. Inflation,

which has increased both the values of real estate and Stock

it. trade. has caused a stubstantial rise in Sears’ inventory in

‘Baltimore and in the counties. Since 1941 Sears’ catalog

shows an incregse cf eighty-four per centum in 1952: an

Y ad

_ assessed at “full cash‘ value” it has classified real and per-

* sonal property alike for assessment ‘purposes. Therefore

the same economic yardstick should be used in making °

Statutes require the same standard of value.

prescribed for real estate, that differences in result do -not

refusal of thé Commissioners. to accept the LIFO method

there adopted the ‘opinion of the Commissioners, which

_ stated. among other things, the following: “Cost er market.

-of tha inventory should be based upon a representative

amount and representative price for the’ inventory, not. °

-increase cf ‘seventy- nine per centum in 1953: and an in- ):_

crease of forty-one: pé centum in 1954. The rise in cost

of goods has been approximately in the same proportion.”

Sears contends under Section 13 (a), supra, as the Gen- |

eral Assembly has stated that all property should be ~

assessments against real and personal property as_ the

The appellee contends that since Section. 14, quoted

above requires inventories: to be assessed at “fair average

value”. the method of assessment i so different from that

constitute unlawful or unconstitutional discrimination

case of May Stores v. State Tax.Commission, 213 Md. 570.

* 132° A. -2d 593. discussed Section 14. It was there stated

that the sole question to be determined was whether the

of calculating the fair average value of the tangible per-—

sonal property of the appellant for the twelve months _pre-

ceding the date of. finality was unlawful, unreasonable. ins

against, the: substantial weight of the evidence. This Court.

whichever is lower, is a fair indication of the reasonable _

value of inventory provided that: either the cost or the

market value is established as of recent date.” It is evident . |

that the words “fair awerdge" applied to inventories. and |

stock in buginess, recognize the fact that the size of in-

ventories fluctuate over the annual period and the value

according to the amount of stock on hand on the date of

finality, but on the fair average for the twelve months pre-

ceding the date of finality. Fair average means an av erage

tvpical of the am< vunt and price " goods acquired over the

twelve month period.

\ . ; * 59

Secti h 13 (a) prescribes: a standard of assessment _ of

property y\to be followed “except as hereinafter provided”.

That standard is “the full cash value thereof on the date -

- of finality”. Section 14, in dealing with stock in trade or '

inventory does otherwise provide in one respect. This is

‘to substitute (for the reasons just stated) an average value

of inventory over a period of twelve months for what

might ‘be the value on some single . day — the date of .-

finality. That. we think, is the only purpose of this formula

- and hence it does. not éall for any further departure from

the basic requirement of “full cash value-* * * on the date

of finality” contained in Section 13 (a). We are strength-

ened in this view because there is, we think, no substantial

difference in meaning between “fair value” and “full cash

value”. See Burke v. vane Trust Co.. - 202 Md. 178, 96 °

A. 2d 254.

- Appellee contends that this Court .and the ‘courts of

other states have recognized that natural and inherent

differences between various classes of property. necessitate -

different ways of ascertaining their value far assessmerit

. purposes, and have long held that the use of different

methods of assessment does not in and of itself violate

. constitutional or statutory requirements of uniformity and

equality in the assessment and taxation of property. It

relies on Baltimore City v. The State, 105.Md. 1, 65, A. 369::

_ Seaboard Commercial Corp. v. State Tax Commission. 181

. Md. 234,29 A. 2d 294; State Tax @ommission v. C. & P.

\ Telephone Co., 193 Md. 222."66 A. 2d 477; State Tax Com-

mission v. Brandt Cabinet Works, 202 Md. 533. 97 A. 2d

290: Household Finance Corp. v. State Tax Commission,

212 Md. 80, 128 A. 2d 640: and May Stores ». State Tax

Commission, supra. Th¢ appellee relics on the case of

Sears. Roebuck v. Inhabitants of: City. 150 “Me. 181. 107 A.

2d 475. It is true that the Court. there held that different

methods might be. used for’ arriving at the value of prop-

erty, but it was there stated that there should be ‘no fav-

oritism or discrimination betw een real and personal prop-

erty. To the same effect are the followi ing .cases relied on. .

by the appellee. McLendon v. Cit; of LaGrange. 107 Ga.

356. 33 S.E. 405: People v. adalat 377 M. 610. 37 NE. 2d

60 -

330; Worten v. City of Paducah, 123 Ky. 44, 93 S.W. 617.

decided in 1906. ‘The case of People v. Southwestern Bell

' . Telephone Co., 377 Il. 303, 36 N.E. 2d 362; relied on by the

appellee, was based on a statute in Illinois which is not

in effect in this State.. In Kentucky Finance Co. v. McCord.

(Ky.), 290 S.W. 2d 481, decided in 1956. the decision turned

on a 1915 amefidment to a statute. not in effect here. The

Commission, being a body of experts on taxation, Seaboard _

Commercial Corp. v. State Tax Commission, supra, may

use any proper method for assessing property. However.

the result must be to arrive at the statutory requirement

of “full cash value”. Of course, the method used to arrive

at the full.cash value of real estate may: be different from

_ the method used to arrive at the full cash value of in-

- ventories. As was stated in Rogan v. Commissioners of

Calvert County, 194 Md. 299, 312, 71 A. 2d 47, the duty

of the County Commissioners to follow the Commission's

instructions as to the method or plan of assessment does

not include the power of the Commission to require or

the duty of the County Commissioners to make any de-

parture from the statutory requirement to assess all prop-

erty to be assessed at the full cash value on Ge date of

finality.

—In-Bemis Broé.-v.-Clatamont. 98. N.H.: 446, a

512, the plaintiff claimed that its stock in trade, along with |

that of other taxpayers, was assessed at’one hundred per

centum of its fair market value for 1951, while real estate

and \other property taxed as such’ were assessed at eighty

fifty-five and sixty’ per centum of such value. The New

Hampshire statute ‘provided that property was-6 | be ap-

' praised.at “its full and ‘true value in. meney”. The Cen-

stitution of that State provided that all taxes on “estates” _

shall be proportionable and reasonable, which means equal .

and just., The Supreme Court of New Hampshire pointed .

out that real estate was not assessed at the fair market

value but rather at ,eighty. per centum: thereof. Machinery

was assessed at sixty per centum, _buildings were assessed

at fifty-five per centum, and stock in trade was assessed at

its full market value. The Court there said: “We find no

Jegal basis for assessing stock in trade at its full market

value and real estate and other such property at varying

_ percentages lower than its market value. * * * ‘There is

‘ no foundation for the proposition that.owners of one kind

of property should pay more or less than their share of

the common burden. because of the’ character of their

estate..* *-* We are of the opinion that the assessment

as made was in violation of the constitutional requirements

of proportionality and equality.” See also Anderson's Red

. 2d 815; Chastain’s, Ine. v. State Tax Commission, 72 Idaho

2d 183; Delaware, Lackawanna & Western R.R. Co. v.

Neeld, 23 N.J. 561, 130 A: 2d 6; Switz v..Middletown Town- ,

ship, 23 N.J. 580, 130 A. 2d 15; Sears, Roebuck v. —

itants of City, supra.

In the case of Hillsborough Township v. Cromwell, 326

U.S. 620, 90 L.Ed. 358, a discriminatory treatment in the

assessment of taxes was claimed in the State of New

Jersey. The Supreme Court of the United States, in an

unanimous opinion, in which Mr. Justice Murphy and Mr.

J ustice Jackson took no part, said: “The equal protection

clause of the Fourteenth Amendment protects the in-

dividual from state action which selects him out for dis-

.criminatory treatment. by subjecting him to taxes. not im-

posed on others of the same class.’ The right is the right to »

equal treatment. He -may not co:npiain if equality is

achieved by increasing the same taxes of other members of

the class to the level of his own. The constitutional re-

quirement,-however, is not satisfied if a’ State does not it-

self remove the discrimination, but imposes on him against

-whom the discrimination has -been.directed the burden of

seeking an upward revision of the taxes of other members «

of the class. Sioux City Bridge Co. ». Dakota County,*260

WS. 441, 445-447; Iowa-Des Moines National Bank v. Ben-

nett, 284 U.S. 239, 247; Cumberland Coal Co. v. Board of

Revision, 284 U.S. 23, 28-29." ia

The appellee also contends that die: nin remedy is‘

not in attempting to be relieved of the assessment itself -

_ but from restraining the Commission from not properly as-

sessing other property. It relies on Schley v. Lee, 106 Md.

390, 67 A. 252, and County Commissioners of Anne Arun-

del County v. Buch,’ 190 Md. 394, 58 A. 24.672, and State

Tax Commission v. Brandt Cabinet Works, supra. Here.’

the appellant is not ‘contending that any other assessment

_ made under the. direction of thé Commission is too low.

It is complaining that its assessment is too high. The dis-

\: ?

_ cLimination here has been intentional and arbitrary. Rogan ~

v..Commissioners of Calvert County, supra. The Supreme .

Court of the United States in Hillsborough Township v.

Cromwell, supra, Kas ruled that the state itself must re-

- move such discrimination. We are of opinion that the order

of the Commission should be reversed.

Order reversed with costs, and casé remanded for fur-

ther proceedings. j

‘APPENDIX c

MANDATE

- Court of Appeals of Maryland:

No. 29 Adv., September Term, 1959

National Can Corporation

State Tax Commission of Maryland |

Appeal from Circuit Court No. 2 of Baltimore City.

Filed: April: 27, 1959.

April 16, 1959: Joiht motion to advance case for —_

ment filed and granted. a, °

July 9, 1959: Order affirmed, with costs.

. Brune, C 5: eiaeateid J. dissents and files dissenting

opinion. .

August 5, 1959: Motion for stay of. emseution of mandate .

filed.

September 1, 1959: Motion granted and mandate ae 7

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