The subjects and methods of taxation of property within the state of Maryland are regulated generally by article 81 of the Code of Public General Laws of that state.
A tax for state purposes and one for local purposes is laid upon all property. In each year the officers of domestic corporations are required to furnish information respecting the value of the shares of stock in such corporations to the state tax commissioner, who determines the aggregate value thereof, deducts therefrom the assessed value of the real estate owned by the corporation, and the quotient, obtained by dividing the remainder by the total number of shares of stock, is treated as the taxable value of each share, subject, however, to correction on appeal to the state comptroller and state treasurer after notice to the corporation of the valuation fixed by the tax commissioner. The rate of the state tax is determined by the general assembly, and that for municipal purposes in Baltimore is fixed by the mayor and council of that city. The levy on property in Baltimore, both for state and city purposes, is made by the municipal authorities. In case of stock in Maryland corporations owned by nonresidents the statutes declare that the situs of such stock, for the purpose of taxation, shall be at the principal office of the corporation in Maryland, and such shares are there assessed at their value to the owners. The statutes undoubtedly impose upon a Maryland corporation the duty of paying for and on account of the owners the taxes assessed in respect of the shares, and compel such payment without reference to the dividends, giving to the corporation a lien upon the shares of stock, and entitling the corporation, when it pays the taxes, to proceed by a personal action to recover the amount paid. Dugan v. Baltimore, 1 Gill & J. 499, 502; Baltimore v. Howard, 6 Harr. & J. 383, 394; American Coal Co. v. Allegany County, 59 Md. 197; Hull v. Southern Development Co. 89 Md. 8, 11, 42 Atl. 943.
The Maryland decisions have also settled that the tax is on the stockholder personalally, because of his ownership of the stock, and is not on the stock in rem or on the corporation. The Maryland doctrine on the subject is shown by the opinion of the court of appeals of Maryland in United States Electric Power & Light. Co. v. State, 79 Md. 63, 28 Atl. 768, where the court said (p. 70, Atl. p. 768):
'But the tax is not a tax upon the stock or upon the corporation, but upon the owners of the shares of stock, though the officers of the corporation are made the agents of the state for the collection of the state tax. It is not material what assets of other property make up the value of the shares. Those shares are property, and, under existing laws, are taxable property. They belong to the stockholders respectively and individually, and when, for the sake of convenience in collecting the tax thereon, the corporation pays the state tax upon these shares into the state treasury, it pays the tax, not upon the company's own property, nor for the company, but upon the property of each stockholder, and for each stockholder respectively, by whom the company is entitled to be reimbursed. Hence, when the owner of the shares is taxed on account of his ownership, and the tax is paid for him by the company, the tax is not levied upon or collected from the corporation at all.'
See, also, Hull v. Southern Development Co. 89 Md. 8, 11, 4 Atl. 943.
Substantially similar laws for the taxing of stock in Maryland corporations were in force in Maryland at the time of the incorporation of the transportation company, and have been in force ever since.
All the claims of Federal right here asserted are embraced in and will be disposed of by passing on two propositions, which we shall consider separately.
The first proposition is that, as the authority of the state of Maryland to tax is limited by the effect of the 14th Amendment to the Constitution of the United States to persons and property within the jurisdiction of the state, and as the tax in question was not in rem against the stock, but was in personam against the owner, the power attempted to be exercised, as it imposed a personal liability, was wanting in due process of law.