City of Parkersburg v. Baltimore & O.R. Co.

• Decision Date: 14 December 1923
• Docket Number: 2101.
• Citation: 296 F. 74
• Court: U.S. Court of Appeals — Fourth Circuit
• Parties: CITY OF PARKERSBURG v. BALTIMORE & O.R. CO. [1]

296 F. 74

CITY OF PARKERSBURG v. BALTIMORE & O.R. CO. ^[1]

No. 2101.

United States Court of Appeals, Fourth Circuit.

December 14, 1923

[Copyrighted Material Omitted]

Francis P. Moats and Robert B. McDougle, both of Parkersburg, W. Va for appellant.

Mason G. Ambler and J. W. Vandervort, both of Parkersburg, W. Va and Frank W. Nesbitt, of Wheeling, W. Va., for appellee.

Before WOODS and WADDILL, Circuit Judges, and GRONER, District Judge.

WOODS Circuit Judge.

The vital question to be decided is whether the city of Parkersburg has lost the right to collect taxes on property of the Baltimore & Ohio Railroad Company situated in the city. The right to be perpetually free from city taxation is asserted by the railroad company on these grounds: (1) Exemption or commutation by a city ordinance of June 8, 1855, a contract with the city of the same date and subsequent ratification thereof; (2) adjudication of July 13, 1897, that the attempted exemption or commutation was valid; (3) laches of the city in acquiescing in the assertion of the validity of the exemption or commutation from 1855 to 1893, and from 1897 to 1921. The material facts will appear from a summary of the bills and the course and status of the litigation.

On April 10, 1894, the Baltimore & Ohio Railroad Company filed a bill in the Circuit Court for the District of West Virginia and on August 6, 1895, an amended and supplemental bill to enjoin the city of Parkersburg from the threatened forcible collection of $1,042.73 taxes claimed for the year 1893. The bill set out an ordinance of the president, recorder, and trustees of the town of Parkersburg and a contract made in pursuance thereof between the town and the Northwestern Virginia Railroad Company, both dated June 8, 1855. Under the ordinance and contract the railroad company was to receive from the town the right to the free and exclusive use and occupation for railroad purposes of the lands, banks, shores, and water rights within described boundaries, and 'the right to lay and use railroad tracks with suitable switches and turnouts along and across such of the streets and alleys of the said town as they may deem necessary to connect their stations and other improvements. ' These rights were subject to the obligation of the railroad company to keep the streets open for traffic, to grade and keep in repair the portion of the streets between sidewalks walks and tracks, and to construct and maintain a certain culvert. All the property of the railroad company then owned, or thereafter acquired, used for railroad purposes, was to be 'free from all town taxes, assessments and charges. ' The consideration to the town was the grant of all the right, title, and interest of the railroad company in lands conveyed to it by Jackson and others, to be used by the town exclusively for wharfage purposes, the construction of two wharfs on the Ohio river, one of them at the foot of Court street, subject to the condition that rates for wharfage should not exceed the lowest rate at certain cities named, except by consent of the railroad company, and that the railroad company should have free wharfage. By the records of the town council of July 13, 1855, it appears that the ordinance and contract were for the adjustment of conflicting claims of title to the banks of the Ohio and Kanawha rivers.

On February 15, 1865, at a foreclosure sale, the Baltimore & Ohio Railroad Company became the purchaser of the property of the Northwestern Virginia Railroad Company, and thereafter conducted its business under the name of Parkersburg Branch Railroad Company. After the foreclosure sale, on May 30, 1865, and May 10, 1867, ordinances were passed declaring the ordinance of June 8, 1855, to be in full force and virtue, but making no special reference to the attempted tax exemption. The ordinance of May 10, 1867, extended the railroad's use of the streets in the city upon condition that the railroad company, in accordance with the agreement of June 8, 1855, with the Northwestern Virginia Railroad Company, should construct the wharf on Court street to be the property of the city. On March 15, 1870, in consideration of the payment of $7,500, the railroad company was released from its obligation to build the wharf on Court street.

On these facts, set out in the bill and exhibits, the court on April 10, 1894, issued a temporary injunction ex parte. The city on May 7, 1894 filed a demurrer to the original bill on the ground that it appeared from the face of the bill that complainants were not entitled to the injunction asked. Afterwards, on June 14, 1894, the city filed its answer alleging lack of power in the city council to exempt the railroad company from taxes or to commute taxes in the manner set up in the bill, and setting up other defenses. On June 20, 1894, plaintiff filed exceptions to the answer of the city as impertinent and immaterial. Plaintiff filed an amended and supplemental bill on August 16, 1895, and obtained another temporary injunction. On September 3, 1895, the city demurred to the amended and supplemental bill, setting out its grounds of objection with more detail.

Under the bills and demurrers the validity of the attempted tax exemption was elaborately argued before Hon. Nathan Goff, Circuit Judge. The demurrers were overruled on July 13, 1897, in a formal decree containing this provision:

'And thereupon came the defendants and asked leave to file their separate answers, heretofore tendered in this cause, to the original bill and the same being considered by the court and ordered filed, and leave is given them to file answer to said amended and supplemental bill within 30 days from this date.'

Thereafter, on August 11, 1897, the city filed its answer to the amended and supplemental bill reiterating the defenses set up in the answer to the original bill, again alleging the invalidity of the ordinances and contracts of the city council in so far as they purported to exempt the Northwestern Railroad Company and the Baltimore & Ohio Railroad Company from taxes, and alleging that, even if the attempted exemption of June 8, 1855, of the Northwestern Virginia Railroad Company was valid, the Baltimore & Ohio Railroad Company did not acquire such exemption by purchase at the foreclosure sale.

On June 9, 1920, an order was made in the District Court striking the cause from the docket. On January 17, 1921, on motion, an order was made restoring the cause to the docket, the order reciting that it appeared to the court--

'from the last order entered in said cause that the same was heretofore submitted to the court upon the motion of the plaintiff to perpetuate a temporary injunction theretofore granted, and upon the motion of the defendant, the city of Parkersburg, to dissolve said temporary injunction, and that neither of said motions, so far as the record discloses, have been disposed of by the court.'

On June 3, 1922, counsel for the city moved that the cause be set for hearing. Plaintiff's counsel objected and moved to strike out the answers--

'upon the ground that the said the city of Parkersburg has acquiesced in the injunctions awarded herein on the 10th day of April, 1894, and the 16th day of August, 1895, and through the lapse of more than a quarter of a century has failed to take any action looking to the dissolution of the said injunctions, and has long since abandoned its claim for the taxes, the collection of which was restrained by said injunctions, and has failed to do or offer to do equity herein, and for other reasons appearing in the record.'

On January 10, 1923, counsel for the city moved to dissolve the preliminary injunctions and dismiss the suit. By final decree, dated February 7, 1923, the answers of the city of Parkersburg were stricken from the record and the preliminary injunctions were made permanent. The appeal is from this decree.

The town of Parkersburg was chartered in 1820. Neither the original charter nor any amendment confers, either directly or by implication, power to exempt property from taxation. Taxation being an essential function of government, the authority to relinquish it must be clearly conferred, and every doubt will be solved against the existence of the power of exemption and against the averment that such a power has been exercised. Wilmington & Weldon Railroad v. Alsbrook, 146 U.S. 279, 294, 13 Sup.Ct. 72, 36 L.Ed. 972; St. Louis v. United Railways Co., 210 U.S. 266, 273, 28 Sup.Ct. 630, 52 L.Ed. 1054; J. W. Perry Co. v. Norfolk, 220 U.S. 472, 480, 31 Sup.Ct. 465, 55 L.Ed. 548; Whiting v. West Point, 88 Va. 905, 14 S.E. 698, 15 L.R.A. 860, 29 Am.St.Rep. 750; Richmond v. Virginia Railway & Power Co., 124 Va. 529, 98 S.E. 691; 3 Dillon's Municipal Corporations (5th Ed.) Sec. 1310.

All attempts of the municipal council to exempt from taxation or to ratify such attempted exemption, being without legal foundation, were absolutely void; and no omission of the council to levy and collect taxes could operate to confer the right of exemption by estoppel. Marsh v. Fulton County, 10 Wall. 676, 19 L.Ed. 1040; Loan Association v. Topeka, 20 Wall. 655, 22 L.Ed. 455; Parkersburg v. Brown, 106 U.S. 487, 501, 1 Sup.Ct 442, 27 L.Ed. 238; Daviess County v. Dickinson, 117 U.S. 657, 6 Sup.Ct. 897, 29 L.Ed. 1026; Bloomfield v. Charter Oak Bank, 121 U.S. 121, 136, 7 Sup.Ct. 865, 30 L.Ed. 923; Barnett v. Denison, 145 U.S. 135, 139, 12 Sup.Ct. 819, 36 L.Ed. 652; Brenham v. German-American Bank, 144 U.S. 173, 183, 12 Sup.Ct. 559, 36 L.Ed. 390. 'The protection of public corporations from such unauthorized acts of their officers and agents is a matter of public policy in which the whole community is concerned. And those who aid in such transactions must do so at their peril. ' Thomas v....