Consolidated Gas Co. of Baltimore v. City of Baltimore

• Decision Date: 22 June 1905
• Citation: 61 A. 532,101 Md. 541
• Parties: CONSOLIDATED GAS CO. OF BALTIMORE v. MAYOR, ETC., OF BALTIMORE et al.
• Court: Maryland Court of Appeals

61 A. 532

101 Md. 541

CONSOLIDATED GAS CO. OF BALTIMORE v. MAYOR, ETC., OF BALTIMORE et al.

Court of Appeals of Maryland

June 22, 1905

Appeal from Baltimore City Court; Henry Stockbridge, Judge.

Proceeding by the appeal tax court of Baltimore city for the assessment of street easements, etc., used by the Consolidated Gas Company of Baltimore. From an order of the Baltimore city court sustaining the assessment, the gas company appeals. Reversed.

Argued before McSHERRY, C.J., and FOWLER, BRISCOE, BOYD, PAGE PEARCE, and SCHMUCKER, JJ.

W Calvin Chestnut and Edgar H. Gans, for appellant.

Sylvan H. Lauchheimer and W. Cabell Bruce, for appellees.

McSHERRY C.J.

The Consolidated Gas Company of Baltimore is a corporation duly formed under the laws of Maryland. In the year 1904 it was assessed by the appeal tax court of Baltimore city, for the purposes of taxation, with sundry parcels of real estate valued at $2,697,791; with 79,000 services, at $158; and with 455 1/2 miles of gas mains, at $1,131,640; making a total of $3,987,431. This total was increased for 1905 to $4,026,997. On September 23, 1904, the following notice was sent to the company by the appeal tax court: "This is to notify you that it is the purpose of the appeal tax court to increase the assessment on your mains, pipes, and other construction located in, on, under, or over the public highways of Baltimore city, so as to include the value of the easement enjoyed by you in said highways, and that on Thursday, September 29, 1904, at 12 o'clock, you will be given an opportunity to make such statements and present such proofs as you may desire, to show why an additional assessment of $6,000,000 should not be placed on said real property. Thereafter the court may enter an increased assessment thereof, according to its best judgment and information in the premises." The company appeared by its counsel. No evidence was adduced by either side, but the company's counsel insisted that the contemplated or projected assessment of $6,000,000 could not be legally made in the form or by the method proposed. On the day following the appeal tax court entered its conclusions in these words: "Additional assessment on mains, pipes, and other construction located in, on, or over public highways of Baltimore city, so as to include the valuation of the easements enjoyed by said company in said highways, $6,000,000." From that action or determination the gas company appealed to the Baltimore city court. Upon the trial of that appeal, evidence was offered with respect to the method pursued by the appeal tax court in arriving at the sum of $6,000,000 as "the valuation of the easements enjoyed by said company in said highways"; and propositions of law, embodied in prayers, were presented, with a view of raising the question as to the right and authority of the city to tax the particular easement involved, and the further question as to the regularity of the mode adopted by the appeal tax court in reaching the result to which it came. The Baltimore city court rejected all the prayers of the gas company, but granted four out of the eight prayers presented by the city. The court, sitting without a jury, passed an order sustaining the action of the appeal tax court, and from that order this appeal was taken.

There are two questions in the case: First, had the city the power to increase the prior assessment on the mains, etc., by the addition of $6,000,000, so as to include by that addition the taxable value of what the appeal tax court describes as the easements enjoyed by the company in the highways? and, secondly, if it did have that power, has it properly and lawfully exerted it?

It is not denied by the appellant that the Legislature could make provision for an independent assessment of the intangible, incorporeal right called by the company a "franchise," but claimed by the city, in view of the facts, to be an easement--the right to occupy a certain space beneath the surface of the streets with gas mains and service pipes; but it is maintained on behalf of the appellant that the General Assembly did not intend, by existing enactments, to allow the appeal tax court to assess as real property the right, privilege, or franchise to occupy the streets with gas mains, because that right, by whatever name you call it, like the franchise to carry on business, forms part of the value of the company's capital, and is taxable only through its shares of stock. It is obvious, when these two contentions are brought into juxtaposition, that, in order to determine the first inquiry with which we have to deal, the exact nature of the right in question, under existing conditions, must be definitely ascertained. It must be ascertained, however, not as a mere abstraction, nor purely from a philosophical standpoint, but especially and specifically with reference to and in the light of previous adjudications by this court, as applied to the actual facts in evidence. It is a question of taxation which is before us. "An easement is a liberty, privilege, or advantage, without profit, which the owner of one parcel of land may have in the lands of another. *** An easement, although only an incorporeal right, and appurtenant to another (the dominant) tenement, is yet properly denominated an interest in land which constitutes the servient tenement; and the expression 'estate or interest in lands,' when used in a statute is broad enough to include such rights, for an easement must be an interest in or over the soil." 14 Cyc. 1139. In every instance of a private easement (that is, an easement not enjoyed by the public), there exists the characteristic feature of two distinct tenements--one dominant, and the other servient. On the other hand, a franchise is a special privilege conferred by government on individuals, which does not belong to the citizens of the country generally by common right. 2 Wash.Real Prop. 303. A franchise does not involve an interest in land. It is not real estate, but a privilege which may be owned without the acquisition of real property at all. The use of a franchise may require the occupancy, or even the ownership, of land, but that circumstance does not make the franchise itself an interest in land. To define the nature of a thing by the accidents which are employed in its use is to confound the thing itself with the agencies applied in its adaptation. Because land may be required in putting a franchise into effective operation, it does not follow that the franchise is land, or an interest in land. But an easement is quite a different thing. It is essentially and inherently an interest in land. It is an estate--a dominant estate imposed upon a servient tenement. To which of these two distinct and dissimilar classes does the right of the gas company to occupy with its mains the subsurface of the streets belong, in the contemplation of the revenue and tax laws of Maryland?

It will be found upon examining some of the cases that there is occasionally, in the arguments of counsel, a want of exactness in the use of terms, and now and then the right to do a particular thing, which is the franchise, is confused with the results achieved in the exercise of the right, and those results are inaccurately spoken of as the franchise. The right to occupy the streets with gas mains is a franchise. The actual occupation of them in that way, pursuant to the franchise, is the acquisition of an easement. You must distinguish between the right to do the thing, and the interest acquired in the soil by the exercise of that right. The right of a railroad company to be and to build a road is a franchise from the state. The roadbed acquired by purchase or condemnation is an easement altogether distinct therefrom, though obtained as a result of the exercise of that pre-existing franchise. It is strictly accurate to say, "The right of a gas company to lay its pipes, and to use the streets of a city for the purposes of laying pipes to convey gas, is a franchise, and can only be conferred upon a corporation by the Legislature." State of Ohio v. Cinn. Gas Co., 18 Ohio St. 262. It is equally correct to declare, "The right to use the public streets of a city for the purpose of laying gas pipes therein is, in my opinion, a franchise which alone the state can confer." Jersey City Gas Co. v. Dwight, 29 N.J.Eq. 242. In each of these cases, and in many more that might be cited, the right to do the thing spoken of is the franchise. And so in Tuckahoe Canal Co. v. Tuckahoe, etc., R. Co., 11 Leigh (Va.) 78, 36 Am.Dec. 374, it was said: "Now, I take a franchise to be (1) an incorporeal hereditament; and (2) a privilege or authority vested in certain persons by grant of the sovereign (with us, by special statute) to exercise powers or to do and perform acts which without such grant they could not do or perform. Thus it is a franchise to be a corporation, with power to sue and be sued, and to hold property as a corporate body. So it is a franchise to be empowered to build a bridge or keep a ferry over a public stream, with a right to demand tolls or ferriage, or to build a mill upon a public river, and receive tolls for grinding, etc. But the franchise consists in the incorporeal right. The property acquired is not the franchise. A bank has a right to purchase a banking house. When purchased, is the house a franchise? Surely not, for it is corporeal, whereas a franchise is incorporeal." In Bridgeport v. N.Y., etc., R. Co., 36 Conn. 266, 4 Am.Rep. 63, it was held that a franchise does not include property gained by the exercise thereof.

The distinction is clear between a franchise, as such, and the property acquired for the use of the franchise. The naked unused, slumbering franchise is property; but it is property concerning...