Levin v. Baltimore & O.R. Co.

• Court: Maryland Supreme Court
• Writing for the Court: [179 Md. 128]PARKE, Judge.
• Citation: Levin v. Baltimore & O.R. Co., 17 A.2d 101, 179 Md. 125 (Md. 1941)
• Decision Date: 03 January 1941
• Docket Number: 69.
• Parties: LEVIN et al. v. BALTIMORE & O. R. CO.

17 A.2d 101

179 Md. 125

LEVIN et al. v. BALTIMORE & O. R. CO.

No. 69.

Court of Appeals of Maryland

January 3, 1941

Appeal from Circuit Court of Baltimore City; W. Conwell Smith Judge.

Proceeding by Harry O. Levin, chairman, and others, constituting the State Tax Commission of Maryland, to assess rolling stock of the Baltimore & Ohio Railroad Company for taxation. From an order of the circuit court of Baltimore City overruling the assessment, the State Tax Commission appeals.

Affirmed and remanded.

William L. Henderson, Deputy Atty. Gen., and Norwood B Orrick, Asst. Atty. Gen. (William C. Walsh, Atty. Gen., on the brief), for appellants.

John S. Stanley and Kenneth H. Ekin, both of Baltimore (Raymond S. Williams and Hershey, Donaldson, Williams & Stanley, all of Baltimore, on the brief), for appellee.

Argued before BOND, C.J., and PARKE, SLOAN, MITCHELL, and DELAPLAINE, JJ.

PARKE, Judge.

The State Tax Commission of Maryland has brought this appeal from an order of the Circuit Court of Baltimore City overruling an assessment by the Commission by which a mileage proportion of the rolling stock of the Baltimore and Ohio Railroad Company was subjected to an assessment for the year 1934 for taxation in Baltimore City and in the counties of the State. The Commission maintains that the assessment was made under the authority of Chapter 226, pp. 621-726, of the Acts of 1929 which is a codification and revision of the revenue and tax laws of the State of Maryland. The General Assembly of the State, by Chapter 687 of the Acts of 1927, authorized the appointment of a Tax Revision Commission, and its report and recommendations are the basis and occasion for the general legislation embodied in Chapter 226, and now, as modified by later enactments, found incorporated in Article 81, title 'Revenue and Taxes', of the Code of Public General Laws (1939). By section 6, subsection (2), all tangible personal property located in this State and not by sections 7 and 8 exempted or otherwise provided shall be subject to assessment to the owner and taxation for ordinary taxes, which are defined by section 4 to be all direct taxes which are imposed upon real or personal property. The assessment to be made and the taxes to be laid on such personal property shall be in either the county or city in which it is respectively permanently located, with the reservation, however, that the rolling stock of railroads worked by steam shall be taxed only as provided by section 8, subsection (a). The mode so prescribed is that rolling stock of railroads worked by steam shall, for purposes of county and Baltimore City taxation, be apportioned among the counties of this State and the City of Baltimore in proportion to the mileage of such railroads therein; and whenever the railroads owning, hiring or leasing said rolling stock shall extend beyond the limits of this State, that proportion of the total rolling stock not permanently located in this State which the mileage of such railroad in this State bears to its total mileage shall be deemed located and taxable in Maryland. Section 8, subsection (a).

Under Section 10, subsection (b)(3), the rolling stock of railroads worked by steam shall be valued and assessed for the purposes of State, county and city taxation, or for any of such political entities, by the State Tax Commission. And such assessment shall be at its full cash value of the date as of which taxes are to be levied for the taxable year in question and upon which assessments become final for such year, subject to authorized correction. Code, Art. 81, sec. 1, subsection (20); secs. 11, 26, 27, 28, 36-45.

These provisions of the statute with reference to the assessment and taxation of the rolling stock of domestic railway corporations are subject to strictly construed exemptions from assessment and from State, county and city taxation in this State, as found in the following subsections of Section 7 of Article 81 of the Code:

'(15) Shares of stock in domestic railroad companies, which are subject to taxation upon their gross receipts within this State; and (from State taxes only) the real and personal property of such railroad companies. * * *

'(21) Any property exempted from taxation by this State by the Constitution of the United States or by any Act of Congress passed pursuant to and in conformity with the Constitution of the United States.'

By subsection (4) of section 1 of Article 81 the term 'domestic' as applied to a corporation shall mean 'organized under the laws of this State'. It follows that exclusively those domestic railroad companies which are subject to taxation upon their gross receipts within this State are exempt from State taxes only on their real and personal property. The gross receipts tax is declared to be a State franchise tax and is levied annually in terms specifically inclusive of 'all domestic or foreign railroad companies, whose roads are worked by steam, doing business in this State'. Code 1939, Art. 81, § 95, subsection (a)(1), and sections 96-100. For the failure to pay the gross receipts tax as prescribed the corporate charter may be forfeited. Supra, secs. 152, 153. All taxes are required to be collected by the public officials who are charged with this duty. Code 1939, Art. 81, secs. 154-166.

Acting in purporting pursuance of these provisions and within their terms, the State Tax Commission of Maryland assessed the rolling stock of the appellant which is a domestic corporation of the State of Maryland under a charter of incorporation granted by Chapter 123 of the Acts of the General Assembly of Maryland of 1826. The principal office of the Baltimore and Ohio Railroad Company, which, for brevity, will hereafter be called 'Company', has, from its creation, been located continuously in Baltimore City. For the tax year beginning with January 1, 1934, the total mileage which was owned or leased by the Company both within and without the State of Maryland was 6,384.39 miles. Its railway system within the confines of the State of Maryland extends through parts of Baltimore City, Baltimore, Howard, Carroll, Frederick, Washington, Allegany and Garrett; Harford, Cecil, Anne Arundel, Montgomery and Prince George's Counties, with an aggregate mileage of 352.52. Of this amount 234.25 miles were acquired under the charter obtained by the Act of 1826, and 118.27 miles were acquired under franchises granted by later Acts. The total mileage in Maryland upon which local taxes upon fixed property is paid by the Company is 181.20 miles, and included in this particular mileage are 50.79 miles on which local taxes on fixed property are paid through the Philadelphia Branch of the Company. The Company claims that the Philadelphia Branch was built under its original charter. See Baltimore & O. R. Co. v. Waters, 105 Md. 396, 405-414, 66 A. 685, 12 L.R.A.,N.S., 326; State v. Baltimore & O. R. Co., 48 Md. 49, 78, 79; State v. Baltimore & O. R. Co., 127 Md. 434, 448, 96 A. 636.

The net value as of January 1, 1934, of all of the Company's rolling stock which was not permanently located within the State of Maryland was fixed by the Commission at $145,579,160. The proportion of the mileage (352.52 miles) of the railway lines within the State to the total mileage (6,384.39) of its lines both within and without the State was found by the Commission to be 5.521 per centum. On this relative mileage basis the Commission apportioned to the State 5.521 per centum of the total value ($145,579,160) or $8,037,442. The Commission then computed that the proportion of the lines (181.20 miles) within the State on which local taxation is paid to the whole mileage (352.52) within the State is 51.4 per centum, and then concluded that a similar proportion of value of the rolling stock, which was allocated to the State ($8,037,442), should ascertain the value of the rolling stock within the State subject to assessment. 51.4 per centum of $8,037,442 is, in even dollars, $4,131,245, the amount of the assessment which the State claims is apportionable under the statute, on a mileage basis, among the City of Baltimore and the several counties of the State. There is no controversy on the basic facts with respect to the mileage, and the use and value of the rolling stock upon which the assessment was made. The questions involved were submitted on a stipulation of the facts which embraced the following statement: '13. As a record of the receipts and expenditures of the funds of The Baltimore and Ohio Railroad Company and of the operation of its business over all lines and branches of its entire system, the said Company maintains but one set of records and one system of books of account. All of the rolling stock of the Company is carred (carried) as one of its assets in one capital account on said books. None of said rolling stock, whether or not permanently located within the State of Maryland, is assigned for use entirely or at all, to any particular line or branch but all of said rolling stock is used indiscriminately upon the entire system and in and to such localities as the necessities of freight and passenger traffic require.'

The formula applied by the Commission in making the assessment is not expressly provided by the statute.

Without pausing to consider at present whether this particular method is contemplated by the statute, but assuming that the assessment so made is in mode authorized and proper, the Company must have recourse to a defense which arises outside of the revenue measure whose provisions have been here mentioned.

This defense is based on the original charter of the Company which granted all the rights and powers necessary to the construction of a railroad from the city of Baltimore 'to some suitable point on the Ohio River'...