State v. Baltimore & O.R. Co.

• Decision Date: 21 February 1878
• Citation: 48 Md. 49
• Parties: STATE OF MARYLAND v. THE BALTIMORE AND OHIO RAILROAD COMPANY.
• Court: Maryland Court of Appeals

48 Md. 49

STATE OF MARYLAND v. THE BALTIMORE AND OHIO RAILROAD COMPANY.

Court of Appeals of Maryland

February 21, 1878

APPEAL from the Superior Court of Baltimore City.

This was an action of debt brought on the 9th of September, 1876 by the appellant to recover from the appellee, the State tax of one-half of one per cent. levied under the Act of 1872 ch. 234, on the gross receipts of the defendant from all sources, (except from its Washington Branch,) from the 1st of April, 1872, to the 31st December, 1873, inclusive. The Act of 1872, ch. 234, was repealed and re-enacted with amendments by the Act of 1874, ch. 408, which provided that said repeal should not affect or impair any right vested or acquired, and existing at the time of said repeal under said Act. The case was tried before the Court without the intervention of a jury.

First Exception.--The plaintiff applied to the Court for an order requiring the defendant to make answer, verified by oath or affirmation, to certain interrogatories in the nature of a bill of discovery, to the end, that discovery might be made as to the nature, character and value of certain property of the company, and the amount of gross receipts derived from all sources from the 1st day of April 1872, to the 31st day of December, 1873, except those received from the Company's Washington Branch Road. The Court (DOBBIN, J.) passed the order as prayed for. The defendant in so far as it deemed the interrogatories pertinent to the issue to be tried, answered them; but to such of them, or such parts of them as it deemed not pertinent to the issue, it excepted on that ground and declined to answer. The third and fourth of the interrogatories so excepted to, and to which reference is made in the opinion of this Court, were as follows:

3. Of what mortgage bonds, bonds, stocks and debts due to it was the said Baltimore and Ohio Railroad Company the owner between the 31st day of April, 1872, and December 31st, 1872 inclusive of said last mentioned day, and in the year ending December 31st, 1873; answer separately as to these different periods of time, and in your answer as to the property so owned at said different periods of time, state the amount and par value of each class of said mortgage bonds, bonds, stocks, and the aggregate of said debts so owned, including in your answer any stock of the Baltimore and Ohio Railroad Company which may form a part of the stocks so owned, whether the same be the stock of the Main Stem, or of the Washington Branch of the said road, and specifying the purpose for which such stock was so owned?

4. Upon which of said mortgage bonds, bonds and stocks so owned, was interest or dividends paid to the Baltimore and Ohio Railroad Company, and to what amounts between said 1st day of April, 1872, and said 31st day of December, 1872, inclusive of said last mentioned day, and on what part of said debt was interest paid to said Company in said period of time, and to what amount, and on which of said mortgage bonds, bonds and stocks so owned, was interest or dividends paid to the Baltimore and Ohio Railroad Company, and to what amount in the year ending December 31st, 1873, and on what part of said debt was interest paid to said Company in said last mentioned period of time, and to what amount?

The Court sustained the defendant's exceptions, and to this ruling the plaintiff excepted.

Second Exception.--A large amount of evidence, chiefly documentary, was introduced by the plaintiff. Among the documentary evidence so introduced were the following Maryland Acts of Assembly: 1826, ch. 123, 1827, ch. 104, 1827, ch. 209, 1835, ch. 245, 1835, ch. 395, 1836, ch. 82, 1836, ch. 276, 1845, ch. 313, 1854, ch. 34, 1865, ch. 70, 1866, ch. 154, 1866, ch. 157, 1868, ch. 119, 1868, ch. 471, and 1870, ch. 362. The Acts of Congress of March 2, 1831, ch. 85, and July 25, 1866, ch. 251, were also introduced. The following Acts of the General Assembly of Virginia were also introduced: Act of March 8th, 1827, Act of March 11th, 1837, Act of March 28th, 1837, Act of April 2nd, 1838, Act of March 19th, 1839, Act of March 6th, 1847, and further, sections 58 and 59 of ch. 35 of the Code of Virginia of 1860, (2nd Ed.) and section 67 of ch. 29 of the Code of West Virginia of 1868. The plaintiff also offered in evidence the twenty-sixth, thirty-second, thirty-third, forty-sixth, forty-seventh and forty-eighth annual reports of the defendant, and copies of the following mortgages: From the defendant to William G. Harrison, dated 29th April, 1853; from the defendant to the Mayor and City Council of Baltimore, dated the 16th of February, 1854; from the defendant to John W. Garrett and others, trustees, dated 1st of March, 1870, and one from the said defendant to John W. Garrett and others, trustees, dated 20th of May, 1872. It was admitted that the indebtedness of the defendant intended to be created under and secured by the said respective mortgages, had been created and secured as provided for by said respective mortgages; and that the money received by the said defendant from or upon the evidences of debt secured by or under said respective mortgages, had been used and applied by the said defendant to the purposes expressed in said mortgages. Evidence was also introduced by the defendant. After the evidence was in, the plaintiff offered ten prayers--not deemed necessary to be set out-- which the Court refused; and the plaintiff thereupon excepted. Verdict was given for the defendant and judgment was entered thereon. The plaintiff appealed.

The cause was argued before BARTOL, C.J., BOWIE, STEWART, BRENT, GRASON, MILLER, ALVEY and ROBINSON, J.

John H. Handy and Charles J. M. Gwinn, Attorney General, for the appellant.

The Court of Appeals in Mayor, etc. vs. B. & O. R. R. Co., 6 Gill, 295, 296, laid down the general rule, that the exemption of the shares of stock of a corporation from taxation, exempted its property also from taxation.

The expression of this general rule was not necessary to the decision of the particular case; the rule, therefore, ought not to control the judgment of this Court, when the principle of that rule is involved in the determination of a new case. Dugan vs. Hollins, 13 Md., 162; Cohens vs. Virginia, 6 Wheat., 399-401; Woodruff vs. Parham, 8 Wallace, 137-139; Carroll vs. Lessee of Carroll, 16 Howard, 287.

Shares of stock in a corporation, in the hands of individual owners, and the franchises and property of such corporation, in its ownership, are not different forms of the same property. They are different properties, which are wholly distinct in their nature. Dartmouth College vs. Woodward, 4 Wheat., 700, 701; Gordon vs. Appeal Tax Court, 3 Howard, 150; Van Allen vs. Assessors, 3 Wallace, 584; Delaware Railroad Tax Case, 18 Wallace, 229; Farrington vs. Tennessee, 95 U. S., 686, 687, 691; Cesena Sulphur Co. vs. Nicholson, L. R., 1 Exc. Div., 451.

The exemption of the shares of stock of a corporation from taxation does not, of itself, exempt the property of such corporation from taxation; nor does the exemption of the property of a corporation from taxation, of itself, exempt the shares of stock of such corporation from taxation. Farrington vs. Tennessee, 95 U. S., 686, 687, 691.

It does not clearly appear from the charter of the appellee that the Legislature intended to do more than exempt its shares of stock from taxation. The franchises and property of the corporation, not being exempted from taxation in clear and unambiguous terms, ought, therefore, to be held to remain within the taxing power of the State. Mayor, etc. vs. B. & O. R. R. Co., 6 Gill, 292; Providence Bank vs. Billings, 4 Pet., 561; Phila. & Wilm. R. R. Co. vs. Md., 10 Howard, 393; Soc. of Savings vs. Coite, 6 Wall., 606; North Missouri R. R. vs. Maguire, 20 Wall., 61; Erie R. R. Co. vs. Penn., 21 Wall., 498; Cooley on Taxation, 54.

The Act of 1872, ch. 234, imposed a tax upon the franchises of railroad companies, measured by their gross receipts. State Tax on Railway Gross Receipts, 15 Wall., 294; State vs. P. W. & B. R. R. Co., 45 Md., 379. As the franchises of the appellee are not clearly exempted from taxation by its charter, its gross receipts remain within the taxing power of the State.

If the Court should adhere to the rule laid down in Mayor, etc. vs. B. & O. R. R. Co., 6 Gill, 295, 296, the exemption of the property of the appellee from taxation, because of the exemption of its shares of stock from taxation, extends only to the property owned by the appellee on March 6, 1859, the date limited by the Virginia Act of March 6, 1847, for the completion of the railroad of the appellee to the Ohio River. The immunity was intended to extend only to the work, which the Company contracted to complete before the day named. It was not intended to extend to additions subsequently made by the appellee to the work thus completed.

The exemption of the property of the appellee from taxation, even if the rule laid down in 6 Gill, 295, 296, be adhered to, cannot certainly extend to franchises or property not held or acquired for the purpose of completing the railroad of the appellee from Baltimore to the Ohio River.

It does not extend to the special stock issued by the appellee for the construction of its Washington Branch Railroad, under the Acts of 1830, ch. 158, and 1832, ch. 175. This special stock is exempted temporarily only from taxation under the Acts of 1872, ch. 234, and 1874, ch. 408.

The immunity does not extend to any stock, or bonds, which the appellee acquired in the exercise of the power given to it by the Acts of 1836, ch. 276, or 1870, ch. 476, to aid in the construction, by other companies, of railroads lateral to, or in continuation of its limited line. Such stocks and bonds...