State v. Northern Cent. Ry. Co.

• Decision Date: 02 March 1876
• Citation: 44 Md. 131
• Parties: THE STATE OF MARYLAND v. THE NORTHERN CENTRAL RAILWAY COMPANY. SAME v. SAME.
• Court: Maryland Court of Appeals

44 Md. 131

THE STATE OF MARYLAND v. THE NORTHERN CENTRAL RAILWAY COMPANY.

SAME v. SAME.

Court of Appeals of Maryland

March 2, 1876

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

John H. Handy, for the appellant.

The 15th Article of the Bill of Rights prohibits all exemptions. That Article is mandatory, and when it provides that "every person in the State, or person holding property therein, ought to contribute his proportion of public taxes for the support of the Government, according to his actual worth in real or personal property," it does not mean that some persons ought to do so and others ought not. Nor does it mean that in estimating his actual worth in real or personal property, any part of either his real or personal property should be deducted. The Court has held several times that this section was mandatory, in so far as to require that taxes should be equal. State vs. Cumb and Penna. R. R. Co. 40 Md., 22.

How can that principle be maintained if one person may be taxed according to his actual worth in real or personal property whilst another is taxed according to only a portion of what he owns?

The Legislature had no power under any of our Constitutions to exempt any person whatever from taxation, or to render his taxes greater or less by reason of the character of the property he owns. Every person owning property must be taxed. The tax must be according to his actual worth in real or personal property ; and in ascertaining that worth no part of his property that is of value can be directed by the Legislature to be omitted.

If then the Legislature had no constitutional power to exempt any person from taxation, it could not lawfully contract to exempt the shareholders of the stock of the Baltimore and Susquehanna R. R. Co. The attempt to do so would be void, and the Act of 1872, ch. 234, would therefore impair no contract between the State and the Railroad Company. See Maxwell, et al., Assessors vs. The State, ex rel. Baldwin, 294.

If it be a contract, what is the extent of it? The exemption if valid, could cover nothing except what it plainly professed to embrace, viz., "the shares of the capital stock of the said company," which are declared to be "personal estate." It cannot be extended by implication, unless that implication is necessary to its own existence. The exemption must be intended to relieve from taxation, the person who would be liable for the tax, the owner of the shares of stock. It is he who would otherwise owe the tax, and who might be compelled to pay it by action of assumpsit and execution on his property generally.

In the absence then of the exemption, who would be liable to pay the tax on each share of stock as owner? Not the corporation; for it does not, and strictly speaking, cannot own its own stock. It would be the individual shareholder. It is therefore, the shareholder from whose "actual worth in real or personal property," the value of his shares of stock is to be deducted in measuring him for taxation. This is no new doctrine. It was asserted by this Court in Howell vs. The State, 3 Gill, 29.

In 1865, the New York Legislature passed an Act enabling State Banks to become National Banks, and by its tenth section provided that "all the shares in any of the banking associations organized under the Act of Congress, held by any person or body corporate, shall be included in the valuation of the personal property of such person or body corporate or corporation in the assessment of taxes," &c. The assessors in the City of Utica, assessed the shares of the capital stock of the Second National Bank of Utica, owned by one Van Allen and others, and demanded taxes in respect thereof. They refused to pay them and suits were instituted for their recovery. A part of the capital of the Bank was invested in Five-twenty bonds at the time of the assessment. Among the positions assumed by the defendants, was the very one insisted on now by the defendant in this cause, viz., that the shares of the capital stock of the corporation was only the representative of the property of the corporation, and that to tax a share of stock was in effect to tax that which it represented, and so indirectly to tax the bonds of the United States, which were exempt. The Court of Appeals held that the Act did not impose a tax on the property of the Banks, and was valid. City of Utica vs. Churchill, et al.; Van Allen vs. Nolan, et al., 33 N. Y. 161. Upon appeal by Van Allen to the Supreme Court of the United States, that Court held that the tax on the shares of the capital stock of the bank, was not a tax on its capital. Van Allen vs. The Assessors, 3 Wall., 583, 584.

This being so, it follows that a tax on the capital of the bank would not be a tax on the shares of the capital stock. Or, stated in another formula: If an exemption of the capital of a corporation from taxation, does not exempt the shares of the capital stock,-- because the ownership of the two species of poperty is not identical, then e converso, for the same reason, an exemption of the shares of the capital stock, cannot exempt the capital of the corporation.

It is obvious therefore that under this decision, the exemption in the charter of the Baltimore and Susquehanna R. R. Co. could extend to no other interest than that said by the Supreme Court to be embraced by similar language in the Act of Congress. It is totally immaterial whether the language be used to tax, or exempt. In either case it is to be strictly construed. The Supreme Court of the United States have repeatedly since affirmed their decision in Van Allen's case. Bradley vs. The People, 4 Wall., 459, 461; Provident Institute vs. Massachusetts, 6 Wall., 630; National Bank vs. Commonwealth, 9 Wall., 359.

Nothing then could be clearer than that the Supreme Court holds that a tax laid upon the shares of the capital stock of the Balto. and Sus. R. R. Co. would not be a tax on the property of the company. And that an exemption of the one does not exempt the other. If this be law, the exemption in the charter of the B. & S. R. R. Co. could not extend to the property owned by that corporation.

If the exemption were valid and extended to the property of the Baltimore and Susquehanna R. R. Co., and was incorporated in the charter of the defendant, yet it did not cover any larger interest than that owned by the portion of the road forming the Baltimore and Susquehanna R. R. Co.

The language of the charter is, "that the company shall possess all the corporate powers and privileges * * * which are expressed in the charter heretofore granted to the said Baltimore and Susquehanna R. R. Co." What was granted to that company? It is said the shares of the capital stock, are equivalent to the entire capital of the company. But they were limited to $2,000,000. It was that amount then which was exempted. Or, if it is said the shares might have been worth more or less than par, it was the actual value of such 20,000 shares. But the new company has $8,000,000 of stock, besides all that authorized to be created by making the Sunbury construction bonds, &c., convertible into stock. The exemption would extend then to only that amount of its property, in the proportion that $2,000,000 of the stock has to the whole amount issued. If that was only $8,000,000, then in no case could more than one-fourth of the capital of the entire corporation be exempt. Phil., Wilm. & Balt. R. R. Co. vs. The State, 10 Howard, 377; Delaware Railroad Tax, 18 Wall., 225, 228.

The tax imposed by the Act of 1872, does not violate the 15th Art. of the Bill of Rights of Maryland. The tax is not a tax on the property qua property of the corporation. It is a tax required to be paid by the corporation itself, for the exercise of its business, and it is entirely immaterial whether it be called a license, an excise, or a tax on gross receipts. The intent of the Act is manifest; it is to compel those corporations to pay for the privilege of using their property. State Tax on Railway Gross Receipts, 15 Wall., 293 to 296; Delaware R. R. Tax, 18 Wall., 231, 232.

It is precisely in the nature of that tax which is imposed upon merchants under the license sytem. They are assessed on their property as other property owners. They have the natural right to use that property as they choose in business. The law restricts that right, and in addition to the tax imposed by reason of ownership, and which, under the clause in the Bill of Rights, must be equal among all, imposes another tax, that for using that identical property in a given way.

Attorney General Gwinn, for the appellant.

Under Article 3, section 47, of the Constitution of 1850, the Act of 1854, ch. 250, incorporating the appellee, was subject to alteration by the Legislature, although the Legislature reserved in the Act itself no such power. Under the constitutional provision in question, the Legislature could not create any corporation by a special Act except on the condition that the special Act so passed was subject to alteration from time to time, or to repeal, by the Legislature. Whether the Legislature reserved this right in the special Act of incorporation, or not, could make no difference. The Constitution of 1850 itself, as the organic and controlling law, reserved to the Legislature the power to alter and amend such charter, as fully as if the reservation of such power had been made in the charter itself. Miller vs. State, 15 Wallace, 478, 497; Tomlinson vs. Jessop, 15 Wallace, 457.

To hold otherwise, would be to decide that the Legislature, by omitting to reserve this power of repeal, or amendment, in a special Act of incorporation granted under the Constitution of 1850, could confer powers which no subsequent Legis...