Baltimore, Chesapeake & Atlantic Railway Co. v. County Commissioners

Schmucker, J., delivered the opinion of the Court. This appeal brings before us for the third time the claim of the appellant, the Baltimore, Chesapeake and Atlantic Railway Company, to an exemption from taxation. It first came here, as a claim to exemption from municipal taxation, in the case of the Appellant v. Ocean City, reported in 89 Md. 89 . It next appeared before us upon a question of county taxation in the case of the Appellant v. The County Commissioners of Wicomico County, reported in 93 Md. 113 .

In each of these cases we held that the appellant was not entitled to the exemption. The history of the incorporation of the appellant and the grounds on which it rests its claim to thé exemption are too fully set forth in the opinions filed in those two cases to require restatement here. We will however, to facilitate the consideration of the present case, again advert to the salient facts upon which the appellant founds its contention. The Baltimore and Eastern Shore Railroad Co. was incorporated in 1886 under those sections of the General Corpora ²⁷⁹ tion Law which were enacted by ch. 242 of the Acts of 1876.

Certain additional powers, privileges and immunities were granted to it by the Act of 1886, ch. 133. The last-named Act authorized the company to consolidate with or acquire by lease or purchase and operate any other railroad lying wholly 'or partly within this State; and further provided that “its franchises, property, shares of capital stock and bonds shall be exempt from State, county and municipal taxation for the term of thirty years accounting from the date of the completion of said road between the termini mentioned in its charter.” The Baltimore & Eastern Shore R. R. Co., armed with these additional powers, purchased the Wicomico and Pocomoke. Railroad on June 30th, 1900, and on the following day made a mortgage upon all of the property and franchises which had been owned by either of the two railroads, to secure the payment of an issue of bonds. The property intended to be conveyed by the mortgage was therein described as “All and singular the entire line of railroad of the party of the first part, the Baltimore and Eastern Shore Railroad, situate, lying and being in the State of Maryland, between Broad Cove,’ Eastern Bay, Talbot County, and Salisbury, in Wicomico County, and extending from said termini through the counties of Talbot, Caroline, Dorchester and Wicomico, in said State, and also all the line of railroad from Salisbury, Wicomico County, and Hammock Point, in Worcester County, in said State, which said last-mentioned railroad comprised the railroad of Wicomico and Pocomoke Railroad Company, an entire distance of about ninety miles,” and also steamboats, docks, piers, rolling stock, etc.; and the rights, privileges, franchises and immunities and exemptions, including the “immunity and exemption from taxation granted to, conferred and bestowed on the party of the first part.” Default having occurred under this mortgage it was foreclosed in August, 1894, by a decree of the Circuit Court of the United States for the District of Maryland and the entire mortgaged property and franchises were sold under the foreclosure to.

Nicholas P. Bond. He, along with certain asso ²⁸⁰ dates, then formed the appellant corporation with its principal office in Wicomico County, by filing a certificate with the Secretary of State under secs. 187, 188, 189 and 190 of'Art. 23 of the Code of 1888, for the purpose of operating the railroad property which' had been purchased by him at the foreclosure sale. The municipality of Ocean City levied taxes on certain property, lying within its corporate limits, which had originally been owned by the Wicomico & Pocomoke R. R. Co., but had been acquired in the manner already mentioned by the appellant and was owned by it when the taxes were levied. The appellant refused to pay these taxes whereupon The Mayor and City Council of Ocean City brought suit and recovered a judgment against it for the amount of the taxes in the Circuit Court for Worcester County and we affirmed the judgment on appeal.

In our opinion in that case we held that, as the property involved in that suit never had been owned by the Baltimore and Eastern Shore Railroad Co., it was not within the contemplation of the legislative exemption from taxation granted to that company by the Act of 1886, chap. ¿33. We there further held, although perhaps not necessary for the purposes of that case, that the exemption from taxation granted by that Act was in the nature of a personal privilege of the very corporation to which it was granted, and that it was not assignable, in the absence of express legislative authority, and that it did not pass to the purchaser of the Eastern Shore Railroad at the foreclosure sale. We relied in part, in support of the views there expressed by us, upon the Chesapeake & Ohio R. R. Co. v. Miller, 114 U. S. 186 , where it was held that while those franchises of a railroad company which were rights and privileges essential to the operation of the corporation and without which it could not successfully conduct its road might be conveyed to a purchaser as part of the property of the company, immunity from taxation was not one of those franchises but was personal to the company and “was incapable of transfer without express statutory direction.”. We also relied upon Picard v. Tennessee, ²⁸¹ 130 U. S. 641 , where the Court said: “Yielding to the doctrine that immunity from taxation may be granted, that point being already adjudged, it must be considered as a personal privilege not extending beyond the immediate grantee, unless otherwise so declared in express terms, the same considerations which call for clear and unambiguous language to justify the conclusion that immunity from taxation has been granted in any instance must require similar distinctness of expression before the immunity will be extended to others than the original grantee.

It will not pass merely by a conveyance of the property and franchises of a railroad company although such company may hold its property exempt from taxation.” The same proposition is stated with at least equal force and clearness, and supported by the citation of authority in the Memphis & Little Rock R. R. Co. v. Berry, 112 U. S. 609 , where it was said upon the authority of earlier decisions of the same Court that “the exemption from taxation must be construed to have been the personal privilege of the very corporation specifically referred to, and to have perished with that,' unless the express and clear intention of the law requires the exemption to pass as a continuing franchise to a successor. This salutary rule of interpretation is founded upon an obvious rule of public policy, which regards such exemptions as in derogation of the sovereign authority and of common right and therefore not to be extended beyond the exact and express requirements of the grants construed strictissirni juris.” The appellant carried the Ocean City case by writ of error to the United States Supreme Court which dismissed the writ for want of jurisdiction, as will appear from the memoranda of unreported cases in 179 U. S. When the Wicomico County case reported in 93 Md. 113 came before us we applied the same doctrine to the liability of the appellant for the taxes there sued for, which had been levied by the County Commissioners of Wicomico County upon certain portions of i;s road bed and other property which had formerly belonged to the Baltimore & Eastern Shore R. R. Co. and had been sold to Nicholas E. Bond under the fore ²⁸² closure of the mortgage made by that company. After, the decision of that case by this Court, Samuel Bancroft, Jr., a non- resident holder of mortgage bonds issued by the appellant applied for and obtained from the Circuit Court of the United States for the District of Maryland an injunction restraining the County- Commissioners of Wicomico County from the levy or collection of the taxes upon that portion of the appellant’s property which had formerly been owned by the Baltimore & Eastern Shore R. R. Co. We will refer to this injunction suit more at-length further on in this opinion. The present suit was instituted on December 27th, 1904, to recover taxes levied by Wicomico County upon real and personal property assessed to the appellant for the years 1900 to 1904, inclusive.

The defendant pleaded the general issue pleas, and limitations, and by a special plea claimed the benefit of the exemption from taxation originally granted to the Baltimore & Eastern Shore Railroad Co. by the Act of 1886, ch. 133. The case was tried before the Court without a jury upon an agreed statement of facts. The- verdict and judgment were for the plaintiff and the defendant appealed. The only bill of exceptions in the record is to the action of the Court below upon the prayers.

The pleas of limitation were demurred to and the demurrer was properly sustained because the pleas were to the entire declaration while the taxes sued for in some of its counts had unquestionably accrued within the statutory period of limitations. There were some other questions of pleading raised by demurrers which were not relied on at the hearing in this Court and do not affect the material issues in the case. The substantial issue, of the appellant’s right to the exemption from taxation claimed by it, was raised by the prayers offered by it as defendant in the Court below all of which were rejected. The plaintiff offered no prayers.

In our opinion the Court below committed no error in rejecting the defendant’s prayers. We have already stated in the cases in 89th and 93rd Maryland and in this opinion the propositions which require us to hold that the exemption from ²⁸³ taxation granted to the Baltimore & Eastern Shore R. R. Co. by the Act of 1886, ch. 133, did not pass to Mr. Bond, the purchaser under the foreclosure of the mortgage, made by that company and therefore it could not have passed through him to the appellant. It remains to be considered whether any such exemption accrued directly from the State to the appellant corporation when it was organized by Mr. Bond and his associates in August, 1894, under secs. 187, &c., of Art. 23 of the Code of 1888. Secs. 187 and 188, which are the ones material to the subject now under consideration, are as follows: “Sec. 187.

In case of the sale of any railroad situated wholly within this State, or partly within this State and partly within an adjoining State, or the District of Columbia, heretofore or hereafter made by virtue of any mortgage or deed of trust, whether under foreclosure or other judicial proceedings, or pursuant to any power contained in said mortgage or deed of trust, the purchaser or purchasers thereof, or his or their survivor or survivors, representatives or assigns, may, together with their associates, if any, form a corporation for the purpose of owning, possessing, maintaining and operating such railroad, or such portions thereof, as may be situated within this State, by filing in the office of the Secretary of State a certificate of the name and style of such corporation, the number of directors, &c., &c. “Sec. 188. Such corporation shall possess all the powers, rights, immunities, privileges and franchises in respect to such railroad, or that part thereof included in such certificate, and in respect to the real and personal property appertaining to the same, which were possessed or enjoyed by the corporation which owned or held such railroad previous to such sale under or by virtue of its charter and any amendments thereto, and of other laws of this State, or the laws of any other State in which any part of such railroad may have been situated, not inconsistent with the laws of this State.” It is to be observed in the first place that there is nothing in either of these sections expressly dealing with or even re ²⁸⁴ ferring to the subject of the taxation of corporations to be formed under their provisions. (The mode and extent of the liability of railroad corporations and their property to taxation is definitely and specifically provided for and regulated in Article 81 of the Code.) Nor is there anything in either of these sections, manifesting an intention to bestow the quality of alienability upon exemptions from taxation, already held by existing corporations, or to change the policy of the law in dealing with'them. The declared object and purpose of those sections was to afford to the purchasers, of “any railroad” at a foreclosure or judicial sale, and their associates a convenient method of assuming a corporate form of organization “for the purpose (as therein expressly declared), of owning, possessing, maintaining and operating such railroad.'-' Therefore the provision in sec. 188, that the new corporation when formed “shall possess all of the powers, rights, immunities, privileges and franchises in respect to such railroad” and its property which were possessed and enjoyed by the corporation that owned the railroad before its sale should by reasonable interpretation be held to refer to and embrace only those powers, &c., enjoyed by the corporation formerly owning the railroad which had passed along with the road and its property under the foreclosure sale; together with such others only as might be necessary for conducting the new corporation and enabling it to successfully maintain and operate its railroad.

Those provisions, so general in their nature and containing no reference to the subject of taxation, ought not to be held by inference or implication to confer upon the new corporation an advantage so exceptional and so opposed to public policy and so inconsistent with the existing laws of the State as an exemption from taxation, merely because the State had seen fit by special Act of the Legislature to grant such án exemption to a corporation which once owned the railroad which the new corporation is about to take over and operate. The decisions of this Court and of the United States Supreme Court are alike emphatic in their statement of the sound ²⁸⁵ rule of construction that the taxing power is so essential to the existence of government that it is never presumed to be relinquished unless the intent to relinquish is expressed in plain terms, or in the words of the Supreme Court, “in the clearest and most unambiguous language;" and the ascertainment of the intent cannot be left to inference or implication. Every reasonable intendment must be made that it was not the design to surrender the power of taxation or to exempt any property from its due proportion of the burden of taxation. Buchanan v. Commrs. of Talbot County, 47 Md. 293 ; State v. Balt. & Ohio R. R. Co., 48 Md. 73 ; Appeal Tax Court v. Rice, 50 Md. 312 ; Appeal Tax Court v. University, 50 Md. 465 ; Memphis and Little Rock R. R. Co. v. Berry, 112 U. S. 609 ; Ches. & Ohio R. R. Co. v. Miller, 114 U. S. 186 ; Picard v. Tennessee, 130 U. S. 641 ; People of New York v. Cook, 148 U. S. 409 ; Phoenix Fire, &c., Co. v. Tennessee, 161 U. S. 174 .

Furthermore this State had distinctly declared its policy in reference to the local taxation of railroad property, by legislative enactment which was in full force in August, 1894, when the appellant was incorporated, and still remains unrepealed. Sec. 155 of Art. 81 of the Code of 1888 provides that “the property real and personal of each and every railroad company in this State shall be assessed and taxed for county and municipal purposes in the same manner in which the property of individuals is now taxed.” Even if the presence of sec. 155 on the statute book had not made it inconsistent with the existing laws of the State to so construe secs. 187, &c., of Art. 23, as to make them operative to vest in the appellant, by virtue of its incorporation under their provisions, an exemption from taxation, such a construction would be in opposition to the well-settled principles of law to which we have already referred governing the subject of exemptions from taxation. The provisions of sec. 187, &c., did not become ■ operative, as to the appellant, until it had accepted them by filing its certificate of incorporation and therefore, for the purpose of ascertaining the extent of its powers and immunities, ²⁸⁶ the law and the