Philadelphia, Wilmington & Baltimore Railroad v. Appeal Tax Court

Alvey, J., delivered the opinion of the Court. These are cross-appeals; though in this opinion, for brevity sake, we shall designate the Philadelphia, Wilmington and Baltimore Railroad Company as appellant, and the Appeal Tax Court of Baltimore City as appellee. The appellant is a corporation composed of several railroad companies, which had been previously chartered by the States of Maryland, Delaware and Pennsylvania; and which, by Acts of these States, were authorized to become consolidated and form one corporation, under the name and style that it now hears. The road of this corporation thus formed, extends from Philadelphia to Baltimore. ⁴⁰⁸ One of tlie original companies now forming a pai't of the present appellant, was the Baltimore and Port Deposit Railroad Company, chartered hy the Act of this State of 1881, ch. 288, to construct a road from Baltimore to Port Deposit, on the Susquehanna river; and another of the original companies of which the appellant is composed was the Delaware and Maryland Railroad Company, chartered hy the Act of this State of 1831, ch. 296, to construct a road from the Susquehanna river to the Maryland and Delaware line.

This latter company was afterwards, hy the Act of 1835, ch. 93, and corresponding Act of the State of Delaware, united with the Wilmington and Susquehanna Railroad Company, a corporation chartered hy the State of Delaware; the two companies united taking the corporate name of the Wilmington and Susquehanna Railroad Company. Afterwards, hy an Act of this State of 1837, ch. 30, and corresponding Acts of the States of Delaware and Pennsylvania, the Wilmington and Susquehanna Railroad Company, and the Baltimore and Port Deposit Railroad Company, were authorized to consolidate with the Philadelphia, Wilmington and Baltimore Railroad Company, which had heen previously chartered; and the consolidated company thus formed is the appellant in this case. The charter of the Baltimore and Port Deposit Railroad Company contained no exemption from taxation whatever; and the charter of the Delaware and Maryland Railroad Company made the shares of stock therein personal estate» and declared that such shares “ shall he exempt from the imposition of any tax or burthen hy the State, except, that portion of the permanent and fixed works of the company, within the State of Maryland.” And it has heen held, that all the real and personal property in this State that belongs or appertains to that part of the road which was originally owned hy the Baltimore and Port Deposit Railroad Company, and also the permanent and fixed works ⁴⁰⁹ of that portion of the road which formerly belonged to the Delaware and Maryland Railroad Company, within this State, are liable to he assessed in the hands of the present appellant, just as they would have been in the hands of the original companies. Phil. & Wilmington R. Co. vs. The State of Md., 10 How., 376 ; Same vs. Bayless, 2 Gill, 355 ; State vs. Phil., Wilm. & Balto.

R. Co., 45 Md., 362 . That being settled, and altogether beyond further controversy, the question made on the present record is: To what extent may the property of this corporation he assessed for municipal taxation in the City of Baltimore, under the Assessment Acts of 1876, ch. 260, and 1876, ch. 159? By the Act of 1876, ch. 159, it was provided that the property, real and personal, of each and every railroad company in this State, working their roads by steam, should he assessed and taxed for county and municipal purposes in the same manner as the property of individuals was then assessed and taxed; and the subsequent General Assessment Act of the same session, 1876, ch. 260, sec. 1, declared that “all property of every kind, nature and description, within this State, shall he liable to valuation, assessment and taxation.” And in regard to these Acts, we have decided in the case of the Appeal Tax Court vs. The Western Md. R. Co., p. 296, ante, that the Act, ch. 260, did not repeal by implication the former Act, ch. 159, and that the later Act was not a substitute for the prior one, hut that they both stood well together, until modified by the Act of 1878, ch. 413. There are two main questions presented by the record: 1.

Whether the City of Baltimore, by virtue of the Acts of 1876, before referred to, had the right to tax two lots or parcels of ground leased by it to the appellant for ninety-nine years, renewable forever, and which have been improved by the appellant, by the erection of depots, shops, ⁴¹⁰ &c., thereon; and 2. Whether the city had the right to tax the rolling stock of the appellant, such as locomotives, passenger, freight and other cars belonging to the appellant, as property located in the City of Baltimore. The Court below held, that the two parcels of ground leased from the City of Baltimore were not subject to valuation and assessment, and accordingly directed them to be stricken from the assessment; but as to the improvements thereon, it was held that they were subject to valuation and assessment. It was also held, that a part of the rolling stock of the appellant was subject to valuation and assessment in the same proportion to the whole rolling stock of the company that the length of the Baltimore and Port Deposit Railroad bore to the whole length of the appellant’s road between Baltimore and Philadelphia.

It is from an order embodying these rulings that both parties have appealed to this Court. 1. The appellant does not contend, as we understand, the counsel, that the parcels of ground leased from the city are entirely exempt from assessment and taxation; but it is contended, that inasmuch as the appellant is owner and holder of a leasehold estate only, subject to a full annual rental, payable to the city, the owner of the reversion in fee, and that the city is entirely exempt from all taxation in respect of the reversion and the rent reserved by the lease, the appellant should only be assessed with the value of the leasehold estate, subject to the rent reserved. And this would seem to be nothing more than what is just and equitable. All the interest and estate of the city in the premises are clearly exempt from taxation by statute; and if the reversion, and the rent, the supposed annual value of the leasehold estate, are free from taxation, upon what principle should the lessee be assessed as for a fee simple estate, without deduction of rent?

In answer to this question, it is said that the appellant has covenanted with the city to “ pay ⁴¹¹ all taxes, assessments and public dues whatever, levied, charged or assessed, or that may hereafter he levied, charged or assessed, on the above described premises, or the yearly rent issuing therefrom.” This is the covenant in the leases from the city, hut it is very manifest that it is but the usual covenant inserted in leases for the benefit and exoneration of the lessor; and that it has reference only to such taxes and assessments as might affect the reversion and its incident the rent reserved under the lease. It does not seem reasonable that it could ever have been the design of the parties that this covenant should have operation notwithstanding the interest of the city in the property and all rent accruing therefrom should have entire exemption from assessment and taxation. The general principle certainly is, that, when the lease is silent upon the subject, the landlord is bound to pay all State and municipal taxes and assessments upon the property (Taylor L. & T., sec. 341, and the cases there cited;) but in this State, ever since the general assessment Act of 1812, ch. 191, sec. 36, it has been made the duty of the tenant holding any leasehold estate, to lc pay the collector the sum valued for the estate or interest of any landlord,” or, as the words now stand in the statute, to pay the taxes levied on the demised premises; and the tenant so paying has been given his right of action to recover such money of the landlord, as money paid for his use, or the right to deduct the same from the rent reserved, unless otherwise agreed. Code, Art. 81, sec. 73 ; Act 1874, ch. 483, sec. 65.

This provision was intended as a means of facilitating the collection of taxes ; there being many cases where the landlord might not be known, or might be absent. But that provision of the law clearly has no application to a case like the present, where there is no liability of the landlord in respect to the taxes, either to the taxing power or to the tenant. If the lease had been silent upon the subject, and the appellant were required, as tenant in possession, to pay ⁴¹² taxes as upon a fee simple valuation, clearly there would be no right of deduction from the rent as against the city; for that would be in palpable violation of the exemption given by the statute. The case of Hughes vs. Young, 5 Gill &, John., 67, relied on by the counsel for the appellee, is hardly an authority for the position for which it is cited.

That was an action of covenant upon a lease for ninety-nine years, and renewable, dated in 1180, brought by the heir of the lessor against the assignee of the lessee, for rent due; and the question was, whether the defendant was entitled to an abatement of the rent for taxes paid. The lease contained no