Rogan v. Baltimore & Ohio Railroad

Markell, J., filed the following dissenting opinion: The Act of 1878 is “An Act to adjust and settle finally, by an agreement, all pending controversies” between the B. & O. and the State. The question is whether the principal method of “settling all controversies,” viz., “by subjecting the franchises and property of said Company within this State to taxation for State purposes to a certain extent,” (1) accomplished its purpose of settling controversies or (2) unsettled all controversies and created endless new controversies by subjecting the company to taxation to an utterly uncertain extent. (Italics supplied.) This question depends upon whether, in the Act of 1878, gross receipts within the State had (1) the meaning which (a) it had when the Act of 1878 was passed, under two decisions of this court construing the Act of 1872, and (b) it has had by unbroken practice for upwards of 60 years since or (2) any one of a thousand meanings which from time to time the tax-collectors may give it. A mere tax statute may, of course, be amended or repealed at any time, either as to the rate or the base of the tax.

Thus the general railroad gross receipts tax, which in 1878 was Y2 of 1 per cent., has been increased to a graduated rate of from 11/4 to 21/2 per cent. Code, 1943 Supplement, Art. 81, sec. 95 (a). The Act of 1878 was not a mere tax statute but a contract, by which the B. & 0., inter alia, agreed to a modification of its charter exemption to a specified extent and not otherwise. This court has held, 30 years ago, that the Act of 1878 is “an irrepealable contract” (State v. Baltimore & O. R. Co., 127 Md. 434, 450 , 96 A. 636, 641 ), that “its object and purpose was to reach a final adjustment of matters in dispute between the state and the railroad, not an adjustment of some and a leaving of others open and subject to future unknown modifications” ( 127 Md. 449 , 96 A. 641 ), that “there was no grant of any new right by the state to the railroad company, though there was a relinquishment of an existing right in return for which the state acquired a valuable right not theretofore possessed” ( 127 Md. 445 , 96 A. 640 ).

State v. Baltimore & O. R. ⁶⁰ Co., 127 Md. 434 , 96 A. 636, 640 . (Italics supplied.) In Erie Ry. Co. v. Pennsylvania, 1875, 21 Wall. 492, 498 , 22 L. Ed. 595 , the gross receipts tax was apportioned “according to the length of the road within the State.” In the Delaware Railroad Tax Case, 1874, 18 Wall. 206 , 21 L. Ed. 888 , the tax on “net earnings” was by statute likewise apportioned on a mileage basis. Counsel for the railroad company argued that this apportionment had the effect of taxing property beyond the State of Delaware, it being admitted that valuable terminals and other outside property were proportionately more valuable than the Delaware property. 18 Wall. 220 , 221, 21 L. Ed. 888 .

The Supreme Court said: “The length of the whole road is in round numbers one hundred miles; the length in Delaware is twenty-four miles. The tax upon the property estimated according to this ratio would be in Delaware 24/100 or 6/25 of the amount of the tax upon the whole property. But the value of the property in Delaware is not 6/25 of the whole property, but much less than this proportion would require.” Nevertheless the court held that the tax was not a property tax but a tax “upon the corporation itself,” measured by a percentage of the value of “a certain proportional part” of its shares of stock, “a rule which, though an arbitrary one, is approximately just.” 18 Wall. 231 , 21 L. Ed. 888 . The Maryland Act of 1872, ch. 234, contained no express limitation to gross receipts within the State.

The Act of 1874, ch. 408, amending the Act of 1872, provided for such limitation and for apportionment on a mileage basis. In State v. Philadelphia W. & B. R. Co., 1876, 45 Md. 361 , 24 Am. Rep. 511 , counsel again argued that this was a tax on property outside the state, and that no apportionment was possible. This court said: “The only remaining point then to be considered, is the apportionment of the gross receipts liable to taxation, under the Acts of 1872 and 1874, and in regard to this, we are of the opinion that upon the pleadings and admitted facts in this case, the State is entitled to recover a sum equivalent to that part of the gross receipts, which may be in the same proportion to the whole amount of ⁶¹ gross receipts of the defendant, on its entire road from Baltimore to Philadelphia, that the number of miles of the Baltimore and Port Deposit Company bears to the whole number of miles of the Philadelphia, Wilmington and Baltimore Company, of which it forms a part.

It is true the gross receipts on one part of the road may be greater than on another, but perfect equality in the assessment and apportionment of taxes is unattainable, and the rule we have adopted seems to be fair and reasonable. Delaware Railroad