48 Md. 49 | Md. | 1878
Lead Opinion
delivered the opinion of the Court.
Section 18 of the Act of 1826, incorporating the Baltimore and Ohio Bailroad Company provides :
“That the said road or roads, with all their works, improvements and profits, and all the machinery of transportation used on said road, are hereby vested in the said company, incorporated by this Act and their successors forever; and the shares of the capital stock of the said company shall be deemed and considered personal estate, and shall he exempt from the imposition of any tax or burthen.”
There is no provision either in the Act of incorporation or in the Constitution then in force in this State, reserving the right to repeal or amend the charter of the appellee, and the exemption from taxation therein granted, is a con
This suit is brought to recover of the appellee a tax imposed by the Act of 1872, ch. 234, on the gross receipts of all railroads incorporated by, and doing business in, this State ; and it is claimed that, under the above section, the property and franchises of the company are exempt from the imposition of any tax or burthen. •
This section has been the subject of judicial construction, and it is necessary therefore in the first place, to understand precisely what has been decided. In the Mayor and City Council of Baltimore vs. The Balt, and Ohio R. R. Co., 6 Gill, 292, the power to tax the real and,personal property, and the capital stock of the company, and its shares of stock in the hands of shareholders, was the question and the sole question, before the Court, and after full argument, all the Judges were of opinion that no such power existed, and that the 18th sec. of the appellee’s charter exempted the property and capital stock, and shares of stock, from taxation.
This decision was made in a case in which the Baltimore and Ohio Railroad Company was a party, and upon the very section of its charter, now under consideration. From that time to the present, a period of thirty years, it has been the accepted law of this State; and upon the faith of it millions of dollars, have been invested in the property of this company. Every consideration therefore of public policy, and of private right, demands that the decision of the Court upon the question thus submitted to its adjudication, shall be deemed final and conclusive.
In delivering the opinion of the Court in that case, Judge Dorsey, however, said, that the exemption of the
The right to construct a railroad and to charge tolls for the transportation of freight and passengers is a franchise granted by the State, and a tax upon the tolls thus received is therefore a tax on the franchise itself. It would follow therefore, that if the franchises of the appellee are exempt from taxation, the gross receipts derived from the exercise of such franchises are also exempt. It is insisted, however, that the question in regard to the exemption of the appellee’s franchises, was not before the Court in 6 Gill; and that whatever deference is due to the opinion of so distinguished a Judge, it ought not to control our judgment in a subsequent suit, where the very point is presented for decision.
Conceding this, the question then is, whether the franchises of the appellee are by the 18th sec. of its charter exempted from taxation? This section, it is true, does not in so many words exempt the franchises of the company, but provides. that its shares of stock shall he exempt from the imposition of any tax or burden. And it is contended that the shares of stock, and the property and franchises' of a railroad company are separate and distinct properties, with separate and distinct ownerships, and that the exemption of the one, does not therefore exempt the other. The question, however, is not.whether shares of stock abstractly considered, embrace and represent the property and franchises of the appellee. Strictly speaking it may he true, that a shareholder is not the legal owner of any portion of the property of the company, and his shares of stock are evidences only of his right to participate in the business and government of the corporation, and to a proportional share of the profits earned by the company. We are not dealing, however, with abstract definitions, hut with an Act incorporating a railroad com
It is a sound rule of construction we admit, that the power of taxation is never presumed to be relinquished, unless the intent to relinquish is clearly expressed. In view however of the fact that the construction of this road “ was considered by the people of the State and by the Legislature as a great State object, tending to develop the wealth and to promote the prosperity of the whole State and particularly of the City of Baltimore,” this Court has said, “that liberal rules of interpretation ought to govern in the construction of the privileges and exemptions conferred on the company, and not such rules of restriction and limitation as are applicable to the charters of companies incorporated for the peculiar benefit of shareholders.” We must bear in mind that the appellee was incorporated in 1826, and was in fact, the first railroad ever chartered in this country for the transportation of freight and passengers. It was to extend from Baltimore to the Ohio River, a distance of 379 miles, involving necessarily in its construction an enormous sum of money, and was therefore justly considered not only as a gigantic, but in a pecuniary sense a hazardous enterprise. Under these circumstances, the Legislature was willing to confer on it “every privilege and immunity which could reasonably be required and which would tend to the completion of the road.” Such then being the motives of the Legislature, let us. look to the clause in the appellee’s charter under which this exemption is claimed. And here we find it provides that “ the said road or roads with all their works,
But conceding this construction, we are pressed with the argument that inasmuch as the appellee was required to complete its road to the Ohio river in the year 1859, and having completed one track by that time, the entire rood is to be considered as completed and equipped at that time, within the meaning of its charter, and that the immunity from taxation thus granted to the appellee is to be limited to the exercise of its franchises necessary to operate this one track, and to the property owned by the company at that time. Now the object of this provision
There is nothing either in the spirit or letter of the charter to justify the narrow construction contended for by the State, namely that by the completion of one track this road is to be considered fully completed and equipped within the meaning of the Act of 1826. On the contrary the appellee was authorized to construct a road not exceeding sixty-six feet in width, with as many tracks as might be deemed necessary; to build lateral roads in any direction, and to erect warehouses and other works necessary and expedient for the completion and operation of the road. To this end, full power was conferred on the President and Directors to increase the capital stock to any amount they might deem necessary ; to issue certificates of indebtedness, and to pledge the property of the road for the payment of the same, and also to use the undistributed profits of the Company.
Now it may be true that neither the Legislature nor the most sanguine promoters of this enterprise realized the great success which this road has achieved. But it is clear they did look forward to it as one of the great routes to and from the West to the seaboard, not merely with one track and with the machinery necessary to operate it, but with as many tracks as could be constructed within the sixty-six feet bed of the road, fully equipped in every respect with machinery and works of every kind necessary to meet the demands not only of the then existing, but what was deemed of much greater importance, the ever increasing trade of that section.
The construction then of such additional tracks and the purchase of machinery, and the erection of buildings and work's incident to and necessary to the business of the
We are of opinion therefore, that the gross receipts of the appellee’s entire road from Baltimore to the Ohio River, and the gross receipts derived from the lateral roads built by the appellee, and from all buildings and works necessary and expedient to the operation of its road are exempt from the imposition of any tax or burthen. And this too, whether said road or roads, and buildings, and works were constructed with money derived from the subscription to its capital stock, or from sales of its shares of stock, or from money borrowed, and secured by mortgage, or from the undistributed profits of the company, or from all these sources combined.
And this brings us to the question, what are the buildings and works necessary and expedient to the operation of the road within the meaning of the appellee’s charter? And here we are met with the argument that “necessary” means buildings and works indispensable to the road. This, however, is not a mere dictionary question, but one involving the construction of a power granted to a railroad company to enable it to accomplish the objects for which it was chartered. And as used in this connection, it is clear the Legislature meant such buildings and works as were reasonably convenient and appropriate to the maintenance and operation of the road. Construed in this sense, the question is whether “necessary” buildings embraces the elevatora, wharves, piers and docks owned by the appellee? Now one of the main objects in chartering this company was to bring the Western trade to the port of Baltimore, not merely to supply a local demand, but for the purposes of transhipment as ocean commerce. These buildings and structures are therefore necessary for the business of the appellee as a common carrier, for the purposes of receiving and storing grain and freight shipped over its road after the same have reached the
It is hardly necessary to say that the original charter does not authorize the appellee to build and conduct hotels in the usual and ordinary manner in which hotels are kept, that is for the accommodation of the public generally. But we are not dealing with the charter of a mere local railroad, but one authorizing the construction of a road from Baltimore to the Ohio River, designed and now used as one of the great through routes to the West. Hotels then, or buildings for the accommodation of passengers over the road, are, we think, necessary to its business and therefore within its charter. The record shows that the Cumberland and Viaduct Hotels were mainly designed
We come now to the receipts derived by the appellee from properties held and owned, not in pursuance of any power conferred by its original charter, but under subsequent grants from the Legislature, and upon which no exemption was engrafted. The Act of 1836, ch. 276, authorized the appellee to subscribe towards the construction of any lateral or connecting road, and to acquire an interest therein not exceeding two-fifths of the estimated cost of constructing such road. This is a distinct privilege or franchise granted to the company, and the gross receipts derived from the interest thus acquired in such lateral or connecting road, are iiable to the tax levied by the Act of 1872.
The gross receipts of the Metropolitan Road are also, we think, liable to this tax. The original charter it is true, authorized the appellee to build lateral roads, and this power is not limited to the construction of roads leading to lime-kilns, factories and distilleries, as was urged in argument by the Attorney General, but authorizes the appellee to build such roads for the transportation of freight and passengers. The Metropolitan Road was not built, however, under this provision in the original charter, but under the Act of 1865, ch. 70, which authorized the appellee to con
It is equally clear, the Act of 1826 confers no power on the appellee, to acquire or hold any interest in Steamship or Steamboat lines. This power is granted by the Act of 1868, ch. 471, sec. 218, and being a separate and distinct franchise, the receipts or dividends derived from the interest acquired in such Steamship or Steamboat lines, by virtue of the special franchise thus conferred, are liable to the-gross receipt, tax.
It does not satisfactorily appear from the record, how, or in what manner the appellee acquired the bonds of the South Carolina and the Ohio and Mississippi Railroad Companies. The charter certainly confers no such power, and if they were acquired under any subsequent grant from the Legislature, then the interest received on such bonds would be liable to tbe tax imposed by the Act of 18Y2. On the other hand if they were held outside of the appellee’s franchises, then such bonds would be liable to
Without extending this opinion by a review of the several properties owned hy the appellee, it is sufficient to say that the gross receipts derived from all: properties and investments held and owned under franchises granted, subsequent to the Act of 1826, incorporating the Baltimore and Ohio Railroad Company, and upon which no exemption from taxation was engrafted, are liable to the tax levied by the Act of 1872.
And this brings us to the question, whether this Act imposes a tax on the entire gross receipts of the appellee, or only on such as are earned by the road within the State. And in determining this question, we must bear in mind that this tax is levied on railroad companies in consideration of special rights and privileges granted to such companies ; these privileges, however, confer no power to maintain and operate a road beyond the limits of the State, and in the absence of language showing a contrary intention, it would he hut fair to presume the Legislature meant to tax such receipts only, as are earned by the franchises thus granted. Now the Act of 1872, merely imposes a tax on all railroads incorporated and doing business in the State, and if the question rested solely upon the construction of this Act, it would be questionable, to say the least, whether the Legislature intended to tax receipts earned by the exercise of franchises granted by other States. But when this Act is construed in connection with the Act of 1874, ch. 408, it is clear, we think, that the tax is imposed only on such gross receipts as are earned in the State.
Such are the conclusions we have reached in this case. Upon an examination of the several prayers offered by the State, we find that none of them present propositions of law in accordance with the views we have expressed, and there was no error therefore in rejecting them. It is plain, however, that the State was entitled to recover in this suit, and
The Court erred, however, in sustaining the defendant’s exceptions to the plaintiff’s third and fourth interrogatories. The Act of 1872 imposes a tax not only on the gross receipts derived from freight and passengers, but on the receipts derived from all other sources, provided such receipts were derived from properties and investments owned by the appellee under franchises granted by the State, and upon which no exemption from taxation was granted.
Judgment reversed, and new trial aioarded.
Concurrence Opinion
filed the following opinion concurring in part, and dissenting in part:
I agree with the majority of the Court as to the nature and extent of the exemptions secured to the corporation, by its charter ; and further, that there is a certain portion of the company’s property that is not embraced by the exemption, and'is, therefore, liable to taxation.
But, in my view of the subject, no recovery can be had in this action; and consequently I am of opinion that the judgment of the Court below ought to be affirmed.
1. In the first place, I do not agree, as held hy the majority of this Court, that the Act of 1872, ch. 234, under which the action is brought, imposes the tax on the franchises of the corporation, measured by the extent of its business; but, in my opinion, the tax on the gross receipts of the company is a property tax, imposed, by the express terms of the statute, upon the particular fund, without mention of or reference to the franchises of the company. Indeed, the State does not sue as for a tax on franchises;
2. But, in the second place, if it were conceded that, by fair construction, the statute imposes the tax on the franchises, and not directly on the gross receipts, the law would still be obnoxious to the 15th Article of the Bill'of Rights; because franchises are property, and, as such, equally entitled to the protection against excessive or arbitrary taxation, under the Bill of Rights, as any other property owned by the corporation. Upon the same principle that the franchises are within the exemption given the property of the corporation, or the shares of its capital stock, though not specifically mentioned as part of the corporate property, are such franchises property within the protection of the Bill of Rights against unequal or excessive taxation. And this has been so declared by this Court, in the case of The Mayor & City Council vs. The Balto. & Ohio R. R. Co., 6 Gill, 288. As to the nature of the property in a corporate franchise, see the cases of The West-River Bridge Co. vs. Dix, 6 How., 534, and Wilmington R. R. Co. vs. Reid, 13 Wall., 264. I am
Dissenting Opinion
filed the following dissenting opinion:
Erom the view I take of the questions involved in this case, it is not of much practical importance to inquire as to the extent of the immunity from taxation, granted to the holders of the shares of the capital stock in the Balto. & O. R. R. Co., hy the provisions of the 18th section of the Act of 1826, ch. 123, which created the corporation.
Erom the peculiar terms employed in that section, vesting the property consisting of “the road or roads with all their works, improvements and profits, and all the machinery of transportation used on said road,” in the said company and their successors forever; and making the shares of the capital stock personal estate; according to the strict principles of construction, now recognized as applicable to immunity from taxation ; there is great force in the argument of the Attorney General in maintaining that the 18th section does not warrant the extension of the exemption, beyond the shares of the capital stock, to the company or its property.
The stockholders have not the ownership of the property or franchises of the corporation ; on the contrary, the
The stockholders can only assert their rights to any dividends accruing from the employment of the property of the company and its franchises. Gordon vs. Appeal Tax Court, 3 Howard, 150; Van Allen vs. Assessors, 3 Wall., 584; Delaware R. Tax Case, 18 Wall., 229-234; Wilmington R. R. Co. vs. Reid, 13 Wall., 264; 20 Wallace, 36.
The legal title to the property being in the company as trustee, the stockholders being the cestuis que trust, both in a qualified sense, their only remedy for the refusal of the company to pay such dividends or to compel the proper discharge of the trust, is by resort to the Courts.
It was competent for the Legislature to have granted to the company, per se, as an artificial person and to vest in it as such, all the property, real, personal or mixed— this has been done in apt language; and to have distinguished the interest of the shareholders being natural persons, and to have declared that to be personal estate— that has been done; and to have conferred upon it immunity from taxation — this has been expressly granted; and to withhold such immunity from the company or its property. Gordon vs. Appeal Tax Court, 3 Howard, 150.
■ The Legislature had also the power in the grant of the charter, to define the quality as well as the quantity of the property to he held by the company and the interest of the shareholders, and to make it real, personal or mixed property. 13 Wall., 264; 18 Wall., 229-234; 20 Wall., 38.
It is not the province of the Courts to determine what is property, or of what it shall consist, or with what faculties endowed, or what characteristics shall constitute the identity of any distinct species, real, personal or mixed.
That is not a judicial hut a legislative function.
There is no doubt of the power of the Legislature to have imposed taxes upon either, or both, or to have exempted one or both, or whilst exempting the one, to leave the other subject to the power of taxation'. See Emory vs. State, 41 Md., 38, and authorities before referred to.
If it had been the intention to exempt the company, a few words would have been sufficient, and there could have been no question upon the subject.
The 15th Art. of the Bill of Rights has provided by its mandate, for the imposition of taxes upon persons holding property, if such resort were necessary.
That Article further cautiously and carefully provides, that such mandate is not to be considered as a denial of the right of the State to impose other taxes, deemed necessary, upon grounds of public policy. The one clause is as mandatory as the other ; the integrity of the declaration cannot be severed ; both provisions, (or one with the qualification of the other,) must be considered to give proper meaning and effect to it.
To take the first clause and ignore the latter, contravenes the intention.
Fully aware of the purport of this great principle of taxation, the Legislature may have intended by the terms
To the Legislature, this sovereign right of taxation or exemption is entrusted, to be exercised according to the mandate of the Bill of Rights.
If it acts without due discretion or oppressively, the remedy is not to be sought through the Courts, but with the people, who have the power to discharge faithless agents. See State vs. Cumb. & Penn. R. R. Co., 40 Md., 22, and other references in the dissenting opinion in that case; State vs. Mayhew, 2 Gill, 501; Mayor of Balto. vs. Balto. & O. R. R., 4 Gill, 292 ; Providence Bank, 4 Peters, 563 ; McCulloh vs. State, 4 Wheaton, 428 ; Howell vs. State, 3 Gill, 24.
Whenever it undertakes to grant the exemption from taxation, it must be clearly expressed. It must not be inferred except from necessary implication. McCulloh vs. State, 4 Wheaton, 428.
The power of taxation or exemption, being from its nature a sovereign attribute, and residing by the terms of the organic law in the Legislature, the Courts have very limited authority to direct, regulate, or trench upon its prerogative.
They are wisely relieved of the political duty of determining what shall, or not be the subject of taxation or exemption, or in what way the Legislature should exercise its power.
It is well that it is a political, and not a judicial function of the Government. The Legislature is the direct and authentic representative of the people, the source of power in the exercise of this high authority. They make the laws — The Courts expound them. There can be no clashing if each moves in its proper orbit.
Immunities from this vital power of taxation granted in charters of incorporation of perpetual existence, having been determined by the Courts to be contracts, or in the
The 48th sec. of the 3rd Art. of the Constitution, amongst other things, provides, by the last clause thereof, “that all charters granted or adopted, in pursuance thereof, and all charters heretofore granted and created, subject to repeal or modification, may he altered from time to time, or he repealed.”
The propriety of the pretension of considering, the exemption of a corporation from the power of taxation, as a contract irrepealable in its nature, has been much questioned, as calculated essentially to impair, if not destroy, the indispensable and sovereign attribute of the State; the power to sustain its government by taxation.
It would seem that if exemption is construed to be in the nature of a contract, and as such irrepealable by the State, and beyond the possibility of destruction by condemnation under the power of eminent domain, it virtually amounts to the establishment of the extraordinary doctrine that the Legislature of a State, upon this subject of taxation, may contract for its surrender.
If this he true, the State may be deprived of all of its attributes of sovereignty, one after another, so far as the Legislature may have authority to bind the State by such contract.
Could the contract be disaffirmed as one against the principles of public policy?
The objections to such a pretension when applied to the power of taxation l>3r a government are of serious import.
Fortunately for this State now, no succeeding Legislature has the authority by the grant of chartered privilege and exemption to create such contract, and to affix irrepealable limits upon its successors, hut each in its succession must be left free to exercise its entire constitutional authority without such restraint.
They were providing for the construction of a road from the City of Baltimore to some point on the Ohio river, by the charter granted to the company, and to exempt any capital stock required therefor, and the property it represented, according to the concession — whatever means, money or property were necessary for the completion of the road, including tracks, if necessary, to the full extent of its road-bed; with any lateral roads connecting therewith, and all necessary or useful appurtenances suitable and adapted for such a highway.
This was the extent, embracing all of its fixed property, with all necessary, useful or convenient adjuncts.
"Whatever the corporation holds outside, or in excess of these reservations, is liable to taxation, according to the discretion of the Legislature, upon such theory of construction.
As to the manner of taxation, I have no doubt of the power of the Legislature to impose a direct tax upon the property of the company; or upon the gross receipts thereof, as their judgment may determine.
But conceding all this to be the status of the company, in regard to taxation, under the provisions of the 18th sec. of the charter, we are confronted with the grave provisions of the Act of 1835, ch. 395, and the effect to be given to the 15th sec. thereof, commonly known as the eight million loan bill.
Whilst the company is claiming that the State should' deal with it, upon the highest good faith, and uberrima fides should be the standard, which" is quite just; there must be a reciprocal obligation on its part to observe its contract.
If the exemption from taxation was granted to it by its charter, and it has since surrendered that immunity for a valuable and tona fide consideration, it can be held to its engagement, and to have parted with such exemption from the power of taxation.
The 1st sec. of the Act of 1835 provides, that upon the assent and agreement to the several provisions of the Act, by the Chesapeake and Ohio Canal Company, and the Baltimore and Ohio Railroad Company, these companies being the chief beneficiaries under the law, respectively, the Treasurer of the State should subscribe to the capital stock of each corporation the sum of three millions of dollars, and pay for the same in the manner and upon the conditions thereinafter mentioned. One of the conditions requires that a majority of the State directors should certify under oath, that in their opinion and judgment, such subscription by the State would, in addition to other subscriptions, be sufficient to complete the road to the Ohio river.
The company, by acceding to the provisions of this Act and accepting its benefits, agreed to all the provisions thereof, and solemnly stipulated to abandon any exemption from the power of taxation on the part of the State; if such be the purport of the Act, and the company has thus contracted to surrender such right to the State, if ever given to it. This subject will be found referred to in the case of the B. & O. R. R. Co. vs. The State, 36 Md., 529.
The difficulty in that case grew out of the construction to be given to the contract between the State and company, arising out of the provision of this Act, as to the medium of payment by which the company could discharge itself from the obligation of the contract.
This was determined by this Court against the State, because of the decisions of the Supreme Court, in the cases of Knox vs. Lee and Parker vs. Davis, 12 Wall., 457, adjudicating that debts could be paid in legal tender notes. Probably, besides the consequences to this State, this decision of the Supreme Court, reversing by a bare majority the former contrary judgment of that Court, has had not only the effect to disturb the integrity of contracts, but to unsettle and derange the currency and business of the country, more then all other causes combined.
The majority of this Court rested its judgment upon the authority of that decision.
It is questionable, in my opinion, if the case had been carried to the Supreme Court, it would have determined that this case between the State and company, came within the general class of cases to which that ruling was intended to apply.
It is clear, at least to my apprehension, that it was understood by the State and the company, and all parties interested, that by this well considered Act, the State designed to become re-invested with its original attribute of sovereignty over the subject of taxation, if it had parted with any ; and the company,- by acceptance of its provisions, intended to abandon any right to exemption. If such is not the meaning of the 15th section, it would be difficult to provide more definite terms. It is specifically and emphatically declaratory of such purpose. •
The following are the terms employed in that section: “And be it enacted, that in case it shall be necessary, at any time hereafter, to levy a direct tax for the support
Upon the passage of this Act of 1835, with its solemn and sweeping provisions, and its acceptance by the company, and the stockholders thereof, both company and stockholders, in keeping with the provisions of the Act of 1826, creating the company ; it followed as a necessai’y consequence, that all exemption of the company, its property, stock and franchises, if any existed under previous legislation, was absolutely and unqualifiedly surrendered to the taxing power of the State.
The company and its stockholders now occupy the same ground, and are subject to the same authority of the State as other corporations or stockholders, and must look to the Legislature for the redress of all grievances, or relief from the burden of taxation, so far as it has authority to interfere upon that subject or otherwise.
Dissenting Opinion
filed the following dissenting opinion :
With profound respect for the great learning and ability of the Bench which decided the earlier tax cases in this State, upon which all the subsequent decisions depend, I am unable to concur in the doctrine supposed to he established by them, viz., that the shares of stock in a joint stock corporation, represent all the franchises and property, real and personal, which the corporation acquires and holds, and consequently the exemption of the shares is an exemption of the franchises and property of the corporation.
According to the best modern authorities, “A share of stock is a right to partake, according to the amount of the party’s subscription, of the surplus profits obtained from the use and disposal of the capital stock of the company to those purposes for which the company is constituted.” Angell &. Ames on Corp., sec. 557, (8th Edition.)
“The land, buildings ,etc., of canal, turnpike and railroad companies are the mere instruments whereby the joint stock of the company is made to produce that profit; and, moreover, belong exclusively- to the corporate body, which is altogether a separate person from the individual members.” Ibid., sec. 557; Bligh vs. Brent, 3 Young & C. Exch., 268, 294; Rex vs. The Hull Dock Company, 1 Term Rep., 219.
In the case last referred to, it was held, “that lands purchased by the company and converted into a dock, were ratable to the poor, although the Act of Parliament declared the shares should be personal estate'; the rate was upon the property in the hands of the company, and not on the share of the individual proprietor.”
“The capital stock of a corporation, is not necessarily, the limit of its property.” Barry vs. Merch. Ex. Co., 1 Sand. Ch., 280; South Bay Meadow Co. vs. Gray, 30 Maine Rep., 547.
“The sound doctrine’ in equity is, that the capital or property, and debts due to corporations constitute a trust
It appears from these authorities, which -might be multiplied indefinitely, that the property of the corporation and the shares of stock of a joint stock corporation are not only not vested in the same persons, but are essentially different things, which cannot represent each other, more than a part can cover the whole.
Figuratively speaking, a part may be put for the whole, but legally, the greater is never included in the less. In the absence of express language, susceptible of no other interpretation, we cannot impfite to the Legislature any such purpose.
“That the taxing power is of vital importance — that it is essential to the existence of government, are truths which it cannot be necessary to re-affirm. They are acknowledged and asserted by all. It would seem that the relinquishment of such a power is never to be assumed. We will not say, that a State may not relinquish it; that a consideration sufficiently valuable to induce a partial release of it may not exist; but as the whole community is interested in retaining it undiminished, that community has a right to insist, that its abandonment ought not to be presumed in a case in which the deliberate purpose of the State to abandon it, does not appear.” Marshall, C. J., 4 Peters, 561; adopted by the Court of Appeals in Gordon’s Ex’r vs. Mayor & City Council of Balto., 5 Gill, 231.
All persons, (natural or legal,) holding property in this State, are bound to contribute their proportions of public taxes for the support of the Government, according to their actual worth in real or personal property, and duties, or taxes, may properly and justly be imposed, or laid, with a political view, for the good government and benefit of the community. Art. 15, Dec. of Rights.
There is no clause in the Declaration of Rights, prohibiting double taxation in express terms, and notwithstanding the general rule indicated by the 15th clause above cited, which has formed a part of that Declaration, since the organization of the State, it has been the constant practice of the Legislature, to lay taxes on its citizens, not only according to their actual worth in real and personal property, but on their business, or vocation; thus banks, merchants, auctioneers, corporations, hotels, theatres, lawyers and physicians, have been specially taxed; and not only the learned professions, which have a species of monopoly, hut the oystermen and laborer.
The transportation of passengers and freight by railroad corporations is a great franchise, immunity, or privilege, conferred by the State on the company, by virtue of its sovereign power, and founded in a great measure upon the exercise of the right of eminent domain, which may he called the “ ultima ratio ” of the civil power. '
When the B. & O. R. R. Company was incorporated with a perpetual charter, designed to unite the City of Baltimore with the Ohio and the great West, the General Assembly, after investing the company, as a corporation, with the most liberal powers, declared by its 18th section,
‘ ‘ that the road or roads ivith all their works, improvements and profits, and the machinery are vested in the said company, and their successors forever, and the shares of the capital stock of said company shall he deemed and considered personal estate and shall he exempt from the imposition of any tax or burden by the States assenting to this law.”
The company claim exemption under this section from all taxation by the State, the City of Baltimore, or the
And this interpretation it is said, is fixed beyond all question by the decision of this Court in 6 Gill, 288, which held “that the specific property of a company was as much an ingredient in the shares of stock, and component part of their value, as is any portion of the corporate property of the company, so that if the one be exempt from taxation under express legislation, so also is the other.”
It has been urged with great force that the interpretation given the 18th section, of the charter of the B. & O. R. R. Co., by the Court in 6 Gill, is sustained by the language of the charter granted by this State to the Potowmac Company in 1784, and the Ches. & O. C. Company in 1824.
There could not be a stronger illustration of the proposition, that exemption when intended to be given by the Legislature, is granted in clear and emphatic terms, than the examples furnished in the 9th clauses of those several charters.
These corporations were the creations of two States, erected by distinct charters in each, by inter-State legislation. They were designed to establish a great highway, between the Eastern and Western waters. There was no monopoly of the right of transportation, they were free to all who paid the tolls.
But the B. & O. R. R. Company sustains no such relation to other States, it is exclusively a Maryland corporation, with the franchises of building and working a railroad through the territory of such States as. intervene between Baltimore and the Ohio.
At the meeting of the citizens of Baltimore held on the 19th Eeby., 1827, preliminary to applying to the Legislature of Maryland for a charter, it was resolved, that the assent of the Legislatures of Pennsylvania and Virginia to
They wanted no corporate power from the assenting States, further than a right of way through the same.
To guard against any assumption of authority over the corporation or its stock, the 18th section of the charter, after declaring “ it shall not be lawful for any other company or any person or persons whatsoever to travel upon or use any of the roads of the company, etc., without license or permission of the president and directors of said company, and that the said road or roads with all their works, improvements and profits, and all the machinery used on said road are hereby vested in the said company, incorporated by this Act, and their successors forever ; and the shares of the capital stock of the said company, shall he deemed and considered personal estate, and shall be exempt from the imposition of any tax or burthen by the States assenting to this law.”
The plain unvarnished meaning and office of the section cited, was to assert the absolute control of the company over the road for travel and transportation; the absolute proprietorship of the corporation in its visible and tangible property, real and personal, and their profits, forever; and the legal status of the shares of stock to he personal estate, (which notwithstanding the general rule is subject to the “ lex clomi” of the owner,) shall be exempt from tax by the States of Pennsylvania and Virginia.
There was no attempt to exempt the road, works and improvements, etc., as such from taxation by the assenting States, (and it is understood they have been continuously taxed in Western Virginia,) hut notwithstanding the obvious distinction drawn in the law, between the road, works, etc., and the shares of stock, it is gravely contended that the real tangible indivisible property of the corpora
The^exemption of the shares of the capital stock by the assenting States, is. the exclusion of exemption as to the road, works, etc., by the enacting State, as “ expressio unius, est exclusio alterius.”
In my judgment, the Legislature of Maryland never entertained the legal fiction, that the shares of capital stock, represented the lands, houses, road, machinery, etc.; that a part was equal to the whole — there was no judicial authority for such a position at that period, as far as I have investigated. The case of the Hull Dock Company above cited, established the contrary, viz., although the shares were made personal estate by the charter, the property in the hands of the company was liable to tax as realty.
The doctrine that the stock of a corporation, represents its whole property, originates in this State, in the decision known as the Tax Cases, decided in 12 G. & J., 117, in which no opinion was delivered by the Court, and the propositions supposed to be sustained by the Court, are deduced by the Reporter from the arguments of the counsel, whose resj)ective cases were affirmed, or rejected.
The most sanguine lawyer must acknowledge that this is a very unsatisfactory basis for building a theory upon, which is to control the legislation of the State forever.
The doctrine was repeated in the case of Gordon vs. The Mayor & City Council of Balto., 5 Gill, 231, and no authority cited, except 12 G. & J., and thus sounded, the refrain was taken up and repeated in the case of The
No chain can he stronger than each of its several links, and if the first is unsound,the whole series is so.
Although many cases are to be found in other States, in which language may be employed, corresponding with that used by the Court in 6 Gill, yet many of those were cases of banking corporations, or others, in which the capital stock, valued at par, might, without any violation of principle, be said to represent all the property of the corporations, but the weight of authority in the United States and in England, as collected and cited in the appellant’s briefs is otherwise.
I am painfully conscious of the responsibility which a Judge incurs in departing from former decisions of a Court of final resort.
The rule “stare decisis,” is one of the most sacred in the law. It is not a wise administration of justice to oppose a current of authorities, where they are to be found. Authorities established are so many laws, and receding from them, unsettles property, etc.
“The Judges now (as their predecessors have always done,) bow down to the rule (of stare decisis,) ‘pro salute populi ’ — which is .the supreme law of every community. ” What the safety of the commonwealth demands, is a momentous problem.
Whether it is better to joersist in error, than to review and correct it, is the position those are placed in who believe the former decision wrong. The author on Legal Judgment says, “it may often be difficult to draw the line, at which it must be considered that a doctrine is settled, or a point closed, and therefore to be adhered to ; or to say when it is not too late to review such doctrine or point. There may be a time when it is not too late to make that review. My own personal experience tells me, says Graham Brun, that nothing is more common, than
‘' The case of Moses vs. Macferlan, was considered for law between thirty and forty years, till the Court, reconsidering the grounds of that decision, overruled it altogether and came back to the true principle in the case of Harriot vs. Hampton, where Lord Kenyon and the rest of the Court individually, refused to recognize the law of the former case, although very solemnly determined after mature consideration and an elaborate judgment.” Ram on Legal Judgment, 128, 129, 130.
This is not, strictly speaking " res judicata,” but “res integra.” In 6 Gill, the doctrine of exemption as apjdied to the appellee in this case, was first announced in a suit between the Mayor and C. C. of Balto., and the appellee. The direct question there, was whether the City bad the power to tax.
It was held, the stock being exempted from State taxation, “afortiori” the City, which was but a municipality of the State, had no power to tax.
The State was no party to that suit, and was not bound by it, and no occasion has arisen since requiring the doctrine to be reviewed. It is in fact" res integra” as to the State. The parent case 12 G. & J., 117, from which the doctrine sprung, was prolific of various propositions, some of which are denied by those who insist on 6 Gill as authority.
The 7th section of the Act of 1821, ch. 131, required the banks to pay a certain bonus for the extension of their charters, and the 11th declared that upon any of them accepting and complying with the terms of the Act, the faith of the State was thereby pledged not to impose any further tax or burden upon them, etc.
From the proposition declared in that case, that “the property of the bank being represented by the shares of stock therein, both cannot be taxed, and therefore when the tax is imposed on the stock in the hands of shareholders, the property of the bank, real or personal, cannot be taxed,” Dorsey, J., is represented as dissenting.
Yet, this proposition is the gist of the whole opinion of the Court delivered by him in 6 Gill.
The 11th section of the Act of 1821, ch. 131, declared “ that upon any of the aforesaid banks accepting and complying with the terms and conditions of this Act, the faith of the State is hereby pledged not to impose any further tax or burden upon them, during the continuance of their charter under this Act.”
The banks contended that this clause restrained not only the Legislature from imposing additional taxes upon the banks, but also the city from assessing them.
This construction of the clause was repudiated by the Court, which held that the exemption could not be allowed, unless the Court -was satisfied “that an intention to liberate the bank from city as well as State taxation, is clearly and indisputably expressed.”
This proposition they held was established by adjudications both in England and the United States, which were cited at considerable length, and with these for their guide they declared, that although the Act exempted the banks from State taxation, it did not exempt them from city taxation, “that the exemption claimed by the appellant cannot be' sustained unless the Court is satisfied that
Apply this principle of construction to the 18th section of the charter of the appellee, and what is the necessary conclusion ?
Are the States assenting to the law, and the State enacting the law the same? Are they not as distinct as the City and the State governments? Is the intention to liberate the visible property of the corporation from taxation clearly and indisputably expressed ? Does it appear beyond all doubt and ambiguity, that the State of Maryland meant under this vague implication to divest itself forever, of one of the vital powers of sovereignty?
In the language of the Court in 5 Gill, 239, paraphrazed, “on this point my opinion is adverse to the claim asserted by the appellee.”
