Petitioners Brief — Commissioners of Wicomico Cty. v. Bancroft

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FILE COPY. eee

JAMES . McKENNEY,

wait.

Supreme Courtof the Aniteit States

OCTOBER TERM, 1905.

No. mm 129

THE COUNTY COMMISSIONERS OF WICOMICO COUNTY

Petitioners

VS.

SAMUEL BANCROFT, JR.,

Respondent.

BRIEF ON BEHALF OF THE PETITIONERS FOR

WRIT OF CERTIORARI.

JAMES E. ELLEGOOD,

Attorney for Petitioners.

BREWINGTON BROS. C., 103 Main Street, Salisbury, Md.

Brsescens

Supreme Courtof the Anited& States

OCTOBER TERM, 1905

No. 424

The County Commissioners for Wicomico County

vs.

Samuel Bancroft, Jr.

Brief on Behalf of the Petitioners for Writ of Certiorari,

Whether the proceedings in this case should be reviewed on direct ap-

peal, or on writ of certiorari is not so important, as whether the Petition

and Record from the Circuit Court of Appeals present questions requiring

the consideration of this Honorable Court.

It is respectfully submitted that they do.

FIRST. Because of the gravity of the issues involved in restraining

an arm of the state government in the matter of taxation;

SECOND. Because of the alleged impairment of the obligation of

a contract between the State of Maryland and one of its corporate bodies;

THIRD. Because of the direct conflict between the decisions of the

U. 8. Circuit Court for the District of Maryland, and the Court of Ap.

peals of the State of Maryland upon the construction of its statutes ;

FOURTH. Because, not only the Petitioner in this case, but the

Commissioners of every other county through which the Baltimore, Ches-

peake and Atlantic Railway runs, are entitled to know their rights, pov-

ers, duties, and responsibilities, which can only be conclusively determined

by thie Court of last resort in sch cases where there is a conflict.

Samuel Bancroft, Jr., a bondholder of the Baltimore, Chesapeake and

Atlantic Railway Company, filed his bill of complaint against the petition-

ers as a body corporate and as individuals, to restrain them “from in aay

manner assessing, levying or collecting taxes against the property, ete,

—7_—~"—""

(2)

nbraced in a mortgage dated September 1, 1894, of the Baltimore, Chesa-

eake and Atlantic Company to secure bonds held by the complainant,

attempting or threatening to do so.” Ree. p. 12.

Tbe question first arose on demurrer to the bill of complaint (Record

age 15) and was decided adversely to the petitioner, (Respondent below)

Record page 16); and then it was presented on Bill, Answer and “Agreed

tatement of Facts” (Record pages 19-34) und decided adversely to the

stitioners as to more than $60,000.00 ; and in its favor as to the residue

Decree-Record page 123); by which decree it was on “the 6th day of

pril, 1903, ordered, ad judged and decreed that the defendants (petition-

s herein) be, and they are hereby enjoined and prohibited from levying,

ssessing or collecting taxes upon 80 much of the property of the Baltimore,

hesapeake and Atlantic Railway Company, situated and being in Wico-

ico county, Maryland, as was formerly the property of the Baltimore

ad Eastern Shore Railroad Company, constructed aud built by the said

silroad under its charter to construct and build a line of railroad between

s termini at Eastern Bay in Talbot County and Salisbury, in Wicomico

‘ounty, in this state, which suid property was subsequently sold at fore-

losure sale of the Baltimore and Eastern Shore Railroad Company, and

ecame, through this sale, the property of the Baltimore, Chesapeake and

\tlantic Railway Co.” As to the other property mentioned in the bill of

omplaint “the relief prayed for in this bill is hereby denied.” This was

firmed on cross appeals by the U. S. Circuit Court of Appeals for

he Fourth Circuit. For the review of this decision the petition in this

ase is filed.

There are four classes of property in the schedule, though it may be

lassed as three:

1. That scheduled (a) page 32 of the Record, constructed by the

altimore and Eastern Shore R. R. Co., through four counties, from Eas-

mn Bay, an arm of the Chesapeake Bay, to Salisbury, Wicemico County,

faryland.

2&3. That bought (») from the Wicomico and Pocomoke R. R.

'o., by the Baltimore and Eastern Shore R. R. Co., and certain rolling

tock (c) belonging to both of these corporations.

4. That acquired by the Baltimore, Chesapeake and Atlantic Rail-

ray since its acquisition of the property in classes 1, 2 & 3. (Record pages

2-34)

(3)

The correctness of the Court’s ruiling in taking jurisdiction and jy

joining the Petitioners is what this Honorable Court is asked to review,

Considered on the demurrer to the bill, or as made out by the “factg”

agreed upon, we respectfully contend that the case is not such as entitles

the Complainant to the relief prayed for or as decreed (Record pages 1-12

for the bill of complaint).

FIRST. Js not the Bill Defective for want of proper parties, and ke.

cause a decree would be ineffective? It should have included the Tax Col.

lector for the years 1900 and 1901, who under Art. 81 Sec. 31 Code of

Public General Laws of Maryland may, “if he found it necessary, proceed

by way of distress” and shall give notice, &c. Sec. 81, Sec. 49 et seq. ; see

also Ch. 76, Acts of 1902, local statute relating to the collecting of taxes

in Wicomico County, amending Act 1894, Ch. 398. By these Statutes the

Treasurer and Collector are the same and made elective.

The Baltimore, Chesapeake and Atlantic Railway Company was also

a necessary party ;

City of Dawson vs. Columbia Trust Co., 197 U. 8. 180. This was a

suit by the Trustee instead of a bond-holder. The Court said, “The bill

should have been dismissed for want of jurisdiction. The water company

is admitted to have been a necessary party and it, like the defendant city,

was a Georgia corporation.”

Against whom will the injunction be inforced ? New Orleans Water

Works 164 U. 8. 481 held such a decree to be of no avail, although this

Court had decided in favor of the complainants claim of right in the prior

cases of New Orleans Water Co., vs. Rivers, 115 U.S. 674; St. Tamany

Co. vs. New Orleans Water Co., 120 U. S. 64. A Court of Chancery

must have all parties before it to make a decree effective. In Water (o's

case above, the Court refused to give “a decree for its (city) guidance in

the future”, page 482.

To go against the body corporate would be ineffective and the individ

uals who did the assessing in November 1899 were out of office before the

decree, if not before the filing of the bill of complaint, while the term of

office of those who made the levies of 1900 and 1901 have expired. Then

too the decree is wholly inoperative as against the Collector for 1900 and

1901, becanse not a party to the suit.

_——

(4)

SECOND. as not the question become re-adjudicata by the Courts of

Maryland? aud by this Court. See par. XIV of the bill of complaint, page 9

of Record. This decision of the Court of Appeals of Maryland is admit-

ted and is reported in 89 Md. 89, Mayor, &c. vs. Baltimore, Chesapeake

and Atlantic Railway Company. For record of this case see pp. 89-95 of

Record.

This case was carried to the United States Supreme Court on writ of

error by the Baltimore, Chesapeake & Atlantic Railway Co. and was _pre-

septed on motion to dismiss and on the merits at the same time and was

dismissed November 1900 on the authority of cases cited and can be found

among the cases disposed of without opinion in 179 U.S. Reports.

Among the cases cited we refer especially to Lehigh Water Co. vs.

Easton, 121 U. 8. 388 and Central Land Co. vs Laidley, 159 U. 8S. 103,

as containing the doctrine which fits the facts in this case. In the latter

itwas held that the obligation of the contract must have been impaired

“by some act of the legislative power of the State and not by a judicial

department only.” These cases show that this Court had in mind the in-

terpretation of the Statute and also whether a federal question was invol-

ved.

After this decision, the County Commissioners of Wicomico County,

in obedience thereto, took up the matter of assessment of the property of

this Railway Co., and gave the company due notice of their intention to

ussegs it, and did assess it in Nov. 1899. (paragraph Tenth, Record pages

30and 31. But the company “claimed that the same was exempt, and

leclined to pay the said taxes,” whereupon the said County Commissioners

brought suit, aud recovered judgmeut for taxes for 1899, at September

lerm 1900, and this judgment was affirmed on appeal by the Court of

Appeals of Maryland, in January 1901. (For Record of this case, see pp.

11-110; prayers of the Court on p. 110. For report of case see 93. Md.

113 et seq.)

It is contended by the complainant below, and so ruled by the Court,

hat he is not estopped by these decisions, because he was not an actual

arty to the suits.

The doctrine of stare dcists and res adjudicata rests on a broader

round than technical estoppel. It has been called “a rule of rest,” and

s founded on public policy.

LOS Go TAREE BAI ae

(5)

The above decisions certainly make the “law of the case,” and settle

the rights of the County Commissioners and the duty of the Railroad Cop.

pany, which became “the thing adjudged.” New Orleans vs Citizens Bank

167 U.S. 398 Covington vs First National Bank 198.7.8. 100. This ig,

clear attempt by a collateral proceeding to bring the Federal Court inte

direct conflict with the State Court, and presents the example of one Court

indirectly inte:fering with the decision of a Court of concurrent jurisdic.

tion and annulling its effect as between ‘he purties. “The fact that the

parties to the injunction proceedings are not the same as the parties to

the judgment, or decree which it is sought to enjoin, does not relieve the

case from the operation of the rule—it is to protect Courts of co-ordinate

jurisdiction and avoid conflict of jurisdiction, confusion and delay in the

administration of justice.” 11 A. & E. Enc. Law (2 Ed) p. 398, citing

Crowley vs. Davis, 37 Cal. 269, and other cases.

The distinction between res adjudicata and stare decisis, is the differ.

ence “between a decree and the law declared by the Court which produces

the decree; and though a person may not be bound by a decree as a party

or privy, he may be bound so to speak by the law which produces the de.

cree. That is to say, his rights are affected, as all other citizens rights are

effected by the declaration of the law made by the Courts in the due ad.

ministration of justice.” 24 A. & E. Enc. Law (2 Ed.) 715 note 3, citing

60 N. J. Eq. 121, Newark City Bank vs. Crane.

The evils of such a conflict is forceably shown in the opinion of the

Court, in Phelps vs. Mutual Reserve Fund L. Assn., 61 L. R. A. 717 (50

©. C. A. 339) and affirmed in 190 U.S. 147. But the complainant says

his rights accrued before these decisions of the Maryland Court. The

answer to that is, “the law of the case” had been settled and the thing

adjudged, before he instituted his suit ; and he fails to assign any reason

in his bill for his delay, or for renewing the combat.

The language of this Court, in the case of the City of Dawson v8

Columbia Ave. Trust Co., 197 U. S. supra, is especially applicable just

here: “The Court will look beyond the pleadings and arrange the partie

according to their sides in the dispute. When that is done, it is obvious

that the company is on the plantiff’s side, and was made defendant solely

for the purpose of re-opening, in the U. 8. Court, a dispute which had

been decided against it in the Courts of the state.”

_ —

(6)

It was there characterized as a‘contrivance between friends to found

a jurisdiction.” The plaintiff claims to be in privity with the Railroad

Company as to the benefits of its alleged “contract” with the State, yet

not bound by a decision which binds the Company. While the Federal

Gourts ure not controlled by the decisions of the State Courts in matters

of general principles of the law, they deem themselves uniformly bound

to follow them when construing their own statutes ; and the jurisdiction of

the Federal Court must rest on other grounds than the mere unconstitu-

tionality of the taxes involved, Sheldon vs. Platt, 139 U. S. 591-599, re-

viewing the cases where injunctions were granted, and affirming Dows vs.

Chicago, 11 Wall. 108.

THIRD. /s not the bill defective in not complying with the 94th. Equity

Rule; or does it allege sufficient grounds for equitable interference ?

It fails to set forth that the suit is not collusive to confer jurisdiction

or to state “with particularity the efforts to secure action on the part of

the managing directors, andthe causes of failure.” This rule, jt, seems

yas adopted immediately after the case of Haws vs. Oakland, U.S.

450, and referred to in Corbus ee laska Treadwell G. M. Co., 187 U.S.

462, and is stated as follows: A Spb

‘Uf the party primarily and directly charged with a tax is unable to make

a case for the interference of a Court of Equity, no one subordinately or in-

liretly affected by the tax should be given relict, unless he shows, not merely

rret arable injury to the tax debtor as well as himself, but also that he has

vaken every essential prelimiuary step to justify his claim of a right to actin

behalf of such debtor.’’

The Complainant alleges no damage as a fact, but says that he is

app: hensive of loss, See (Paragraph XVIII Bill of Complaint, page 11 of

Record.)

FOURTH. Js this not in effect a suit against the State of Maryland?

The allegations in this bill (like those in the case of Davis & F. Mfg. Co-

vs. Los Angeles, 189 U. S. 221,) upon which the Complainant depends

for jurisdiction, are diversity of citizenship and the unconstitutionality of

“the ordinance or resolution passed by the defendants, under which said

taxes are attempted to be enforced—which will impair the obligation of

the contract made by Chapter 133, of the Acts of Maryland of 1886.”

Record p. 11, paragraph XVII.

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(7)

It is contended by the Complainant, and so ruled by his Honor Judge

Morris, that “the imposing of a taxon this property is a legislative act,

impairing the obligation of the contract of exemption, and within the jp.

hibition of the Federal Constition.” (Record page 122.)

The Circuit Court of Appewls says, “the demand on the part of the

County Commissioners is in the nature of a legislative act, and therefore

isin violation of Art. 1, Sec. 10 of the Constitution of the United States,

We respectfully submit, the conclusion that the ordinance, or the demand,

impairs the obligation of a contract, is predicated upon insufficient founds-

tion, even though it be a “legislative act,” in which event it would be the

act of the State of Maryland through one of its properly constituted ao.

thorities and its unconstitutionality, the unconstitutionality of a state law,

Davis & F. Mfg. Co. vs. Los Angeles, supra; this being so, the effect of

this injunction is to restrain one of the “properly constitued auchoritieg

of the state” from performing a legislative act.

_ What difference is there between enjoining the Legislature itself, asa

State Agency of government, and enjoining the Petitioner as a subordinate

agency; both are provided for and limited by the Constitution, which says

of the County Commissioners, ‘their powers and duties shall be such as are

now, or shall hereafter be conferred by law”. (Constitution of Maryland,

Art. 7, Sec. 1.).

Since much of the state government is committed by the Legislature,

under the Constitution of the state, to these political divisions, the effect

of this decision will apply to each county and to Baltimore City, and the

practical effect is to subordinate to the Federal Courts, by injunction,

these governmental agencies.

It has been held that an injunction will lie against a state officer, act-

ing merely colori offcii, who commits a trespass; or as said in ex parte

Ayers 123 U.S. 500, an “injunction will he to restrain the collection of taxes

sought to be collected by setzure of property, imposed in the name of the

state, but contrary to the Constitution of the U. 8., defendants being of-

ficers threatening ‘the distrain complained of——are threatening a violation

of the personal or property rights of the complainants, for which they are

personally, or individually liable”. his is called “the vital principle in

all such cases.” The 11 Amendment “must be held to cover, not only suits

brought against the state, by name, but also those against its officers, ageuts,

and representatives, where the state though not named as such, is iever

theless the only real party against which relief is asked”.

—

(8)

When the question arises, whether a contract is impaired or not, it

must be; has the State impaired it, and not whether there is a breach of it.

And when the question arises in regard to a Charter Contract between the

state and one of its creatures, no one but the state can smpair it, therefore

to restrain its impairment when the state is effected by suit, must be so re-

strain the state, and it does not matter whether it be the state in its whole

sovereign capacity, or one of its corporate state agencies, or departments,

or divisions. The distinctive words that permit an injunction against the -

state officers, who are assuming to act vrfufe oficti, but who are in fact

acting only colore offcit, are such words as “actual invasion”, “distress”,

“trespass”, “personal liability” as trespassers, &c. No such condition is

shown in this case.

The distinction is again made clear in Fitz v. McGhee 172 U. 8. 53

“between some act of wrong or trespass, and a suit against officers of the

state merely to test the constiutionally of a statute, in the enforcement of

which those officers will act only by formal proceedings in the Courts of

the state.”

The case of Shelton v. Platt, 139 U.S. 591, was a bill for an injune-

tion by Thos. A. Platt, as President of U. 8S. Express Co. for himself and

others, against the Comptroller of the state and the Sheriff, averring

that the Comptroller had issued a distress warrant to the Sheriff and had

levied on, or was about to levy on the property of the Express Co. Mr.

Chief Justice Fuller said, touching the jurisdiction: “It is asserted by

counsel that a Court of Equity has jurisdiction to restrain the collection

of a tax, when the tax is wholly illegal and void, and that such jurisdic-

tion has been uniformly exercised in Federal Courts” (cases cited); “but the

jurisdiction will be found to have rested on other grounds than merely the

unconstitutionality of the tax involved”;

FIFTH. 9 74s not the Rule of Construction adopted by the Court of Appeals

of Maryland, the Rule of Construction for this Court?

Whatever may be the opinion of the correctness of the decisions of

the Maryland Court of -Appeuls, we respectfully contend that those

decisions, being the construction of the statutes on which the complainant

rests his claim, settle “the law of the case”. The complainant alleges,

and the U. S. Circuit Court finds that the contract is in the construction

of the statute Art. 23, Sec. 188 of the code Maryland, and makes it depend

16,

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(9)

on the meaning of the word “immunities” and undertakes to discover th,

legislative intent from this word, because it is an apt word to include ¢.

emption from taxation, After an able review of the authorities, whic)

sustain the doctrine that this exemption is “a personal privilege”, and jp

be given only by “direct legislation” and not “assignable”, the learne

Judge says on page 121 of the Record, “it is difficult to concive what

immunity in respect to this property could be meant, if not the immunity

from taxation, which the original company had”. With great respect, yw

submit that this is not the necessary inference ; and it presents this dilem.

ma; if the Court meant to refer, and confine the word immunity “to this

property” and ¢¢s exemption from taxation, then it is exclusive of other

immunities. But neither this property nor this corporation was in the

mind of the Legislature, and if it is used with reference to he right of this

company, or any corporation so organized then it is made too comprehen.

sive in order to include by implication, an immunity which is never give,

by implication, and which is not a positive right, nor is it necessary

gratify every positive right under the statue, or Secs, 187 et seq. of An,

23, which constitutes a part of a general statute relating to the sale of

mortgaged railroads only, ‘he exemption from taxation “does not become

impressed on the property itself into whosesoever hands it should after.

wards come”. L. & N. R. R. Co. v. Palmes, 109 U. 8.250. Iu this case, the

officers of the corporation had exemption from militia duty. In Coving.

ton vs. Sanford. 164 U. 8. 578, there was emeption from legislation regu-

lating rates, and it was said, “the grant should be construed sérictissimé juni

when applied to the exemption from legislative control of toll”, affirming

Morgan vs. Louisiana, 93 U.S. 217.

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The plural form of the word implies more than one immunity ; there.

fore, in the light of the authorities, the most liberal construction can only

include such “immunities” as are transferable and essential to the oper

tion of a corporation.

In construing this statute, the Court of Appeals of Maryland, in Mavor

&ec. of Ocean City, vs. Baltimore, Chesapeake and Atlantic Ry. Co., 89 Md,

adopted this rule of strict construction, and at page 98 says: “There is

no such express statutory authority in this case. The 187 and 188 Secs

of Article 23 of the Code, relied upon by the appellant, refer to such rights

and property, as would pass under the sale of a railroad mentioned in

those Sections, and not to an exemption from taxation suchas is presented

here.” This is quoted and affirmed in 93 Md. 122, B., C. & A. Railway

Company vs. Wicomico Co.

(10)

. But if the rights of the plaintiff had been invaded, it was not

y the Petitioners, who acted only in conformity with the decisions

Court of Appeals of Maryland, which hed given a construction of

tute in connection with the facts; and it is the rule of this Court

yw such construction, 5 How. 342, Bank vs. Buckingham, holding

ye applicatior of an earlier banking lew to a bank subsequently

ed, is one of construction and not of validity. The same principle

lin Baltimore vs. Hopkins, 130 U. 8., 223 ; Central Land Co. vs.

y, 159 U. 8. 110, where it ws one of construction and not of validity.

construction of State statutes the case of the State Railroad Tax

12 U. S. 575-617 declares the decision of « State Court to be “the

f Decision” of the Federal Court; Fairfield vs, Galatin Co., 100 U.

Wilson vs. Standefer, 184 U. 8, 412.

the case of Gulf & S. Island Co. vs. Hewes, 183 U. 8. 68, this

was asked to correct the decision of the Supreme Court of Miss. but

»Y5 it is suid: “Tbe whole foundation of our jurisdiction in this class

3 must rest upon a contract which can not be legally impaired”.

‘the Court’s attention to Sec. 2, Acts of 1886, Ch. 133, which ex-

not only the property of the Baltimore & Eastern Shore R. R. Co.,

0 “the shares of capital stock and bonds” of the Company. By Sec.

tock is limited to $500,000.00, while by the Charter of the Balti-

Chesapeake and Atlantic Ry. Co, (Record page 71) the capital stock

“this corporation shall be $1,000,000.00", Now if the exemption

6 is not lost, it follows by the creation of this new corporation, that

1 of $500,000.00 of shares there are $1,000,000.00 of shares exempt,

ynds in proportion, without the authority or knowledge of the Leg-

e.

3. We here submit that the Act of 1876, Chapter 322, Codified in

3, Sec. 302, Code of 1888, being Sec. 417 of Art. 23, of late Code

sets at rest the proper construction of this Article, as to exemption

axation, whatever other meaning may be given to the word “immu-

,

Nothing in this Article contained shall be construed as to bring

) any supposed exemption from taxation, State, County or .funicipal,

‘Charter of any Company desiring to take advantage of any of the

ions in this Article contained, any property, real, personal or mixed,

| under or by virtue of any of the provisions of this Article, or any

preferred or otherwise, or any bonds or other evidence of debt issued

or by virtue of any of the provisions of this Article”.

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(11)

SIXTH. But independent of the decisions of the Court of Apjes

of Maryland, the larger questions are :

1. Js thers a contract of Exemption between the State of Marylarj

and the Baltimore, Chesapeake & Atlantic Ry. Co.?

2. What has the State done that it did not have the power to do jp

regard to this exemption ?

To raise a contract, the Complainant relies on several constituent fact.

A. The Act of 1886, Ch. 133, enlarging the original sharter power

of the Baltimore & Eastern Shore R. R. Co., in which the exemption wy

granted it for thirty years. Bill of complaint, paragraph III, page 253 of

Record.

B. The Mortgage from this corporation to the Atlantic Trust (o,

pages 47 and 68, and paragraph VI, page 5 of Record.

C. The decree of foreclosure by the U. 8. Circuit Court for th

District of Maryland. Record, page 35.

D. The sale to Mr. Nicholas P. Bond, and its ratification. Record,

Page 45, and paragraphs VII, VIII, IX, Page 6.

E. The forming of the Baltimore, Chesapeake & Atlantic Ry. (o,

by him and his associates. Record, Page 71 for Charter.

F. The construction and application of Sec. 187 and 188 et sey,

Art. 23 of the Code of Public General Laws of Maryland to the abow

state of facts. Record, Page 7, paragraphs X, XI, Xil.

1. There onght to be no doubt about the rights and powers in two

stages of this evolution of rights and powers.

a That the Baltimore & Eastern Shore R. R. Co. did have a gift,

but not a contract of exemption.

b. And that it could not assign or mortgage this exemption to the

Atlantic ‘Trust Company.

An exemption from taxation is not a vested right, a property right,

or a positive right, 67 N. Y., 116, People vs. Supervisors; 161 U. 8. 662,

Pearsol vs. Great Northern R. R. Co., holding that it is only such rights

as are necessary to the full enjoyment that are contracts.

The root of the alleged contract is in Sec. 2, Ch. 133, Acts of 1886,

giving the exemption to the Baltimore & Eastern Shore R. R. Co., but this

tl

(12)

exemption was not a part of the original Charter of this corporation, and

the grant is a mere gratuity.

Appeal Tax Court vs. Grand Lodge, 50 Md., 428.

Rector vs. Philadelphia, 24 How. 300

Grand Lodge vs. New Orleans, 166 U. 8. 148.

People vs. Commissioners, 47 N. Y. 504.

2, The U.S. Circuit Court of Appeals argues “that there is a gen-

eral inclination on the part of Legislatures to grant immunities to rail-

ads and other corporations with a view to encouraging the development

of particular sections” ete. This argument as the reason or ground for the

contract, is fully answered in the case of Wis. & M. R. R. Co, vs. Powers,

191 U. 8. 386. ‘Che first question was whether the general statute of 1897

repealed the law of 1893, giving a qualified immunity from taxation to

ay railway company hereafter building and operating a line of railway

within the State north of parallel 44, of latitude until, &.

The Court held that the Act of 1897 did repeal that of 1893, else

“the plaintiff would have no standing in Court”, and then proceeded! with

“the first and main question, whether the Act of 1893 purported to make

au ‘revocable contract with such railroads as might thereafter comply

with its terms. ‘The question is pretty well answered by a series of decis-

ions of this Court, A distinction between an exemption from taxation

ina special charter and a general encouragement to all persons to engage

ina certain class ef enterprise is poiuted out in East Saginaw Mfg. Co. vs,

East Saginaw, 13 Wall. 373”.

The differentiation between a contract in terms of a bargain by the

sta’e with one of its corporations, and a gi/f from the state is so clearly set

forth in the case of Wis. & M. R. R. Co. vs. Powers (supra) and is so ap-

propriate in several respects as to seem decisive of this case. The complain-

ent does not rely upon a special charter, or exemption given to it, but toa special

exemption given to another corporation and upon “the generaé encouragement

(not to build a railroad), du to take over, under a general law (Art. 27, See.

187 &c.) any mortgaged railroad corporation, that has been sold. The deci-

sion proceeds: “the broad ground in a case like this is that in view of the

subject matter, the Legislature is not making promises, but framing a

scheme of public revenue and public improvement”.

(13)

The scheme of Art. 23, Sec. 187 et seq., applying only to the saleof rai)

rouge, was to provide an easy, expenditions and cheap method for the pur.

chiager and his associates to form a new corporation, and to transfer to jt

all that he bought under the mortgage. “In announcing this policy an¢

providing for carrying it out, it may open a chance for benefits to thog

who comply with its conditions, but it does not address them, and, there.

fore, it makes no promises to them”. The purchaser under the Act and

Sees. named is pot “addressed.” He is only empowered to do something

if he wishes; and it is impossible to address a corporation not i esse, and

that may or may or not be formed 7” furturo.

The vice and danger of the claim made is most forcibly stated. [t

would be quite intolerable, if parties not expressly addressed, were allowed

to set up a contract on the strength of their interest in, and action on the

faith of a statute, merely because their interest was obvions and their

action likely on the face of the law. What we have said is enough toshow,

that in our opinion, the plaintiff never had a contract, and, therefore, makes

it unnecessary to consider the usual power to alter, amend, or repeal

charters, contained in the Constitution of Michigan”. W. & M. R. R. Co

vs. Powers.

But what promise has the Balto., Ches. and Atl. Ry. Co. made to the

state? And what has it done to its own detriment to bind the state? It

found a magnificent charter and a*railroad already built, and entered

into possession thereof.

According to the theory of the Complainant, she state gives all and

takes nothing—and conversely, the railroad corporation has a right to demand

all and give nothing. The analogy, both in fact and reason, in the case of

the Ches. & Ohio R. R. Co. vs. Miller, 114 U. 8S. 177, to this is striking,

There the railroad company was incorporated under a statute providing

for the purchase of aa insolvent corporation, and claimed tae exemption

of the former. In speaking of the later statute, the Court said: ‘Zhe sub-

ject matter of this legislation was not the original construction of the raslroad,

but the operation of a railroad, already constructed. 'The state was not in the

attitude of a contractor soliciting subscriptions of captial stock, d&c. It

was legislating in reference to enterprises already undertaken, prosecuted,

and completed by companies originally thus incorporated,” and is the et-

act condition of this case.

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Referring to the statute as creating a contract and stating their con-

clusions, as above, the Court also said: “Were it otherwise,—we should

nevertheless be compelled also to hold on distinct grounds, that: the ex-

emption thus conferred did not constitute a contract p:obibited from re-

peal”. In the case of the Phoenix In. Co. vs. State ~i Tennessee, 161 U.

§, 175, this Court held that there was no contract, and no Federal question

jpvolved in the case.

That the grant of exemption is a gratuity and not a contract, see

Tucker vs. Ferguson, 22. Wall. 527-576, which is a leading case.

SEVENTH. ‘These corporations carry two distinct legal ideas or

rights :

1. The right or franchise to be a corporation—its corporate ex-

istence.

2. The franchise of maintaining, operating aud owning it, and such

substantial rights as are essential to these ends.

Now what did the Baltimore & Eastern Shore Railroad Co. mortgage to

the Atlantic 7rzst Co., and what did Mr. Bond buy at the foreclosure sale ?

This is best answered by reference to the cases of Memphis & Little

Rock Railroad Co. vs. Berry, 112 U. S., page 609; and People ex rel

Schurtz vs. Cook, 148 U.S., page 397 (S. UC. 110 N. Y. 443) since these

cases are so analogous in principle, and the cases of Memphis & Little

Rock Railroad Co., goes so on all fours with this, as to be conclusive. In

the original charters in both of these cases there were exemptions fiom

taxation granted by the Legislature ; mortgages by the Railroad to secure

bonds; sales under the mortgages; the right of purchasers to reorganize

under statutes like the Maryland statute; and giving to the reorganized cor-

porations “all the corporate rights, liberties, privileges, ¢mmunities, powers

and franchises of and concerning the railroad so sold, etc.”, Memphis

Railroad Co., 112 U. S. page 614.

The same powers, with the same word “immunities” were in the New

York Statute of Reorganization. In the Arkansas case, supra, there was

a “bill to enjoin the Railroad Commissioners from appraising for the pur-

poses of taxation any property of the plaintiff in error, on the ground that

it is exempted from taxation by a contract with the State contained in its

charter of incorporation”. After holding that “the franchise of being 4

corporation belongs to the corporators” and that the “corporation has no

ARORA ALAR PERTH BUILDS RGIMOS 2 OR NE HERMOSA RY RRR RRS IARURES N Soc tnESRER TE LTE ROT RO CERN

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power to dispose of this franchise”, (page 619) and after holding that th

Reorganization Statute was “a matter of law and not.of contract, and mp.

ferred only the vigk¢ to organize as a corporation”, upon the purchage

or bondholders, even “if in the charter under consideration, it had bec,

conferred in express terms”, (page 621), the Court says: “Our conclusions

then are, that exemption from taxation contained in 2¢ Sec. Act of Jay

11th, 1853 was intended to apply only to the Memphis & Little Rock Ryii,

road Co., as the original corporation organized it; that it did not pass by

the mortgage of its charter aud works” et seq. ;

In the case of the People vs. Cook, supra, the contention was that the

i.organized corporation was not liable under the Act of 1886 for the

franchise tax of ¢ of one per cent. on its capital stock. Mr. Peckam, J,

in 110 N. Y. page 448, says, “the counsel for the appellants claim that the

Act of 1886 applies to cases where the State grants franchises to a cor.

poration, and it was stated that none was granted in such a case as this,

They also argued that the reorganization Act of 1874, amended in 1876;

in such a case as this simply continued or revived the franchises of the oli

corporation under the same charter and with the same immunities and

rights held by the former company. Lastly, they claimed that the Act of

1886 was unconstitutional in violation of the provisions of the Federal

Constitution. We think none of these claims is well founded”, and the

Court also holds that the reorganization acts “were in no sense contracts

on the part of the State”; relying on Memphis & L. R. R. Co., supra. On

writ of error, this conclusion was sustained by this Court. Same case in

jn 148 U. 8. 397. At page 404, after quoting with approval Jndg

Peckam’s opinion and answering the argument of counsel made against it,

this Court affirms the decision. We snbmit that the exemption, beinga

personal privilege of the Baltimore & Eastern Shore Railroad Co., and nx

assignable, and the corporate existence of that Company being the franchise

of the corporators and not transferable, it follows that if its corporate er-

istence is still extant then this exemption belongs to or inheres in its being.

or if it is dissolved then the exemption passed away with its dissolution #

in the case of a natural person.

Suppose Mr. Bond had operated this railroad, as he had a right to u-

de~ the cases just cited; or suppose that he had sold it to some corpo

tion already existing, authorized to buy and operate it, could it be success

fully contended that either be, or this sy aaa» would have the exemp-

tion granted the Baltimore and Eastern Shore Railroad Company?

(16)

EIGHTH. What has the State done in violation of Art. 1, Sec. 10 of

2 Constitution of the United States ?

1. The power of the Legislature, under Art. 3, Sec. 48 of the State

onstituéion, to alivy ov amend the charter is conceded by the , laintiff and

y the Court. As a matter of law and fact, has not the State, by the Gen-

ral Assessment Law of 1896. Chapter 120, repealed the exemption ? Sec.

declares, “Ail state and county taxes shall be levied upon assessments

ade in conformity to the provisious of this Article, and in conformity

ith all laws relating to revenues and taxes not embraced in this Arti-

le.” In the following Section, specifying what property shall be taxed,

ithe following: ‘The property, real and personal, of each and every rail-

gad company in this State, working its road by steam power, shall be valued

nd assessed for county and municipal purposes, in the same manner as the

roperty of individuals may be valued and assessed wnder this Act.” Then

llows a section giving exemptions. This repeals the exemption because

f the repugnancy between the exemption in the statute, and “the statute

hich was intended as a revision of the laws upon the subject of taxa-

ay Columbia Mfg. Co. vs. Vanderpool), 4 Cowen 556.

The Act of 1896, Sec. 2, page 188, “exceptions and provisos,” re-

rves from its operations any “irrepealable contract or obligation”, but

serves no special exemptions. State vs. N. C. R. R., 90 Md. 472, for re-

eal by implication. ‘To tax “each and every railroad company in this

tate in the same manner as individuals” must take in this company.

In N. C. R. R. Co. vs. State of Md., 187 U. S., 266, it was contended

y the corporation that the assessment law of 1890 did not repeal the

ompromise Act of 1880, and if so, then it was a void Act; but the Court

f Appeals of Maryland held otherwise, and was affirmed in this Court.

2. What constitutes the “Legislative act” ?

The Circuit Court says, “That the exercising of the taxing power is

legislative act”, and violates the Constitution, and the Circuit Court of

ppeals says the “demand”, etc.

The “taxing power” of assessing was completed in Nov. 1899, and the

ower involved in the annual levies of 1900 and 1901 were exercised in

une of each year. These powers became executed before the filing of

he bill of complaint and can not now be restrained ; while the levies of

he future year were yet to be declared. The prevailing rule in states

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which have allowed injunctions to restrain municipalities have only per.

mitted restriction of the enforcement, but not of the passage of even “yp,

authorized orders and resolutions, or ordinances of municipal Corpora.

tions”. 18 L. R. A. 835 (144 Ill.) Stevens vs. St. Mary’s Training

School; and refuse to restrain their enforcement, where they are within

the jurisdiction, or the exercise of the legal powers of the municipalities

4 L. R. A. 617 (Ala.) Montgomery Gas Light Co. vs. Montgomery; [De

Moines Gas Co. vs. Des Moines, 44 Iowa 55, sustained the doctrine tha

legislative action of these corporations can not be enjoined. New Orleans

Water Co. vs. New Orleans, 164 U. 8. 481, holding that “a court of equity

can not properly interfere with, or in advance restrain the discretion of g

municipal body while it is in the exercise of powers that are legislative in

their character—ordinances, if legally enacted, have the force of laws

passed by the Legislature of the state, and are to be respected by all.”

The relief prayed for in that case was to compel the city to cancel

ordinances and rants, and if the city refused, then for the Court to de

clare them nul! and void, and to restruin future grants. All of which

was refused, even to prevent “multiplicity of actions”.

It is conceded in paragraph “Tenth”, “Agreed Statement of Facts”

page 30 of Record, “That the said Board had the power to assess such

property as was liable to taxation, and that it had been omitted from w-

sessment by the general assessors of the said county”. This power is vest-

ed in the Board. by the General Assessment Law of 1896, Chap. 120, Sec.

182, and in Art. 81, Sec. 10 of the Code. And by Art. 7, Sec. 1 of the

State Constitution “their powers and duties shall be such as are now, or

may hereafter be prescribed by law”. There being no doubt abont the

“power and duty” of the Petitioners, the Court is asked to restrain the

exercise thereof.

In 16 A. & E. Ene. of Law, (2 Ed) 423, under the headlines “En.

joining Legislative or Executive Action”, it is thus laid down: “Legis

lative enactments of a state, or of a municipal corporation within the scope

of its powers, can not be restrained by injunction, even if the threatened

act, if passed, will be unconstitutional and void”. Legislation is the e-

ercise of a political power, and taxation is one of the most important powers

of the State. What does it matter whether the State, in the General Assem-

bly exercises it, or whether for convenience, it delegates the power to some sub-

ordinate division of the State? The principle is the same.

MIST Ie SO FEELS SELLS a Te LTS ELLE LPT

(18)

NINTH. 7s there any doubt about the right of this railroad company to

his exemption? If so, that must be resolved in favor of the State.

*hoenix Co. vs. Townsend, 161 U. 8.177, holding that the “exemption

nat be made out wholly beyond doubt”; and “must be granted in terms

00 plain to be mistaken”.

Chicago B. & K. Co. vs. Guffey, 120 U.S. 569575, says: “It can

ot exist by implication ; a doubt is fatal to the claim”. Chicago Theo-

ogical Seminary vs. Illinois, 188 U.S. 672, and many other cases using

ike strong language.

This statute, to support the complainant’s contention, must be thor-

ughly reconciled with the presumption against exemption, with that ex-

etness and directness demanded by all the authorities relating to these

semptions ; it must be reconciled with the revenue laws of the state and

ith the general policy and sovereign power of the state, in regard to tax-

tion, expressed in Art. 15 of the Bill of Rights, that “Every person in

he state, or person holding property therein, ought to contribute his pro-

ortion of public taxes for the support of the Government, according to

is actual worth in real or personal property”.

But whatever doubt, if any, may have existed as to the proper con-

truction of Sec. 177-188 et seq. Art. 23, it has been removed by the de-

ision of so able a tribunal as the Court of Appeals of Maryiand, which

as established the law in Maryland, and for the citizens thereof.

But if this question were res intregra in a Court of competent juris-

iction for decision, the sole questions would be, not the impairment of a

ontract, but did the exemption revive upon the formation of a new corpo-

ition, ipso facto, under Sec. 187, etc., Art. 23; and if so, has the Legisla-

ire repealed the exemption by the General Assessment Law of 1896. It

ems to the petitioners that this is a 'ocal or state matter, in any phase

it.

_ But whether the contention of the Petitioners be correct or not, it is

jost respectfully submitted, that the importance of the question and the

nflicting decisions, require the consideration and decision of this Honor-

ble Court, to the end that uniformity and harmony may be established.

Respectfully Submitted,

JAMES E. ELLEGOOD,

Attorney for Petitioners.