Northern Central Railway Company v. Maryland
The Baltimore & Susquehanna Railroad Company was chartered by an act of the legislature of Maryland in 1827, with authority to construct a railroad from the city of Baltimore to the Susquehanna river. The charter contained a provision declaring that the 'shares of the capital stock of the company should be deemed and considered personal estate, and should be exempt from the imposition of any tax or burden.' It was conceded by both parties in the discussion at bar that the effect of this provision, as interpreted by the setted adjudications of the state of Maryland, was to forever exempt the company and its property from taxation. It was also conceded that at the time this act was passed there was no provision in the Constitution of the state of Maryland restricting the legislative power to exempt, and that no reservation of the power to repeal, alter, or amend was found in the Constitution of the state, or expressed or implied in the charter in question. In 1854 an act was passed by the Maryland legislature, designated as chapter 250 of the laws of that year. The title of this act was as follows:

'An Act to Authorize the Consolidation of the Baltimore and Susquehanna Railroad Company with the York and Maryland Line Railroad Company, the York and Cumberland Railroad Company and the Susquehanna Railroad Company, by the Name of the Northern Central Railway Company.'

The companies referred to in this title other than the Baltimore & Susquehanna Railroad were corporations owing their existence to charters granted by the legislature of Pennsylvania, and which were operating railroads in that state connecting with the Baltimore & Susquehanna. The effect of the consolidation was to create one corporation owning and operating one line of railroad from and across the state of Maryland into and across the state of Pennsylvania. The act of 1854 authorizing the consolidation, the title of which has just been stated, by its first section empowered the stockholders of the Baltimore & Susquehanna Railroad, upon their acceptance of the act, 'to unite and to consolidate their company or corporation with the York & Maryland Line Railroad, the York & Cumberland Railroad Company and the Susquehanna Railroad Company of the state of Pennsylvania, so as to form and constitute one company or corporation, to be called the Northern Central Railway Company, on such terms and conditions, and conformably to such agreements and regulations, as the said several companies shall respectively determine and adopt, subject, nevertheless, to the following general provisions: First, that all existing contracts, engagements, and liabilities of the said Baltimore & Susquehanna Railroad Company shall continue to bind said company pany and its property as fully as before the consolidation herein above authorized, or that the said existing contracts, engagements, and liabilities shall be duly adopted and assumed by the consolidated company except as herein expressly altered or rescinded; second, that all laws heretofore made in reference to the said Baltimore & Susquehanna Railroad Company and not repealed or modified by the legislature of Maryland, and all ordinances relating to said company heretofore made and not repealed by the mayor and said council of Maryland, shall be binding and operative upon the said consolidated company, so far as its property or its operations may be within the jurisdiction of the state of Maryland or the city of Baltimore respectively, and so far as the laws or ordinances may be applicable to and consistent with the new oganization of the said consolidated company; third, that the consolidated company shall have power from time to time to establish its capital stock at an amount not exceeding eight millions of dollars, the same to be represented by such number of shares, and the said consolidated company shall have power to issue their bonds convertible into stock on such terms as the company may prescribe, and to secure the same by one or more mortgages for any such amounts as they may find necessary for paying off any existing debt of the company.'

After providing for a board of directors and officers of the new or consolidated company, the act proceeded to say: 'That the company shall make and use a common seal, and possess all the corporate powers and privileges, and be subject to all the duties and obligations not inconsistent with this act, and its general intent, which are expressed in the charter heretofore granted to the said Baltimore & Susquehanna Railroad Company, and its supplements: Provided, that this clause shall not be construed to deprive the parties to the said consolidated company of the right or authority to make such provisions and regulations, notwithstanding said original charter and its supplements, as may be necessary to create and establish said consolidated company, and bring its organization into agreement and consistency with the terms and conditions of the charter of the several companies of which the said consolidated company shall be composed: And provided also, That the parties to the consolidated company shall be authorized and empowered to adopt and conform the organization of the said consolidated company to such provisions or enactments as may be required by the legislature of the state of Pennsylvania, touching the name of said corporation, and of the board of president and directors in said consolidated company, and the conditions relating to their appointments.'

The 2d section of the act, among other things, provided that 'this act shall take effect whenever and as soon as the said parties hereinbefore referred to shall have agreed to consolidate their several companies into one, and shall have settled, determined, and agreed upon the terms and conditions of such consolidation in conformity with the provisions of this act. . . .'

In pursuance of the authority thus conferred upon the Maryland corporation, and in virtue of power granted by the legislature of Pennsylvania to the three Pennsylvania corporations, the consolidation was effected, new stock was issued, and a company came into being known as the Northern Central Railway Company, whose affairs were managed by the new board of directors and officers elected or appointed pursuant to the new charter. The corporation, in availing itself of the provisions of the law of 1854, executed articles of consolidation. Although the act of 1854 only provided that the new corporation should have the corporate 'powers and privileges' of the constituent bodies, it is stated in argument that the articles of consolidation executed under the law purported to vest the new corporation with, not only the right to the property rights and privileges of the old companies, but also with their immunities. In 1854, at the time the act of consolidation was passed, the Maryland Constitution (of 1850) was in force, and provided in § 47, article 3, as follows:

'Corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes; and in cases where in the judgment of the legislature the object of the corporation cannot be attained under general laws. All laws and special acts pursuant to this section may be altered from time to time or repealed.'

In the years 1872 and 1874 the legislature of Maryland passed an act imposing a tax of 1/2 of 1 per cent upon the gross receipts of all steam railroad companies incorporated by the state and doing business therein. Two suits were thereafter (the one in 1873 and the other in 1874) brought by the state of Maryland against the Northern Central Railway Company to recover the 1/2 of 1 per cent tax upon the gross receipts of that company from that part of its railroad lying in the state of Maryland. The defense of the company was substantially, first, that it was entitled to the exemption from taxation granted by the act of 1827 to the Baltimore & Susquehanna Company; that such exemption was existing and had not been repealed, and, if repealed, the repealing act was void because an impairment of the obligations of the contract resulting from the act of 1827 and the transmission of its immunities to the new company created by the act of 1854. The causes were decided in the trial court in favor of the corporation. The cases were taken to the court of appeals of the state of Maryland. That court (in 1875) reversed the judgment of the court below, and remanded the cases for a new trial. The court of appeals in its opinion conceded that when in 1827 the charter of the Baltimore & Susquehanna Railroad Company was granted there was no restriction in the Constitution of the state on the power of the general assembly to make a contractual exemption from taxation. It also conceded that at that time there was no general power reserved in the Constitution to repeal, alter, or amend charters, and that no such reservation was found in the charter of 1827. But the court deemed it unnecessary to pass upon the question of whether the consolidation act of 1854 had endowed the new company with the exemption from taxation expressed in the act of 1827, because, conceding, arguendo, this to have been the case, it was held that as the consolidation had created a new company with new stock, new franchises, new rights, and new officers, the charter of such newly created company as to all its provisions, including the exemption from taxation, if such exemption were found in it expressly or by implication, was subject to the power to repeal, alter, and amend, reserved by the Constitution. Construing the acts imposing the tax which were sued for in connection with other laws of the state of Maryland, the court held that the exemption from taxation had been repealed. 44 Md. 162.

The cause on being remanded to the trial court remained untried in 1880. In that year the legislature of Maryland passed an act on the subject of the taxation of the Northern Central Railway Company. The title of that act purported to adjust and settle finally by agreement all pending controversies on the subject of taxation between the state of Maryland and the railroad company. The preamble referred to and recapitulated the organization of the Baltimore & Susquehanna, the consolidation by the act of 1854, and the pending suits on the subject. The title and preamble are reproduced in the margin.

An Act to Adjust and Settle Finally, by Agreement, All Pending Controversies between the State of Maryland and the Northern Central Railway Company, by Subjecting the Franchises and Property of Said Company within This State to Taxation for State Purposes to a Certain Extent, and by Providing for the Payment of a Certain Indebtedness Claimed by the State of Maryland to Exist on the Part of Said Northern Central Railway Company to Said State of Maryland, being an Act Supplementary to the Act of Eighteen Hundred and Fifty-Four, Chapter Two Hundred and Fifty, Entitled An Act to Authorize the Consolidation of the Baltimore and Susquehanna Railroad Company with the York and Maryland Line Railroad Company, the York and Cumberiand Railroad Company, and the Susquehanna Railroad Company, by the Name of the Northern Central Railway Company.

Whereas, a controversy has arisen and exists between the state of Maryland and the Northern Central Railway Company in reference to the rights of the state of Maryland to subject to taxation the franchises and property of the Northern Central Railway Company, the said company claiming exemption of the same from taxation upon the grounds that among the terms and conditions of the union and consolidation of the several companies by which said Northern Central Railway Company was formed is one, that the latter should have all the rights, privileges, and immunities of each of said companies, which said terms were entered into under the authority given by the act of Maryland of eighteen hundred and fifty-four, chapter two hundred and fifty, which, moreover, declared that said Northern Central Railway Company should have all the powers and privileges expressed in the charter granted by the state of Maryland to the Baltimore & Susquehanna Railroad Company, among which privileges and immunity from taxation.

And whereas, the state of Maryland having, by the act of eighteen hunBy the 1st section of the act it was provided that the Northern Central Railway Company 'shall have and possess all the powcrs, rights, privileges, and immunities, and be subject to all the duties and obligations, which are expressed in the act of assembly of Maryland of 1827, chapter 72, entitled, An Act to Incorporate the Baltimore & Susquehanna Railroad Company, and all the franchises and property of every description and gross receipts of said Northern Central Railway Company within the state of Maryland, shall be subject to taxation for state purposes to the extent of an annual tax of one half of one per cent upon the gross receipts from its railroad and franchise lying within the state of Maryland, and from all other sources within this state, and said franchises, property, and gross receipts shall not be subject to any other tax under the laws of the state of Maryland; . . .' The act further provided for the payment of a designated sum by the railroad company for past taxes, declared said payment should acquit such taxes, and directed the discontinuance of all suits pending against the company for such taxes. It was, however, provided that its provisions should not be operative until the payment which the act required had been made and until the acceptance of the provisions of the act by the stockholders of the company. The act was accepted, the money was paid and the suits were discontinued. At the time of the passage of this act of 1880 the Constitution of Maryland of 1867 was in force, and therein it was provided (art. 3, § 48): 'Corporations may be formed under general laws but shall not be created by special act, except for municipal purposes and except in cases where no general laws exist providing for the creation of corporations of the same general character as the corporation proposed to be created, and any act of incorporation passed in violation of this act shall be void. . . . All charters granted or adopted in pursuance of this section, and all charters heretofore granted and created, subject to repeal or modification, may be altered from time to time, or be repealed.' In accordance with the act of 1880 the company year by year paid the tax on its gross receipts

In 1890 the state of Maryland passed a general law entitled 'An Act to Provide for State Taxation on the Revenues of Railroad, Telegraph, or Cable, Express or Transportation, Telephone, Parlor Car, Sleeping Car, Safe Deposit, Trust, Guaranty, Fidelity, Oil or Pipe Line, Title, Insurance, Electric Light or Electric Construction Companies Incorporated Under Any General or Special Law of This State and Doing Business Therein.' [Md. Laws, chap. 559.] By this act a tax of 1 per cent was imposed upon the gross receipts 'of all railroad companies worked by steam incorporated by or under the authority of this state and doing business therein.' Under the asserted authority of this statute a tax of 1 per cent was levied by the state in each of the years 1891 to 1895, both inclusive, upon the gross receipts of the Northern Central Railway Company for the year preceding, and these taxes were paid by the company under protest. Upon demand, however, being made in 1896 for payment of the tax of 1 per cent upon the gross receipts for the year 1895, compliance was refused. A tender by the company of the taxes, calculated at the rate of 1/2 of 1 per cent, was refused by the state, and the present action was thereupon brought to recover the taxes thus asserted to be due and payable under the act of 1890. The company defended on the ground that the act of 1880 was contract protecting it from a higher rate of tax on its gross receipts than in that act specified; that the act had not been repealed; that if repealed the repealing statute was void, because it impaired the obligations of the contract resulting from the act of 1880. There was judgment in favor of the corporation. The case was taken to the court of appeals of the state of Maryland and the judgment was reversed, the court holding that the provisions of the act of 1880 had been repealed by state statutes to which it referred, and that the repeal did not violate the Constitution of the United States by impairing the obligations of the contract, as asserted by the company, because the corporation held its rights subject to the power to repeal, alter, and amend, as reserved in the Constitution at the time both the acts of 1854 and 1880 were passed. 90 Md. 449, 45 Atl. 465. The case was remanded for a new trial. It was again tried, the Federal defense of the impairment of the obligation of the contract was again specially urged, the case was decided against the corporation, was taken again to the supreme court of the state of Maryland. That court, adhering to its former view, affirmed the judgment. It is to this judgment that the present writ of error is prosecuted. 51 Atl. 1108.

Mr. Bernard Carter for plaintiff in error.

Messrs. Louis E. McComas and George R. Gaither for defendant in error.

Mr. Justice White, after making the foregoing statement of the case, delivered the opinion of the court: 

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