The Act of 1878 is "An Act to adjust and settle finally, by an agreement, all pending controversies" between the B. O. and the State. The question is whether the principal method of "settling all controversies," viz., "by subjecting the franchises and property of said Company within this State to taxation for State purposes to a certain extent," (1) accomplished its purpose of settling controversies or (2) unsettled all controversies and created endless new controversies by subjecting the company to taxation to an utterly uncertain extent. (Italics supplied.) This question depends upon whether, in the Act of 1878, gross receipts within the State had (1) the meaning which (a) it had when the Act of 1878 was passed, under two decisions of this court construing the Act of 1872, and (b) it has had by unbroken practice for upwards of 60 years since or (2) any one of a thousand meanings which from time to time the tax-collectors may give it.
A mere tax statute may, of course, be amended or repealed at any time, either as to the rate or the base of the tax. Thus the general railroad gross receipts tax, which in 1878 was 1/2 of 1 per cent., has been increased to a graduated rate of from 1 1/4 to 2 1/2 per cent. Code, 1943 Supplement, Art. 81, § 95(a). The Act of 1878 was not a mere tax statute but a contract, by which the B. O., inter alia, agreed to a modification of its charter exemption to a specified extent and not otherwise. This court has held, 30 years ago, that the Act of 1878 is "an irrepealable contract" (State v. Baltimore O.R. Co.,127 Md. 434, 450, 96 A. 636, 641), that "its object and purpose was to reach a final adjustment of matters in dispute between the state and the railroad, not an adjustment of some and a leaving ofothers open and subject to future unknown modifications" (127 Md. 449, 96 A. 641), that "there was no grant of any new right by the state to the railroad company, though there was a relinquishment of an existing right in return for which the state acquired a valuable right not theretofore possessed" (127 Md. 445, 96 A. 640). State v. Baltimore O.R. *Page 60 Co., 127 Md. 434, 96 A. 636, 640. (Italics supplied.)
In Erie Ry. Co. v. Pennsylvania, 1875, 21 Wall. 492, 498, 22 L. Ed. 595, the gross receipts tax was apportioned "according to the length of the road within the State." In the DelawareRailroad Tax Case, 1874, 18 Wall. 206, 21 L. Ed. 888, the tax on "net earnings" was by statute likewise apportioned on a mileage basis. Counsel for the railroad company argued that this apportionment had the effect of taxing property beyond the State of Delaware, it being admitted that valuable terminals and other outside property were proportionately more valuable than the Delaware property. 18 Wall. 220, 221, 21 L. Ed. 888. The Supreme Court said: "The length of the whole road is in round numbers one hundred miles; the length in Delaware is twenty-four miles. The tax upon the property estimated according to this ratio would be in Delaware 24/100 or 6/25 of the amount of the tax upon the whole property. But the value of the property in Delaware is not 6/25 of the whole property, but much less than this proportion would require." Nevertheless the court held that the tax was not a property tax but a tax "upon the corporation itself," measured by a percentage of the value of "a certain proportional part" of its shares of stock, "a rule which, though an arbitrary one, is approximately just." 18 Wall. 231, 21 L. Ed. 888.
The Maryland Act of 1872, ch. 234, contained no express limitation to gross receipts within the State. The Act of 1874, ch. 408, amending the Act of 1872, provided for such limitation and for apportionment on a mileage basis. In State v.Philadelphia W. B.R. Co., 1876, 45 Md. 361, 24 Am. Rep. 511, counsel again argued that this was a tax on property outside the state, and that no apportionment was possible. This court said: "The only remaining point then to be considered, is the apportionment of the gross receipts liable to taxation, under the Acts of 1872 and 1874, and in regard to this, we are of the opinion that upon the pleadings and admitted facts in this case, the State is entitled to recover a sum equivalent to that part of the gross receipts, which may be in the same proportion to the whole amount of *Page 61 gross receipts of the defendant, on its entire road from Baltimore to Philadelphia, that the number of miles of the Baltimore and Port Deposit Company bears to the whole number of miles of the Philadelphia, Wilmington and Baltimore Company, of which it forms a part. It is true the gross receipts on one part of the road may be greater than on another, but perfect equality in the assessment and apportionment of taxes is unattainable, and the rule we have adopted seems to be fair and reasonable.Delaware Railroad Tax Case, 18 Wall. 208, 21 L. Ed. 888."45 Md. 384, 385, 24 Am. Dec. 511. In State v. Baltimore O.R. Co.,48 Md. 49, decided February 21, 1878, this court held that the gross receipts from roads built under the original charter of 1826 were exempt from taxation, but the receipts from the Metropolitan Branch, built until later acts, were not within the charter exemption. Concerning apportionment this court made the same decision as in the Philadelphia W. B. case, viz.: "No separate account, however, has been kept of the receipts derived from this road, but it appears they were commingled with the receipts of the Main stem. Under such circumstances the only rule by which we can approximate to such receipts, is to say that they shall bear the same proportion to the entire gross receipts derived from the Main stem in the State, as the number of miles of the Metropolitan road bears to the entire length of the appellee's road."
On March 27, 1878, the Act of 1878 was passed. This contract of 1878 superseded, as to the B. O., the Acts of 1872 and 1874. When the contracting parties used the term "gross receipts within this State," they used it with the same meaning the term "gross receipts" in the Acts of 1872 had been given by this Court twice, and by the legislature in the Act of 1874 — apparently the only meaning any court or legislature had ever put upon such words. The words already construed by this court were adopted with their judicial construction. Cf. Smith v. City of Baltimore,120 Md. 143, 87 A. 824.
In the instant case the opinion of this court, by calling the Act of 1878 an irrepealable contract, keeps the word *Page 62 of promise to the ear, but breaks it to the hope by construing it to "produce the most beneficial results," i.e., the most taxes, by methods foreign to the construction of contracts and to this court's previous construction of the contract or of terms of the contract. The opinion rests on two unwarranted assumptions, (1) that the Act of 1878 is a legislative grant, to be construed most favorably to the State and (2) that "it is undisputed that the line-mile method has been inadequate and unfair." Obviously the act could not be both a legislative contract (by which the taxpayer surrendered part of its tax exemption), to be given "a fair and liberal interpretation," and also a legislative grant, "to be construed most favorably to the State." Nor is it "undisputed that the line-mile method has been unfair," though the State apparently regards its contract as "inadequate" and seeks to escape it. It is impossible (if it were permissible) for hindsight to compare the expectations of the contracting parties in 1878 with the results after 60 years. The inexactness of mileage apportionment, or any other apportionment, was then as well known to the parties and to the courts as it is now. Assumption that every second track or side track doubles receipts has no more basis in fact than would an opposite assumption that such additional tracks have no value at all. The 1878 contract,inter alia, substituted a gross receipts tax for a passenger fare tax. At least during the second half of the 60 years after 1878, the relative receipts of passenger business, as compared with freight, greatly diminished. At all events, in 1878, "all-track" apportionment was as far from the thoughts and the words of the contracting parties as smoking cars for women or flying machines. Equally remote from the purpose or the words of the contract, or the decisions of this court, was the idea of delegating to the tax-collectors selection of any one, or a combination of more than one, of eight bases of apportionment varying to the extent of 300 per cent. between extremes.
In the lower court Judge Niles filed an able and comprehensive opinion, fully supported by reasoning and *Page 63 authority. He read nothing into the contract beyond this court's previous construction of the contract or of terms of the contract. He quoted, inter alia, the following statement by this court in State v. Baltimore Ohio R. Co., 127 Md. 434, 439, 96 A. 636, 642: "The same rule of fair dealing which is enforced between individuals must be applicable where the parties are the state and a corporation having contractual relations with the state. The state can no more retain the benefits derived from its agreement and repudiate the benefits which are derived or to be derived by the other party to the contract, than can the individual."
The pecuniary stake in the instant case, though by 1878 standards substantial, will not make or break either party. The hope of the world lies largely in reviving and expanding observance of agreements among nations. If contracts between governments and their own taxpayers are not construed with candor and with due regard for precedents and practice of a life time, but to exact the uttermost farthing, agreements are "scraps of paper."