Commissioners of Wicomico County v. Bancroft

Background

A bondholder, Samuel Bancroft Jr., sued the Wicomico County commissioners to stop taxes on property of the Baltimore, Chesapeake and Atlantic Railway Company. The railway had been created after a foreclosure and reorganization of an earlier railroad that had received a 30-year tax exemption under a Maryland law. The reorganized company issued mortgage bonds, and county officials later assessed and threatened to sell the property for unpaid taxes, prompting the bondholder’s court challenge.

Reasoning

The key question was whether a statewide law passed in 1896 that required all railroads to be assessed for county and municipal taxes wiped out any earlier, repealable tax exemption for the reorganized company. The bondholder conceded there was no unchangeable contract protecting the exemption from state action. The Court accepted the Maryland courts’ interpretation that the 1896 law, with its wording and proviso about preserving only irrepealable contracts, showed an intent to withdraw exemptions that the State could repeal. For that reason, the Court reversed the lower federal courts and ordered the injunction dismissed.

Real world impact

The decision means county governments may assess and collect taxes on the reorganized railroad’s property unless the exemption is part of a contract the State cannot legally repeal. Bondholders cannot rely on a repealable state-granted tax immunity to block tax collection. The ruling follows the State’s own courts’ reading of its statutes and enforces the 1896 assessment law’s practical effect.