Gulf & Ship Island Railroad v. Hewes

after making the above statement, delivered the opinion of the court.

1. The motion to dismiss must be overruled. Counsel for the-railroad company appear to have invoked the contract clause of the Constitution upon the original argument; hut whether this be so or not, the bill was subsequently amended under leave of the court, by averring that the charter and the exemption from taxation contained in the eighteenth section constituted a contract between the plaintiff corporation and the State of Mississippi that the State would not demand any taxes upon its capital, property or stock for the term of twenty years from the enactment of the charter; and that, if said exemption from taxation had been repealed, which the company denied, it ivas not within the power of the State to repeal such exemption for the reason that the same constituted a contract upon which the company had acted, and upon the faith of which it had constructed the road; and that such repeal was a violation of the contract clause of the Constitution The Federal question was properly raised, and there is at least sufficient color for it to sustain our jurisdiction. No opinion was delivered by. the Supreme Court, but the Chief Justice certifies that the validity of the state legislation subsequent to the charter of 1882 was drawn in question upon the ground of its impairment of the contract contained in such charter, and that the decision was in favor of the validity of such legislation. While such a certificate is insufficient to give us jurisdiction, where

2. The bill set out, and, until the argument in this court, the plaintiff company relied solely upon, a charter granted February 23,1882, by the legislature of Mississippi to incorporate the Gulf and Ship Island Railroad Company, the eighteenth section of which declared: “ That in order to encourage the investment of capital in the works which said Company is hereby authorized to construct and maintain, and to make certain in advance of such investment, and as an inducement and consideration therefor, the taxes and burdens which this State will and will not impose thereon, it is hereby declared that said Company, its stock, its railroad, and appurtenances, and all its property in the State necessary or incident to the full exercise of all the powers herein granted, shall be exempt from taxation for a term of twenty years from the passage of this Act.”

To strengthen its position, and to enable the company to rally to its support an exemption antedating the constitution of 1869, upon which the defendant relies, the plaintiff calls to our attention an act passed in 1850 to incorporate the Gulf and Ship Island Railroad Company, and a further act approved March 1,1854, c. 66, amendatory of that act, the eleventh section of which declares “ that the property and investments of the Company connected with this enterprise, within this State, shall not be subject to taxation until the road shall be in full operation and completed.”

The position of the plaintiff in this connection is that, prior to the Code of 1857, there was no general law and no constitutional provision in any way restraining the legislature from granting irrepealable exemptions, and that the charter of 1882 was a mere continuance of the original charter of 1850-185.4; that the construction of the road, authorized by that charter

, But we are of opinion that the charter of 1882 cannot be considered as a revival or continuation of the charter of 1854, since the names of' the incorporators are entirely different, the routes of the two railroads are also different, and no reference is made in the charter of 1882 to the prior charters, although the names of the two corporations are identical. There is nothing in the act of 1882 to indicate even the existence of a prior act incorporating a road under the same name. It is true that, at the same session of the legislature (1882), another memorial to Congress was adopted by the legislature for a revival of the grant of public lands made by the United States in 1856 to aid in the construction of the Gulf and Ship Island Railroad, but in this very memorial it was stated that “ at its present session our legislature has granted a new act of incorporation with liberal provisions, thus again attesting the abiding and earnest interest felt by our people in this important work.”

It is also true that on March 13, 1884, the legislature passed another act to facilitate the construction of the Gulf and Ship Island Railroad, and for other purposes, c. 612, p. 971, the eighth section of which declared: “ That said Gulf and Ship Island Railroad Company are hereby subrogated to all the rights and privileges heretofore granted by the State of Mississippi to the Gulf and Ship Island Railroad' Company, and shall have the right' to use and enjoy such field notes, maps and surveys as have been heretofore made in the interest of said road as were authorized and granted by the State under the acts approved March 2, 1854, and December 3, 1858.” This is an effort to subrogate the new railroad to the rights and privileges of the former one, ,but its language contaihs an implied admission that, without such subrogation, the rights and privileges of the former company had lapsed, and that a new act was necessary to revive them. But if the act be. considered as a

We are unable to see that there is anything in this legisla-lation to indicate that the plaintiff company stands in a position to escape the application of the constitution of 1869. Indeed, it seems to us entirely clear that the injunction of the charter of 1850-1854 into this case was a mere afterthought; and that the charter upon which the plaintiff must rely is that of 1882, set forth in this bill, • and that such charter must be construed in subordination to the constitution of 1869, which we now proceed to consider.

3. The only provisions of the constitution pertinent to this case are the following sections -of Article XII:

“Seo. 13. The property of all corporations for pecuniary profit, shall be subject to taxation, the same as that of individuals.”

“ Sec. 20. Taxation shall be equal and uniform throughout the State. All property shall be taxed in proportion to its value, to be ascertained as directed by law.”

As it is not altogether clear from the language of these sections whether it was competent for the legislature to grant to a railroad company an exemption from taxation, it is conceded by both sides to this controversy that we are bound to look to the decisions of the Supreme Court of Mississippi at the time this charter was granted, for their proper interpretation. Douglass v. County of Pike, 101 U. S. 677 . While the question of contract or no contract in a particular case is one which must be determined by ourselves, every such alleged contract is presumed to have been entered into upon the basis, and in contemplation of, the existing constitution and statutes, and upon the established construction theretofore put upon them by the highest judicial

We are referred to the case of Mississippi Mills v. Cook, 56 Mississippi, 40, decided in 1878, four years prior to this charter, as settling the proper construction of these sections of the constitution. Indeed, counsel stipulate that the stockholders invested their money in reliance upon this adjudication. The Mississippi Mills were chartered in 1871 for the purpose of manufacturing cotton and woolen fabrics, and in 1872 an act was passed, of which the Mississippi Mills were subsequently given the benefit, providing that all taxes upon the property of said company should be applied to the payment of debts which the company had incurred in the construction of their factory. In 1877 this act was so far amended as to be substantially repealed; and in 1878 the company filed a bill in chancery against the tax collector, setting up the acts of 1872 and 1873 as constituting a contract with the company, and alleging that the act of 1877 impaired the obligation of such contract, and was in violation of the Constitution of the United States.

The bill was held not to be maintainable, the court deciding:

(1.) That it was not intended by section 13 of article XII of the constitution to confer power on the legislature to tax the property of corporations, because that existed without this section as an inherent legislative power.

(2.) That the property of the corporations mentioned was declared to be subject to taxation, that is, liable to taxation, the same as that of individuals, but it was not necessarily to be subjected to taxation. Since overruled in Adams v. Yazoo & Mississippi Valley Railroad, 77 Mississippi, 194.

(3.) That any legislative act, “ whether it be a charter or other form of.law, which says it shall be exempt, and not subject to taxation, is in conflict with the constitution.” But that the legislature might exempt property of a certain class, whether the owners were corporations or natural persons, but corporate property could never be placed beyond the reach of the taxing power. “ It may not be taxed, but it must be ever liable. It need not be subjected, but it must always be subject, to taxation,

(4.) That it followed from this that it was competent for the legislature to modify or repeal the act of 1872, and that the repealing act of 1877 was constitutional, and operated as a repeal of the exemption. This was reaffirmed in Attala Co. v. Kelly, 68 Mississippi, 40; Railroad Co. v. Lambert, 70 Mississippi, 779.

(5.) In a concurring opinion, delivered by the Chief Justice, he held that if the exemption were granted in the form of a contract in the charter, it' was prohibited.

Although the decision of the case was put upon the ground that the exemption from taxation contained in the acts of 1872 and 1873 was a mere bounty, and subject to repeal by the legislature, the report would seem to indicate the opinion of the court to have been that no-exemption was valid which was contained in the charter of a particular corporation; (a question not necessarily involved,) but whether this be so or not, it is entirely clear that the court intended to decide that, under the constitution of 1869, any exemption granted by the legislature was a mere bounty and subject to repeal.

Under this construction of the constitution it becomes unnecessary to decide whether the exemption- contained in' the charter of 1882 be void or not, since, as it appears by the certificate of the Chief Justice, the decision of the court below was put upon the ground that the subsequent legislation, and particularly the Annotated Code of 1892, which was construed by the court as repealing the exemption in the charter, was constitutional and valid. Indeed, counsel for the collector, in their brief, expressly disclaim any reliance upon the position that the exemption in this case was originally unconstitutional and void, putting their case expressly upon- the ruling of the Supreme Court that suoh exemption had been repealed.

¥e do not find it necessary to pass upon the soundness of this conclusion, as we are of opinion that the question whether the ruling'of the Supreme Court, that a repeatable exemption has been in fact repealed by a subsequent statute, is one which turns upon the construction of a state law, and is not reviewable here, although if the exemption were irrepealdble and thus constituted a contract, it would be. our duty to decide for ourselves whether the subsequent act had repealed it or impaired its obligation. Thé only contract relied upon is one exempting the property of a particular corporation from taxation for a certain number of years; a contract which, in the light of the state constitution and the prior decisions of the state courts, must be read as if it contained a proviso that the legislature might in the meantime alter, amend or repeal the act. Hence, as the legislature is left entirely free to act upon the sub

This court has repeatedly held that we cannot revise the judgment of the highest court of a State unless, by its terms, or necessary operation, it gives effect to some provision of a state constitution or law which, as thus construed, impairs the obligation of a precedent contract. In Railroad Co. v. Rock, 4 Wall. 177 , 181, this court pronounced it a “fundamental error that this court can, as an appellate tribunal, reverse the judgment of a state court, because that court may hold a contract

We are therefore of opinion that we cannot review the action of the state court in holding this exemption to have been repealed.

•4. A single point with regard to the privilege taxes included ih the assessment sought to be enjoined remains to be considered.

. By section 18 of the company’s charter of 1882 it was declared “that such Company, its stock, its railroad-and appurtenances, and all its property in this State, necessary or incident to the full exercise of all the powers herein granted, shall be exempt from taxation for a term of twenty .years from the passage of this act.” This undoubtedly implies an exemption from privilege as well as ad valorem taxes, and such has been the construction given to it by the Supreme Court of Mississippi. Grand Gulf and Port Gibson Railroad v. Buck, 53 Mississippi, 246.

But, as we have already held, this section must be construed as subservient to section 13, article XII, of the constitution of

Now, if privilege taxes are taxes upon thq property of corpo-. rations, an exemption, from such taxes was subject to repeal as much as we have already held an exemption of ad valorem, taxes to be.

Whatever may have been the fluctuations of opinion upon this subject, and it is not to be denied that there are manycases in the state courts holding that a privilege tax is not a tax upon property, the law in this court, so far as concerns railway franchises, must be deemed to have been settled by the case of Wilmington Railroad v. Reid, 13 Wall. 264 , in which an exemption in the charter of the Wilmington and Raleigh Railway Company of “ the property of said company and the shares therein ” from taxation, was decided, to extend .'to a tax upon the franchise and rolling stock. In delivering the opinion of this court, Mr. Justice Davis observed: “It is insisted, however, that the tax on the franchise is something entirely distinct from the property of the corporation, and that the legislature, f^ieref ore, was not inhibited from taxing it. The position is equally unsound with the others taken in this case. Nothing is better set-,' tied than that the franchise of a private corporation — which in its application to a railroad is the privilege of running it and taking fare and freight — is property, and of the most valuable kind, as it cannot be taken for public use even, without compensation. It is true it is not the same sort of property as the rolling stock, roadbed and depot grounds, but it is equally with them covered by the general term ‘ the property of the company,’ and therefore equally within the protection of the charter.” To the same effect are Adams Express Co. v. Ohio, 165 U. S. 195 , and Veazie Bank v. Fenno, 8 Wall. 533 , 547.

This also appears to be the law in Mississippi. Coulson v. Harris, 43 Mississippi, 728; Drysdale v. Pradat, 45 Mississippi, 445.

In West River Bridge Co. v. Dix, 6 How. 507 , 534, the franchise of a bridge company was held to be property subject to condemnation under the law of eminent domain. See also Monongahela Nav. Co. v. United States, 148 U. S. 312 ; Spring

It follows, then, that privilege taxes being taxes upon property are subject to the constitutional limitations of 1869, and their exemption was equally repealable as that of ad valorem taxes.

The railroad company also.calls attention to section 181 of the constitution of 1890, by virtue of which “ exemptions from taxation to which corporations are legally entitled at the adoption of this constitution, shall remain in full force and effect for the time of such exemptions as expressed in their respective charters, or by general laws, unless sooner repealed by the legislature.” The words “sooner repealed” in this section apparently refer to a repeal before the expiration .of the exemption under their respective charters, and as the Supreme Court has held that the exemption in this case was repealed by the Annotated Code of 1892 the company can gáin no additional advantage by this section. Adams v. Tombigbee Mills, 78 Mississippi, 676.

Inasmuch as the statute, in question could not, and' in the opinion of Supreme Court did not, impair the obligation of any prior contract, its judgment must be

Affirmed.

Mr. Justice Gray was not present at the argument and took no part in the decision of this case.