Trask v. Maguire - 85 U.S. 391 (1873)
U.S. Supreme Court
Trask v. Maguire, 85 U.S. 18 Wall. 391 391 (1873)
Trask v. Maguire
85 U.S. (18 Wall.) 391
A railroad company exempted by the legislature of a state from taxation accepted bonds for large sums of money from the state by way of loan, the statute which authorized the transaction declaring that the acceptance by the company of the bonds should operate as "a mortgage of the road of the company and every part and section thereof, and its appurtenances," and that if the company did not provide for the payment of the bonds, it should be lawful for the governor to sell "their road and its appurtenances" at auction to the highest bidder or to buy in the same subject to such disposition, in respect to such road or its proceeds, as the legislature might thereafter direct.
Subsequently to this, the state made for itself a new constitution, provisions of which were in these words
"No property, real or personal, shall be exempt from taxation except such as may be used exclusively for public schools and such as may belong to the United States, to this state, to counties, or to municipal corporations within this state."
"The General Assembly shall not pass special laws . . . exempting any property of any named person or corporation from taxation."
At the same time, it adopted in a separate form "An ordinance for the payment of state and railroad indebtedness," which was to "have full force and effect as a part of the constitution," which ordinance, after
referring to the particular railroad company now under consideration and then in default, and to some other railroad companies, ordained that
"The General Assembly shall provide by law for the sale of the railroad and other property, and the franchises of the company that shall be in default under the lien reserved to the state."
And ordained further that
"Whenever the state shall become the purchaser of any railroad or other property or the franchises sold as hereinbefore provided for, the General Assembly shall provide by law in what manner the same shall be sold."
It added that no sale should be made "without reserving a lien upon all the property and franchises thus sold."
Subsequently to this the governor took the opinion of the judges of the supreme court of his state (as its constitution authorized him to do) upon the meaning of parts of this ordinance, but not specially upon the relations of any of them to the provision already quoted of the constitution, and the judges returned for answer, among other things, that no sale could be made by the state without reserving a lien, but that "the legislature was left unrestricted further as to the time, terms, and conditions of sale."
The legislature after this passed a law to foreclose the state lien, the law enacting that if the state should buy the road in and afterwards sell it, the persons purchasing should have all the rights, franchises, privileges, and immunities which were enjoyed by the companies for whose default the road was sold. The road was sold, the state purchased it in, and afterwards sold it to certain persons, the vendees of whom organized themselves, as the laws of the state allowed them to do, into a new corporation. A collector of state and county taxes having sought to enforce the payment of state and county taxes from this new corporation, which preserved the name of the old one, a stockholder in the new one filed a bill to enjoin him.
1st. That when the state became the purchaser of the railroad and its appurtenances and held them, the immunity from taxation previously granted ceased of necessity, the property belonging now to the state.
2d. That the ordinance did not mean to say that the legislature might provide for the sale in any manner which the new constitution forbade.
3d. That the new constitution forbade the renewal of an exemption from taxation as much as it did the creation of one in an original form.
Appeal from the Circuit Court for the District of Missouri, in which court Trask filed a bill against Maguire, collector of state and county taxes at St. Louis, to restrain him from collecting taxes upon the property of the St. Louis & Iron Mountain Railroad Company, a corporation organized in the State of Missouri, July 26, 1867, and to have the property of the said company decreed exempt from liability to such taxes.
The case was this:
A general corporation law of Missouri, in force in 1845, thus ordained: [Footnote 1]
"The charter of every corporation that shall hereafter be granted by the legislature shall be subject to alteration, suspension, and repeal at the discretion of the legislature."
This provision of general law being in force, the Legislature of Missouri, on the 3d of March, 1851, passed "An act to incorporate the St. Louis & Iron Mountain Railroad Company." The capital stock of the company was $6,000,000, and it was enacted that:
"The stock of said company shall be exempt from all state and county taxes."
On the 17th of February, 1853, it was enacted that the railroad above mentioned as having been incorporated should be exempted from the provisions of the general corporation law already quoted. The statute further enacted:
"All the engines, cars, wagons, machines and other property belonging to said company shall be deemed a part of the capital stock of the company and shall be vested in the respective shareholders of the company forever according to their respective shares, and transferable by them in the transfer of stock, as personal property."
Subsequently to this, and to aid it in making the road, the State of Missouri lent to the company (in the shape of bonds, the principal and interest of which the company agreed to pay) a large sum of money. The act authorizing the transaction enacted that none of the bonds should be delivered to the company until it filed in the office of the secretary of state certificates of acceptance of them, executed under the corporate seal &c. The act then proceeded:
"SECTION 4. Each certificate of acceptance so executed and filed as aforesaid, shall be recorded in the said office of the secretary to state, and shall thereupon become and be, to all intents
and purposes, a mortgage of the road of the company executing and filing their acceptance, as aforesaid, and every part and section thereof, and its appurtenances, to the people of this state for securing the payment of the principal and interest of the sums of money for which such bonds shall from time to time be issued and accepted."
"SECTION 11. In case the said companies or either of them shall make default in the payment of either interest or principal of the said bonds . . . it shall be lawful for the governor to sell their road and its appurtenances by auction to the highest bidder or to buy in the same at such sale for the use and benefit of the state, subject to such disposition in respect to such road or its proceeds as the legislature may thereafter direct."
On the 4th of July, 1865, the State of Missouri adopted a new constitution of government. It contained the following provisions:
"No property, real or personal, shall be exempt from taxation except such as may be used exclusively for public schools and such as may belong to the United States, to this state, to counties, or to municipal corporations within the state."
"The General Assembly shall not pass any special laws . . . exempting the property of any named person or corporation from taxation."
At the same time that it adopted this new constitution, it adopted, in the separate form of AN ORDINANCE, entitled "An ordinance for the payment of state and railroad indebtedness," certain provisions which were to have "full force and effect as a part of the constitution of the state."
The ordinance was thus:
"SECTION 1. There shall be levied and collected from the Pacific Railroad, the North Missouri Railroad Company, and the St. Louis & Iron Mountain Railroad Company an annual tax of 10 percentum of all their gross receipts for the transportation of freight and passengers . . . from the 1st of October, 1866, to the 1st October, 1868, and 15 percentum thereafter, which tax shall be appropriated by the General Assembly to the payment of the principal and interest now due, or hereafter to become due, upon the bonds of the state, and the bonds guaranteed by the state, issued to the aforesaid railroad companies. "
"SECTION 3. The tax in this ordinance specified shall be collected from each company hereinbefore named only for the payment of the principal and interest on the bonds, for the payment of which such company shall be liable, and whenever such bonds and interest shall have been fully paid, no further tax shall be collected from such company."
"SECTION 4. Should either of said companies refuse or neglect to pay said tax as herein required, and the interest or principal of any of said bonds, or any part thereof, remain due and unpaid, the General Assembly shall provide by law for the sale of the railroad and other property, and the franchises of the company that shall be thus in default, under the lien reserved to the state, and shall appropriate the proceeds of such sale to the payment of the amount remaining due and unpaid from said company."
"SECTION 5. Whenever the state shall become the purchaser of any railroad or other property or the franchises sold as hereinbefore provided for, the General Assembly shall provide by law in what manner the same shall be sold for the payment of the indebtedness of the railroad company in default; but no railroad or other property, or franchises purchased by the state shall be restored to any such company until it shall have first paid . . . all interest due from said company, and no sale or other disposition of any such railroad or other property or their franchises shall be made without reserving a lien upon all the property and franchises thus sold or disposed of for all sums remaining unpaid, and all payments therefor shall be made in money or in bonds or other obligations of this state."
On the 1st of November, 1865 -- soon after the adoption of the new constitution and of this ordinance -- the General Assembly met and bills were introduced providing for the sale of several railroads, including the St. Louis & Iron Mountain, then in default on its obligations. Pending these bills, questions as to the effect of the ordinance arose in the mind of the governor, and on the 27th of the same month of November he propounded to the judges of the supreme court, as it was his right to do under the Constitution of Missouri, certain interrogatories as to the operation of the ordinance, and among the rest one as follows:
"If you are of opinion that the sale of the railroads may be
ordered before such refusal or neglect, I request you to say whether such sale can be made 'without reserving a lien upon all the property and franchises thus sold for all sums remaining unpaid,' as provided by section five of the ordinance. In other words, does this clause in the ordinance constitute a condition of all sales of railroads ordered by the state, or does it refer only to sales made under the ordinance for refusal or neglect to pay the tax? [Footnote 2]"
To these questions the judges replied. In the course of their reply, they say that one of the things provided for by the ordinance is a tax to pay the debts of the railroad companies to the state, and another thing provided for is, "in what manner railroads purchased by the state under her lien shall be sold again;" that "the fifth section relates to all sales of railroads under liens reserved to the state," whether sold for the nonpayment of the tax or for the nonpayment of the mortgage debt. "The fifth section," said the judges,
"provides further that no sale or other disposition of any such railroad or other property, or their franchises, shall be made by the state without reserving a lien upon the property sold for all sums remaining unpaid -- that is to say by the purchaser -- and the purchaser is required to make all payments therefor in money or in bonds or other obligations of this state, but the legislature is left unrestricted further as to the time, terms, and conditions of sale."
After this -- that is to say on the 16th of February, 1866 -- the legislature passed an act "to foreclose the state lien and to secure the early completion of the road."
By the act it was made the duty of the governor to advertise for sale the different roads in default, "their appurtenances, rolling stock, and property of every description, and all rights and franchises." A board of commissioners was to attend the sale, and on a contingency named, purchase for the state. The commissioners, in case the state should purchase, were to give notice of their authority to sell and to invite proposals to purchase. The governor, on a sale's
being made by the commissioners, was to make a deed to the purchaser, which, it was provided, should have
"the effect to convey, transfer, and make over to the purchaser said road and all of the franchises, privileges and rights, title and interests appertaining to the road."
And the act further provided, that the purchaser should acquire by his purchase "all the rights, franchises, privileges, and immunities which were had and enjoyed by" the original corporation "under the charter and the laws amendatory thereof."
One month after the passage of the act just quoted, and pending proceedings thereunder for the sale of the road, another act was passed, approved March 20, 1866, entitled,
"An act authorizing the incorporation of the purchaser or purchasers of any railroad, or of any part, section, or branch thereof, which has heretofore or may hereafter become forfeited to and sold by the state."
That act enacted thus:
"SECTION 4. Each corporation provided under this act shall have the same power, franchises, right, and privileges, and be subject to the same liabilities and restrictions as the corporation to which it shall become the successor may have had by its original charter, and the amendments thereto, into and over the property and franchises forfeited and sold aforesaid."
At the sale, which the governor advertised, the state bought the railroad and its appurtenances in, and the commissioners sold it to three persons, who afterwards sold it to one Allen. Allen availing himself of the privileges of the last above-quoted act, organized himself and certain other persons, including Trask, already named as the complainant below, into a new corporation having the name of the old one.
Hereupon the defendant, Maguire, a collector, as already said, of state and county taxes in Missouri, having sought to levy certain state and county taxes on this new corporation, Trask filed a bill in the court below to enjoin him, and that court dismissed the bill. Trask now appealed from that decree.