The "Argilite Mining and Manufacturing Company" was incorporated
by an act of the General Assembly of Kentucky passed March 4, 1865.
Its name, by an amendment to the charter, was changed to the
"Kentucky Improvement Company," and it was authorized to
"construct one or more rail tracks from any lands owned or
improved by said corporation to convenient points on the Ohio or
Little Sandy River, or both, or to connect with other railways, and
to maintain said track or tracks, and to draw cars over the same by
suitable motive power."
For the "construction and convenient and proper use and
maintenance of such railroads," the company was authorized to
condemn and appropriate the necessary lands and materials. Pursuant
to said authority, the company built and equipped a railroad, and
on Aug. 15, 1866, issued in payment therefor its six percent coupon
bonds to the amount of $500,000, secured by mortgage on its landed
property and improvements. The road was finished in June, 1868, and
thereafter the company transported over it its own freight,
officers, and agents, and in addition thereto, though not in terms
so authorized by the charter, from time to time other passengers
and freight for hire.
Held that the company was, within
the meaning of the ninth section of the Act of July 13, 1866, 14
Stat. 138, a railroad company, and as such, for the year 1870,
liable to the tax of five percent on coupons thereby imposed.
This was an action brought by the Kentucky Improvement Company
against Charles W. Slack, Collector of Internal Revenue for the
Third Collection District of Massachusetts, to recover the amount
of certain internal revenue taxes which, it was alleged, had been
erroneously and illegally assessed and collected.
The case was submitted to the court below upon the following
agreed statement of facts:
"After an appeal duly made to the Commissioner of Internal
Revenue (April 29, 1873), this suit was brought against
Page 100 U. S. 649
the collector to recover the sum of $750, paid to him May 24,
1870, being a tax of five percent assessed upon coupons to the
amount of $15,000, payable Feb. 15, 1870, on bonds of said company
to the amount of $500,000, dated Aug. 15, 1866, and bearing
interest at the rate of six percent, payable semiannually."
"The company was originally organized under an Act of the
General Assembly of the Commonwealth of Kentucky, approved March 4,
1865, by the name of the 'Argilite Mining and Manufacturing
Company,' which act provided as follows:"
" SEC. 2. The objects and purposes of the incorporation of said
company shall be the mining for coal, iron ore, petroleum, carbon,
or rock oil, and any and all other minerals or mineral substances,
or the direct products of the earth, or any or all of them, and the
manufacture and refining of any or all of them, and transportation
to market of the same; the location and field of mining and
manufacture of said company shall be in Greenup, or any of its
adjoining counties."
" SEC. 7. Said company shall have the power, and may, if they
choose so to do, lock and dam Little Sandy River up to their mines
and property,
provided, for the condemnation of lands and
property for said purpose, the proceedings shall be had as is now
provided by law for the condemnation of mill sites."
" SEC. 8. Said company shall have the power to take, acquire,
and hold such lands, mines, and mining rights as they may deem
necessary for the uses of said company, and all such personal
property, machinery, boats, flats, &c., as may be necessary,
and to dispose of, for the use of the company and the stockholders,
any or all of the same."
"It was enacted by an act of the said General Assembly, approved
December 14, as follows:"
" SEC. 1. That the name of the 'Argilite Mining and
Manufacturing Company' is hereby changed, and said corporation
shall hereafter be known and styled the 'Kentucky Improvement
Company.'"
" SEC. 4. The said corporation is hereby authorized to construct
one or more rail tracks from any lands owned or improved by said
corporation to convenient points on the Ohio or Little Sandy River,
or both, or to connect with other railways, and to maintain said
track or tracks, and to draw cars over the same by
Page 100 U. S. 650
suitable motive power. The company is hereby authorized to
condemn and appropriate such lands and materials as may be
necessary for the construction and convenient and proper use and
maintenance of such railroads,
provided that for the
condemnation of the lands and materials for such purpose, the same
proceedings shall be had as are now required by law for the
condemnation of lands and materials for turnpikes and plank roads;
provided further that the land condemned for any railroad
track shall not exceed in width one hundred feet."
" SEC. 5. That, in order to carry out to the fullest extent the
purposes and objects of said act of incorporation, the said company
is authorized to sell all minerals, mineral substances, products of
the earth, and all other articles of commerce and manufacture
lawfully possessed by them, and to buy and sell all such articles
of merchandise as may be required to carry out the objects of their
charter, and to establish agencies in any part of the United
States, for the prosecution of the traffic hereby authorized."
" SEC. 6. That should said company lock and dam the Little Sandy
River, they shall build two bridges over said river sufficient for
the public travel, one of the bridges to be at the crossing of the
Greenupsburg and Raccoon Furnace Road, and the other at the
crossing of the Greenupsburg and Grayson Road at or near the
Argilite Mills."
"The Kentucky Improvement Company was duly organized under the
acts aforesaid, and commenced and continued operations thereunder
until it ceased to exist, about March 1, 1870."
"At an adjourned meeting of the shareholders of said company
held on the 24th of July, 1866, it was resolved,"
" 1st, to authorize the building of a railroad and to provide
locomotives, cars, and other facilities for the transportation of
coal and other productions to market for the canal openings near
Hunnewell Furnace to Hockaday's Landing, on the Ohio River."
" 2d, that a sum not exceeding $500,000 be raised for the
purpose of building and equipping said railroad, and afford
facilities for transportation to market for the mineral and other
productions of the company's property."
" 3d, that the president and board of directors of this company
be, and they hereby are, authorized and empowered to issue bonds to
the amount of $500,000, . . . secured by an indenture of mortgage
on all their present landed property and improvements . . . bearing
six percent interest, the interest payable semiannually. "
Page 100 U. S. 651
"In pursuance of the above vote, an issue of bonds was made to
the amount and bearing the interest named, and of date Aug. 15,
1866, and was secured by a mortgage to trustees of even date of the
then landed property and improvements of said company, and the
coupons taxed in this case were a part of the coupons attached
thereto."
"The whole issue was duly subscribed for and delivered to the
subscribers. The road was finished and opened for the business of
the company about the 1st of June, 1868."
"In addition to its own freight and its own officers and
servants, the company transported over its road from time to time
for hire other passengers and freight, but there was no provision
in its charter in terms authorizing it to convey freight or
passengers other than its own."
"The receipts of the company were as follows:"
image:a
Page 100 U. S. 652
"The company's sales of coal were as follows:"
1866, April 1 to Dec. 31 . . . . . . . . . $ 774.71
1867, Jan. 1 " " . . . . . . . . . 324.33
1868, " " " " . . . . . . . . . 25,576.82
1869, " " " " . . . . . . . . . 40,909.01
1870, " " Feb. 15 . . . . . . . . . 6,541.55
----------
$74,126.42
"And the company produced for its own use during same period as
follows:"
1866 . . . . . . . . . . . . . . . . . . 356.16 tons
1867 . . . . . . . . . . . . . . . . . . 5,433.55 "
1868 . . . . . . . . . . . . . . . . . . 2,286.78 "
1869 . . . . . . . . . . . . . . . . . . 792 "
1870 . . . . . . . . . . . . . . . . . . 60 "
"And the company's sales of iron were:"
1866, April 1 to Dec. 31 . . . . . . . . . $ 49,071.16
1867, Jan. 1 " " . . . . . . . . . 95,846.46
1868, " " " . . . . . . . . . 161,735.46
1869, " " " . . . . . . . . . 145,812.15
1870, " " Feb. 15 . . . . . . . . . 18,204.13
-----------
$470,669.36
"And the company's sales at its stores on the ground during same
period amounted to $506,529.75."
The court below found for the defendant, whereupon the company
sued out this writ of error.
Page 100 U. S. 654
MR. JUSTICE CLIFFORD delivered the opinion of the Court.
Moneys involuntarily paid for internal revenue taxes illegally
exacted may be recovered back from the collector in an action of
assumpsit.
Taxes of the kind, to the amount of $750, were paid to the
collector by the plaintiffs, after an unsuccessful appeal to the
Commissioner. Redress being refused, the plaintiffs instituted the
present suit in the state court, where the defendant appeared and
removed the cause into the circuit court for the same district.
Subsequently both parties appeared in the circuit court and
submitted the cause to the circuit court upon the agreed statement
of facts exhibited in the transcript.
Bonds with coupons annexed, it appears, were issued by the
plaintiff company in the sum of $500,000, bearing interest at the
rate of six percent, payable semiannually. Sufficient appears also
to show that the tax in question was a tax of five
Page 100 U. S. 655
percent upon $15,000 of those coupons which fell due at the time
specified in the agreed statement. Payment of the tax was resisted
upon the ground that the plaintiffs were not a railroad company,
and the claim to recover back the money paid for the tax, with
interest, is made upon the same ground. Judgment was rendered in
favor of the defendant in the circuit court, and the plaintiffs
sued out the present writ of error.
Errors assigned in the Court are as follows:
1. That the circuit court erred in rendering judgment for the
defendant.
2. That the court erred in finding that the plaintiffs were a
railroad company.
3. That the court erred in holding that the plaintiffs were not
protected from paying the tax by the provision in the amendatory
act. 14 Stat. 139.
When first organized under their original charter, it is
doubtless true that the plaintiffs were a mining and manufacturing
company, covering a very large field of operations and with some
quite extraordinary powers, as for example they might lock and dam
Little Sandy River up to their mines and property, and for that
purpose they might exercise the same power in condemning lands and
property as was authorized by law for the condemnation of mill
sites.
Had the case stopped there, the question would be attended with
difficulty, and perhaps would require a reversal of the judgment;
but it does not stop there. Instead of that, the agreed statement
shows that the name of the company was subsequently changed to that
of the Kentucky Improvement Company, and the powers and privileges
of the company were not only greatly enlarged, but were extended to
objects and purposes other than those relating to mining and
manufacturing. Authority is given to the company by the fourth
section of the new act to construct one or more rail tracks from
any lands owned or improved by the corporation to convenient points
on the Ohio or Little Sandy River, or both,
or to connect with
other railways, and to maintain said track or tracks, and to
draw cars over the same by any suitable motive power.
Under the enlarged power conferred by the new act, the company
may not only construct railway tracks and connect with other
railways, but they may condemn and appropriate such lands and
materials as may be necessary for the construction
Page 100 U. S. 656
and convenient and proper use and maintenance of such railroad,
without any limitation except that the same proceedings shall be
had in effecting such condemnation as are required by law for the
condemnation of lands and materials for turnpikes and plank roads,
and that the lands condemned for any railroad track shall not
exceed in width one hundred feet.
Tested by the terms of the charter, it is clear that the powers
granted were more comprehensive than are usually found in railroad
charters, both in respect to the routes it may establish and the
lands and materials the company may condemn and appropriate to such
uses. For aught that appears to the contrary, they might construct
an indefinite number of tracks in any direction from their own
lands, and might connect with every other railroad in the state;
and in constructing such tracks or making such connections, they
might without limit condemn and appropriate all such lands and
materials as might be necessary and convenient in constructing and
maintaining the same, provided the width for the railroad track did
not exceed one hundred feet.
Confirmation of the proposition that the plaintiffs are a
railroad company is also derived from the evidence reported, which
shows that the plaintiffs, after their road was constructed and
equipped with rolling stock, used it not only to transport their
own products and manufactures, but as a public highway for the
conveyance of freight and passengers.
Two suggestions are made by the plaintiffs in explanation of the
evidence introduced to prove that the railroad was used for the
public accommodation:
1. That the annual receipt from that source of employment was
less than that derived from mining and manufacturing; but it is a
sufficient answer to that suggestion to say that it does not appear
that they did not accommodate all shippers and passengers who
applied for any such services.
2. That the charter does not in terms authorize the company to
convey freight or passengers for hire. Suppose that is so, still it
remains that power is given to the plaintiffs to construct a
railroad, and if so it must be inferred that the builders and
owners of it have a right to use it, and to charge a reasonable
price for its use.
Ample power to lock and dam Little Sandy River and flow the
water to their property was given by the act of incorporation,
Page 100 U. S. 657
nor is there any ground to suppose that that power was taken
away or withdrawn by the amendatory charter, as the latter provides
that if the company shall lock and dam that river they shall build
two bridges over the river, sufficient for the accommodation of the
public, at the points specified in the eighth section of the act,
which warrants the conclusion that the power to construct railroads
and to lock and dam the river named are both included in the
charter as amended. Enough appears to show that the plaintiffs
adopted the act changing their corporate name, and that the company
was duly organized under the new charter, and that they continued
operations under it until the company ceased to exist.
Meetings were held by the stockholders, and at an adjourned
meeting they resolved to authorize the building of a railroad and
to provide locomotives, cars, and other facilities for the
transportation of coal and other productions to market from the
canal openings to a certain landing on the Ohio River. What that
distance is the resolution does not state, but it is supposed to be
about twenty miles.
They also resolved that a sum not exceeding $500,000 be raised
for the purpose of building and equipping said railroad, and to
afford facilities for transportation to market for the mineral and
other productions of the company's property. Officers had
previously been elected, and the shareholders also empowered the
president and directors to issue bonds for the amount raised, to be
secured by mortgage of all their landed property and improvements,
the bonds bearing six percent interest, payable semiannually. Bonds
to that amount were accordingly issued and were secured as
indicated, and it appears that the coupons taxed in this case were
a part of the coupons attached to those bonds.
Two years later, the railroad was finished and opened for
business, and it appears that the company within one year and eight
months transported passengers and freight over its railroad for
hire to the amount of $8,700 in addition to their own freight and
passengers not paying fare.
Viewed in the light of these suggestions, it is so clear that
the plaintiffs are a railroad company, and that their road is a
railroad, that it is not deemed necessary further to pursue the
argument.
Page 100 U. S. 658
Grant that and still it is insisted by the plaintiffs that the
tax was illegally exacted because the company of the plaintiffs was
not a railroad company indebted for any money for which bonds had
been issued.
Congress enacted to the effect that any railroad indebted for
any money for which bonds or other evidences of indebtedness have
been issued, subject to interest, or with coupons representing
interest, shall pay a tax of five percent on the amount of all such
interest or coupons. 14 Stat. 138;
Barnes v.
The Railroads, 17 Wall. 294,
84 U. S.
299.
Express authority was given to the plaintiffs as an improvement
company to construct one or more rail tracks, as before explained,
or to connect with other railways, and to maintain said track or
tracks and draw cars over the same, by any suitable motive power,
before the plaintiffs as such improvement company resolved to build
said railroad and to provide locomotives, cars, and other
facilities for the purposes antecedently mentioned; and it was for
the purpose of constructing and equipping that railroad that the
shareholders of the company resolved to raise the said sum of
$500,000 and to issue the coupon bonds for the amount. Coupon bonds
were accordingly issued, and the record shows that the tax in
question was assessed on $15,000 of such coupons.
Examined in the light of these suggestions, as the case should
be, and it follows that the company of the plaintiffs was a
railroad company indebted for money for which bonds had been
issued.
Concede both of the preceding conclusions and still the
plaintiffs contend that they should recover, because they insist
that the receipts of the company derived from the public use of
their railroad were insufficient to pay the semiannual interest of
the bonds, and that they are protected from such a tax by the
proviso added by the one hundred and twenty-second section of the
amendatory act. 14 Stat. 139.
Nothing is shown in support of the theory of fact assumed in the
proposition except what is found in the table exhibited in the
transcript. Even suppose that that is correct, it by no means
follows that it will avail the plaintiffs in the present case, for
several reasons:
1. Because, if the interest was in
Page 100 U. S. 659
fact paid by the plaintiffs, it is of no consequence where they
obtained the money, it being clear that in order to raise the
question there must be an actual failure to make the payment.
2. Where the interest is paid, the presumption is conclusive
that every other circumstance existed to justify the assessment of
the tax.
3. Proof to show that the interest has never been paid is not
exhibited, nor is the table referred to of a character to satisfy
the court that it shows the whole amount of the pecuniary advantage
which the plaintiffs derived from their railroad. Without more,
these remarks are sufficient to show that each of the assignments
of error must be overruled.
Judgment affirmed.
MR. JUSTICE FIELD, with whom concurred MR. CHIEF JUSTICE WAITE
and MR. JUSTICE HARLAN, dissenting.
I dissent from the judgment of the Court in this case. The
construction of the short railway by the company for its own use,
to carry the products of its mine to the Ohio River, did not, in my
opinion, convert the Improvement Company, which was organized to
mine for coal, iron, and other minerals, into a railroad company so
as to bring it within the statute providing for a tax upon the
coupons of bonds issued by such companies.
