Where, under a decree to enforce a statutory lien retained by
the state upon the property, real and personal, stock, and
franchises of a railroad company, the property and franchises were
sold,
held that the property was thereafter subject to
taxation under the laws of the state, as immunity therefrom, if
possessed by the company, did not pass to the purchaser.
This was an action brought by the East Tennessee, Virginia, and
Georgia Railroad Company, against the County of Hamblen, Tennessee.
The question at issue was as to the liability of the company to pay
taxes on the assessed value of that portion of its road which lies
in that county.
The Cincinnati, Cumberland Gap, and Charleston Railroad Company
was chartered by an Act of the General Assembly of Tennessee,
approved Nov. 18,1853, the eighth section of which provides,
"That said company shall be, and they are hereby, vested with
all the rights, powers, and privileges, and subject to all the
restrictions and liabilities, of the Nashville and Louisville
Railroad Company except where otherwise provided for in this
charter."
A charter was granted to the latter company Feb. 9, 1840, the
fortieth section of which provides:
"That the capital stock in said company, the dividends thereon,
and the roads and fixtures, depots, workshops, warehouses, and
vehicles of transportation belonging to the company, shall be
forever exempt from the taxation in each and every of the said
States of Tennessee and Kentucky, and it shall not be lawful for
either of
Page 102 U. S. 274
the said states or any corporation or municipal police or other
authority thereof or of any town, city, county, or district thereof
to impose any tax on such stock or dividends, property or estate,
provided the stock or dividends, when the said dividends
shall exceed the legal interest of the state, may be subject to
taxation by the state in common with and at the same rate as money
at interest or interest thereon, and when the state shall impose a
tax on the dividends declared in favor of the stockholders of the
company, the tax shall extend only to such proportion of the said
dividends and capital stock as the part of the road in that state
shall bear to the whole road, from the profits of which the said
dividends have arisen, which tax, when imposed, shall be retained
by the company out of the dividends and paid to the state; but no
tax shall be imposed so as to reduce the part of the dividends to
be received by the stockholders below the legal interest of the
state."
The company first named borrowed from the state her coupon
bonds. To secure their payment, the General Improvement Act of
1852, and the acts amendatory thereof, which authorized the loan,
retained a lien therefor upon the property, real and personal,
stock, and franchises of the company. The latter failing to pay the
interest, a law was passed conferring upon the Chancery Court of
Nashville jurisdiction of all questions arising upon loans made
under those acts to the various railroad companies. The state filed
her bill July 21, 1871, in that court to enforce her lien, and
secure the payment of the bonds so advanced to the company. A
decree was passed for the sale of the property, which is set out in
the opinion of this Court. McGhee, the purchaser under the decree,
conveyed the property to the East Tennessee, Virginia, and Georgia
Railroad Company.
The Circuit Court for the County of Hamblen held that the
company was subject to the tax, and entered judgment accordingly,
upon the affirmance of which by the supreme court the case was
removed here.
Mr. CHIEF JUSTICE WAITE delivered the opinion of the Court.
This case is, we think, governed by the of
Morgan
v.
Page 102 U. S. 275
Louisiana, 93 U. S. 217. We
there held that immunity from taxation was not such a franchise of
a railroad corporation as would pass by a sale under a mortgage "on
the property and franchises of the company," and that the term
"franchises" was not synonymous with "rights, privileges, and
franchises," "rights, powers, and privileges," and the like. The
Cincinnati, Cumberland Gap, and Charleston Railroad Company was by
its charter invested "with all the rights, powers, and privileges"
of the Nashville and Louisville Railroad Company; but the statutory
lien retained by the state as security for its advances covered
only "the property, real and personal, stock, and franchises" of
the Cincinnati, Cumberland Gap, and Charleston Company. The decree
of the Chancery Court of Nashville provided that if the railroad
company itself, or some one or more of its stockholders, should not
purchase
"the said railroad and all the property, real, personal, and
mixed, and the franchises and privileges of said railroad company,
for $700,000, payable in the bonds of the State of Tennessee, with
the coupons attached of and after Jan. 1, 1871,"
or sell "the same to other parties . . . under the conditions,
liabilities, and restrictions as aforesaid, which are fully set
forth in said . . . decree," then the commissioners of the state
might sell "all the property and franchises of the . . . company to
the best advantage, either at public or private sale." Neither the
company nor its stockholders bought under this decree; but C. M.
McGhee, for himself and his associates, proposed to the
commissioners to pay for the road $300,000 in bonds of the state,
with January, 1871, coupons attached, and in his proposal he said,
"I expect a full and perfect title to the road, including the
state's interest, franchises, and privileges." This proposition was
accepted by the commissioners, and the sale, reported to the court,
was confirmed by decree in the following words:
". . . which report being seen, heard, and fully understood by
the court, and not excepted to, is in all things confirmed, and it
appearing to the satisfaction of the court that the sales of the
Knoxville and Kentucky and the Cincinnati, Cumberland Gap, and
Charleston Railroad, with their property and franchises, have been
made by the commissioners in conformity with the previous decrees,
it is therefore ordered, adjudged, and decreed
Page 102 U. S. 276
that these said sales be confirmed, and that the commissioners
retain the bonds and collect the residue of the purchase money as
the same falls due, and when the same is fully paid, make title to
the purchasers according to the terms of the contract and former
decrees of this court. It is further ordered and decreed by the
court that the purchasers be at once put in possession of these
roads, severally bought by them, with all the property, franchises,
and effects so bought by them as aforesaid, and for this purpose,
if necessary, the clerk and master is hereby ordered and directed,
upon the application of either of said purchasers, to issue a writ
of possession, or writs of possession, directed to the sheriff of
the several counties in this state through which the roads may run,
or in which any part thereof, or of the property sold, may be,
directing said sheriff to put the purchasers in possession of such
property at once, and make return of his action to this court. It
is further ordered, adjudged, and decreed that all the acts of the
commissioners in reference to said sales be, and the same are
hereby, approved, sanctioned, and ratified by the court."
From this it will be seen that although McGhee in his proposal
said, "he expected a full and perfect title to the road, . . .
franchises, and privileges," the court, in passing upon the
confirmation, treated the sale as of the "property and franchises,"
"in conformity with the previous decrees," and directed that, when
the agreed price was paid in full, the commissioners "make title to
the purchasers according to the terms of the contract and former
decrees of this court."
In this way, as it seems to us, the title of these purchasers
was confined to the property and franchises of the company,
notwithstanding the use of the additional word "privileges" in the
proposal. The authority to sell embraced only "property and
franchises," and the sale recognized by the court as having been
made is confined within the same limit. An opportunity was afforded
the company itself or its stockholders to discharge the state lien
or buy the state's interest, on the payment of $700,000 in state
bonds. In that event, the original franchises and privileges of the
company were to remain unimpaired or pass to the company's vendee;
but if a sale was
Page 102 U. S. 277
made by the state authorities to a third party under the
statutory lien, then only the franchises which the lien covered
were to be transferred; and those, as we said in
Morgan v.
Louisiana, supra, were only "the positive rights or
privileges, without the possession of which the road of the company
could not be successfully worked." The Act of Dec. 21, 1870, does
not purport to enlarge the state's interest. It simply provided a
way in which the statutory lien, as originally retained, could be
enforced, and gave authority, upon a sale of "any of the
franchises," to transfer and vest in the purchaser "all the rights,
privileges, and immunities appertaining to the franchises sold." As
in this case only franchises "essential to the operations of the
corporation, and without which its road and works would be of
little value" (
Morgan v. Louisiana) were sold, the
immunity from taxation did not pass as an incident.
Our attention has been called to the case of the
Knoxville
& Ohio Railroad Co. v. Hicks, decided by the Supreme Court
of Tennessee at its September Term, 1877, but not yet reported in
the regular series of reports, as holding that this immunity did
pass under a similar sale. We do not so understand that case. There
it appears that the Chancery Court of Nashville, acting under the
jurisdiction conferred by the act of Dec. 21, 1870,
"distinctly adjudged that not only the property of the old
company, but all its rights, franchises, privileges, and
immunities, as defined by the charter and laws and the decree in
the cause, passed to and vested in the new company."
Here, on the contrary, the same court adjudged, under the
authority of the same act, that only the "property and franchises"
passed. The same difference therefore exists between these cases
that there is between
Humphrey v.
Pegues, 16 Wall. 244, and
Morgan v. Louisiana,
supra. In
Humphrey v. Pegues, we held that immunity
from taxation did pass under a transfer of "all the powers, rights,
and privileges" of a railroad corporation, but in
Morgan v.
Louisiana that it did not by a transfer of "property and
franchises" only.
This disposes of the case and makes it unnecessary to consider
whether the immunity from taxation which the Nashville and
Louisville Company had by its charter was granted to the
Cincinnati, Cumberland Gap, and Charleston Company
Page 102 U. S. 278
or whether, if it was, this immunity could be transferred to a
purchaser at a sale to enforce the statutory lien retained by the
state, even with the aid of the jurisdiction conferred on the
Chancery Court of Nashville by the act of Dec. 21, 1870.
Judgment affirmed.
