A special charter to a railroad corporation contained a
provision of exemption from taxation as follows:
"The stock of the said company and its branches shall be exempt
from taxation for and during the term of seven years from and after
the completion of the said railroads, or any of them, and after
that, shall be subject to a tax not exceeding one-half of one
percent, per annum on the net proceeds of their investments."
In construing this provision, held that:
The words "after that" are equivalent to the word "thereafter"
and relate to the entire period of time after the expiration of the
seven years of total exemption, and are not to be construed as
limited by another provision in the charter for a definite period
during which the corporation should have exclusive rights.
The capital stock of a corporation is the capital upon which the
business is to be undertaken, and is represented by property of
every kind acquired by the company, while the shares are mere
certificates representing a subscriber's contribution to the
capital stock and measuring his interest in the company. This
distinction is obvious, although the words "stock" and "shares" are
sometimes used synonymously.
The stock exempted in this case was the capital or property of
the corporation, and not the shares of stock in the hands of the
stockholders.
The federal courts accord to a judgment of the state court only
that effect given to it by the courts of the state in which it was
rendered, and where the highest court of a state has held that a
judgment in
Page 216 U. S. 421
a tax suit is not
res judicata in a suit for taxes
subsequently assessed for another year, even though it must be
decided on the same questions, this Court will regard such a
decision only as an authority and determine the question on its
merits.
Where the capital of a corporation is exempted from taxation,
except as specified, the exemption continues even if the property
appreciates in value, and where, as in this case, it is evident
that the legislature intended that the taxation of the corporation
should be measured by the income, the exemption will not be
construed as limited to the then value of the property, so that
natural increases in value will be subject to any other method of
taxation than that stipulated in the charter.
A law which imposes a tax upon the franchise of a railroad
company whose property is exempt from taxation is a law in
derogation of the exemption contract.
An act of a state legislature attempting to tax the whole or any
part of the capital or franchise of a corporation, whose charter
contains an express limitation and method of taxation, such as in
this case, by any method other than that specified therein, impairs
the obligation of the charter and is unconstitutional under the
contract clause of the federal Constitution.
A state statute authorizing or directing the grant or transfer
of the privileges of a corporation which enjoys immunity from
taxation or regulation should not be interpreted as including that
immunity in the grant or transfer.
Rochester Railway Co. v.
Rochester, 205 U. S. 236,
205 U. S.
252.
While an exemption from taxation enjoyed by a corporation which
acquires the franchises and property of another corporation may not
be affected as to property which it already possesses, such
exemption does not apply to additional property so acquired, nor do
the exemptions enjoyed by the corporation whose property and
franchise are acquired pass to the purchasing corporation.
The power of taxation is never to be regarded as surrendered or
bargained away if there is room for rational doubt as to the
purpose.
Where the decree is affirmed but modified as to a substantial
contention, the costs of the appeal will be divided.
The facts are stated in the opinion.
Page 216 U. S. 422
MR. JUSTICE LURTON delivered the opinion of the Court.
This is a bill to restrain the enforcement of certain taxes
imposed by the State of Georgia, which the railroad company claims
to be in violation of a contract between itself and the state. The
court below sustained the contention of the railroad company, and
held that the scheme of taxation found in the charter of the
company was of inviolable obligation, and enjoined any method of
taxation conflicting with the stipulations of the charter; from
this decree the comptroller has appealed.
The charter in question was granted by the State of Georgia in
1833 -- a time long before the imposition of any restriction upon
the power of the legislature of that state to stipulate for either
an entire or partial exemption from taxation. It is therefore not
denied by the state that the charter constitutes a contract which
may not be impaired by subsequent legislation. In view of this
concession, we are only called upon to decide the extent of the
charter exemption, and, incidentally, its duration.
The controlling section of the charter is the fifteenth. The
part now relevant is as follows:
"The stock of the said company and its branches shall be exempt
from taxation for and during the term of seven years from and after
the completion of the said railroads, or any of them, and after
that, shall be subject to a tax not exceeding one-half of one
percent per annum, on the net proceeds of their investments."
The period of absolute exemption has, of course, long since
passed. The only question is as to the duration and extent of the
partial exemption which followed.
That the property exempt altogether for seven years is the same
property subject to a limited tax thereafter was long
Page 216 U. S. 423
ago decided by the Supreme Court of Georgia in a case which
involved the interpretation of this very contract.
City Council
of Augusta v. Georgia Railroad & Banking Company, 26 Ga.
651, 661
et seq. The question in that case was as to the
legality of municipal taxes assessed by the City of Augusta upon
that part of the capital of the company employed in its banking
business and upon real estate situated in that city. The taxes were
held illegal. Interpreting this section, that court said:
"It means, first, that the stock of the company was to be
subject to a tax, but not to any tax exceeding one-half of one
percent on the net proceeds of its investments."
Second.
"That the stock of the company, as stock, as a unit, is alone
what is to be subject to the tax; not parts of the stock, as the
part used in banking, nor the particulars in which the stock
consists, as, the land, cars, rails, etc."
Third. "That this tax to which the stock is to be subject is to
be a tax to be laid by the state."
We may as well turn to one side just here to deal first with the
question of the duration of this commuted tax which is to follow
the period of tax exemption, because we construe the words "after
that," which immediately follow the exemption clause, as synonymous
with "thereafter," and as fixing the time when that property which
was theretofore exempt should be subject to the system of taxation
provided by the succeeding clause.
It has been rather faintly urged that the duration of this
commuted tax or partial exemption was limited to a term of
thirty-six years after the completion of the railroad, and that
this period has long since expired. This suggested limitation seems
to have no other basis than that the words "and after that" do not
mean "thereafter," as we have assumed, nor refer to the limitation
immediately preceding, but to a more remote limitation found in the
second section of the charter, and again in the earlier part of the
fifteenth section. But the thirty-six-year limitation is one
obviously applicable
Page 216 U. S. 424
only to the grant of an exclusive right, within a defined
territory, to construct and operate railroads. This was intended to
protect this pioneer railroad from being paralleled within that
time. The recurrence to this exclusive right in the first part of
the fifteenth section is only for the purpose of placing a
condition thereon which, as matter of fact, never happened, and
which therefore never became vested, and to provide that the
termination of that right should not otherwise affect the corporate
existence, estate, powers, or privileges of the company. This
reference to the exclusive right conferred first by the second
section is followed by the provision above set out, providing
that
"the stock of the said company and its branches shall be exempt
from taxation for and during seven years from and after the
completion of said railroads, or any of them, and after that shall
be subject to a tax not exceeding one-half of one percent per annum
on the net proceeds of their investment."
"After that" obviously refers to the last limitation -- the
termination of the exemption period -- and it would be an
indefensible construction to construe the words as referring it to
the thirty-six-year limitation of the exclusive right regulated by
the preceding part of the same section.
Coming now to the question as to what is the meaning and scope
of the partial exemption found in this clause, we are confronted,
first, with the contention that only the shares in the hands of
shareholders are within either the first or second clause of this
contract, and that the entire property of the company is subject to
the taxing power of the state, unaffected by any contract for any
stipulated form of limited taxation. This claim is, of course,
bottomed on the contention that "stock of the said company and its
branches" refers to and means only the shares in the capital stock
held by the shareholders, and that the benefit of the stipulation
was intended for the shareholders in their character as such.
The word "stock" is not uniformly used to designate the capital
of a corporation, although its primary meaning is capital, in
whatever form it may be invested. Indeed, it is
Page 216 U. S. 425
not at all unusual to find the word used synonymously with
"shares," and meaning the certificates issued to subscribers to the
company's stock. It is therefore important to look at the
connection in which the word is used when an exemption or
substituted method of taxation is involved, to see whether the
legislative intent was to exempt the capital of the company, in
whatever form invested, or the shares of stock in the hands of the
shareholders.
Powers v. Detroit & Grand Haven Railway,
201 U. S. 543,
201 U. S. 559.
There is an obvious distinction between the capital stock of an
incorporated company and the "shares" of the company. The one is
the capital upon which the business is to be undertaken, and is
represented by the property of every kind acquired by the company.
Shares are the mere certificates which represent a subscriber's
contribution to the capital stock, and measure his interest in the
company. The charter, plainly enough, recognized this. Thus, in the
third section, it is provided that "
the stock of the
company . . . shall consist of fifteen thousand shares of one
hundred dollars per share, and
the said company to be formed on
that capital." By a later section, the times and places for
taking subscriptions are defined, "so that, on summing up the
whole, it may appear whether
the stock is filled up,
or falls short of the aforesaid capital." In the seventh
section, we find the interest of the subscribers to the "stock"
recognized and described as shares, while the capital of the
company in which he holds such
shares is described as "the
stock of the said company." Thus, each subscriber is given
"a number of votes equal to the number of shares he may hold in the
stock of the company." That "stock," as used, means "capital," in
whatever form invested, appropriate to the purpose of the company,
is also plainly evidenced by the provision that, after the total
exemption period, this stock shall be subjected to a specific tax
"on the net proceeds of their investments." It has been suggested
that by "their investments" was meant the investments of the
shareholders in the company's stock. This interpretation is based
upon
Page 216 U. S. 426
the use of the plural "their;" but in many places in this same
charter, the company is referred to in the plural. As this same act
provides for the organization of one or more companies to construct
branch lines, and extends to them the same tax exemption, it is
grammatically correct to read "their" as referring to this
plurality of companies. That "stock" in the first clause means
capital, and "their investments," the property into which the
company's capital has gone, seems, in any view you take of it, the
most rational interpretation of the matter. That the only mode of
taxation stipulated for after the period of total exemption is a
tax upon the net income of the company's property is seemingly the
plain and obvious meaning of this contract. That this is the way in
which it has been read and interpreted by everybody who has had to
do with the matter of taxation in an official way since 1845, when
the railroad seems to have been finished, affords strong evidence
that this construction accords with the intent of the charter.
Aside from at least sixty years of legislative and executive
acquiescence in reading this partial exemption as applicable to the
capital stock of the company, there has been a series of cases
decided by the Supreme Court of Georgia which involved the meaning
of this clause. In each case, the court has held either that the
whole of the capital was exempt, in whatever form invested, or so
much of the investment as corresponded in value to the authorized
capital stock.
City of Augusta v. Georgia Railroad &
Banking Company, 26 Ga. 651, 662
et seq.; The State of
Georgia v. Georgia Railroad & Banking Company, 54 Ga. 423;
Goldsmith, Comptroller &c. v. Georgia Railroad &
Banking Company, 62 Ga. 485.
In the case of
State of Georgia v. The Georgia Railroad
& Banking Company, cited above, the court held that the
act of 1874, which sought to assess an
ad valorem tax
against the property of the railroad company, was void, as in
violation of the obligation of a contract by which the state was
limited to a tax which should not exceed one percent "on its
earnings."
Page 216 U. S. 427
Goldsmith, Comptroller v. The Georgia Railroad & Banking
Company is relied upon as overruling the earlier case. But
this is a mistake for more than one reason. That case was dismissed
for want of jurisdiction over the subject of the legality or
illegality of the tax resisted. Hence, all that was said about the
taxability of the appellee's property under this charter exemption
was
obiter. But, so far as the question of the
applicability of this partial exemption to the capital of the
company, as invested in its railroad, is concerned, the opinion
distinctly accepts the former case as a settlement of the question.
Referring to the former case, Mr. Justice Bleckley said:
"It seems to have been the purpose of this court to hold in 54
Ga. 423 that, except as to stock issued under the amendment of
1868, authorizing the Clayton branch, the limit put by the charter
of the Georgia Railroad & Banking Company upon the taxing power
extends to all the capital stock of the corporation as a railroad
company, and is irrepealable. These questions were fairly involved
in that case, and the adjudication of them there announced ought to
be accepted as final."
That Mr. Justice Bleckley afterward concluded that the former
case had not considered or decided whether any excess of value of
property over the amount of the authorized and exempt capital would
be subject to an
ad valorem tax is true, but that does not
detract from the recognition of the former as an authoritative
opinion upon the point that the exemption was of the capital of the
company.
We come now to the question as to whether so much of the value
of the company's railroad and appurtenances as exceeds in value the
amount of the authorized capital stock, under the charter and
amendments prior to 1863, is subject to taxation as other property
of like character, under the law of the state. This value "it is
admitted exceeds by four millions of dollars the nominal value of
the capital stock of said company," which excess, it is further
conceded, has been
"the
Page 216 U. S. 428
result of natural increase in the value of said property, and by
renewals, alterations, and betterments of the same, from time to
time, by said company."
That this is the true and proper method of taxation, admissible
under the charter exemption, has been urged upon several grounds.
First, it is said that this construction was given this very
charter in
Goldsmith, Comptroller v. Georgia Railroad &
Banking Company, heretofore cited, and the appellants plead
the judgment in that suit as
res judicata. Confessedly, if
this is a good plea, it must operate not only for the purpose for
which it has been interposed, but will be entirely fatal to the
claim that the exemption now in question has expired, or that it
extended only to the shares in the hands of shareholders.
The opinion in that case does so construe the exemption, but, as
we have already shown, the case went off wholly upon the question
as to whether the trial court had any jurisdiction of the question,
and the opinion, after construing the clause here involved, passed
on to this matter as to whether the question could be made under
the statutory remedy resorted to by the company, and concluded by
holding that, whether the railroad company had been taxed illegally
or not, the court below ought to have dismissed the proceeding for
want of jurisdiction, and that the remedy, if any, was by bill in
equity. Accordingly, the judgment which the supreme court entered
was one which reversed the judgment below and directed that the
proceeding be dismissed for want of jurisdiction. This judgment in
no way involved the construction of this exemption contract, nor
the liability of the Georgia Railroad Company to taxation upon its
property, or otherwise, and does not therefore have any efficacy as
an estoppel. There was therefore no error in the ruling of the
circuit court that this plea was bad. Upon the other hand, when the
plea of estoppel just disposed of came in, the complainants amended
their bill and set up the judgment in the earlier case of
State
of Georgia v. Georgia Railroad & Banking Company,
Page 216 U. S. 429
54 Ga. 423, as an adjudication concluding not only the claim
that the exemption was only of the shares in the hands of
shareholders, but as an adverse decision of this claim that only so
much of the "investments" of the company were exempt from a general
ad valorem tax as equalled in value the authorized capital
stock of the company under the charter and amendments prior to
1863.
But in
Georgia Railroad & Banking Company v.
Wright, 124 Ga. 596, the Supreme Court of Georgia seems to
have definitely decided that a judgment in a suit to collect a tax
assessed for one year is not a bar to a suit for taxes subsequently
assessed for another year, although the question decided in the
first case is the same question upon which the second suit must be
also decided.
This Court, as is well settled, accords to a judgment of a state
only that effect given to it by the court of the state in which it
was rendered.
Union Bank v. Memphis, 189 U. S.
71;
Covington v. First Nat. Bank, 198 U.
S. 100.
We shall therefore disregard this plea and determine the matter
upon its merits, giving to the decision of the Georgia court
consideration only as an authority.
Coming, then, to the question on its merits: under the original
charter and certain amendments, there exists today an authorized
capital stock of $4,156,000. This leaves out of account a small
increase under a later act, aggregating 440 shares, which capital
is subject to taxation and is not now in dispute. The railroad
property, including its railway, depots, equipments, and
appurtenances proper, has a present value of some four millions of
dollars in excess of the authorized capital. Now the contention is
that, to the extent of this excess, the property of the company is
assessable and taxable as other property. There is not much to be
gained by the reference to
Farrington v. Tennessee,
95 U. S. 687,
and
Bank of Commerce v. Tennessee, 161 U.
S. 134,
161 U. S. 137,
where something is said in an argumentative way about the
taxability of a bank's surplus whose capital was exempt. That
Page 216 U. S. 430
might well be if the bank should choose to enlarge its actual
capital in the business by using profits as capital instead of
distributing them as profits to the shareholders, where the
exemption was of a specific amount of capital. The facts in this
case are so different from the case presented of a bank's surplus
as to make the illustration of little value, even if it were
settled that in all cases a bank's surplus would be taxable
although its capital was exempt. We have here nothing which
corresponds very closely to a bank's surplus. An investment made
nearly seventy-five years since, of $4,156,000, has now a value of
$4,000,000 in excess of that cost. The property is the same
property. The conceded fact is that, through renewals, alterations,
and betterments made from time to time, and the natural increase in
the value of the road, this appreciation has come about. There has
been no suggestion that there has been any hiding away of capital
added, by either new stock, or by the use of bonds or other forms
of credit, nor that the improvements made from time to time, called
"renewals, alterations, and betterments," have been other than the
necessities of an enlarging business and the improved maintenance
naturally demanded. There is no suggestion that there has been any
bad faith in covering up taxable assets under cover of assets
immune.
Mobile & Ohio Railroad Co. v. Tennessee,
153 U. S. 486,
153 U. S.
506.
After all, the precise question is whether the legislative
purpose, as expressed, was that the railroad incorporated should
pay no tax except one based upon net profits of operation, or was
it the intention that a specific amount of capital only should be
so relieved? Undoubtedly the state did not intend that any other
capital than that authorized and invested directly in this specific
railroad should be immune. That is plain by the express limitation
of the charter. But is there any contingency under which this
particular railroad is to be subject to any other taxation than one
measured by the amount of its net profits? The contract, though one
for a partial exemption from taxation, may nevertheless be read
Page 216 U. S. 431
in the light of the purpose sought to be accomplished and the
public policy entertained at the time. That is true of this as well
as other contracts -- namely, that the meaning may be discovered by
regard to attendant circumstances. That the intent was to exempt a
capital aggregating $4,156,000 is, for the purpose of the present
question, the necessary foundation of the claim now being looked
at. That was, at the beginning, mere subscribers' promises to pay,
next money in the treasury of the company. While money, the charter
says, it may, until needed, be invested "in the public stock of the
United States or of the State of Georgia." But this capital was
intended to be the only means by which this line of railroad was to
be constructed and equipped. Thus, the original capital was fixed
at one and a half million dollars, with power to enlarge same, "so
as to make their capital adequate to the work." This power of
increase does not seem to have been regarded as clear enough, and
when an authorized extension of the work demanded more capital the
charter was amended so as to increase it to $4,000,000, "to meet
excess of cost of road over present capital." To insure the
completion of the authorized road within the limit of the fixed
capital, it was provided that the engagements of the company should
not exceed the company's capital, and that the officers and
directors who should contract beyond that capital should be jointly
and severally liable to the contractors and to the corporation.
Finally, no power was given to issue bonds, the usual incident to
any modern railway construction. From the plain purpose that this
authorized capital should be adequate to the construction and
equipment of a particular railroad it is plainly inferable that
that railroad should be subject, after a time of complete immunity,
only to a tax upon the profit of its operation. That railroad is
the product of the investment of the authorized capital, and is, as
such, subject only to a tax based upon its "net proceeds." This
plan of tax upon net earnings is quite inconsistent with any other
form of taxation, and is
Page 216 U. S. 432
absolutely independent of any question as to whether the
property thus taxed only upon its profits should have a less or
greater value than the capital invested. A tax upon earnings is a
tax which at last covers and includes, unless double taxation is
intended, all property necessarily held and used to make that
income, including the enjoyment of its franchises. It is not to be
presumed, in the light of the public of the time, that the state
intended that this pioneer railroad should be subjected to any form
of taxation of property which produced the taxable income.
State of Georgia v. Atlantic and Gulf R. Co., 66 Ga. 563,
567.
We are therefore of opinion that this property is not subject to
any other method of taxation than that of the special system
stipulated for by the contract, and that the act of the Georgia
Legislature, insofar as it provides for an
ad valorem tax
upon any part of this invested capital of the Georgia Railroad
& Banking Company, does impair the obligation of the
contract.
But it is said that the tax, so far as imposed upon the
franchise of this company, is not in derogation of the charter, and
that the decree below should be modified in this particular.
If we are right in construing the tax as one upon net income as
a substitute for a property tax, the franchise may no more be taxed
than any other property appropriate to the operation of the road.
When the state gave up the right to levy and collect a property
tax, and to take in substitution a tax upon the annual net profit,
it gave up the right to tax the franchise of the company as
certainly as it gave up the right to tax its railroad. The Georgia
act taxing franchises treats the franchise as property, and
requires that "they shall be returned and valued in the same way as
returns are made by railroads of their physical property. . . ."
And that "all franchises of value shall be returned for taxation
and taxed as other property." That a law which imposes a tax upon
the franchise of a railroad company whose property is exempt from
taxation is a law in derogation of the exemption contract
Page 216 U. S. 433
is well settled.
Wilmington Railroad v.
Reid, 13 Wall. 264;
Gulf & Ship Island
Railroad v. Hewes, 183 U. S. 67,
183 U. S.
77.
Included in the total mileage owned and operated by the appellee
railroad company is a line eighteen miles long known as the
Washington branch. The company has all along claimed that this
branch road was within the partial exemption clause of its original
charter, granted in 1833. So far as appears from this transcript,
this claim has not before been challenged, though no distinct issue
seems ever to have been made in respect to its exclusion by reason
of the legislation under which that branch was acquired. Neither
does the answer of the comptroller in this case claim or set out
any difference between the tax exemption applicable to the other
parts of the appellee's railroad and this Washington branch, and
the decree of the court below expressly finds that the original
charter exemption includes this Washington branch. But the general
denial that any part of the property of the railroad company was
exempt from
ad valorem taxation may well be regarded as
covering the parts which make up the whole. To the decree holding
the Washington branch exempt the comptroller has moreover assigned
error based upon the legislation under which that branch was
constructed. The right of exemption claimed for this branch was,
however, distinctly put in issue by the counties of Wilkes and
Talliaferro, which, for this purpose, were allowed to intervene,
having a direct interest due to the fact that that branch, passing
through those counties, would be subject to county taxation if not
within the tax exemption clause. These counties have appealed from
the decree below and assigned error also.
The first legislative enactment in regard to the construction of
the Washington branch road seems to have been in the act of 1833,
but nothing was ever done under that. The same may be said in
reference to another act passed in 1836. In December, 1848, an act
was passed in these words:
"The power heretofore granted to the Georgia Railroad
Page 216 U. S. 434
and Banking Company to construct a branch of their road to
Washington, in the County of Wilkes, be, and the same is hereby,
revived and authorized to be exercised by said company, provided
that the amount of the increased stock of said company ($200,000)
shall not be exempt from taxation as is secured to the present
stock by the latter clause of the fifteenth section of the charter
of said company, but shall be subject to such tax as the
legislature may hereafter impose."
But this was a section in an act amending the charter, and was
never accepted.
See 26 Ga. 651, 654. At the same
legislative session, on February 5, 1850, another act was passed in
these words:
"That [naming incorporators] be and they are hereby authorized
to build, construct, and keep a plank or railroad from the Town of
Washington, in Wilkes County, to some point on the Georgia Railroad
and Banking Company's railroad, and for that purpose shall be
authorized to create and receive by subscription a capital stock
not exceeding $200,000, and shall be authorized to exercise all the
powers and privileges conferred by the act of the general assembly
passed in the year 1833, to incorporate the Georgia Railroad
Company, and shall be under all the liabilities and restrictions
therein contained."
So far as we can discover, the only legislative authority for
the construction or acquirement of a branch railroad to Washington,
accepted or acted under by it, is found in the Act of January 21,
1852, entitled
"An Act to Authorize the Consolidation of the Stocks of the
Georgia Railroad & Banking Company and of the Washington
Railroad or Plank Road Company, Incorporated February the Fifth,
Eighteen Hundred and Fifty, and for Other Purposes."
The first section of that act provides:
"That the Georgia Railroad and Banking Company and the
Washington Rail or Plank Road Company be authorized and empowered
to consolidate their stocks, the said Georgia Railroad and Banking
Company issuing stocks in their said
Page 216 U. S. 435
company to the stockholders of the Washington Railroad or Plank
Road Company, on terms of equality with the general stockholders,
in amount equal to the amount held by them respectively in the
stock of the Washington Railroad or Plank Road Company, and that
the two companies aforesaid, after the consolidation of their
stocks, shall be known as one corporate body, under the name and
style of the Georgia Railroad and Banking Company, and that said
corporate body shall be authorized to exercise all the powers and
privileges conferred by existing laws upon the Georgia Railroad and
Banking Company, and be under all the liabilities and restrictions
imposed on the same."
That this consolidation neither extinguished the Georgia
Railroad and Banking Company nor deprived it of any of its powers,
privileges, or immunities is plain. No such result has been
claimed. Nor is it claimed that it thereby lost any tax exemption
which it then had. The act authorizing the consolidation is
substantially like that under which the Central Railroad and
Banking Company was consolidated with the Macon Railroad,
considered in
Central Railroad Company v. State of
Georgia, 92 U. S. 665, where
it was held that the tax exemption which the Central Railroad had
enjoyed continued after consolidation in respect of the property of
that company, but that, as the Macon company, consolidated with it,
had no exemption, its property continued subject to taxation. That
the Washington Railroad or Plank Road Company would go out of
existence when this merger was accomplished is plain; it was,
indeed, absorbed by the Georgia company. The purpose was to vest in
the latter all of the rights, powers, and privileges of the merged
company without diminishing or enlarging them.
See what is
said by CHIEF JUSTICE FULLER in commenting upon a similar merger in
W. & W. R. Co. v. Alsbrook, 146 U.
S. 279,
146 U. S.
300.
Did the Washington Railroad, before consolidation, possess any
contract tax exemption?
The claim that it did is based upon the provision in the
Page 216 U. S. 436
act under which it was incorporated, providing that it
should
"be authorized to exercise all the powers and privileges
conferred by the Act of the general assembly, passed in the year
1833, to incorporate the Georgia Railroad Company, and shall be
under all the liabilities and restrictions therein contained."
The question, then, is whether, under the power "to
exercise all the
powers and
privileges
[italics ours] conferred by" the act incorporating the Georgia
Railroad Company, the immunity from any other tax than one based
upon a given percent of annual net profits was granted to that
company. The affirmative of this proposition finds some support in
the cases of
Humphrey v.
Pegues, 16 Wall. 244;
Chesapeake & O. R.
Co. v. Virginia, 94 U. S. 718;
South Western R. Co. v. Georgia, 92 U. S.
665, and
Tennessee v. Whitworth, 117 U.
S. 139. In later cases, this doctrine of a legislative
transfer of a tax immunity under the term franchise, powers,
estates, or privileges was questioned. Thus, in
Chesapeake
& O. R. Co. v. Miller, 114 U. S. 176, a
tax immunity was held not to pass under a mortgage foreclosure
sale, under the provision of a statute which authorized the
purchaser to become a corporation, and "succeed to all such
franchises, rights, and privileges" pertaining to the mortgagor
company. In
Picard v. East Tennessee &c. R. Co.,
130 U. S. 637,
130 U. S. 642,
it was held that such an immunity would not pass to a purchasing
company under a decree enforcing a statutory lien, where the sale,
as confirmed, was of the "property and franchises" of the mortgagor
company. In that case, it was said:
"It is true there are some cases where the term 'privileges' has
been held to include immunity from taxation, but that has generally
been where other provisions of the act have given such meaning to
it. The later, and, we think, the better, opinion is that, unless
other provisions remove all doubt of the intention of the
legislature to include the immunity in the term 'privileges,' it
will not be so construed. It can have its full force by confining
it to other grants to the corporation. "
Page 216 U. S. 437
In
Wilmington & Weldon Railroad Co. v. Alsbrook,
146 U. S. 279,
146 U. S. 297;
K. & W. R. Co. v. Missouri, 152 U.
S. 301, and
Phoenix Fire & Marine Insurance Co.
v. Tennessee, 161 U. S. 174, the
earlier cases were also much shaken so far as they tended to
establish that a tax exemption would be transferred by legislative
enactment conferring upon one road the powers or franchises or
privileges of another, in the absence of other language or pregnant
circumstances, showing a plain intent to confer such exemption.
But whatever doubt upon this subject may have existed as to the
effect of the transfer to one company of the powers and privileges
of another in conferring a tax exemption possessed by the latter is
set at rest by
Rochester R. Co. v. Rochester, 205 U.
S. 236,
205 U. S. 252.
MR. JUSTICE MOODY, after reviewing all of the cases referred to
above and others, sums the matter up by saying:
"We think it is now the rule, notwithstanding earlier decisions
and dicta to the contrary, that a statute authorizing or directing
the grant or transfer of the 'privileges' of a corporation which
enjoys immunity from taxation or regulation should not be
interpreted as including that immunity."
There is an absence of anything in the history of this branch
railroad which points to a purpose to grant any exemption from
taxation. Thus, in the Act of December 20, 1849, reviving the
authority of the Georgia Railroad and Banking Company to construct
such a branch, originally authorized by earlier acts, it was
expressly provided that the stock to be issued for the purpose
"should not be exempt from taxation, as is secured to the present
stock by the later clause of the fifteenth section of the charter
of said company," etc. This provision was probably the very reason
why the Georgia Railroad and Banking Company did not accept or act
under that statute. At the same session of the legislature, an
independent company was created to construct and operate the same
branch road. Presumably with the knowledge of the fact that the
Georgia Railroad and Banking Company could
Page 216 U. S. 438
not itself construct this road with immunity from taxation, this
act authorizing this new corporation to build the same branch,
declared that this company should be "authorized to
exercise" [italics ours] "all powers and privileges"
conferred by the act originally creating the Georgia Railroad and
Banking Company. It is one thing to have authority to "exercise"
all the "powers and privileges" of another company, and another
thing to enjoy an exemption from taxation. The "
exercise"
of the "powers and privileges" of the company referred to was
reasonably essential to the construction and operation of the
independent railroad. Its immunity from taxation was not.
See
Wilmington & Weldon R. Co. v. Alsbrook, 146 U.
S. 279,
146 U. S. 295,
and
National Bank v. United States, 101 U. S.
1. The power of taxation is never to be regarded as
surrendered or bargained away if there is room for rational doubt
as to the purpose.
We conclude, therefore, that the Washington Railroad or Plank
Road Company had no exemption from taxation at the time this
consolidation occurred. That the consolidating act did not intend
to confer any immunity from taxation which did not then exist is
plain. The object was to vest in the Georgia company the property
and franchises and rights and privileges of the Washington company.
When the Georgia company succeeded to its property and franchises,
it did so subject to whatever right the state had in the matter of
taxation. The case in this aspect is controlled by
Central
Railroad Co. v. Georgia, 92 U. S. 665.
The decree of the court below is modified so as to exclude the
eighteen miles constituting the Washington Branch Railroad, but in
all other respects it is affirmed. The costs of this appeal will be
divided between Wright, Comptroller General, and the Georgia
Railroad & Banking Company.
Affirmed.