Where it is inherently legal and protects private rights, the
construction given a local statute by the supreme court of a
territory will be followed by this Court unless there is such
manifest error as to warrant reversal. In this case, this Court
follows the construction, given to a territorial statute of Arizona
by the supreme court of that territory, that an exemption from
taxation of certain railroad property went with the land, and
extended to assigns of the first road.
12 Ariz. 69, 117 affirmed.
Page 222 U. S. 449
The facts are stated in the opinion.
Page 222 U. S. 450
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a bill brought by the railway company, the appellee, to
restrain the collection of taxes from which it says that it is
exempt. The facts in brief are these: a predecessor of the
appellee, the Santa Fe & Grand Canyon Railroad Company, between
August, 1899, and October, 1900, built over 56 miles of the road
concerned. In July, 1901, this road was sold on foreclosure sale to
Page 222 U. S. 451
who organized the appellee, and in August conveyed the road to
it. The new company finished the road to the edge of the Grand
Canyon and laid out stations and hotel grounds at the end. In 1906,
the Territorial Board undertook to levy the tax complained of. The
supreme court held that the appellee was exempt. 12 Ariz. 69; 12
The railroad company was organized under Act No. 3, February 8,
1897, of the territory, which authorized such corporations to be
formed for the purpose of buying the property of railroads sold on
foreclosure, and to buy and exercise "all the rights, privileges,
franchises, immunities, and powers" of their predecessors. By § 7,
such corporations were to have all rights, immunities, etc., then
or thereafter given to any railroad organized under the general
laws, but by § 8 it was provided that the act should not be
construed "to give to any corporation created under it, any
exemption from taxation created by any existing or future exemption
laws of the territory of Arizona." The question does not stand on
this act alone, however, and the cases discussed in Rochester
Railway Co. v. Rochester, 205 U. S. 236
for, by a later statute of March 16, 1899, No. 68, "for the purpose
of inducing and encouraging the construction of railroads," it was
provided that the "property used or necessary in the construction
and operation of railroads," of road thereafter constructed,
"whether owned or operated by a person or persons, association or
railway corporation, his, their, or its successors or assigns,"
should be exempt from all manner of taxation for ten years from the
date of the act. The supreme court held that this exemption was
so to speak, went with the land, and extended to
the assigns of the first road.
No doubt a strong argument can be made and was made for a
different view based on the passage before and on the date of the
Act of 1897 of statutes like that of 1899.
Page 222 U. S. 452
But the considerations that prevailed also are agent, and so
obvious as not to need statement. Moreover, the question is not
whether the later statute constituted a contract, Damon v.
Hawaii, 194 U. S. 154
194 U. S. 160
Wisconsin & Michigan Ry. Co. v. Powers, 191 U.
. The courts of the territory have given to the
railroad the rights that it claims, as against the territory
authorities seeking to levy the tax. The only question is whether
any sufficient reason appears for not following the construction
given to a local statute by the territorial court, when that
construction is inherently reasonable, is at least the first to
strike the mind, and is one that protects private rights. It is
enough to answer that, on the principle followed so far as may be
by this Court, there is no such manifest error as to warrant us in
reversing the decision below. Fox v. Haarstick,
156 U. S. 674
156 U. S. 679
English v. Arizona, 214 U. S. 359
214 U. S.