The same reasons which led this Court to decide that the tax
exemptions in the special charters of the Augusta & Savannah
and the Southwestern Railroads inured to the Central of Georgia
Railway as their lessee and precluded taxing the latter upon the
fee of the leased property (Wright v. Central of Georgia Ru.
Co., 236 U. S.
Page 248 U. S. 526
invalidate an attempt to evade the charter contracts by a tax of
the leasehold interests.
Contracts in special charters creating perpetual tax exemptions
are not revocable by later provisions of the state
146 Ga. 406 reversed.
The case is stated in the opinion.
MR. JUSTICE HOLMES delivered the opinion of the court.
This is a bill in equity brought by the Railway Company to
prevent the collection of certain taxes which, it is alleged, would
be contrary to Article I, § 10, and to the Fourteenth Amendment of
the Constitution of the United States. The case was heard on bill,
demurrer and answer, and certain agreed facts, and the court of
first instance issued an injunction as prayed. The decree was
reversed, however, by the Supreme Court of Georgia, and a writ of
error was taken out to bring the case here. It presents another
attempt to accomplish, by a change in form, what in Wright v.
Central of Georgia Ry. Co., 236 U. S. 674
held to be an unconstitutional result.
In that decision, it was explained how the Central of Georgia
Railway Company had become the holder of leases from the Augusta
& Savannah and the Southwestern Railroad of property which by
the charters of the lessors was to be taxed only in a certain way
and to a certain amount. An attempt had been made to tax the lessee
for the property, the leases being for one hundred and one years,
renewable in like periods upon the same terms forever. The tax was
laid upon the real estate, roadbed,
Page 248 U. S. 527
and franchise value (with a certain deduction) of the two
lessors. It was held that the statutes made the fee exempt from
other taxation than that provided for in favor as well of the
lessee as of the lessor. The taxes now attempted to be levied are
upon the leasehold interests of the lessee in the same roads, and
it is argued that, if the leases produce a profit in excess of the
rental, the value is required to be taxed by the constitution of
the state. But the constitution was subsequent to the charters that
created the exemption, and must yield to them if they apply to the
present attempt. We are of opinion that, although the decision in
the former case necessarily was confined to the question before the
court, the reasoning applies with equal force to that now before
us. The cases of Rochester Ry. Co. v. Rochester,
205 U. S. 236
Jetton v. University of the South, 208 U.
, were urged as opposed to the conclusion reached,
but were thought not to control in view of the exceptional facts
and language that had to be considered, as was recognized in
Morris Canal & Banking Co. v. Baird, 239 U.
, 239 U. S. 132
We must follow the precedent that was established after full
discussion and with recognition of the difficulties involved.
The charter contracts in question are of a kind that goes back
to the time when railroads were barely beginning, and that would
not be likely to be repeated, but, of course, will be carried out
by the state according to what was meant when they were made.