Thomson v. Pacific Railroad
Annotate this Case
76 U.S. 579 (1869)
U.S. Supreme Court
Thomson v. Pacific Railroad, 76 U.S. 9 Wall. 579 579 (1869)
Thomson v. Pacific Railroad
76 U.S. (9 Wall.) 579
1. Although confessedly Congress may constitutionally make or authorize contracts with individuals or corporations for services to the government; may grant aids by money or land in preparation for and in the performance of such services; may make any stipulation and conditions in relation to such aids not contrary to the Constitution, and may exempt, in its discretion; the agencies employed in such services from any state taxation which will really prevent or impede the performance of them; yet in the absence of all legislation on the part of Congress to indicate that such an exemption is deemed by it essential to the full performance of the party's obligations to the government, the exemption cannot be applied to the case of a corporation deriving its existence from state law, exercising its franchise under such law, and holding its property within state jurisdiction and under state protection, only because of the employment of the corporation in the service of the government.
2. The point decided in McCulloch v. Maryland does not establish a broader doctrine even if some of its reasoning may seem to do so.
The Union Pacific Railway Company, Eastern Division, was originally incorporated in 1855, by the Legislature of the territory of Kansas, as the Leavenworth, Pawnee, and Western Railroad Company, with authority to construct the road from the west bank of the Missouri to the western boundary of the territory. Subsequently, in 1862, under an act of the State of Kansas, it assumed its present name, with authority to unite or consolidate with any other company
or companies organized, or to be organized, under the laws of the United States, or of any state or territory.
Some months later, the Union Pacific Railroad Company was incorporated by Congress, with power (conferred by the original act of 1862 and various amendatory acts) to construct a railroad and telegraph westward through the territory of the United States, from the hundredth meridian east of Greenwich, to connect with the Central Pacific Railway Company, incorporated by the State of California, and so to form, in connection with eastern roads, a continuous line from ocean to ocean. Several other railroad companies, already incorporated by Missouri and Iowa, as well as the company just mentioned, chartered by Kansas, were authorized to construct roads through the national territory, so as to join the Union Pacific road on the hundredth meridian; and to all these roads large grants of land were made, and large subsidies engaged on the security of a second mortgage, upon the condition of paying, at maturity, the bonds advanced by way of subsidy, and of rendering certain services to the government in the transmission of messages, and in the transportation of mails, troops, munitions, and other property, at reasonable rates of compensation.
But neither by the original act nor by any amendment did Congress undertake to incorporate any railroad company, or authorize the construction of any railroad within the limits of any state, without the consent of the state concerned. And this was as true of the Union Pacific Railway Company, Eastern Division, as of any other of the roads aided by Congress. Whatever was done by Congress in reference to this last named road was done not merely with the consent, but upon the solicitation of the State of Kansas. The corporation, however, remained a state corporation, though entitled to certain benefits, and subject to certain duties under the legislation of Congress.
In this state of things, and the Legislature of Kansas having passed a law laying certain taxes upon the property of the company, one Thomson and numerous other persons filed a bill in the Circuit Court of the United States for the
District of Kansas, against the Union Pacific Railway Company, Eastern Division, and three persons, whom the bill named, treasurers, respectively, of Douglass, Wyandotte, and Jefferson Counties in the State of Kansas. The bill stated that the complainants were stockholders in the railway company; that under an act of the Legislature of Kansas, certain taxes had been imposed on the railroad and telegraph property of the company, which the treasurers of the counties named were proceeding to collect; that the property of the company was mortgaged to the United States; that the company was bound to perform certain duties, and ultimately to pay five percent of its net earnings to the United States; that the company would be greatly hindered and embarrassed in the performance of its obligations and duties to the United States, if the taxes imposed should be collected; and that, to some extent, taxes of the same description had been already paid by the company, to the prejudice of the just rights of the complainants and of the securities of the United States. Upon this case the complainants prayed an injunction to restrain the company from paying, and the other defendants from collecting, the taxes assessed; and a temporary injunction was allowed by the district judge.
The answer of the company admitted the allegations of the bill. The answers of the three county treasurers admitted the assessment of the taxes under the laws of Kansas, but denied that such taxes had been imposed with any view to impede or embarrass the railway company, and insisted that the property of the company only bore its due proportion of the taxes levied upon all property in the State of Kansas, and that no discrimination was made against the company in the matter of taxation.
To these answers no replication was put in, but an agreed statement of facts was filed, which recited sundry resolutions of the Kansas Legislature, urging upon Congress legislation in aid of the railway company; and admitted that the property of the company was liable, under the laws of Kansas, to be taxed for state, county, and municipal purposes; that the taxes complained of had been assessed in conformity
with the statutes of the state; that the company had executed a first mortgage prior in lien to the debt to the United States, and that a table of earnings and expenditures for 1867-1868, appended to the agreed statement, was correct.
Upon these pleadings and this agreed statement the question arose, whether the property of the railway company described in the bill was subject to the tax which the statutes of Kansas authorized to be levied on all other property, not specially exempted, for state, county, and municipal purposes. And upon this question the judges of the circuit court were divided in opinion, and certified it for decision here.
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