The doctrine announced in Tracker v.
22 Wall. 527, that an act of the
legislature of a state exempting property of a railroad company
from taxation is not, when a mere gratuity on the part of the
state, a contract to continue such exemption, but is always subject
to modification and repeal in like manner as other legislation,
reaffirmed and applied to this case.
MR. JUSTICE SWAYNE delivered the opinion of the Court.
The facts of this case are substantially the same with those of
22 Wall. 527, and the question presented
for our determination does not vary materially from the one there
Page 93 U. S. 596
The United States granted certain lands to the State of
Wisconsin to aid in the construction of railroads in that state.
The state transferred a portion of the lands to the plaintiff in
error for the purpose and upon the terms and conditions specified
Patents for designated quantities of the land were to issue to
the company as successive sections of the road of twenty miles each
were completed. In the meantime, the title of the company was
inchoate. On the 2d of April, 1864, the Legislature of Wisconsin
passed an act whereby, in the first section, it was declared that
all the lands in question the title whereto should become vested in
the company should be exempt from taxation for ten years from the
passage of the act. The second section declared that such lands
should become subject to taxation as soon as they were sold,
leased, or conveyed by the company. The last clause of this section
is as follows: "Provided that said lands may be mortgaged for the
purpose of raising funds to build said railroad without being
subject to taxation for the time aforesaid."
In August, 1868, the company executed a mortgage of its roadway
and rolling stock, and of all the lands it might thereafter
acquire, as security for its bonds, to the amount of $4,000,000,
maturing at different times. By another act, of the 16th of March,
1870, the exemption from taxation was further extended for ten
years. But it was declared:
"And it is further provided, and this act is upon the express
condition that if said railroad company shall not have built their
said road within two years from the passage of this act, then and
in that case this act shall be null and void, provided
that this act shall not apply to Pierce County."
The bonds secured by the deed of trust were issued in successive
series in the years 1868, 1870, 1871, and 1872. The company
realized from the four millions of bonds about $3,200,000, and
applied the amount received to the construction of their road. A
part of the road was completed in 1868, forty-five miles in 1870,
and the entire line during the month of November, 1871. By an act
of the legislature of March 15, 1871, it was enacted that the lands
in Trempealeau County belonging to any railroad company "not used
for roadbed or depot purposes shall
Page 93 U. S. 597
be liable to taxation the same as other real estate." By an Act
of March 24, 1871, the Exemption Act of March 16, 1870, was amended
so that it should not apply to Trempealeau County. The tax in
question was levied in 1871, and the sale for its nonpayment
complained of was made in 1872. The exemption created by the act of
1864 was to terminate in 1874. That specified in the act of 1870
was then to commence.
The plaintiff in error insists that these acts -- the lands of
the company having been mortgaged pursuant to the first, and the
road having been completed within the time limited by the second --
created a contract within the contract clause of the Constitution
of the United States, and that therefore the two acts of 1870
abrogating the exemptions were void.
In the argument here, a large share of the discussion was
devoted to sec. 1, art. 2, of the Constitution of Wisconsin. In our
view, it is unnecessary to consider that branch of the case, and it
will not be further adverted to.
One who has examined this case cannot look through Tucker v.
as reported, without being struck with the
similarity of the points and arguments as well as the substantial
identity of the facts in the two cases. The latter case was
carefully considered in all its aspects by this Court. It is
unnecessary to reproduce at length the views then expressed. In
that case, 22 Wall. 89 U. S. 575
"The taxing power is vital to the functions of government. It
helps to sustain the social compact and to give it efficacy. It is
intended to promote the general welfare. It reaches the interests
of every member of the community. It may be restrained by contract
in special cases for the public good, where such contracts are not
forbidden. But the contract must be shown to exist. There is no
presumption in its favor. Every reasonable doubt should be resolved
against it. Where it exists, it is to be rigidly scrutinized, and
never permitted to extend, either in scope or duration, beyond what
the terms of the concession clearly require. It is in derogation of
public right, and narrows a trust created for the good of all."
We hold here, as we held there, that the exemptions in question
were gratuities offered by the state, without any element of a
contract. There was no assurance or intimation
Page 93 U. S. 598
that they were intended to be irrevocable, or that the laws in
question should not be at all times subject to modification or
repeal in like manner as other legislation. If a different intent
had existed, it would doubtless have been clearly manifested by the
language employed. It would not have been left to encounter the
possible results of such a struggle and conflict as have occurred
in this litigation.
The state asked for no promise from the company, and the company
gave none. It was optional with the company to mortgage its lands
or not, and to complete or not to complete the road within two
years. The early completion of the road was beneficial to the
company as well as to the public. Until then, there could be no
income, and there was a constant loss of interest. Every step of
progress added to the value of the lands of the company through
which the road was to pass.
Each party was at liberty to take its own course. If the company
came within the condition specified in the act of 1870, it would be
in a position to take the gratuity offered by that act. If this
were so, the state might continue or withdraw that gratuity when it
took effect, as it might deem best for the public welfare, and it
possessed the same power with reference to the exemption created by
the prior act of 1864, while that act was operative. Neither party
was, nor was intended to be, in any wise bound to the other. The
state was at all times wholly unfettered as to both exemptions. The
company chose to bring itself within the condition of the act of
1870. The state chose to continue the gratuity for a time, and then
withdrew it. The exemption given by both acts was abrogated a year
before the bonds of the last series were issued, and before the
first term of exemption expired or the second began. The state did
what it had an unqualified right to do. In such cases, a reasonable
doubt is fatal to the claim. Prima facie,
presumption is against it. It is only when the terms of the
concession are too explicit to admit fairly of any other
construction that the proposition can be supported.
Providence Bank v.
4 Pet. 561; Christ's Church v.
24 How. 302; Gilman
2 Black 513; Herrick v.
13 Vt. 531; Easton Bank v. Commonwealth,
Penn.St. 450; People v. Roper,
35 N.Y. 629.
Page 93 U. S. 599
We hold the conclusion we have announced to be the law of this
case. With its ethics we have nothing to do. That subject is not
open to our consideration.
MR. JUSTICE DAVIS did not sit in this case.