1. The charter of the Chesapeake & Ohio Railroad Company
does not exempt from taxation that portion of the road of the
company between Richmond and Covington.
2. A railroad corporation, formed, under an act of the
legislature, by the consolidation of existing companies and "vested
with all the rights, privileges, franchises, and property which may
have been vested in either company prior to the act of
consolidation," acquires no greater immunity from taxation than
they severally enjoyed as to the portions of the road which
belonged to them under their respective charters. Whatever property
was subject to taxation would, after the consolidation, remain
so.
The Chesapeake & Ohio Railroad Company was incorporated in
the year 1868, by the action of joint commissioners of Virginia and
West Virginia, in pursuance of the legislation of those states. The
object of the incorporation was to construct a railroad from
Covington in Virginia, through their territory, to the Ohio River.
The Virginia Central Railroad Company was then operating a
continuous line from Richmond to Covington, composed of the Blue
Ridge road and of its own road, running westward until it connected
with that road, which was the property of the state, and so used by
arrangement with the state.
Page 94 U. S. 719
The extension of railroad communication between Covington and
the Ohio River, through territory then all her own, had been some
time before undertaken by Virginia, and a large amount of money and
labor expended on the enterprise by the state Board of Public
Works, operating as a corporation styled the Covington & Ohio
Railroad Company; but the work had been arrested by the war in
1861.
Subsequently, West Virginia was taken from Virginia by a line
which cuts the proposed route some sixteen miles west of Covington,
leaving within the limits of Virginia about two hundred and eight
miles of completed road from Richmond to Covington, and about
sixteen miles beyond Covington, over which the road was yet to be
constructed. The distance from Covington to the Ohio, over which
the road was to be carried, is about two hundred and fifteen
miles.
After the separation, Virginia passed an Act approved Feb. 26,
1866, by which any responsible capitalists, who would accept the
benefits of the charter thereby created, and become organized
according to its terms, should constitute a corporation under the
same style of the Covington and Ohio Railroad Company. When fully
organized, the company was to have
"all the rights, interests, and privileges of whatever kind, in
and to the Covington & Ohio Railroad, and appurtenances thereto
belonging, now the property of the state, upon condition that it
shall, within six months after its incorporation, as provided in
the tenth section of this act, commence, and within six years
complete, equip, and operate a railroad, from some point at or near
Covington in Alleghany County, Virginia, and connecting with the
Virginia Central Railroad, by the way of the White Sulphur Springs
and the valleys of Greenbrier River, New River, and Kanawha River,
to a point at or near the mouth of Scary Creek, and thence to the
Ohio River. . . . But this grant is not intended to include the
unexpended amount appropriated by the State of Virginia to this
work."
It further provides,
"That the rates of charge by said company for passengers and
freight transported on the main line and branches shall never
exceed the highest allowed by law to other railroads in the State
of Virginia, and no discrimination shall be made in such charge
against any connecting railroad
Page 94 U. S. 720
or canal company in which the state has an interest, and no
taxation upon the property of the said company shall be imposed by
the state until the profits of the company shall amount to ten
percent a year on its capital."
Commissioners were appointed by the act (and, if a like number
should be appointed by West Virginia, the whole were to act in
conjunction),
"to offer the benefits of the charter for the acceptance of
capitalists, to insure the speediest and best construction,
equipment, and operation of said railroad. To this end they are
hereby empowered to make a contract with any parties who shall give
the best terms and the most satisfactory assurances of capacity and
responsibility, and to introduce into the said contract such
additional stipulations for the benefit of the state, and in
furtherance of the purposes herein declared, and not inconsistent
with this act; which said contract shall be, to all intents and
purposes, as much a part of this charter as if the same had been
herein included at the time of the passage of this act."
Virginia Session Acts, 1865-66, p. 317.
This act was, March 1, 1866, met by corresponding legislation on
the part of West Virginia, and the benefits of the charter were
offered to capitalists by the joint commissioners of the states,
but not accepted; and no company was ever organized as contemplated
under the authority of the laws so passed.
Afterwards laws were passed by the states for the further
encouragement of the enterprise, by which the Covington & Ohio
Railroad Company, when organized under the preceding acts, was
authorized to consolidate with the Virginia Central Railroad
Company, and other companies named (all or either of them), upon
terms to be agreed upon between them. The companies thus
consolidated were to constitute one corporation, to be vested with
all the rights, privileges, and franchises, and property which may
have been vested in either company prior to the act of
consolidation, the new corporation to be known as "The Chesapeake
& Ohio Railroad Company." The new company was further
authorized, within two years after its organization, to purchase
the stock held by the state in the company, and also the right to
the state in the Blue Ridge Railroad. Further, it was provided,
that
"The Virginia Central Railroad Company may contract with the
Covington and
Page 94 U. S. 721
Ohio railroad commissioners for the construction of the railroad
from Covington to the Ohio River; and, in the event such contract
be made, the said Virginia Central Railroad Company shall be known
as the Chesapeake & Ohio Railroad Company, and shall be
entitled to all the benefits of the charter of the Covington &
Ohio Railroad Company, and to all the rights, interests, and
privileges which by this act are conferred upon the Chesapeake
& Ohio Railroad Company when organized."
Acts of Virginia, 1866-67, p. 705.
The contract thus authorized to be made between the joint
commissioners and the Virginia Central Railroad Company, was made
by them on the 31st August, 1968, and it is a conceded fact, that
the exemption from taxation provided for in the acts hereinbefore
referred to was held out to the Virginia Central Railroad Company
by the commissioners appointed by said acts as one of the
inducements to the company to unite in the contract with them for
the construction of the railroad from Covington to the Ohio River,
it being supposed by said commissioners and the Virginia Central
Railroad Company that such exemption would apply to the whole line
from Richmond to the Ohio River.
Under this contract the Chesapeake & Ohio Railroad Company
was duly organized. It took the interest of the state in her
uncompleted work on the line west of Covington, and constructed and
equipped a railroad thence to the Ohio River, according to its
charter; and, within two years after its organization, purchased
the Blue Ridge Railroad from the state, and has ever since operated
a continuous line of road from Richmond to the Ohio River.
The profits of the company have never amounted to ten percent
per annum on its capital.
Certain proceedings, under the assessment and tax acts of
Virginia, were instituted in the Circuit Court of the City of
Richmond, against the company, for failing to report to the auditor
of public accounts, on the first day of February, 1871, the
estimated value of its real and personal property of every
description; and for failing, also, to report quarterly, on the
first day of February, May, August, and November, of that year, the
net earnings of the road for the preceding three months,
Page 94 U. S. 722
and for failing to pay the taxes imposed thereon by law into the
treasury at the time fixed for making said report.
The company contended that those acts did not apply to it, and,
if they did, that they were in violation of the tenth section of
the first article of the Constitution of the United States, as by
the charter no taxation was to be imposed upon its property until
its profits hould amount to ten percent a year upon its capital.
The court sustained the claim of exemption set up by the company,
and dismissed the proceedings. The judgments of that court was
reversed by the Supreme Court of Appeals of the State of Virginia;
whereupon the company brought the case here.
MR. JUSTICE STRONG delivered the opinion of the Court.
Each of these cases presents the same question. That a contract
for some exemption from taxation was made by a legislative offer of
the state, and an acceptance of the offer by the company, is not
controverted, but the extent of the exemption is the matter in
question between the parties. To ascertain what that was, it is
necessary to review the legislative acts which made the offer
accepted by the company. Preparatory to such an examination, it may
be well also to notice some antecedent facts stated in the
record.
On the fifteenth day of February, 1853, an act of the
Legislature of Virginia was passed authorizing the board of public
works of that state to construct a railroad from Covington to the
Ohio River, on state account, under which act the construction was
commenced and prosecuted by means of state appropriations, made
from time to time, until the work was arrested by the late civil
war. The completion of the road, however, was deemed an object of
great importance to the people of Virginia, and on the 26th of
February, 1866, an act was passed, entitled "An Act to incorporate
the Covington & Ohio Railroad Company," the provisions of which
we shall presently notice. The state having then been divided, the
Legislature of West Virginia, to which state the road was deemed
equally
Page 94 U. S. 723
important, a few days afterwards passed a similar act, also
entitled "An Act to incorporate the Covington & Ohio Railroad
Company." The object of both these statutes was the completion of
the same road by one and the same corporation. The act of Virginia
declared that the persons upon whom the benefits of the charter
might thereafter be conferred, and who might be organized as
thereinafter provided, should thereupon be constituted a
corporation, under the name of "The Covington & Ohio Railroad
Company," and should have all the rights, interests, and privileges
in and to the Covington & Ohio Railroad, and its appurtenances,
then belonging to the State of Virginia, on certain conditions, not
now necessary to be noted. By the seventh section of the act, the
state reserved a right to connect, at any point within its limits,
with the railroad of the said company, or any of its branches, any
canal or railroad in which the state had an interest; and the
section declared that "no taxation upon the property of said
company shall be imposed by the state until the profits of the
company shall amount to ten percent a year on its capital." The
ninth section appointed five commissioners, to act in conjunction
with an equal number who might be appointed by West Virginia, whose
duty it was made to offer the benefits of the charter to
capitalists, so as to secure the speediest and best construction,
equipment, and operation of the railroad. To this end, they were
empowered to contract with any parties, and to introduce into the
contract any additional stipulations for the benefit of the state,
in furtherance of the purposes declared, and not inconsistent with
the act. And it was further enacted, that such contract should be
to all intents and purposes as much a part of the charter as if it
had been included in the act at the time of its passage.
The Act of Feb. 26, 1866, proved ineffectual. The Covington
& Ohio Railroad Company was not formed. The commissioners were
unable to find parties able and willing to accept the charter, and
contract with them on the terms proposed by it. Accordingly, on the
26th of February, 1867, the Legislature of West Virginia, and on
the 1st of March, 1867, the Legislature of Virginia, each passed
another act, entitled "An Act to provide for the completion of a
line or lines of railroad
Page 94 U. S. 724
from he waters of the Chesapeake to the Ohio River." The two
acts were of like import. That of Virginia, as well as that of West
Virginia, held forth two alternative propositions. The first was
that the Covington & Ohio Railroad Company, which might be
organized under the first act, might consolidate with the Virginia
Central Railroad Company, the South-Side Railroad Company, and the
Norfolk and Petersburg Railroad Company, or with one or more of
them; the consolidated companies constituting one corporation, to
be known as the Chesapeake & Ohio Railroad Company, and to have
a capital not exceeding $30,000,000. The act also contained some
new provisions respecting the organization of the Covington &
Ohio company. The second section gave to the consolidated company,
in case consolidation should be effected, all the rights,
privileges, and franchises and property which might have vested in
either company prior to the act of consolidation. The fourteenth
section authorized the new, the consolidated company, to purchase
stocks held by the state, to pay debts due to the state from either
of the companies named, and to purchase the Blue Ridge Railroad,
belonging to the state, by the surrender of state bonds equal in
amount to the stocks purchased, the debts paid, and the valuation
of the Blue Ridge Railroad, respectively. Such was the first
alternative proposition.
The second was made to the Virginia Central Railroad Company
alone, and it was made in the fifteenth section of the act, which
is as follows:
"The Virginia Central Railroad Company may contract with the
Covington & Ohio Railroad commissioners for the construction of
the railroad from Covington to the Ohio River, and, in the event
such contract is made, the said Virginia Central Railroad Company
shall be known as the Chesapeake & Ohio Railroad Company, and
shall be entitled to all the benefits of the charter of the
Covington & Ohio Railroad, and to all the rights, interests,
and privileges which by this act are conferred upon the Chesapeake
& Ohio Railroad Company when organized."
No such consolidation as that proposed by this statute ever took
place. It was impossible, because the Covington & Ohio Railroad
Company never came into existence. But the second alternative
proposed was accepted. The Virginia Central did
Page 94 U. S. 725
enter into a contract with the railroad commissioners, as
authorized by the fifteenth section, and thus became the Chesapeake
& Ohio Railroad Company. By the contract, it undertook to
construct the unfinished railroad, and the commissioners, on behalf
of the state, engaged that it should be
"entitled to all the benefits of the charter of the Covington
& Ohio Railroad, and to all the rights, interests, and
privileges, which, by the statute aforesaid, were conferred upon
the Chesapeake & Ohio Railroad Company when organized."
The statutes referred to were those passed by the Legislatures
of Virginia and West Virginia in 1866 and 1867, which we have
mentioned.
Thus the contract between the state and the company was formed,
and such were its terms. The question now is how far did the
contract exempt the property of the Virginia Central (now the
Chesapeake & Ohio) Company from taxation, or rather what
property did it exempt?
This is to be answered in view of the statute alone. The
contract with the railroad commissioners made no attempt to confer
upon the company any greater or other rights, privileges, or
immunities than those described in the statutes. By virtue of it,
the company obtained two classes of rights: first, the benefits
which the Act of Feb. 26, 1866, amended by the act of 1867, would
have conferred upon the Covington & Ohio Railroad Company had
it been formed; and second, the rights, interests, and privileges
of the corporation contemplated by the first alternative
proposition -- namely, the corporation formed by consolidation of
the companies mentioned -- would have possessed had such
consolidation been made. What, then, were those rights, benefits,
interests, and privileges? The Covington & Ohio Company, had it
been formed, would have been exempt from all state taxation of its
property; but its charter gave exemption to no other property. Had
a consolidation taken place between it and the Virginia Central,
and had the two companies become one corporation, together owning
the property of both, that portion of the property brought by the
Covington & Ohio into the aggregate would have continued
exempt. But exemption of other property was not contemplated by the
charter. So much is settled by repeated decisions of this court.
Philadelphia, Wilmington,
& Baltimore
Page 94 U. S. 726
Railroad Co. v. Maryland, 10 How. 377;
The
Delaware Railroad Tax Case, 18 Wall. 206;
Tomlinson v.
Branch, 15 Wall. 460;
Central Railroad &
Banking Co. v. Georgia, 92 U. S. 665. In
most if not in all of these cases, the statutes which authorized
the consolidation or union of the companies declared that the
consolidated or united companies should possess all the rights and
privileges which each of the companies enjoyed under its charter.
Yet it was ruled that those rights and privileges did not extend
beyond that portion of the aggregated property which each had held
under its charter.
There was no express provision in either of the statutes that
the property of the Virginia Central shall, in any contingency, be
exempt from taxation, and certainly, in our opinion, nothing they
contain raises an implication of such an exemption. What was
exempted was that which the legislature provided might be the
property of another company. The right or immunity of that company
was a limited right or immunity, and the Virginia Central, when it
acquired it, took it with its limitations.
Nor was there any thing in the grant to the Virginia Central,
made by the contract under the fifteenth section of the act of
1867, of all the rights, interests, and privileges which by that
act were conferred upon the Chesapeake & Ohio Railroad Company
when organized (that is, upon the Chesapeake & Ohio, if such a
company should be formed by consolidation), from which can be
inferred an exemption from taxation of any thing except what would
have been brought into the common stock, if the proposed Covington
& Ohio Company had been organized, and had become a party to
the consolidation. The consolidated corporation would have
acquired, as we have seen, no greater immunities from taxation than
the constituent companies had prior to the union, and would have
held them distributively; that is to say, whatever privileges and
advantages either of them possessed would have been held by the new
company to the extent of the road occupied by each respectively
upon the consolidation. It would have stood in their place, and
have possessed the powers, rights, privileges, and immunities the
constituent companies had severally enjoyed in the portions of the
road which had previously belonged to them.
If it be asked, why, then, were the rights of the
consolidated
Page 94 U. S. 727
Chesapeake & Ohio conferred upon the Virginia Central, if
they were only such as the Covington & Ohio had -- those rights
having been granted by the other provision of the statute and of
the contract -- the answer is at hand. By the fourteenth section of
the act, other rights were promised to the consolidated corporation
when organized. We have already called attention to them. Among
them was the right to pay the debts of the several companies, and
buy the state stock therein with state bonds, and the right to buy
the Blue Ridge Railroad, and thus acquire a continuous line of
railroad from Richmond to the Ohio River. All these rights passed
to the Virginia Central; but none of them had any reference to
exemption from liability to taxation of any property other than
that which would have belonged to the Covington & Ohio Railroad
Company had it come into existence.
No doubt the extension of a railroad from Covington to the Ohio
River was a favorite project of the state; and it was intended to
offer terms which, it was supposed, would induce the Virginia
Central Company to undertake its construction; but what the terms
were must be gathered from the acts of the legislature, and from
the contract with the railroad commissioners.
In the agreed statement of facts, it appears that the exemption
from taxation provided for in the statutes was held out to the
Virginia Central by the railroad commissioners, as one of the
inducements to enter into the contract to construct the road, it
being supposed by the commissioners and by the company that the
exemption covered the whole line from Richmond to the Ohio River.
This fact, however, can be of no importance to the decision we feel
constrained to make. No such stipulation was inserted in the
contract; and even if such a representation was made to the
company, it was but the expression of an opinion respecting the
meaning of a statute, in regard to which the company had the same
knowledge that the commissioners had.
It will be seen from what we have said, that, in our opinion,
the Court of Appeals of Virginia construed the acts of 1866 and
1867 correctly, and that no attempt has been made to impair the
obligation of a contract.
Judgment affirmed.
