A railroad corporation of Indiana, by a written contract of
lease with a railroad corporation of Illinois, acquired the right
and assumed the duty of managing and carrying on the business of
the main line and a branch road of the latter company. The lease
was confirmed by an act of the Legislature of Illinois which
declared that said lessee should be a railroad corporation in the
latter state and possess as large powers as were possessed by the
lessor and such other powers as are usual to railroad corporations.
The state board for the equalization of taxes in Illinois made an
assessment on the capital stock and franchises of the lessor
corporation, over and above its tangible property, for the roads
which passed from its control by virtue of the lease, and then
assigned to the several counties so much of the assessment as was
in the same proportion to the whole as the length of track within
their respective limits bore to the entire length of the leased
roads, the taxes due upon such assessment being charged to and to
be collected from the company which, with the consent of the state,
was entitled to have, and did have, exclusive control and
management of such roads.
Held that the mode adopted by
the state board was in substantial conformity to the laws of
Illinois.
The facts are stated in the opinion of the Court.
MR. JUSTICE HARLAN delivered the opinion of the Court.
Upon the filing of the bill in this case by the Indianapolis
& St. Louis Railroad Company, suing as a corporation organized
under the laws of Indiana, against sundry county tax collectors in
the State of Illinois, a temporary injunction was granted
restraining the defendants from levying on the property, or taking
any steps to collect taxes upon the capital stock, of the
complainant, for the years 1873, 1874, and 1875 under or by virtue
of any warrants in their hands for that purpose.
The defendants, denying that there had been any assessment upon
the capital stock of the complainant, insisted that the taxes in
question were due upon assessments, rightfully made by the State
Board of Equalization of Illinois upon the capital
Page 96 U. S. 451
stock and franchises of an Illinois corporation, the St. Louis,
Alton & Terre Haute Railroad Company, over and above its
tangible property, for so much of its main line and the Alton
branch thereof as were leased to, and operated in Illinois by, the
Indianapolis & St. Louis Railroad Company, to whom, defendants
claimed, the taxes in question were therefore properly charged.
The cause, by agreement of parties, was submitted upon the
pleadings and exhibits filed, and upon final hearing a decree was
rendered dissolving the injunction and dismissing the bill.
From that decree this appeal is prosecuted.
The essential facts in the case are these:
The Constitution of Illinois requires the general assembly of
that state to provide such revenue as may be needful by levying a
tax by valuation, so that every person and corporation shall pay a
tax in proportion to the value of his, her, or its property -- such
valuation to be ascertained by some person or persons to be elected
or appointed in such manner as the general assembly shall direct.
Persons or corporations owning or using franchises and privileges
are to be taxed in such manner as the general assembly shall from
time to time direct, the tax, however, to be uniform as to the
class upon which it operates.
In pursuance of the constitution, the general assembly, in the
year 1872, passed a general revenue law providing for the
assessment of property and prescribing the mode for the collection
of taxes. It contained specific directions for the assessment of
the different kinds of property owned by railroad companies, their
visible or tangible property to be assessed under the heads of
"railroad track," "rolling stock," &c. In reference to their
capital stock, the statute provided that the "capital stock of all
companies and associations" (other than banking associations
organized under the general laws of the state)
"now or hereafter created under the laws of this state shall be
so valued by the state board of equalization as to ascertain and
determine respectively the fair cash value of such capital stock,
including the franchises, over and above the assessed value of the
tangible property of such company or association,"
-- that value to be ascertained under such rules and principles
as the board might deem equitable and just.
Page 96 U. S. 452
The rule adopted by the state board was this: to the market or
fair cash value of the shares of capital stock, add the market or
fair cash value of the debt of the corporation, excluding that
created for current expenses, and from this amount deduct the
aggregate amount of the equalized or assessed valuation, as
ascertained by the board, of all the tangible property of the
corporation, the amount remaining to be taken as the fair cash
value of the capital stock, including the franchise, which the
board is required to assess against such corporation.
At the annual meetings of the state board held in each of the
years 1873, 1874, and 1875 for the purpose of examining the
abstracts of property assessed for taxation in the several counties
as returned to the auditor of state, and for the purpose also of
equalizing assessments, the question arose as to the mode in which
the capital stock of the St. Louis, Alton & Terre Haute
Railroad Company should be assessed for taxation.
The difficulties which attended an intelligent discharge of that
duty will be comprehended by a statement of the relations of that
corporation to the complainant.
On the 11th of September, 1867, the complainant, by a written
contract of lease with the St. Louis, Alton & Terre Haute
Railroad Company, acquired the right and assumed the duty of
managing and carrying on, for the term of ninety-nine years,
commencing June 1, 1867, the business of the principal or main line
of the latter, one hundred and eighty-nine miles in length,
extending from Terre Haute, Ind., to East St. Louis, Ill., and also
of the Alton branch, four miles in length, subject to certain
prescribed terms and conditions.
The tenth article of the lease is as follows:
"The said party of the first part [the complainant], its
successors and assigns, shall and will, at all times during the
term aforesaid, pay or cause to be paid any and all taxes,
assessments, and imposts of whatever kind which shall or may at any
time during such term be charged, levied, assessed, or imposed upon
the said main line of said railroad and the said Alton branch
thereof or upon either or any part of either of the said railroads
or their appurtenances, or upon any business or transactions done
upon them or either of
Page 96 U. S. 453
them, or upon any income arising therefrom, or upon any property
whatsoever, the use of which during said term is hereby agreed to
be furnished to the party of the first part, or which may be
charged against or imposed upon the said party of the second part
[the St. Louis, Alton & Terre Haute Railroad Company], its
successors or assigns, for or on account of its or their ownership
of said railroads or either or any part of either thereof or of
such property or any part thereof,
provided however that
nothing in this contract contained shall be so construed as to
render the party of the first part in any way liable for the tax
specifically upon the income of the holders of the bonds or stocks
of the party of the second part."
Under this lease, the complainant took possession of all the
property connected with or essential to the business of the
principal line and the Alton branch of the lessor.
Some doubt having been expressed as to the validity of the lease
under the laws of Illinois, an act of the general assembly of that
state approved March 11, 1869, directs that the lease "be and stand
confirmed according to the terms" thereof, and the second section
provides:
"The said lessees, their associates, successors, and assigns,
shall be a railroad corporation in this state under the said style
of 'The Indianapolis & St. Louis Railroad Company,' and shall
possess the same or as large powers as are possessed by said lessor
corporation, and such other powers as are usual to railroad
corporations. Said Indianapolis & St. Louis Railroad Company
may, and are hereby authorized to, extend said line of road from
any point on the same between the cities of Pana and Litchfield on
said road, or from either of said points westward to the
Mississippi River opposite Louisiana, or any point below, not
exceeding fifteen (15) miles, in the State of Missouri, with a
branch thereof to the City of Quincy, in the State of Illinois, and
the same to connect with the railroad bridge over said river at
said City of Quincy."
At its annual meetings in 1873, 1874, and 1875, the state board
made assessments upon the capital stock and franchises of the
various railroad companies of the state over and above their
tangible property respectively. Having ascertained the fair cash
taxable value of the capital stock, including the franchise of the
St. Louis, Alton & Terre Haute Railroad Company, without any
reference to the lease made by the latter, it
Page 96 U. S. 454
fixed the sums of $2,918,184, $1,125,139, and $1,004,416 as the
proportion of such valuation which should be distributed for the
years 1873, 1874, and 1875, respectively, to the counties on the
line of the leased railroads, assigning to each county, in
conformity to the rule prescribed by the statute, such proportion
of those annual assessments as the length of line in such county
bore to the entire length of the leased railroads in the state. The
assessments thus distributed to the several counties through which
the leased railroads passed were charged to the Indianapolis &
St. Louis Railroad Company. The balance of the assessment upon the
capital stock and franchise was distributed to the counties upon
the lines which the St. Louis, Alton & Terre Haute Railroad
Company operated, and were charged directly against it.
While the officers of state deny that the assessments were upon
the capital stock of the Indianapolis & St. Louis Railroad
Company, they evidently intend that the warrants based upon those
assessments shall be levied upon such of the leased property as by
the laws of Illinois can be seized for the payment of taxes against
corporations created under the laws of that state.
Whether the assessments made by the state board, and the
intended levy by the county collectors of the warrants in their
hands, are in accordance with the laws of Illinois are the
fundamental questions in this case.
In support of the negative of these propositions, the counsel
for the complainant insist that the Indianapolis & St. Louis
Railroad Company is a corporation created by the laws of Indiana,
with stock subscribed and held under the authority of that state
and with an organization there and not elsewhere; that neither
before nor after the passage of the Act of March 11, 1869, did the
stockholders or officers of the Indianapolis & St. Louis
Railroad Company organize, subscribe for stock, elect officers, or
do any other act to become a corporation under its provisions; that
no capital stock of the corporation referred to in that act was
ever subscribed by the lessee therein referred to, and that the
complainant owns no capital stock except that owned by it as a
corporation existing under the laws of Indiana; that the Act of
March 11, 1869, construed in reference to its objects intended to
be attained, and the constitutional powers
Page 96 U. S. 455
of the General Assembly of Illinois, did not make the
Indianapolis & St. Louis Railroad Company a corporation of that
state, but amounts only to a license to an Indiana corporation to
exert its corporate powers in Illinois by holding and operating a
line of leased railroads within her limits, that the state board
had no authority to assess the capital stock and franchise of an
Indiana corporation, and that the property managed and controlled
by the latter, whether acquired prior to or held under the lease of
1867, could not be seized to pay taxes due upon any assessment of
the capital stock of the St. Louis, Alton & Terre Haute
Railroad Company.
These propositions, presenting, it must be conceded, questions
of some difficulty, will be noticed in the progress of this
opinion.
There can be no doubt that the Illinois revenue statute of 1872
was intended to meet the provisions of the state Constitution which
required such legislation as would subject to taxation, according
to its value, every kind of property, whether owned by individuals
or corporations. It was not supposed that the constitutional duty
imposed upon the general assembly would be discharged by taxing
simply the tangible property of railroad companies. Hence a tax was
imposed upon their capital stock, including the franchise, over and
above their tangible property. "Capital stock," within the meaning
of the Illinois statute, does not mean shares of stock, but "the
aggregate capital of the company," which includes "the value of the
right to use this tangible property in a special manner, for
purposes of gain." We so held in
State Railroad Tax Cases,
92 U. S. 575, where
the provisions of this revenue statute were critically examined. It
is to be observed in this connection that the state board of
equalization was not authorized to assess the capital stock of
companies or associations managing property or engaging in business
in Illinois unless they were created under the laws of that state.
Such seems to be the settled construction of that statute by the
Supreme Court of Illinois. In
Western Union Telegraph Company
v. Leib, 76 Ill. 172, this language is held:
"We are unable to find any authority in the act for assessing
the capital stock of companies or associations doing business in
the state, but incorporated under the laws of another state.
Page 96 U. S. 456
The care manifested by the legislature, whenever any allusion is
made to the assessment of capital stock, to limit it to
corporations created by or under the laws of the state is so clear
and positive that no doubt can exist as to the purpose
intended."
When the lease of 1867 was executed, the capital stock,
including the franchise, of the lessor corporation was taxable over
and above its tangible property, assessed under the head of
railroad track &c. But upon the execution of that lease and its
confirmation by the state, that corporation no longer enjoyed the
right to use the leased property in a special manner for the
purposes of gain. That right for a fixed period, and with the
declared consent of the state, passed to the lessee corporation and
became thereafter a part of its aggregate capital not reached by
taxation upon its tangible property operated in Illinois, but
assessable only under the head of capital stock and franchise. The
taxable value of the capital stock and franchise of the lessor was
diminished by the amount which the state board should ascertain to
be the value of that right. By the confirmation of the lease,
according to its terms -- among which was the obligation of the
lessee to pay all taxes, assessments, and imposts, of whatever
kind, charged against or imposed upon the lessor for or on account
of its ownership of the leased lines -- the state was estopped from
collecting, as against the lessor, any taxes assessed upon that
right. This, in our opinion, is a fair construction of the lease,
and the Act of March 11, 1869.
The question whether the state can require any other corporation
to respond to the taxation, which, but for the lease and the Act of
March 11, 1869, would have been assessable against and collectible
from the St. Louis, Alton & Terre Haute Railroad Company
depends for its solution altogether upon the construction to be
given to that act.
Upon the theory of complainant's counsel, the State of Illinois
cannot make the leased property liable to these assessments upon
capital stock and franchise under any form of assessment, since, as
they claim, that property is managed and operated by a corporation
deriving its existence from, and holding its stock and maintaining
its organization under, the laws of Indiana, and not under the laws
of Illinois.
In this view we cannot concur. That act was something
Page 96 U. S. 457
more than a mere license to an Indiana corporation to exert its
corporate powers and enjoy its corporate rights and privileges in
another state. Such would undoubtedly have been the case had the
act closed with the first section, as it would have done had the
general assembly intended nothing more than to confer upon the
corporation of another state authority to extend its operations by
carrying on railroad business in Illinois. We cannot thus restrict
the effect of the act without disregarding wholly the ordinary
meaning of the plain words of its second section, which declares
that the lessees, their associates, successors, and assigns, shall
be a railroad corporation in the State of Illinois. It does more:
it gives the style by which that corporation shall be known. Still
further, it does not authorize the complainant corporation to
exercise, in Illinois, the corporate powers granted by the laws of
Indiana, but confers by affirmative language upon the corporation,
which it declares shall be a railroad corporation in Illinois, "the
same or as large powers as are possessed" by an Illinois
corporation, the St. Louis, Alton & Terre Haute Railroad
Company, and in addition such other powers as are usual to railroad
corporations. The Indianapolis & St. Louis Railroad Company, as
lessee of the St. Louis, Alton & Terre Haute Railroad Company,
was thus created, by apt words, a corporation in Illinois. The fact
that it bears the same name as that given to the company
incorporated by Indiana cannot change the fact that it is a
distinct corporation, having a separate existence derived from the
legislation of another state. After the passage of the Act of March
11, 1869, the property described in the lease of 1867 became, at
least for purposes of taxation in Illinois, that of the corporation
created by that act as a railroad corporation in that state.
But it may be suggested that the utmost which can be claimed for
the act is that, without creating a new corporation in Illinois, it
only made the complainant, as an Indiana corporation, a corporation
of the State of Illinois. It was clearly competent for the general
assembly to have done this, as held in
Railroad
Company v. Harris, 12 Wall. 65, where the Court
said:
"Nor do we see any reason why one state may not make a
corporation of another state, as there organized and conducted,
a
Page 96 U. S. 458
corporation of its own,
quo ad any property within its
territorial jurisdiction."
But we do not see how this view gives any support to the
position of the complainant. For had the act, after confirming the
lease of 1867, declared in terms that the lessee corporation, as
organized and conducted in Indiana, should be deemed a corporation
of Illinois, we should have felt bound to hold that, as to the
property obtained by and operated under the lease within that
state, it was, in the sense of the Illinois revenue statute of
1872, a corporation "created under the laws" of that state, subject
to taxation upon its capital stock, including its franchise, so far
as such stock and franchise were fairly represented by the leased
property.
Railroad Company v. Harris, supra, is relied upon by
counsel as sustaining their construction of the act of 1869, but
there is no substantial analogy between that case and this. The
Virginia act did not purport to make the Maryland corporation a
corporation of Virginia, nor did it contain any language from which
could be inferred a purpose to create thereby a new and distinct
corporation in Virginia. On the contrary, the Illinois act of 1869
declares in express terms that certain parties shall be a railroad
corporation in that state, under a designated name, with authority
to exercise not the powers which had been granted by the State of
Indiana to another corporation of the same name, created under the
laws of that state, but the same powers which were possessed by a
corporation theretofore created under the laws of Illinois. We are
unable to perceive any conflict between the views expressed in that
case and those announced in this opinion.
Some stress is laid upon the fact that there was no formal
subscription to the capital stock, or any formal organization of
the corporation created by the act of March 11, 1869.
Notwithstanding the absence of such subscription and organization,
we are of opinion that the state board had the right, for the
purposes of taxation, to regard the corporation authorized by that
act to exercise the powers of the lessor corporation, as a
corporation created under the laws of Illinois.
There is still another objection earnestly urged against this
construction of the Act of March 11, 1869. It is said that, being a
special act and containing nothing to show that the corporation
Page 96 U. S. 459
therein named might not have been organized under the general
laws of Illinois, the act cannot be construed as creating a new
corporation without bringing it into conflict with the following
clause of the Illinois Constitution of 1848, then in force,
viz.,
"Corporations not possessing banking powers or privileges may be
formed under general laws, but shall not be created by special
acts, except for municipal purposes, and in cases where, in the
judgment of the general assembly, the objects of the corporation
cannot be attained under general laws."
The argument is that a special act creating a corporation is in
violation of that constitutional provision unless it appears
affirmatively from the act or from the recorded proceedings of the
general assembly that the latter was of opinion that the objects of
the corporation could not be attained under the general laws. In
the absence of any decision upon this question by the Supreme Court
of Illinois, we should give weight to this argument. But this
precise point was made in the case of
Johnson v. Joliet &
Chicago Railroad Co., 23 Ill. 207. In that case, it appears
that a special act creating a railroad company, passed in 1855,
contained no statement of the inability of the general assembly to
accomplish the objects of the incorporation under the general law.
The court said:
"It is too late now to make this objection, since by the action
of the general assembly under this clause, special acts have been
so long the order of the day, and the ruling passion of every
legislature which has been convened under the constitution, until
their acts of this description fill a huge and misshapen volume,
and important and valuable rights claimed under them. The clause
has been wholly disregarded, and it would now produce far-spread
ruin to declare such acts unconstitutional and void. It is now
safer and more just to all parties to declare that it must be
understood that in the opinion of the general assembly at the time
of passing the special act, its objects could not be attained under
the general law, and this without any recital by way of
preamble."
That decision furnishes an answer to the objection under
consideration.
We come now to the examination of the mode in which the
Page 96 U. S. 460
assessments were made. Looking into the proceedings of the state
board so far as they have been laid before us, we meet with some
difficulty in understanding the precise theory upon which the
assessments of 1873, 1874, and 1875 were made. But for the lease
made in 1867, the way of the board would have been free from all
embarrassment. The assessment in that event would have been upon
the capital stock, including the franchise, of the St. Louis, Alton
& Terre Haute Railroad Company, over and above any tangible
property it owned and operated. But as heretofore shown, after the
confirmation of the lease, the capital stock and franchise of that
corporation were diminished in value to whatever extent their
taxable value was represented by the leased lines of railroad.
Technically, the assessment under the head of capital stock and
franchise should have been upon the capital stock and franchise of
the corporation created by the act of March 11, 1869. But that
corporation had no defined amount of capital stock separate from
that of the Indiana corporation of the same name. The state board
therefore made an assessment upon the capital stock of the lessor
corporation for that portion of the lines of railroad which passed
from its control in virtue of the lease of 1867, and then
distributed such assessment among the various counties on the lines
of the leased railroads, in the proportion that the extent of track
in the respective counties bore to the whole length of the leased
lines in the state, the taxes due upon such assessment being
charged to and to be collected from the Indianapolis & St.
Louis Railroad Company, which, with the consent of the State of
Illinois as expressed in the Act of March 11, 1869, was entitled to
have and did have exclusive control and management of such leased
lines.
The mode thus adopted by the state board was, as we think, in
substantial conformity to the laws of Illinois and affords the
complainant no just ground of objection.
The complainant sues as a corporation created by the laws of
Indiana upon the ground that the assessment was upon its capital
stock and that the purpose of the county collectors was to seize
its property. But the state officers deny that any assessment was
made or intended to be made upon its capital stock. Clearly the
county collectors have no right to levy the
Page 96 U. S. 461
warrants in their hands upon any property which belongs to the
Indiana corporation, as distinguished from the Illinois corporation
of the same name. But they have the right, for the reasons
heretofore given, to subject to the payment of the taxes in
question the property which the corporation, created by the act of
1869, is operating and managing in that state as lessee of the St.
Louis, Alton & Terre Haute Railroad Company. The assessment
made by the state board is in every just sense an assessment upon
the capital stock and franchise of an Illinois corporation, to-wit,
the Indianapolis & St. Louis Railroad Company, lessee under and
by authority of the Act of March 11, 1869, of the St. Louis, Alton
& Terre Haute Railroad Company.
We perceive no error in the decree to the prejudice of the
complainant.
Decree affirmed.
MR. JUSTICE FIELD and MR. JUSTICE HUNT did not hear the argument
in this case, nor participate in the decision.