1. where two or more corporations, subjected to a special tax
upon the net income of their roads, with immunity from other
taxation, the amount of such special tax being dependent upon
reports to be made and information communicated by their directors
and other officers, are consolidated into a new corporation, with
different directors and other officers who are neither bound nor
able to make the reports and give the information required of the
original companies, the new corporation thus created is not
entitled to the immunity of the original companies from general
taxation.
2. A new corporation may be created by the union of two or more
corporations, and its powers and privileges designated by reference
to the charters of other companies as well as by special
enumeration.
3. The act of the legislature of Maine of 1856, authorizing two
or more existing corporations to consolidate and form a new
corporation, was an act of incorporation of the new company, and
the latter, upon its formation, became at once subject to the
provisions of the general law of 1831, which declared that any act
of incorporation subsequently passed should at all times
thereafter
"be liable to be amended, altered, or repealed at the pleasure
of the legislature, in the same manner as if an express provision
to that effect were therein contained, unless there shall have been
inserted in such act of incorporation an express limitation or
provision to the contrary."
So long as this provision remained unrepealed, subsequent
legislation not repugnant to it was controlled by it, and is to be
construed and enforced in connection with it.
Page 96 U. S. 500
d. There being in the act of 1866 no limitation upon the power
of amendment, alteration, and repeal, the state, by the reservation
in the law of 1831, which is to be considered as if embodied in
that act, retained the power to alter it in all particulars
constituting the grant of corporate rights, privileges, and
immunities to the new company formed under it. The existence of the
corporation, and its franchises and immunities, derived directly
from the state, were thus kept under its control. Rights and
interests acquired by the company, not constituting a part of the
contract of incorporation, stand upon a different footing.
An act of the legislature of Maine passed in 1874 provides for a
tax upon the corporate franchise of every railroad company in that
state, at the rate of one and one-half percent upon its estimated
value, determined in this wise: the governor and council of the
state are each year required to ascertain the true market value of
its shares, and estimate therefrom the fair cash valuation of all
the shares constituting its capital stock, on the first day of the
preceding April. From this valuation are to be deducted the value
of its real estate and other property subjected to local taxation,
and, where its lines extend beyond the limits of the state, such
portion of the valuation as is proportional to the length of that
part of the lines lying without the state. Upon the value of the
franchise thus determined, the governor and council are to assess
the tax; the assessment is to be certified by the secretary of
state to the treasurer, and by him notice thereof is to be given to
the company. The tax thus assessed is to be in lieu of all taxes on
shares of the company previously required by law, and, in case of
nonpayment, an action will lie for its collection.
The Maine Central Railroad Company was a corporation of Maine in
1875, and the owner of a railroad in the state, and its franchise
was assessed and taxed for that year under this statute. It is
admitted that the provisions of the act were in all respects
complied with and the required notice of the assessment given to
the company. The tax not being paid, the present action of debt was
brought for its recovery. The company pleaded in defense that the
act of 1874 was is conflict with the provisions of its charter, and
also with the constitution of the state and of the United states in
that it impaired the obligation of the contract contained in the
charter. Upon
Page 96 U. S. 501
an agreed statement of facts, the case was submitted to the
supreme court of the state for its decision. That court gave
judgment for the state sustaining the validity of the tax, and the
company brought the case to this Court on writ of error.
The Maine Central Railroad Company was originally formed in
October, 1862, by the consolidation of two distinct corporations --
the Androscoggin and Kennebec Railroad Company, which was
incorporated in March, 1845, and had constructed a railway from
Waterville to Danville, and the Penobscot and Kennebec Railroad
Company, which was incorporated in April, 1845, and had constructed
a railway from Bangor to Waterville.
The charter of each company required it to keep a regular
account of its disbursements, expenditures, and receipts in a book
which was to be open at all times to the inspection of the governor
and council and any committee of the legislature, and required its
treasurer, at the expiration of every year, to make, under oath, an
exhibit to the legislature of the net profits derived from the
income of its road. It also provided that the real estate of the
company should be taxable by the towns, cities, and plantations in
which it lay in the same manner as that of private persons, and its
value be estimated in the same way; that the shares of the
stockholders should be deemed personal estate, taxable to them at
their places of residence; and that whenever the annual net income
of the company amounted to ten percent upon the cost of the road
and "its appendages, and incidental expenses," the directors should
make a special report of the fact to the legislature, "from and
after which time" one moiety, or such other portion as the
legislature might determine, of the net income accruing thereafter,
above the ten percent, first to be paid to the stockholders, should
annually be paid by the treasurer of the corporation, as a tax,
into the treasury of the state. It also declared that no other tax
should ever be levied or assessed on the corporation, or any of its
privileges or franchises, and that the charter should "not be
revoked, annulled, altered, limited, or restrained without the
consent of the corporation except by due process of law."
The consolidation of these two companies into the Maine Central
Railroad Company was effected under an act passed in
Page 96 U. S. 502
April, 1856, which authorized it upon the agreement of their
directors, approved by the stockholders, prescribing the terms and
conditions thereof, the mode of carrying the same into effect, the
name of the new corporation, the number of its directors, the time
and place of holding the first election, the amount of its capital,
the number of shares of stock, and the manner of converting the
shares of the capital stock of each of the corporations into those
of the new corporation, and filing a duplicate or counterpart of
the agreement in the office of the secretary of state. Immediately
afterwards, upon the election of the directors, the corporation
making the agreement were to be consolidated, and together to
constitute a new corporation, by the name therein mentioned. The
act provided that the new corporation thus formed should have "all
the powers, privileges, and immunities" possessed by each of the
corporations entering into the agreement, and be subject to all the
legal obligations then resting upon them respectively, with a
proviso, however, that it should not be construed as extinguishing
the old corporations or annulling their charters, but that they
should be
"regarded as still subsisting, so far as their continuance for
the purpose of upholding any right, title, or interest, power,
privilege, or immunity, ever possessed, exercised, or enjoyed by
either of them may be necessary for the protection of the creditors
or mortgagees of either of them, or of such new corporation, the
separate exercise of their respective powers and the separate
enjoyment of their respective privileges and immunities being
suspended until the protection of such creditors or mortgagees
shall require their resumption, when such suspension shall cease so
far and for such time as the protection of such creditors or
mortgagees may require."
Some years after this consolidation, by a law passed in 1873,
three other railroad companies, whose roads were at that time under
lease to the Maine Central Railroad Company, were allowed to
consolidate with it upon the same terms and conditions prescribed
by the act of 1856 so far as they were applicable, and such second
consolidation was effected in 1874. These three companies were the
Portland and Kennebec Railroad Company, which owned a railroad from
Augusta to Portland; the Sommerset and Kennebec Railroad Company,
which
Page 96 U. S. 503
had constructed a railroad from Skowhegan to Augusta, and the
Leeds and Farmington Railroad Company, which owned a railroad from
Farmington to Leeds Junction.
The first of these three companies was formed by holders of
bonds of the Kennebec and Portland Railroad Company, a corporation
created in 1836, and, by the act of 1845, possessed of a similar
conditional immunity from taxation to that of the two companies
first consolidated. By authority of the legislature, this company
had issued its bonds, secured by mortgage upon its road and
franchise. In 1862, the mortgage was foreclosed and the present
corporation formed. The new corporation was by statute invested
with the legal rights and immunities of the original corporation.
It is admitted that the charters of the other two of those three
corporations contained no limitation upon the taxing power of the
state.
It is upon the franchise of the Maine Central Company, as formed
in 1874, upon the second consolidation, that the tax was assessed
and levied for which this action was brought.
An act of the Legislature of Maine, passed in 1831, c. 503,
contained the following provision:
"All acts of incorporation which shall be passed after the
passage of this act shall at all times hereafter be liable to be
amended, altered, or repealed, at the pleasure of the legislature
in the same manner as if an express provision to that effect were
therein contained, unless there shall have been inserted in such
act of incorporation an express limitation or provision to the
contrary."
Judgment was rendered in favor of the state, and the company
sued out this writ of error.
Page 96 U. S. 507
MR. JUSTICE FIELD, after stating the facts, delivered the
opinion of the Court.
The principal question for our determination is whether the
conditional and limited taxation to which the two original
companies first consolidated were subjected is extended to the
present corporation defendant after its second consolidation. As
the act of 1856, authorizing the first consolidation, conferred
upon the new corporation "all the powers, privileges, and
immunities" possessed by each of the consolidating companies, and
the act of 1873, by reference, adopts the same provisions, it is
contended that the new company is exempt from any other taxation
than that to which they were subjected, at least, that so much of
the road of the company as originally belonged to those
consolidating companies is thus exempt.
It is not questioned by counsel on either side that the charter
of a private corporation is a contract between the state and its
corporators, and protected under the Constitution of the United
Page 96 U. S. 508
States, like any other contract, from legislation impairing its
obligation. This has been so often decided that its statement is
only the repetition of an admitted legal principle. The only
question for serious inquiry where legislation affecting the
charter is the subject of complaint is whether it does in fact
impair the obligation of the contract, for there may be legislation
touching the powers of the corporation which will not have that
result. Nor is it questioned by counsel that the taxation, both in
its mode and extent, may be so prescribed in the charter as to
preclude any subsequent interference by the state with either.
Repeated decisions of this Court have so adjudged, though the right
of one legislature to bind its successors in the exercise of its
power of taxation, which is an essential attribute of sovereignty,
has met with frequent earnest dissent from a minority of the
Court.
The provision in the charters of the two original companies was
a clear conditional limitation upon the power of the state to tax
them. Language could not be made more direct and positive. Only
upon the annual net income received from the roads of the companies
above the ten percent paid to the stockholders could a tax be
imposed by the state, and then only a portion of such net income
could be exacted. "No other tax," said the charter, should ever be
levied or assessed on the corporations or any of their privileges
or franchises. So long as these companies were distinct
corporations, only the tax thus prescribed could be imposed upon
them. But when they were merged in the new corporation, their
distinct corporate existence ceased except so far as their
existence might be necessary for the protection of their creditors
or mortgagees or those of the new corporation. The conditions upon
which the limitation of taxation was prescribed could be performed
only while the companies were distinct corporations operating
separate lines. Those companies only were required to keep an
account of their disbursements, expenditures, and receipts, for the
inspection of the governor and council and committees of the
legislature. Their treasurers only were bound to render to the
legislature, at the expiration of every year, exhibits under oath
of the net profits of their roads. Their directors only were called
upon to make a special report to the legislature
Page 96 U. S. 509
whenever their annual income amounted to ten percent upon the
cost and expenses of their roads. It was only upon such report that
the legislature was to determine the portion of the income which
should be received in lieu of other taxes. The new company was
subject to no such duty of keeping an account of the expenditures
and receipts of the original lines; its directors were not called
upon to make any report as to the income of such lines, nor was its
treasurer required to make any annual exhibit of the net profits
derived from them. The assets of all the companies were
intermingled, and continuous trains were run over the whole length
of the several roads. It would have been impossible to show what
would have been the profits of each road without the consolidation.
Only an approximation to them would have been attainable, and that
would have been based upon estimates more less speculative in their
character.
The consolidation of the original companies was a voluntary
proceeding on their part. The law made it dependent upon their
agreement, and that law was presumably passed upon their request,
as they are named in it and they acted under it. Having thus
disabled themselves from a compliance with the conditions upon the
performance of which the amount to be paid as a tax to the state
could be ascertained, they must be considered as having waived the
exemption dependent upon such performance. Their exemption was
qualified by their duties, and dependent upon them. They
incapacitated themselves from the performance of those duties by a
proceeding which they supposed would give them greater advantages
than they possessed in their separate condition, and they thus lost
their exemption. The new company was not charged with the duties
which they were to perform to the state and by which the state was
to be governed in its taxation, nor was the state under any
obligation to accept a substituted performance from other
parties.
The provision in the act authorizing the consolidation that the
new company should have all the powers, privileges, and immunities
of the original companies must therefore be taken with the
qualification that it should have them so far as they could be
exercised or enjoyed by it with its different officers
Page 96 U. S. 510
and distinct constitution. Where their exercise or enjoyment
required other officers or a different constitution, the grant was
to that extent necessarily inoperative.
The Maine Central Railroad Company was, upon the consolidation
of the original companies, a new corporation, as distinct from them
as though it had been created before their existence. The fact that
the powers, privileges, and immunities which they had possessed
were conferred upon the new company, so far as they could be
exercised or enjoyed by it, in no respect affected its character as
a distinct body. A new corporation may be as readily created by the
union of two or more corporations as by the union of individuals,
and its powers and privileges may as well be designated by
reference to the charters of other companies as by special
enumeration.
It follows that the limitation of the taxing power of the state
to a portion of their net income prescribed in the charters of the
old companies ceased upon their consolidation into the Maine
Central. When this new company came into existence, it became
subject to the provisions of the general law of 1831, which
declared that any act of incorporation subsequently passed should
at all times thereafter
"be liable to be amended, altered, or repealed, at the pleasure
of the legislature, in the same manner as if an express provision
to that effect were therein contained, unless there shall have been
inserted in such act of incorporation an express limitation or
provision to the contrary."
Although this provision could not bind any succeeding
legislature which might choose to disregard it, so long as it
remained unrepealed, subsequent legislation not repugnant to it was
controlled by it, and must be construed and enforced in connection
with it. There was no limitation in the act authorizing the
consolidation, which was the act of incorporation of the new
company, upon the legislative power of amendment and alteration,
and of course there was none upon the extent or mode of taxation
which might be subsequently adopted. By the reservation in the law
of 1831, which is to be considered as if embodied in that act, the
state retained the power to alter it in all particulars
constituting the grant to the new company, formed under it, of
corporate rights, privileges, and immunities. The existence of the
corporation, and
Page 96 U. S. 511
its franchises and immunities, derived directly from the state,
were thus kept under its control. Rights and interests acquired by
the company, not constituting a part of the contract of
incorporation, stand upon a different footing. But no such rights
or interests are here involved.
New Jersey v. Yard,
95 U. S. 104;
Tomlinson v.
Jessup, 15 Wall. 454.
The several cases cited by counsel from the decisions of this
Court upon the effect of consolidating several companies where some
of them possess an immunity from taxation do not militate against
the views here expressed. They are
The
Delaware Railroad Tax, 18 Wall. 206;
Central
Railroad & Banking Co. v. Georgia, 92 U. S.
665; and
Chesapeake & Ohio Railroad Co. v.
Virginia, 94 U. S. 718. In
the
Delaware Railroad Tax Case, it appeared that three
companies -- one of which owned a railroad in Pennsylvania, one a
railroad in Maryland, and one a railroad in Delaware -- were
consolidated into one company under the legislation of those
states. The act of the Legislature of Delaware declared that the
respective companies should constitute one company and be entitled
to all the rights, privileges, and immunities which each and all of
them possessed and enjoyed under their respective charters, and one
of those charters, which was granted by Maryland, had exempted the
shares of the capital stock of its company from taxation. It was
held that the provision in the Delaware act in no respect affected
its power of taxation upon the property of the new company in that
state, that the new company stood in each state as the original
company had previously stood in that state, invested with the same
rights and subject to the same liabilities, and that it was not the
intention of either state to enforce within its limits the
legislation of the other. This decision has no bearing upon the
questions involved in the present case.
In
Central Railroad & Banking Co. v. Georgia, it
was held that the consolidation of two railroad companies did not
necessarily work a dissolution of both and the creation of a new
corporation; that whether such would be its effect depended upon
the legislative intent manifested in the statute under which the
consolidation took place; that, in the case under consideration,
the two companies there mentioned were
Page 96 U. S. 512
not dissolved by their consolidation; that the consolidated
company continued to possess all the rights and immunities which
were conferred upon each company by its original charter; and,
inasmuch as one of the companies was exempted from liability to any
greater tax than one-half of one percent of its net annual income,
the exemption continued after the consolidation. The state in that
case claimed that a new company was the result of the
consolidation, and that its charter was then subject to repeal or
modification at the will of the legislature. The Court replied that
if the charter of the company having the exemption had been
surrendered and a new corporation created by the consolidation, the
consequences claimed by the state "might and probably would
follow." There is nothing in this decision which touches the case
at bar.
In
Chesapeake & Ohio Railroad Co. v. Virginia, it
was held that a railroad corporation formed under an act of the
legislature by the consolidation of existing companies and "vested
with all the rights, privileges, franchise, and property which may
have been vested in either company prior to the act of
consolidation" acquired no greater immunity from taxation than had
been severally enjoyed by the original companies as to the portions
of the road belonging to them, and that whatever property had been
subject to taxation previous to the consolidation remained so
afterwards. This decision has no application to the questions
involved in the case before us. In none of these cases were duties
required of the original companies and their directors and officers
which could not have been equally discharged by the new companies,
nor was the extent or mode of taxation made dependent upon
information to be imparted by officers who, upon the consolidation
of the companies, had ceased to exist.
We have in this opinion made no reference to the charters of the
three railroad companies which were consolidated with the Maine
Central Company in 1874. It is admitted that the charters of two of
them contained no limitation upon the taxing power of the state.
The third company, incorporated in 1836, obtained, by an act passed
in 1845, a conditional exemption from taxation, like that in the
charters of the two companies in the first consolidation. A
mortgage upon its road and
Page 96 U. S. 513
franchise was, in 1862, foreclosed by the mortgagees, who
acquired the property and formed a new corporation. This new
corporation was, by the statute which authorized it, declared
invested with the legal rights and immunities of the original
corporation. When it afterwards consolidated with the Maine
Central, its rights and immunities passed to that company, only to
the extent and subject to the same limitations as those of the
original two companies.
It follows that there is no error in the judgment of the Supreme
Court of Maine, and it is therefore
Affirmed.
MR. JUSTICE STRONG dissented.
