A provision in a charter granted by a state to a railroad
company by which
"the capital stock of said company shall be exempt from
taxation, and its road, fixtures, workshops, warehouses, vehicles
of transportation and other appurtenances, shall be exempt from
taxation for ten years after the completion of said road within the
limits of this state"
does not exempt the road, fixtures and appurtenances from
taxation before such completion of the road.
The omission of taxing officers to assess certain property
cannot control the duty imposed by law upon their successors, or
the power of the legislature to tax the property, or the legal
construction of a statute under which its exemption from taxation
is claimed.
The original suit was brought by the sheriff and
ex
officio collector of taxes of the Parish of Madison in the
State of Louisiana to recover the amount of taxes assessed under
general laws of the state in 1877 and 1878 to the Vicksburg,
Shreveport and Texas Railroad Company, and in 1880 to the
Vicksburg, Shreveport and Pacific Railroad Company, upon
thirty-four miles of railroad, with fixtures and appurtenances, in
that parish. The Vicksburg, Shreveport and Texas Railroad Company
was incorporated on April 28, 1853, by a statute of Louisiana, to
construct and maintain a railroad from a point in the Parish of
Madison on the Mississippi River opposite Vicksburg, westward by
way of Monroe and Shreveport to the line of the State of Texas.
Section 2 of that statute was as follows:
"The capital stock of said company shall be exempt from
taxation, and its road, fixtures, workshops, warehouses, vehicles
of transportation, and other appurtenances shall be exempt from
taxation for ten years after the completion of said road within the
limits of this state."
The eastern part of the railroad, from Vicksburg to Monroe,
Page 116 U. S. 666
about seventy-five miles, was completed before January 1, 1861,
and the western part, from Shreveport to the Texas line, about
twenty-five miles, was completed before January 1, 1862, leaving
the central part, from Monroe to Shreveport, about one hundred
miles, uncompleted. The further construction of the road was
prevented and suspended during the civil war, and much of the
track, bridges, stations, and workshops was destroyed by the
hostile armies.
Soon after the return of peace, a holder of four out of a large
number of bonds secured by a mortgage executed by the corporation
on September 1, 1857, of its railroad, property, and franchises,
commenced a suit in a court of the State of Louisiana, and obtained
a decree for the sale of the whole mortgaged property, and it was
sold under that decree.
Upon a suit afterwards brought by a very large number of the
bondholders, in behalf of all in the circuit court of the United
States, that sale was, by a decree of this Court at October term,
1874, annulled as fraudulent and illegal, and the railroad,
property, and franchises ordered to be sold for the benefit of the
bondholders and other creditors of the corporation.
Jackson v.
Ludeling, 21 Wall. 616.
On December 1, 1879, they were sold pursuant to this decree and
purchased by a committee of the bondholders, who on the next day
organized themselves with their associates into a corporation under
the general statute of Louisiana of March 8, 1877, by the name of
the Vicksburg, Shreveport and Pacific Railroad Company, and now
claimed to be entitled, under this statute, to all the rights,
powers, privileges, and immunities of the Vicksburg, Shreveport,
and Texas Railroad Company, including its exemption from taxation.
In 1881 and 1882, the new corporation made contracts for the
completion of the railroad between Monroe and Shreveport, and began
to complete it; but it has not yet been completed. The Supreme
Court of Louisiana held that the provision of the statute of 1853,
exempting the railroad, fixtures, and appurtenances "from taxation
for ten years after the completion of said road," did not relieve
the old corporation from taxation before the road was completed,
and therefore gave judgment
Page 116 U. S. 667
for the plaintiff without determining whether the new
corporation had succeeded to the rights of the old one in this
respect. 34 La.Ann. 954.
A writ of error was sued out by the defendant and allowed by the
chief justice of that court because there was drawn in question the
validity of a statute of or an authority exercised under the state,
on the ground of its being repugnant to the Constitution of the
United States, as impairing the obligation of contracts, and the
decision was in favor of its validity.
MR. JUSTICE GRAY delivered the opinion of the Court. After
stating the facts in the language reported above, he continued:
In determining whether a statute of a state impairs the
obligation of a contract, this Court doubtless must decide for
itself the existence and effect of the original contract (although
in the form of a statute), as well as whether its obligation has
been impaired.
Louisville and Nashville Railroad v.
Palmes, 109 U. S. 244,
109 U. S.
256-257, and cases cited;
Wright v. Nagle,
101 U. S. 791,
101 U. S. 794.
But the construction given by the Supreme Court of Louisiana to the
contract relied on in the present case accords not only with its
own decision in the earlier case of
Baton Rouge Railroad v.
Kirkland, 33 La.Ann. 622, but with the principles often
affirmed by this Court.
In the leading case of
Providence Bank v.
Billings, 4 Pet. 514, Chief Justice Marshall,
speaking of a partial release of the power of taxation by a state
in a charter to a corporation, said:
"That the taxing power is of vital importance, that it is
essential to the existence of government, are truths which it
cannot be necessary to reaffirm. . . . As the whole community is
interested in retaining it undiminished, that community has a right
to insist that its abandonment ought not to be presumed, in a case
in which the deliberate purpose of the state to abandon it
Page 116 U. S. 668
does not appear. . . . We must look for the exemption in the
language of the instrument, and if we do not find it there, it
would be going very far to insert it by construction."
4 Pet.
29 U. S.
561-563. In
Philadelphia & Wilmington
Railroad v. Maryland, 10 How. 376, Chief Justice
Taney said:
"This Court on several occasions has held that the taxing power
of a state is never presumed to be relinquished unless the
intention to relinquish is declared in clear and unambiguous
terms."
10 How.
51 U. S. 393.
In the subsequent decisions, the same rule has been strictly upheld
and constantly reaffirmed in every variety of expression. It has
been said that
"neither the right of taxation nor any other power of
sovereignty will be held by this Court to have been surrendered
unless such surrender is expressed in terms too plain to be
mistaken;"
that exemption from taxation "should never be assumed unless the
language used is too clear to admit of doubt;" that
"nothing can be taken against the state by presumption or
inference; the surrender, when claimed, must be shown by clear,
unambiguous language which will admit of no reasonable construction
consistent with the reservation of the power; if a doubt arise as
to the intent of the legislature, that doubt must be solved in
favor of the state;"
that a state "cannot by ambiguous language be deprived of this
highest attribute of sovereignty;" that any contract of exemption
"is to be rigidly scrutinized, and never permitted to extend,
either in scope or duration, beyond what the terms of the
concession clearly require;" and that such exemptions are
regarded
"as in derogation of the sovereign authority and of common
right, and therefore not to be extended beyond the exact and
express requirement of the grants, construed
strictissimi
juris."
Jefferson Branch Bank v.
Skelly, 1 Black 436,
66 U. S. 446;
Gilman v.
Sheboygan, 2 Black 510,
67 U. S. 513;
Delaware Railroad
Tax, 18 Wall. 206,
85 U. S.
225-226;
Hoge v. Railroad Co., 99 U. S.
348,
99 U. S. 355;
Southwestern Railroad v. Wright, 116 U.
S. 231,
116 U. S. 236;
Erie Railway v.
Pennsylvania, 21 Wall. 492,
88 U. S. 499;
Memphis Gaslight Co. v. Shelby Taxing District,
109 U. S. 398,
109 U. S. 401;
Tucker v.
Ferguson, 22 Wall. 527,
89 U. S. 575;
West Wisconsin Railway v. Supervisors, 93 U. S.
595,
93 U. S.
597;
Page 116 U. S. 669
Memphis & Little Rock Railroad v. Railroad
Commissioners, 112 U. S. 609,
112 U. S.
617-618.
It is argued in support of this writ of error that as the
exemption from taxation of the capital stock was unqualified and
perpetual, and began at the very moment of the creation of the
corporation, the further exemption of the railroad and its
appurtenances, conferred in the same section, was intended to begin
at the same moment, although limited in duration to ten years after
the completion of the road, and that the legislature, while
exempting the railroad from taxation for ten years after its
completion, could not have intended to subject it to taxation
before its completion, and while its earnings were little or
nothing.
On the other hand, it is argued that the consideration of the
exemption from taxation, as of all the franchises and privileges
granted by the state to the corporation, was the undertaking of the
corporation to prosecute to completion within a reasonable time the
work of building the whole railroad from the Mississippi to the
Texas line; that one reason for defining the exemption of the
railroad and its appurtenances from taxation as "for ten years
after the completion of said road," without including any time
before its completion, was to secure a prompt execution of the work
and to prevent the corporation from defeating the principal object
of the grant and prolonging its own immunity from taxation by
postponing or omitting the completion of a portion of the road, and
that the state had never allowed a similar exemption to take place
except after a railroad had been entirely finished, and this
argument is supported by the opinions of the Supreme Court of
Louisiana in
State v. Morgan, 28 La.Ann. 482, 491, and in
the case at bar, 34 La.Ann. 954, 958.
Each of these arguments rests too much on inference and
conjecture to afford a safe ground of decision where the words of
the statute creating the exemption are plain, definite, and
unambiguous. In their natural and their legal meaning, the words
"for ten years after the completion of said road" as distinctly
exclude the time preceding the completion of the road as the time
succeeding the ten years after its completion. If the
legislature
Page 116 U. S. 670
had intended to limit the end only, and not the beginning, of
the exemption, its purpose could have been easily expressed by
saying "until" instead of "for," so as to read "until ten years
after the completion," leaving the exemption to begin immediately
upon the granting of the charter.
To hold that the words of exemption actually used by the
legislature include the time before the completion of the road
would be to insert by construction what is not to be found in the
language of the contract, to presume an intention, which the
legislature has not manifested in clear and unmistakable terms, to
surrender the taxing power, and to go against the uniform current
of the decisions of this Court upon the subject, as shown by the
cases above referred to.
The omission of the taxing officers of the state in previous
years to assess this property cannot control the duty imposed by
law upon their successors, or the power of the legislature, or the
legal construction of the statute under which the exemption is
claimed.
In the case of
Morgan v. Louisiana, 93 U. S.
217, affirming the decision in 28 La.Ann. 482, neither
this Court nor the Supreme Court of Louisiana expressed any opinion
upon the question now before us, because both courts held that, the
sale of the railroad in that case having taken place before the
passage of the statute of 1877, whatever rights were conferred by a
similar clause of exemption had not passed to the purchasers.
Judgment affirmed.
MR. JUSTICE FIELD, with whom concurred THE CHIEF JUSTICE, MR.
JUSTICE MILLER, and MR. JUSTICE BRADLEY, dissenting.
I am obliged to dissent from the judgment in this case. I agree
with the majority in all that is said in the opinion as to the
construction of statutes which are alleged to exempt from the
taxing power of the state property within its jurisdiction. Where
there is a reasonable doubt as to their construction, whether or
not they create the exemption, it should be solved in favor of the
state. But here it does not seem to me there can be any such doubt.
The statute in question
Page 116 U. S. 671
declares that the capital stock of the company
"shall be exempt from taxation, and its roads, fixtures,
workshops, warehouses, vehicles of transportation, and other
appurtenances shall be exempt from taxation for ten years after the
completion of said road within the state."
This exemption was designed to aid the road, and was therefore
much more needed during its construction than when completed. It
seems like a perversion of the purpose of the statute to hold that
it intended to impede by its burden the progress of the desired
work, and relieve it of the burden only when finished. The
enterprise is to be nursed, according to the majority, not in its
infancy, but when successfully carried out and needs no
support.
I am authorized to say that THE CHIEF JUSTICE, MR. JUSTICE
MILLER, and MR. JUSTICE BRADLEY concur with me in this dissent.
