Chesapeake Ry Co v. Miller

• Decision Date: 06 April 1885
• Citation: 114 U.S. 176,5 S.Ct. 813,29 L.Ed. 121
• Parties: CHESAPEAKE & O. RY. CO. v. MILLER, Auditor, etc
• Court: U.S. Supreme Court

114 U.S. 176

5 S.Ct. 813

29 L.Ed. 121

CHESAPEAKE & O. RY. CO. v. MILLER, Auditor, etc.

April 6, 1885.

Wm. J. Robertson, Geo. F. Edmunds, and Jas. H. Ferguson, for plaintiff in error.

C. C. Watts, for defendant in error.

MATTHEWS, J.

This writ of error brings into review a final decree of the supreme court of appeals of the state of West Virginia dismissing the bill of complaint filed by the plaintiff in error, the error assigned being that that court gave effect to a statute of the state alleged to be void, on the ground that it impaired the obligation of a contract between the plaintiff in error and the state of West Virginia. The statute thus drawn in question is an act of the legislature of West Virginia, passed March 7, 1879, subjecting the property of the plaintiff in error in that state to taxation. The contract alleged to be thus broken by the state is one of exemption from taxation, contained in the seventh section of an act of the legislature of West Virginia, passed March 1, 1866, entitled 'An act to incorporate the Covington & Ohio Railroad Company,' and is in the following words: '(7) The rate of charge by said company for passengers and freight transported on the main line and branches of said railroad shall never exceed the highest allowed by law to other railroads in the state, and no discrimination shall be made in such charges against any connecting railroad or canal company chartered by the state, and no taxation upon the property of the said company shall be imposed by the state until the profits of said company shall amount to ten per cent. on the capital of the company.'

The plaintiff in error, (complainant below,) alleging that it was entitled to the benefit of this exemption by way of contract with the state, and that no profits had been made by it upon its capital, prayed for an injunction to restrain the appellee, the auditor of West Virginia, from proceeding under the act of March 7, 1879, to assess and collect any tax upon its property within the state.

The plaintiff in error became a party to the contract contained in the act of March 1, 1866, to incorporate the Covington & Ohio Railroad Company, in the following manner: This act was similar in its terms to one passed about the same date by the general assembly of the state of Virginia. Both had in view the completion of a railroad from Covington, in Virginia, to some point on the Ohio river, the construction of which had been undertaken by the state of Virginia as a public work by its own means, but which was suspended, after an expenditure of several millions of dollars, in consequence of the breaking out of the civil war in 1861. A portion of it was within the territory that became West Virginia, and thenceforward that part of the work fell within the jurisdiction and ownership of the new state. To provide for its completion was the object of the act of March 1, 1866, to incorporate the Covington & Ohio Railroad Company. That ct did not, by its terms, create a corporation, but authorized a future organization under it. It ceded to the company, when constituted and certified as thereinafter provided, 'all the rights, interest, and privileges, of whatsoever kind, in and to the Covington & Ohio Railroad, and appurtenances thereunto belonging, now the property of the state of West Virginia, upon condition that it shall within six months after its incorporation, as provided in the tenth section of the act, commence, and within six years complete, equip, and operate a railroad,' etc., as therein described; and a failure to comply with this condition operated to forfeit the title to the road, which should then revert to the state.

The act also appointed commissioners on the part of the state to act in conjunction with others appointed by the state of Virginia, whose duty it was to offer the benefits of the charter 'for the acceptance of capitalists, so as to secure the speediest and best construction, equipment, and operation of said railroad.' 'To this end,' it added, 'they are 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 said contract any additional stipulations for the benefit of the state and in furtherance of the purposes herein declared and not inconsistent with this act, which 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.' The certificate of these commissioners of the due execution of such a contract, and the organization of the company, should operate to confer upon said company all the benefits of this charter, subject only to the provisions of the Code of Virginia for the government of internal improvement companies, so far as not inconsistent with that act.

On February 26, 1867, the legislature of West Virginia passed an act to provide for the completion of a line or lines of railroad from the waters of the Chesapeake to the Ohio river, which authorized the consolidation of the Covington & Ohio Railroad Company, when organized under the act of March 1, 1866, with one or more of several other railroad companies, including the West Virginia Central Railway Company; the consolidated company to be known as the Chesapeake & Ohio Railroad Company, and to be vested with 'all the rights, privileges, franchises, and property which may have been vested in either company prior to the act of consolidation.' It was also thereby provided that the Virginia Central Railroad Company and the West Virginia Central Railway Company, or either of them, '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 be made, the said Virginia Central Railroad Company, or the West Virginia Central Railway 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.'

Accordingly, on August 31, 1868, the commissioners of Virginia and of West Virginia entered into a contract with the Virginia Central Railroad Company, by which the Chesapeake & Ohio Railroad Company was formed, and under which it was organized, and the same was approved, ratified, and confirmed by an act of the legislature of West Virginia, 'confirming and amending the charter of the Chesapeake & Ohio Railroad Company, passed January 26, 1870.' Among other things, it was therein provided that the company might borrow such sums of money, at a rate of interest not exceeding 8 per cent. per annum, as might be necessary, in addition to the funds arising from stock subscriptions for the completion of the road, and should have power to execute a lien on its propert and resources to secure the payment of the principal and interest of such loans; and the Chesapeake & Ohio Railroad Company was thereby declared to be entitled to all the benefits of the charter of the Covington & Ohio Railroad, and to all the rights, interests, benefits, and privileges, and be subject to all the duties and responsibilities, provided and declared in the said contract, and in the statutes therein referred to. In pursuance of these powers, the Chesapeake & Ohio Railroad Company completed the contemplated line of railroad and put the same in operation; not, indeed, strictly within the time limited in the charter, but the forfeiture thereby incurred was released by an act of the legislature of West Virginia, passed February 20, 1877.

In the mean time, to raise the funds necessary to complete the construction and equipment of the road, a large amount of bonds had been issued by the company, secured by several deeds of trust, the particulars of which are fully set out in the bill; and default in the payment of interest having occurred, due proceedings for the foreclosure and sale of the property embraced in the deeds of trust were prosecuted to final decrees in the courts of Virginia and West Virginia; so that, in the latter, all of the railroad and other property situate in that state, were brought to sale under a decree of the circuit court for the county of Kanawha, in West Virginia, rendered on December 18, 1877, and were sold and conveyed to the purchasers, who, in pursuance of the statute then in force, applicable thereto, became a corporation under the name of the Chesapeake & Ohio Railway Company, the plaintiff in error in these proceedings. The statute under which these proceedings took place was an act of the legislature of West Virginia passed February 18, 1871, relating to sales made under deeds of trust, or mortgages by railroads or other internal improvement companies in that state, as amended by an act passed February 20, 1877, extending its provisions to judicial sales.

It was provided by these acts that 'if a sale be made under a deed of trust or mortgage executed by a railroad or other internal improvement company in this state, on all its works and property, and there be a conveyance pursuant thereto, such sale and conveyance shall pass to the purchaser at the sale, not only the works and property of the company, as they were at the time of making the deed of trust or mortgage, but any works which the company may, after that time and before the sale, have constructed, and all other property of which it may be possessed at the time of the sale, other than debts due to it. Upon such conveyance to the purchaser, the said company shall ipso facto be dissolved. And the said purchaser shall forthwith be a corporation by any name which may be set forth in said conveyance, or in any writing signed by him or them, and recorded in the recorder's office of any county wherein the property so sold, or any part thereof, is situated,...