Fred Stearns v. State of Minnesota James Marr 16, 17 1900

• Decision Date: 23 April 1900
• Docket Number: No. 20,20
• Citation: 45 L.Ed. 162,179 U.S. 223,21 S.Ct. 73
• Parties: FRED STEARNS, as County Auditor of Aitkin County, Minnesota, Plff. in Err. , v. STATE OF MINNESOTA on the Relation of JAMES N. MARR. Argued January 16, 17, 1900. Ordered for reargument,
• Court: U.S. Supreme Court

179 U.S. 223

21 S.Ct. 73

45 L.Ed. 162

FRED STEARNS, as County Auditor of Aitkin County, Minnesota, Plff. in Err.,

v STATE OF MINNESOTA on the Relation of JAMES N. MARR.

No. 20.

Argued January 16, 17, 1900.

Ordered for reargument, April 23, 1900.

Reargued October 16, 17, 1900.

Decided December 3, 1900.

This case comes on error to the supreme court of the state of Minnesota, is brought here at the instance of certain railroad companies, and involves the question whether the real estate belonging to them, and not used in the operation of their roads, is subject to taxation according to its value, or is excepted from such ordinary rule of taxation by virtue of a contract alleged to have been made many years ago by legislation of the state, to the effect that railroad companies should pay a certain per cent on their gross earnings in lieu of taxes on all their property.

The facts are as follows, and first as to lands belonging to the St. Paul & Duluth Company:

The Constitution of Minnesota, adopted in 1858, has always contained these provisions (article 9, §§ 1 and 3):

'Sec. 1. All taxes to be raised in this state shall be as nearly equal as may be, and all property on which taxes are to be levied shall have a cash valuation, and be equalized and uniform throughout the state.'

'Sec. 3. Laws shall be passed taxing all moneys, credits, investments in bonds, stocks, joint-stock companies, or otherwise, and also all real and personal property according to its true value in money; but public burying grounds, public schoolhouses, public hospitals, academies, colleges, universities, and all seminaries of learning, all churches, church property used for religious purposes, and houses of worship, institutions of purely public charity, public property used exclusively for any public purpose, and personal property to an amount not exceeding in value two hundred dollars for each individual, shall, by general laws, be exempt from taxation.'

On May 23, 1857, by the territorial legislature of Minnesota the Nebraska & Lake Superior Railroad Company was organized. Minn. Laws 1857, chap. 93, p. 323. By an act of the state legislature, of date March 8, 1861, the name of this company was changed to the Lake Superior & Mississippi Railroad Company. Minn. Laws 1861, p. 201. By this act certain of the swamp lands granted to the state by the act of Congress of September 28, 1850 (9 Stat. at L. 519, chap. 84), were granted to that company to aid in the construction of its railroad. The St. Paul & Duluth company is the successor in interest of that company, and has succeeded to all its rights, privileges, immunities, and property. By act of Congress of date May 5, 1864 (13 Stat. at L. 64, chap. 79), as amended July 13, 1866 (14 Stat. at L. 93, chap. 178), lands were granted to the state of Minnesota to aid in building a railroad from the city of St. Paul to the head of Lake Superior. The first section declaring the grant reads: 'That there be, and there is hereby, granted to the state Minnesota for the purpose of aiding in the construction of a railroad in such state from the city of St. Paul to the head of Lake Superior, every alternate section of public land,' etc. Section 5 reads:

'That the said lands, hereby granted, when patented to said state, shall be subject to the disposal of said state for the purposes aforesaid, and for no other; and the said railroad shall be and remain a public highway for the use of the government of the United States, free from all toll or other charge, for the transportation of any property or troops of the United States.'

On February 23, 1865, the legislature of Minnesota passed an act accepting the grant, and transferring the lands to the predecessor of the St. Paul & Duluth Railroad Company. Minn. Special Laws 1865, chap. 2, p. 19. The 1st section, after accepting the lands granted, reads:

'And the same are hereby granted, vested in, and transferred to the Lake Superior & Mississippi Railroad Company, its successors and assigns, to be held, used, or sold and disposed of by said railroad company, to aid in the construction of a railroad, as contemplated and provided by said act of Congress, and for the equipment and operation of the same, and for no other purpose whatever, the same to be held, used, and disposed of upon and subject to the conditions in said act of Congress provided, and upon the conditions in this act contained. That in consideration of lands granted by this act, and of the lands, rights, privileges, and franchises which have heretofore been granted to said railroad company, the said company shall, on or before the 1st day of March of each and every year after said railroad is completed and in operation, pay into the treasury of the state 3 per cent on the gross earnings of said railroad, which sum shall be in lieu and in full of all taxation and assessments upon the said railroad, its appurtenances and appendages, and all other property of said company, real, personal and mixed, including the lands hereby and heretofore granted to said company, or so intended to be granted. Provided, however, that the lands hereby and heretofore granted to said company shall be subject to like lands of individuals, to be taxed as fast as the same are sold or conveyed, or contracted to be sold, or are leased by said company, or the stumpage upon any lands is sold or contracted to be sold by said company; but no mortgage or trust deed executed by said company upon said lands shall, for the purpose of taxation, be construed as such sale, conveyance, lease, or contract of sale.'

Eight days thereafter, and on March 3, 1865, an act amendatory of this act was passed. Special Laws 1865, chap. 8, p. 45. The 1st section of this act is as follows:

'1. That whenever any lands heretofore or hereafter granted to the Lake Superior & Mississippi Railroad Company to aid in the construction or completion of its road or branches shall be contracted to be sold, conveyed, or leased by said company, the same shall be placed upon the tax list by the proper officer for taxation as other real estate for the year succeeding that in which such contract for a sale, conveyance, or lease thereof shall have been made, but, in enforcing a collection of the taxes thereon, the title or interest of the said company or of any trustee or mortgagee thereof shall be in nowise impaired or affected thereby, but the improvements thereon and all the interest of the purchaser or lessee therein may and shall in case of default in the payment of taxes upon such land, be sold to satisfy the same, and it shall be the duty of the proper officers to assess and collect such taxes in accordance with the general laws relating to the assessment and collection of taxes, and that the provisions of the several acts in relation to the taxation of the lands of said company, so far as the mode of taxing such lands conflict with the provisions of this act, shall be and they are repealed. Provided, that said company shall, during the first three years after 30 miles of said railroad shall be completed and in operation, on or before the 1st day of March in each and every year, pay into the treasury of the state 1 per cent on the gross earnings of said railroad, the first payment to be made on the 1st day of March next after 30 miles of said railroad shall be completed and in operation, and shall, during the seven years next ensuing after the expiration of the three years aforesaid, pay into the treasury of this state on or before the 1st day of March of each and every year, 2 per cent of the gross earnings of said railroad, and shall, from and after the expiration of said seven years, on or before the 1st day of March of each and every year, pay into the treasury of this state 3 per cent of the gross earnings of said railroad; and the payment of such per centum annually, as aforesaid, shall be and is in full of all taxation and assessment whatever.'

The 2d section provided for acceptance of the provisions of the act by the railroad company; that when accepted 'the same shall become obligatory upon the state and upon said company;' and they were accepted. Thereafter, as admitted, the railroad was constructed by the company 'in reliance upon said act.' Taxes were paid by the railroad company on its property in accordance with the terms of this alleged contract until 1895, and during those years the state made no attempt to levy any taxes upon these lands. In 1871 the following amendment to the state Constitution was by vote of the people duly adopted (Minn. Laws 1871, p. 41):

'Any law providing for the repeal or amendment of any law or laws heretofore or hereafter enacted, which provides that any railroad company now existing in this state or operating its road therein, or which may be hereafter organized, shall, in lieu of all other taxes and assessments upon their real estate, roads, rolling stock, and other personal property at and during the time and periods therein specified, pay into the treasury of this state a certain per centum therein mentioned of the gross earnings of such railroad companies now existing or hereafter organized, shall, before the same shall take effect or be in force, be submitted to a vote of the people of the state, and be adopted and ratified by a majority of the electors of the state voting at the election at which the same shall be submitted to them.'

In November, 1896, this statute passed in 1895 (Laws 1895, p. 378), was adopted by the people:

'Sec. 1. All lands in this state heretofore or hereafter granted by the state of Minnesota or the United States or the territory of Minnesota to any railroad company shall be assessed and taxed as other lands are taxed in this state, except such parts of said lands as are held, used, or occupied for right of way, gravel pits, side tracks, depots, and all buildings and structures which are necessarily used in the actual management and operation of the railroads of said...