Louisville & N.R. Co. v. Wright

• Decision Date: 18 July 1912
• Citation: 199 F. 454
• Parties: LOUISVILLE & N.R. CO. et al. v. WRIGHT, Comptroller General.
• Court: U.S. District Court — Northern District of Georgia

199 F. 454

LOUISVILLE & N.R. CO. et al. v. WRIGHT, Comptroller General.

United States District Court, N.D. Georgia.

July 18, 1912

Jos R. & Bryan Cumming, of Augusta, Ga., and McDaniel & Black, R C. & P. H. Alston, Tye, Peeples & Jordan, and King, Spalding & Underwood, all of Atlanta, Ga., for complainants.

T. S Felder, Atty. Gen., and John C. Hart and Samuel H. Sibley both of Union Point, Ga., for defendant.

NEWMAN District Judge.

This case is now before the court for final decree on a bill filed by the Louisville & Nashville Railroad Company and the Atlantic Coast Line Railroad Company, lessees of the Georgia Railroad & Banking Company, against William A. Wright, Comptroller General of the state of Georgia, to enjoin the collection of certain taxes assessed against them by the Comptroller General. The case is here on bill, answer, and agreed statement of facts; this agreed statement of facts being in writing and signed by counsel for the parties, respectively. The facts necessary to an understanding of the case are as follows:

The Georgia Railroad Company was chartered by an act of the General Assembly of the state of Georgia December 21, 1833 (Acts 1833, p. 256). On December 18, 1835 (Acts 1835, p. 180), the name was changed to the Georgia Railroad & Banking Company, by which name it is still known. In the original charter of the company, granted in 1833, is this provision (section 15):

'The stock of the said company and its branches shall be exempt from taxation for and during the term of seven years from and after the completion of the said railroads, or any one of them; and after that, shall be subject to a tax not exceeding one-half per cent. per annum on the net proceeds of their investments.'

The question as to whether or not this scheme of taxation is binding upon the state, and still exists, has been before the courts several times. It was before the Supreme Court of Georgia in City of Augusta v. Georgia R. & Banking Co., 26 Ga. 651, and in the case of State of Georgia v. Georgia R. & Banking Co., 54 Ga. 423, and Goldsmith, Comptroller, etc., v. Georgia R. & Banking Co., 62 Ga. 485, and before this court in Georgia R. & Banking Co. v. Wright, Comptroller General (C.C.) 132 F. 912, and, finally, on appeal from this last-named decision, before the Supreme Court of the United States, settling the matter definitely and finally as between the state and the Georgia Railroad & Banking Company, in favor of the Georgia Railroad & Banking Company's right to be taxed one-half of 1 per cent. on the net proceeds of its investment. Wright, Comptroller General, v. Georgia R. & Banking Co., 216 U.S. 420, 30 Sup.Ct. 242, 54 L.Ed. 544. So clearly is this settled that the learned counsel for the Comptroller General in the present case state in their brief:

'It is conceded by the Comptroller General that at the time the state incorporated the Georgia Railroad & Banking Company the Legislature had the power to make, and did make, a contract with the Georgia Railroad & Banking Company never to tax that company in excess of the rate fixed in the charter, to wit, one-half of 1 per cent. on its net income, and that as far as that company is concerned that it has an irrevocable contract with the state'--citing the case in 216 U.S., 30 Sup. Ct., 54 L. Ed., just mentioned.

The original charter of the Georgia Railroad & Banking Company of 1833 (section 12) contains this provision:

'That the said company may, when they see fit, rent or farm out all or any part of their exclusive right of transportation or conveyance of persons, on the railroad or railroads, with the privilege to any individual or individuals, or other company, and for such term as may be agreed upon. * * * ' On May 7, 1881, the Georgia Railroad & Banking Company entered into a contract with William M. Wadley, under the provision of this charter authorizing it to 'rent or farm out,' etc., in which it was provided that the Georgia Railroad & Banking Company--

'hath rented and farmed out to said party of the second part and his assigns, and does by these presents rent and farm out to said party of the second part and his assigns for the full term of ninety-nine years from the first day of April, one thousand eight hundred and eighty-one, all its privileges, general and exclusive, of transporting persons, merchandise, produce and every kind of property whatsoever, which is or may become the subject of railroad transportation, over the lines of railroad owned or controlled by the party of the first part, to the full extent that the party of the first part has and enjoys, or is now entitled to have and enjoy, or may hereafter acquire the right to have and enjoy such privileges, and subject to all the obligations and duties, imposed by its charter in this behalf upon the party of the first part.

'And the party of the first part has also rented and farmed out, and does by these presents rent and farm out to the party of the second part for the aforesaid term of ninety-nine years, as the means of full enjoyment of the privileges hereinbefore rented and farmed out, the following property, to wit:

'The Georgia Railroad from Augusta to Atlanta, and its branches, viz.: The Branch from Barnett to Washington; the branch from Camak to Warrenton, and the branch from Union Point to Athens, with all the extensions thereof which may be made hereafter to other points; also, the Macon and Augusta Railroad, from Warrenton to Macon; together with the rights of way, roadbeds, depots, stations, warehouses, elevators, workshops, wells, cisterns, water tanks, and other appurtenances of said railroad and branches.'

The Louisville & Nashville Railroad Company and the Atlantic Coast Line Railroad Company have, by successive conveyances, become the successors of William M. Wadley, and have been operating said railroads thereunder for a number of years.

The main question for determination here is, Did the Georgia Railroad & Banking Company, by this contract and agreement, give to Wadley and his assigns a mere usufruct of this property, or did it convey an estate for years? The contention for the Comptroller General is that this instrument, properly construed, vested an estate in complainants, making them liable, under the laws of Georgia, for the taxes thereon. The contrary contention is that this contract conveyed a mere usufruct, and that, even if it be an estate for years as opposed to an usufruct, it would still leave the landlord liable for the entire taxes due on the property.

The first question, therefore, is, Do the complainants occupy the position of tenants having the mere right of possession and use, or have they an estate for years in the property? Section 3691 of the Code of Georgia of 1910 is as follows:

'When the owner of real estate grants to another simply the right to possess and enjoy the use of such real estate, either for a fixed time or at the will of the grantor, and the tenant accepts the grant, the relation of landlord and tenant exists between them. In such case no estate passes out of the landlord, and the tenant has only a usufruct, which he cannot convey except by the landlord's consent, and which is not subject to levy and sale, and all renting or leasing of such real estate for a period of time less than five years shall be held to convey only the right to possess and enjoy such real estate, and to pass no estate out of the landlord, and to give only the usufruct, unless the contrary be agreed upon by parties to the contract, and so stated therein.'

Section 3685, under the chapter heading of 'Estates for Years,' defines an estate for years as follows:

'An estate for years is one which is limited in its duration to a period fixed, or which may be made fixed and certain. If it be in lands, it passes as realty in this state. It may be for any number of years, so that the limitation be within the rule against perpetuities.'

The language used in the contract between the Georgia Railroad & Banking Company and Wadley is, 'hath rented and farmed out,' following the exact language of section 12 of the charter, 'all its privileges, general and exclusive, of transporting persons, merchandise, produce and every kind of property whatsoever,' etc., and 'has also rented and farmed out, and does by these presents rent and farm out, to the party of the second part for the aforesaid term of ninety-nine years, as the means of full enjoyment of the privileges hereinbefore rented and farmed out,' etc. So that the language of the instrument clearly is such as to bring it within the section of the Code of Georgia defining the relation of landlord and tenant. I do not see anything whatever in the definition of landlord and tenant to prevent the creation of such a relation in Georgia for any number of years. The length of the tenancy would be immaterial so far as anything is said in this provision of the statute.

If I understand the argument here, it is not denied that, if the relation of landlord and tenant exists in this case, the Georgia Railroad & Banking Company, as owner, is liable for the taxes, but the contention is, as stated above, that the effect of the transaction is to create such an estate in the complainants as to render them liable for the taxes. If the Georgia Railroad & Banking Company is still the owner of this property, and is consequently liable for the taxes on the same, it seems clear that it is liable only under the scheme of taxation provided for it by the Legislature in its original charter. If an estate has been created in the property, a difficult question would arise as to whether or not it was such an estate as would make complainants liable for the entire taxes on the property, or for the lesser liability, that of taxes on...