Morgan v. Louisiana

• Decision Date: 01 October 1876
• Citation: 93 U.S. 217,23 L.Ed. 860
• Parties: MORGAN v. LOUISIANA
• Court: U.S. Supreme Court

93 U.S. 217

23 L.Ed. 860

MORGAN v. LOUISIANA.

October Term, 1876

ERROR to the Supreme Court of the State of Louisiana.

This was an action by the State of Louisiana against Morgan, to recover certain taxes.

The facts are stated in the opinion of the court.

The judgment below was in favor of the plaintiff. The defendant thereupon sued out this writ of error.

Submitted on printed arguments by Mr. Henry J. Leovy for the plaintiff in error.

1. The legislature of Louisiana had power to exempt the property from taxation; and the grant made in this case was a contract which was inviolable. New Jersey v. Wilson, 7 Cranch, 164; Jefferson Bank v. Shelly, 1 Black, 536; Home of the Friendless v. Rouse, 8 Wall. 430; Wilmington Railroad v. Reid, 13 id. 264, 269; Humphrey v. Pegues, 16 id. 244; 18 id. 392; 20 id. 36; 21 id. 492; Lacey's Dig. Railway Decisions, p. 853; 31 Ill. 484; 17 id. 291.

2. Exemption from taxation is a franchise that may be mortgaged and sold, especially in Louisiana. La. Stat. 1853, 1854, 1856; Civil Code, arts. 2449, 3183; New Jersey v. Wilson, 7 Cranch, 165; Jefferson Bank v. Shelly, 1 Black, 536; Home of the Friendless v. Rouse, 8 Wall. 430; Trask v. Maguire, 18 id. 392; Pacific Railroad v. Maguire, 20 id. 36; Humphrey v. Pegues, 16 id. 244; 13 id. 269; Wilmington Railroad v. Reid, 13 id. 264; Bardstown & Louisville R. R. Co. v. Metcalfe, 4 Ky. (Met.) 199; Allen v. Mont. R. R. Co., 11 Ala. 437; Pollard v. Maddox, 28 id. 321; 30 Vt. 182; 70 Penn. 355; St. Paul Co. v. Parker, 14 Minn. 297; Lacey's Dig. Railway Decisions, 753; Union Bank Case, 6 Humph. 515; Enfield v. Hart, 17 Conn. 40.

Plaintiff in error is the owner by purchase at public sale of all the property formerly owned by the railroad company, including all its franchises; and his title to the same has in no manner been forfeited.

3. The exemption from taxation of the capital stock of the company is without limitation; but that part invested in works, fixtures, workshops, &c., is exempt till ten years after completion of the road, &c. Sect. 2, Act 1853. It is admitted that the capital stock is exempt for ever. The 'capital stock' is the capital of the company, whether remaining in money or invested in the necessary real estate, rails, and track, in grading, and in laying rails. Trask v. Maguire, 18 Wall. 391; Wilmington Railroad v. Reid, 13 id. 264; Pacific Railroad v. Maguire, 20 id. 42.

The tax claimed in this case is for $400,000, real estate (part of the road), $300,000, capital, and $19,000, ferry-boats; in all, $719,000. All this is clearly part of the capital stock exempted from taxation.

Mr. J. Q. A. Fellows for the defendant in error.

As the first grand division of eighty miles of road, purchased by the plaintiff in error at the marshal's sale in May, 1869, had been completed for more than ten years prior to that time, it was not exempt from taxation, and his purchase of the remaining property of the railroad company at the sheriff's sale in March, 1870, did not, and could not, include the franchises of the company.

Only by virtue of an express authorization of the legislature can the franchises of a corporation be divested. This was not the case at the sheriff's sale, made in the execution of an ordinary judgment on an ordinary debt against the railroad company. 1 Redf. Railw. c. 7, p. 117 (ed. 1873); 2 id. c. 7, pp. 484, 501 (ed. 1873); Lacey's Dig. Railway Decisions, p. 292, Nos. 4, 7, 21, 25; Plymouth Railroad v. Colwell, 39 Penn. St. 337; State v. Rives, 5 Ired. 297; Benedict v. Heineberg, 43 Vt. 231; State v. Mexican Gulf Railroad Co., 3 Rob. (La.) 513.

The plaintiff in error could buy at the sheriff's sale only the tangible property of the railroad company, and not any of its franchises. He therefore did not acquire the right of exemption from taxation of the property purchased previously at the marshal's sale; even if such exemption be a franchise, and not a strictly personal right or immunity, which is neither transferable by the railroad company, nor subject to seizure and sale under execution.

The plaintiff in error can therefore claim only by virtue of his purchase at the marshal's sale, under the laws as they existed at the time of his purchase.

MR. JUSTICE FIELD delivered the opinion of the court.

This is an action by the State of Louisiana to recover of the defendant taxes levied upon his property for the years 1870 and 1871. The defendant contends that the property was exempt from taxation in his hands, because it was thus exempt whilst held by the New Orleans, Opelousas, and Great Western Railroad Company, from whom it was acquired in part by purchase at a mortgage sale, and in part by purchase at a sheriff's sale upon a money judgment. The facts upon which the defendant relies are substantially these: By an act passed in April, 1853, the legislature of Louisiana incorporated the New Orleans, Opelousas, and Great Western Railroad Company, for the purpose of constructing, working, and maintaining a rail road from Algiers, opposite New Orleans, westward to Berwick's Bay, and thence to Washington, in the parish of St. Landry, to be afterwards extended to a point on the Sabine River most favorable for the purpose of continuing the road through the State of Texas to El Paso on the Rio Grande.

The act provided that the capital stock of the company should be exempt from taxation, and that the works, fixtures, workshops, warehouses, vehicles of transportation, and other appurtenances of the company, should be exempt from taxation for ten years after the completion of the road within the limits of the State; and that the president, engineers, clerks, agents, and servants of the company, should be exempt from jury duty, and from military duty, except in case of invasion or insurrection.

The company was authorized to borrow, from time to time, such sums as might be required for the construction of the road above the amount received from subscriptions to its capital stock, not exceeding $6,000,000, and to secure the loans by mortgaging its property in whole or in part, as might be deemed expedient. Subsequently, in 1856, the legislature passed a general law extending the powers of railroad companies, and providing that, in addition to those already conferred, any railroad company established under the laws of the State might borrow, from time to time, such sums of money as might be required for the construction or repairs of any railroad, and for that purpose might issue bonds or obligations secured by mortgage on the property and franchises of the company, and payable at such times and places as its president and directors might designate.

In 1857 the road of the company was completed as far as Berwick's Bay, a distance of eighty miles from New Orleans and, to obtain funds to continue its construction beyond that point, the directors, in March, 1859, authorized the president to issue two thousand bonds of the company, in sums of $1000 each, and to secure their payment and interest by a first mortgage on the portion of the road completed, together with the land over which the road was constructed, the equipments, appurtenances, rights, and franchises of the company applicable to that portion. Under this authority the bonds were issued and the mortgage executed in April, 1859. With the funds raised by this means work on the road was resumed, and its grading was nearly completed to Opelousas, a distance of eighty miles beyond Berwick's Bay, when, in 1862, the work was discontinued, the road having been seized by the military forces of the United States, by whom it was held until February, 1866, when it was restored to the company. Since its restoration no further work has been done, and the construction of the portion of the road beyond Opelousas to the Sabine River has never been commenced.

The defendant was the owner of several hundred of the mortgage bonds issued; and their coupons not being paid, proceedings were, in 1869, instituted by him in the Circuit Court of the United States for the sale of the mortgaged property, which resulted in the issue of executory process to the marshal of the district. At the sale made by that officer, the defendant became the purchaser of the completed division of the road, and the equipments and franchises appertaining to that division, with its cars, locomotives, machinery, utensils, and effects generally. The proceeds received not covering the entire indebtedness of the company, suits were instituted by several bondholders in the State courts for the amount due them, and judgments were...