Railroad Company v. Maine

• Decision Date: 01 October 1877
• Citation: 24 L.Ed. 836,96 U.S. 499
• Parties: RAILROAD COMPANY v. MAINE
• Court: U.S. Supreme Court

96 U.S. 499

24 L.Ed. 836

RAILROAD COMPANY v. MAINE.

October Term, 1877

ERROR to the Supreme Judicial Court of the State of Maine.

An act of the legislature of Maine, passed in 1874, provides for a tax upon the corporate franchise of every railroad company in that State, at the rate of one and one-half per cent upon its estimated value, determined in this wise: The governor and council of the State are each year required to ascertain the true market value of its shares, and estimate therefrom the fair cash valuation of all the shares constituting its capital stock, on the first day of the preceding April. From this valuation are to be deducted the value of its real estate and other property subjected to local taxation, and, where its lines extend beyond the limits of the State, such portion of the valuation as is proportional to the length of that part of the lines lying without the State. Upon the value of the franchise thus determined the governor and council are to assess the tax; the assessment is to be certified by the secretary of state to the treasurer, and by him notice thereof is to be given to the company. The tax thus assessed is to be in lieu of all taxes on shares of the company previously required by law; and, in case of non-payment, an action will lie for its collection.

The Maine Central Railroad Company was a corporation of Maine in 1875, and the owner of a railroad in the State, and its franchise was assessed and taxed for that year under this statute. It is admitted that the provisions of the act were in all respects complied with, and the required notice of the assessment given to the company. The tax not being paid, the present action of debt was brought for its recovery. The company pleaded in defence that the act of 1874 was is conflict with the provisions of its charter, and also with the Constitution of the State and of the United States, in that it impaired the obligation of the contract contained in the charter. Upon an agreed statement of facts, the case was submitted to the Supreme Court of the State for its decision. That court gave judgment for the State, sustaining the validity of the tax; and the company brought the case to this court on writ of error.

The Maine Central Railroad Company was originally formed in October, 1862, by the consolidation of two distinct corporations, the Androscoggin and Kennebec Railroad Company, which was incorporated in March, 1845, and had constructed a railway from Waterville to Danville; and the Penobscot and Kennebec Railroad Company, which was incorporated in April, 1845, and had constructed a railway from Bangor to Waterville.

The charter of each company required it to keep a regular account of its disbursements, expenditures, and receipts, in a book, which was to be open at all times to the inspection of the governor and council, and any committee of the legislature; and required its treasurer, at the expiration of every year, to make, under oath, an exhibit to the legislature of the net profits derived from the income of its road. It also provided that the real estate of the company should be taxable by the towns, cities, and plantations in which it lay, in the same manner as that of private persons, and its value be estimated in the same way; that the shares of the stockholders should be deemed personal estate, taxable to them at their places of residence; and that whenever the annual net income of the company amounted to ten per cent upon the cost of the road and 'its appendages, and incidental expenses,' the directors should make a special report of the fact to the legislature, 'from and after which time' one moiety, or such other portion as the legislature might determine, of the net income accruing thereafter, above the ten per cent, first to be paid to the stockholders, should annually be paid by the treasurer of the corporation, as a tax, into the treasury of the State. It also declared that no other tax should ever be levied or assessed on the corporation, or any of its privileges or franchises, and that the charter should 'not be revoked, annulled, altered, limited, or restrained, without the consent of the corporation, except by due process of law.'

The consolidation of these two companies into the Maine Central Railroad Company was effected under an act passed in April, 1856, which authorized it upon the agreement of their directors, approved by the stockholders, prescribing the terms and conditions thereof, the mode of carrying the same into effect, the name of the new corporation, the number of its directors, the time and place of holding the first election, the amount of its capital, the number of shares of stock, and the manner of converting the shares of the capital stock of each of the corporations into those of the new corporation; and filing a duplicate or counterpart of the agreement in the office of the secretary of state. Immediately afterwards, upon the election of the directors, the corporation making the agreement were to be consolidated, and, together, to constitute a new corporation, by the name therein mentioned. The act provided that the new corporation thus formed should have 'all the powers, privileges, and immunities' possessed by each of the corporations entering into the agreement, and be subject to all the legal obligations then resting upon them respectively; with a proviso, however, that it should not be construed as extinguishing the old corporations or annulling their charters, but that they should be 'regarded as still subsisting, so far as their continuance for the purpose of upholding any right, title, or interest, power, privilege, or immunity, ever possessed, exercised, or enjoyed by either of them may be necessary for the protection of the creditors or mortgagees of either of them, or of such new corporation; the separate exercise of their respective powers and the separate enjoyment of their respective privileges and immunities being suspended until the protection of such creditors or mortgagees shall require their resumption, when such suspension shall cease, so far and for such time as the protection of such creditors or mortgagees may require.'

Some years after this consolidation, by a law passed in 1873, three other railroad companies, whose roads were at that time under lease to the Maine Central Railroad Company, were allowed to consolidate with it, upon the same terms and conditions prescribed by the act of 1856, so far as they were applicable; and such second consolidation was effected in 1874. These three companies were the Protland and Kennebec Railroad Company, which owned a railroad from Augusta to Portland; the Sommerset and Kennebec Railroad Company, which had constructed a railroad from Skowhegan to Augusta; and the Leeds and Farmington Railroad Company, which owned a railroad from Farmington to Leeds Junction.

The first of these three companies was formed by holders of bonds of the Kennebec and Portland Railroad Company, a corporation created in 1836, and, by the act of 1845, possessed of a similar conditional immunity from taxation to that of the two companies first consolidated. By authority of the legislature, this company had issued its bonds, secured by mortgage upon its road and franchise. In 1862, the mortgage was foreclosed, and the present corporation formed. The new corporation was, by statute, invested with the legal rights and immunities of the original corporation. It is admitted that the charters of the other two of those three corporations contained no limitation upon the taxing power of the State.

It is upon the franchise of the Maine Central Company, as formed in 1874, upon the second consolidation, that the tax was assessed and levied for which this action was brought.

An act of the legislature of Maine, passed in 1831, c. 503, contained the following provision:——

'All acts of incorporation, which shall be passed after the passage of this act, shall at all times hereafter be liable to be amended, altered, or repealed, at the pleasure of the legislature, in the same manner as if an express provision to that effect were therein contained, unless there shall have been inserted in such act of incorporation an express limitation or provision to the contrary.'

Judgment was rendered in favor of the State, and the company sued out this writ of error.

Mr. Josiah H. Drummond for the plaintiff in error.

1. The legislature has the power, by contract, to exempt a person or corporation from taxation, and no subsequent legislature can repeal the exemption. Cooley, Taxation, 55; New Jersey v. Wilson, 7 Cranch, 164; Gordon v. Appeal Tax Court, 3 How. 133; Piqua Branch of State Bank of Ohio v. Knoop, 16 id. 369; Ohio Life Insurance & Trust Co. v. Debolt, id. 416; Dodge v. Woolsey, 18 id. 331; Mechanics', &c. Bank v. Thomas, id. 384; Jefferson Branch Bank v. Skelly, 1 Black, 436; McGee v. Mathis, 4 Wall. 143; Von Hoffman v. City of Quincy, id. 535; Home of the Friendless v. Rouse, 8 id. 430; Washington University v. Rouse, id. 439; Wilmington Railroad v. Reid, 13 id. 264; Raleigh & Gaston Railroad Co. v. Reid, id. 269; Tomlinson v. Jessup, 15 id. 454; Tomlinson v. Branch, id. 460; Humphrey v. Pegues, 16 id. 244; The Delaware Railroad Tax, 18 id. 206; Pacific Railroad Co. v. Maguire, 20 id. 36; Erie Railway Co. v. Pennsylvania, 21 id. 492; Bailey v. Magwire, 22 id. 215; Central Railroad, &c. Co. v. Georgia, 92 U. S. 665; Branch et al. v. City of Charleston et al., id. 677.

This power, when the charters of the consolidating companies were granted, or when any of the acts in addition thereto, or under which the plaintiff in error claims any rights, were passed, was not limited by any provisions of the Constitution of Maine.

2. The plaintiff in error has a valid subsisting contract in its charter, in relation to the manner in which it shall be taxed. The two companies first consolidated into the Maine Central were, by their charters of 1845, subjected only to a...