Railway Company v. Shane Et Al

• Decision Date: 01 October 1874
• Citation: 89 U.S. 444,22 Wall. 444,22 L.Ed. 747
• Parties: RAILWAY COMPANY v. McSHANE ET AL
• Court: U.S. Supreme Court

89 U.S. 444

22 L.Ed. 747

22 Wall. 444

RAILWAY COMPANY v. McSHANE ET AL.

October Term, 1874

APPEALS from the Circuit Court of the United States for the District of Nebraska; in which court the Union Pacific Railroad Company filed a bill to enjoin one McShane and other persons, severally treasurers of different counties in the said State, through which the road ran, and in which it had lands, from the collection of taxes assessed upon them. There were also cross-bills.

The case was thus:

An act of July 1st, 1862, creating the Union Pacific Railroad, enacted¹——

'SECTION 3. That there is hereby granted to the said company for the purpose of aiding in the construction of said railroad . . . and to secure the safe and speedy transportation of the mails, troops, munitions of war, and public stores thereon, every alternate section of public land . . . designated by odd numbers, to the amount of five alternate sections per mile on each side of said railroad, on the line thereof and within the limit of ten miles on said road, not sold, reserved, or otherwise disposed of by the United States, and to which a pre-emption or homestead claim may not have attached at the time the line of said road is definitely fixed. . . .

'And all such lands so granted . . . which shall not be sold or disposed of by said company within three years after the entire road shall have been completed, shall be subject to settlement and pre-emption, like other lands, at a price not exceeding $1.25 per acre, to be paid to said company.'

The statute went on to enact that whenever the company should have completed forty consecutive miles of any portion of its road, ready for the service contemplated by the act, and supplied with all the appurtenances of a first-class road, the President of the United States should appoint three commissioners to examine it and report to him in relation thereto; and if it should appear that forty consecutive miles had been properly completed, then, patents were to issue 'conveying the right and title' to the lands to the company on each side of the road as far as the same should be completed to the amount aforesaid; and patents in like manner were to issue as each forty miles of road were completed.

An act of July 2d, 1864, amendatory of this act, after authorizing the company, on the completion of each section of its road, to issue first mortgage bonds on the same to an amount designated, and extending the grant for twenty miles on each side of said road, enacted:²

'SECTION 21. That before any land granted by this act shall be conveyed to the said company or party entitled thereto . . . there shall first be paid into the Treasury of the United States, the cost of surveying, selecting, and conveying the same, by the said company or party in interest, as the titles shall be required by said company.'- In the case of Railway Company v. Prescott,³ this act was interpreted by this court, upon some clauses not necessary to be here quoted, as making the costs of surveying attach to all the lands granted to the road, whether by the original act of 1862, or by the amendatory act, just quoted, of 1864.

The work of constructing the road was begun in 1865. In 1867 the company, 'for the purpose of raising money to aid in the construction,' mortgaged its lands to secure the payment of $10,000,000. The terms of the mortgage required the trustees, upon payment of the bonds, to reconvey the residue of the unsold lands to the company. It reserved to the company the exclusive control and management of the lands, with power to sell the same; the purchase-money, however, to be paid to the trustees before a conveyance was made. The holder of bonds under the mortgage might purchase lands and pay for them in bonds. Both company and trustees were to join in any conveyance in order to make a title.

By the 1st of April, 1869, a road capable of being safely and speedily travelled on, though susceptible still of many obviously desirable improvements, was practically completed.

On the 10th of that same month, some allegations having been made, that certain subsidies granted by the United States to the company in government bonds, to aid in building the road, had not been applied in the exact way designed by Congress, in the acts granting them, and so as to make the road one absolutely of the 'first class,' a joint resolution was passed, by which it was resolved that to ascertain the condition of the road, the President should appoint a commission of five eminent citizens to examine into the matter and report upon the condition of the road, and to report also what sum, if any, would be required to complete it as a first-class road, such as was contemplated by the acts of Congress. A commission of five eminent citizens was accordingly appointed.

However, the commissioners whom the act of 1862 had directed to decide whether the road was properly built and in pursuance of the acts authorizing it, having certified that it was so built, the President accepted it May 10th, 1869.

The commission of eminent citizens afterwards reported that while the road was in its then state a good and reliable means of communication, well equipped and prepared to carry passengers and freight with safety and dispatch, yet to make it a first-class road within their construction of the act of Congress, would in their judgment require an expenditure of $1,500,000 more than had as yet been laid out on it.

The joint resolution, just above mentioned, by its third section had

'Resolved, That the President is hereby authorized to withhold from said company an amount of subsidy bonds, sufficient to secure the full completion as a first-class road, of all sections of such road, 'or in lieu of such bonds he may receive as such security an equal amount of the first mortgage bonds of such company."

The section enacted further, that in case it appeared to the President that the amount of subsidy bonds yet to be issued was insufficient to secure the full completion of the road, requisition should be made on the company for enough subsidy bonds, or enough of its own first mortgage bonds, to secure full completion, and in default of obtaining such security, that measures should be taken 'to compel the giving of it, and thereby, or in any manner otherwise, to protect the interest of the United States in said road, and to insure the completion thereof as a first-class road, as required by law and the statutes in that case made.'

As to the status of the lands now assessed, it appeared that at the date of the levy and assessment of the tax in question, the company had dealt with the lands, and was now dealing with them as if they were in all respects their absolute property. They had mortgaged them, as we have already stated; were now advertising and selling them. They did not recognize the right of the public to settle upon or pre-empt, and to buy them at $1.25 per acre. On the other hand, neither Congress nor the Interior Department had taken any steps to subject the lands to settlement and pre-emption.

Upon the report of the committee of 'eminent citizens,' under the joint resolution, already mentioned, of April 10th, 1869, that $1,500,000 would be required for supplying deficiencies in the road, the Secretary of the Interior, November 3d, 1869, to indemnify the government, ordered that only one-half the lands to which the company would otherwise be entitled should be patented, and that patents for the rest be suspended until further direction from the Department. Accordingly, in February, 1871, a patent issued to the company under this order for about 640,000 acres of land, half the quantity of the land; the Department refusing to issue a patent for the other half. And so the matter now stood; that is to say, patents for one-half of the company's land were still withheld as security for the completion of its road in matters reported as not up to the required standard.

It also appeared that of the lands situated within the tenmile limit, every alternate odd section which the company claimed had been patented previous to the assessment and levy of the tax, that the residue of the grants within like limits was unpatented, and that the costs of surveying had not been paid on any lands situated within the ten-mile limit, whether patented or unpatented, because (as was stated by the land agent of the company) not required by the Interior Department.

In respect to the lands situated between the ten and twenty-mile limits, it appeared that they had all been selected, listed, certified, and that the land-office fees and costs of surveying had been paid, and every alternate odd section of those claimed by the company patented, the residue being unpatented.

In this state of things, the company, in July, 1873, filed the present bill. It alleged that in 1872 the assessors of the several counties where the lands were situated (which lands were described in lists filed as exhibits with the bill), assessed them, and that the boards of commissioners of the same counties levied taxes for State, school, and local municipal purposes upon them, and that the defendants, the treasurers of these counties, were about to proceed to the collection of those taxes by seizing and selling the locomotives, cars, and rolling stock generally of the company, with other personal property. The bill alleged further, that the lands were not liable to any State taxation at the time of the assessment or levy, and it prayed that these treasurers might be enjoined from further proceedings for the collection of them.

The grounds on which this exemption was claimed may be divided into three distinct propositions, some of which were applicable to all the lands and others to only part of them.

1. That by the third section of the act of 1862, under which the company was organized, and by which the lands within the ten-mile limit were granted in aid of the construction of the road, it was provided that...