State v. Great Northern Ry. Co.
| Decision Date | 24 December 1908 |
| Docket Number | Nos. 15,994, 15,996-(27, 28).,s. 15,994, 15,996-(27, 28). |
| Citation | 106 Minn. 303 |
| Parties | STATE v. GREAT NORTHERN RAILWAY COMPANY.<SMALL><SUP>1</SUP></SMALL> |
| Court | Minnesota Supreme Court |
formerly known as the Extension Line or St. Vincent Extension, and all operated under a lease from the St. Paul, Minneapolis & Manitoba Railway Company,) were built and have always been operated by virtue of the provisions of the charter of the Minnesota & Pacific Railroad Company and the acts amendatory thereof; that by virtue of section 18 of the act of May 22, 1857, it was provided the last named company should be exempt from all assessments and taxes whatever upon the payment of three per cent. of its gross earnings; that by virtue of various enumerated mortgage foreclosure proceedings and purchases at foreclosure sales and of chapter 30, Laws of 1876, and chapter 49, Laws of 1879, the Manitoba Company became invested in respect of each of the lines purchased "with all and singular the franchises, rights, powers, privileges and immunities theretofore granted to or possessed by the corporation making such mortgage or deed of trust" to the same extent as if the same had been originally conferred upon such purchaser, and still possessed the same contract rights which were theretofore possessed by the Minnesota & Pacific Railroad Company, the St. Paul & Pacific Railroad Company and the First Division of St. Paul & Pacific Railroad Company in respect to the payment of three per cent. of gross earnings in lieu of all other taxes under the contract whose terms are stated in the act of May 22, 1857. It further alleged that it had paid on said leased lines of road the amount of the three per cent. tax on their gross earnings for the year 1905 as required by the act of May 22, 1857. It alleged that the amount claimed was one per cent. of their gross earnings and was claimed solely by virtue of Laws 1903, chapter 253, and that the act was void as to defendant in that it impaired the obligation of the contract contained in the act of May 22, 1857, and so violated section ten of article one of the federal constitution and section eleven of article one of the Minnesota constitution.
The case was submitted upon stipulated facts. The court, Olin B. Lewis, J., found that since June, 1879, the Manitoba Company had constructed, acquired and leased sixteen branch lines of road and that plaintiff was entitled to judgment in an amount equal to one per cent. of the gross earnings for the year 1905 of the several branches enumerated. It was then stipulated that on the findings the amount to which plaintiff was entitled was $32,285.94. From a judgment entered pursuant to the order, both plaintiff and defendant appealed. Affirmed as to defendant's appeal, reversed as to state's appeal and judgment ordered in favor of the state for the amount claimed in the complaint.
Edward T. Young, Attorney General, George W. Peterson, Assistant Attorney General, and O'Brien & Stone, for plaintiff.
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William R. Begg, for defendant.
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This action involves the validity of chapter 253, p. 375, Laws 1903, approved by the people at the general election of 1904, as provided for by article 4, § 32a, of the state constitution, increasing the gross earnings tax upon railroad companies of the state to four per cent. Though the facts and various statutes bearing upon the case, and which control its determination, have been stated and referred to in prior opinions, a restatement is necessary to an understanding of the present opinion.
By an act approved March 3, 1857 (11 St. 195, c. 99), congress granted to the territory of Minnesota certain public lands to aid in the construction of railroads therein. Edgerton, R. R. Laws, 82. The act particularly defined the terms of the grant, and expressly provided that the lands thereby granted were subject to the future disposal of the territory or state for the purposes therein expressed, and no other. This, when accepted, created a trust which the territory or future state was bound to carry out in form and spirit as directed by the terms of the grant. For this purpose the territorial legislature, by chapter 1, Laws 1857, Ex. Sess., in effect accepted the grant and provided for the incorporation of the Minnesota & Pacific Railroad Company, and conferred upon it and its successors authority to construct and operate certain lines of railroad within the territory, including specified branches, and providing for the conveyance to the company of the lands granted by congress, substantially upon the terms and conditions imposed by the act of congress.
This act constituted the charter of the railroad company. Its organization was completed, and the company, after formally accepting the act, commenced the construction of the railroad therein provided for. Lack of capital to prosecute the work necessitated a loan by the company, and it mortgaged by trust deed its line, all its property and franchise privileges, to Elon Farnsworth, and others, to secure the payment of funds thus obtained. This mortgage was executed on July 31, 1858, and was supplemented by a second mortgage to the same parties in November, 1858, securing the payment of bonds issued by the company, a part of which were delivered to the state in exchange for its bonds issued under the constitutional amendment of April 15, 1858, to aid in the construction of the road. Edgerton, R. R. Laws, 3. The state bonds, to the amount of five million dollars, though the company utterly failed to construct the road and the state in fact received no consideration therefor, the state, after a prolonged contest, by the decision of this court in State v. Young, 29 Minn. 474, 9 N. W. 737, was rightly compelled to pay.
Section 18 (Page 12) of the charter of the Minnesota & Pacific Company contained two distinct provisions upon the subject of taxation, in the language following:
1. "In consideration of the grants, privileges and franchises herein conferred on the said Minnesota & Pacific Railroad Company, the said company shall and will, on or before the first day of March in each year, pay into the treasury of the territory or future state, three per centum of the gross earnings of the said railroad, * * * and in consideration of such annual payments the said company shall be forever exempt from all assessments and taxes whatever by the territory or state which shall succeed the territory, or by any county, city, town, village or other municipal authority in the territory or state upon all stock in the said `Minnesota and Pacific Railroad Company,' whether belonging to said company or to individuals, and upon all its franchises or estate, real, personal or mixed, held by said company," and
2. "Said land granted by said act of congress hereby authorized to be conveyed to the said Minnesota and Pacific Railroad Company shall be exempt from all taxation till sold and conveyed by said company."
The company did not complete the construction of the lines of road provided for by its charter, and made default in the payment of the Farnsworth mortgage. Whereupon, on June 3, 1860, the mortgage was duly foreclosed by advertisement in the manner and in accordance with its terms and the statutes of the state in such case made and provided, and the railway, properties, franchises, rights, and privileges of the company were purchased by the state for the sum of one thousand dollars, it being the highest and best bidder at the sale. By this purchase the state became vested with all the railroad properties, and, no redemption being made, the company became wholly divested of its rights. In March, 1861, for the purpose of giving the company another opportunity to complete the roads contemplated, the state legislature by an act approved March 8, 1861,2 restored to the company all rights lost under the foreclosure upon the terms and conditions specified in the act, one of which was that if the company failed to construct a line of road between St. Paul and St. Anthony before January 1, 1862, all rights under the act should be forfeited to the state without any further act or ceremony on its part. The company failed to comply with the conditions, and in consequence the land grant and all property, rights, privileges, and immunities of the company reverted to and became finally, fully, and absolutely vested in the state.
Thereafter the state legislature by chapter 20, p. 247, Sp. Laws 1862, being an act to facilitate the construction of the Minnesota & Pacific Railroad, and to amend and continue the act incorporating that company, provided for the organization of the St. Paul & Pacific Railroad Company, and thereby granted to that company, and its successors, all rights, privileges, franchises, lands, and property theretofore granted to the Minnesota & Pacific Company and restored to the state by the foreclosure just referred to, and authorized it to construct the lines of road undertaken by the old company. The terms and conditions relating to the construction of the road and the conveyance of lands as the work progressed were in all respects in conformity with the act of congress. That company accepted the act, and proceeded to the performance of the obligations...
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