State v. Northern Pacific Railroad Company

• Decision Date: 18 July 1884
• Citation: 20 N.W. 234,32 Minn. 294
• Parties: State of Minnesota v. Northern Pacific Railroad Company
• Court: Minnesota Supreme Court

20 N.W. 234

32 Minn. 294

State of Minnesota v. Northern Pacific Railroad Company

Supreme Court of Minnesota

July 18, 1884

This action was brought in the district court for Ramsey county to recover three per cent. of defendant's gross earnings during the year 1881, derived from its operation of the line of railroad between St. Paul and St. Cloud, owned by the St Paul, Minneapolis & Manitoba Railway Co., and over which the defendant ran its trains by virtue of the contract between the companies stated in the opinion. The defendant, in its answer, denied that it had any possession or control of the line, and relied on Sp. Laws 1870, c. 65, also stated in the opinion. The action was tried by Brill, J., who ordered judgment for plaintiff; a new trial was refused, and the defendant appealed.

Order affirmed.

W. P Clough, for appellant.

W. J. Hahn, Attorney General, for the State.

OPINION

Gilfillan, C. J. ^[1]

The charter of the former Minnesota & Pacific Railroad Company provided that, in consideration of the grants, privileges, and franchises therein conferred on the 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 for the year ending on the last day of the preceding December, in lieu of all taxes and assessments whatever," and that to secure the same "the state shall have a lien upon the railroads of the said company, and upon all other property, estate, and effects of the said company, whether real, personal, or mixed;" and that, in consideration of such 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 & 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." Laws 1857, Ex. Sess. c. 1, subc. 1, § 18.

In State v. St. Paul, M. & M. Ry. Co., 30 Minn. 311, 15 N.W. 307, the term "gross earnings," in the foregoing quotation, was held to include, not rents received for the right to operate the railroads, but only sums earned by operation, and that leasing or selling the railroad cannot affect the rights of the state; and into whosesoever hands it may pass, and whoever may receive the gross earnings, the obligation to pay, and the right of the state to receive, the three per centum on such gross earnings are unimpaired, and they still furnish the measure of such obligation and right. In First Div., etc., R. Co. v. Parcher, 14 Minn. 224, (297,) it was held that the exemption from taxation was not a personal privilege conferred on the Minnesota & Pacific Railroad Company, but a right appurtenant to its lines of road; and in Chicago, M. & St. P. Ry. Co. v. Pfaender, 23 Minn. 217, that the condition annexed to it (to wit, the obligation to pay the percentage on gross earnings) always accompanied it as to every part of the road, so that any company in acquiring any portion thereof, with the franchises and immunities appertaining thereto, took it subject to the condition, and burdened with the charge. So that, when the line of road in question here passed to the St. Paul & Pacific Railroad Company, then to the First Division of the St. Paul & Pacific Railroad Company, and finally to the St. Paul, Minneapolis & Manitoba Railway Company, each took it with the exemption, and the obligation to pay the percentage. And as the exemption and charge would accompany any part, however small, of the original company's lines, it follows that, ordinarily, if any company should acquire any estate or interest in any part of such lines that would give it the right to operate the same as a railroad, and to receive gross earnings from operating it, the company would take and hold such estate or interest exempt from taxation, but subject to the obligation to pay the percentage on the gross earnings received by it.

This is not seriously questioned. The defendant rests its defence on the proposition that no such estate or interest passed to it by the contract between it and the St. Paul, Minneapolis & Manitoba Railway Company, and that if the contract did pass such estate or interest, it was exempted, without the obligation to pay the percentage, by Sp. Laws 1870, c. 65, § 1.

The effect of the contract between the two companies must be determined by its terms, without reference to the manner in which, at times, from motives of convenience or otherwise the business of the defendant over the line has been conducted. Whatever estate or interest passed by the contract remains in it unaffected, so far as this case shows, by anything done since. The terms of the contract bearing on the question whether any estate or interest passed to the defendant may be briefly stated. By it the St. Paul, Minneapolis & Manitoba Railway Company, designated in it as the party of the first part, covenants with the defendant, designated as the party of the second part, "that the said party of the second part, its successors and assigns, shall henceforth have, possess, and enjoy the free and unobstructed perpetual use, and the right and title to such use, in common with the said party of the first part, its successors and assigns, of the said branch line," (being the line from St. Paul to St. Cloud,) "and of that part of said main and extension lines extending from East Minneapolis to Minneapolis, and from East St. Cloud to St. Cloud, for the running and operating of the locomotive engines, cars, and trains of the said party of the second part, its successors and assigns, from, to, and between the stations and depots owned, used, and occupied by the said party of the first part in St. Paul, Minneapolis, and St. Cloud, and the terminus of the said Western Railroad at Sauk Rapids, subject only to the necessary regulations for the safety of the trains, and the convenient transaction of the business of both said parties;" and that the party of the second part should thenceforth...