William Wright v. Georgia Railroad Banking Company

• Citation: 54 L.Ed. 544,30 S.Ct. 242,216 U.S. 420
• Decision Date: 21 February 1910
• Docket Number: No. 70,70
• Parties: WILLIAM A. WRIGHT, Comptroller General of the State of Georgia, the County of Wilkes, and the County of Taliaferro, Appts., v. GEORGIA RAILROAD & BANKING COMPANY
• Court: United States Supreme Court

216 U.S. 420

30 S.Ct. 242

54 L.Ed. 544

WILLIAM A. WRIGHT, Comptroller General of the State of Georgia, the County of Wilkes, and the County of Taliaferro, Appts.,

v GEORGIA RAILROAD & BANKING COMPANY.

No. 70.

Argued January 11, 1910.

Decided February 21, 1910.

Messrs. John C. Hart, Samuel H. Sibley, Hooper Alexander, and Ligon Johnson for appellants.

Messrs. Joseph B. Cumming, Joseph R. Lamar,

[Argument of Counsel from page 421 intentionally omitted] Alexander C. King, and King & Spalding for appellee.

Mr. Justice Lurton delivered the opinion of the court:

This is a bill to restrain the enforcement of certain taxes imposed by the state of Georgia, which the railroad company claims to be in violation of a contract between itself and the state. The court below sustained the contention of the railroad company, and held that the scheme of taxation found in the charter of the company was of inviolable obligation, and enjoined any method of taxation conflicting with the stipulations of the charter; from this decree the comptroller has appealed.

The charter in question was granted by the state of Georgia in 1833,—a time long before the imposition of any restriction upon the power of the legislature of that state to stipulate for either an entire or partial exemption from taxation. It is therefore, not denied by the state that the charter constitutes a contract which may not be impaired by subsequent legislation. In view of this concession we are only called upon to decide the extent of the charter exemption, and, incidentally, its duration.

The controlling section of the charter is the fifteenth. The part now relevant is as follows:

'The stock of the said company and its branches shall be exempt from taxation for and during the term of seven years from and after the completion of the said railroads, or any of them; and after that, shall be subject to a tax not exceeding 1/2 of 1 per cent per annum, on the net proceeds of their investments.'

The period of absolute exemption has, of course, long since passed. The only question is as to the duration and extent of the partial exemption which followed.

That the property exempt altogether for seven years is the same property subject to a limited tax thereafter was long ago decided by the supreme court of Georgia in a case which involved the interpretation of this very contract. Augusta v. Georgia R. & Bkg. Co. 26 Ga. 651, 661, et seq. The question in that case was as to the legality of municipal taxes assessed by the city of Augusta upon that part of the capital of the company employed in its banking business and upon real estate situated in that city. The taxes were held illegal. Interpreting this section, that court said:

'It means, first, that the stock of the company was to be subject to a tax, but not to any tax exceeding 1/2 of 1 per cent on the net proceeds of its investments.' Second. 'That the stock of the company, as stock, as a unit, is alone what is to be subject to the tax; not parts of the stock, as the part used in banking, nor the particulars in which the stock consists, as, the land, cars, rails, etc.' Third. 'That this tax to which the stock is to be subject is to be a tax to be laid by the state.'

We may as well turn to one side just here to deal first with the question of the duration of this commuted tax which is to follow the period of tax exemption, because we construe the words 'after that,' which immediately follow the exemption clause, as synonymous with 'thereafter,' and as fixing the time when that property which was theretofore exempt should be subject to the system of taxation provided by the succeeding clause.

It has been rather faintly urged that the duration of this commuted tax or partial exemption was limited to a term of thirty-six years after the completion of the railroad, and that this period has long since expired. This suggested limitation seems to have no other basis than that the words 'and after that' do not mean 'thereafter,' as we have assumed, nor refer to the limitation immediately preceding, but to a more remote limitation found in the 2d section of the charter, and again in the earlier part of the 15th section. But the thirty-six-year limitation is one obviously applicable only to the grant of an exclusive right, within a defined territory, to construct and operate railroads. This was intended to protect this pioneer railroad from being paralleled within that time. The recurrence to this exclusive right in the first part of the 15th section is only for the purpose of placing a condition thereon which, as matter of fact, never happened, and which, therefore, never became vested, and to provide that the termination of that right should not otherwise affect the corporate existence, estate, powers, or privileges of the company. This reference to the exclusive right conferred first by the 2d section is followed by the provision above set out, providing that 'the stock of the said company and its branches shall be exempt from taxation for and during seven years from and after the completion of said railroads, or any of them, and after that shall be subject to a tax not exceeding 1/2 of 1 per cent per annum on the net proceeds of their investment.' 'After that' obviously refers to the last limitation,—the termination of the exemption period,—and it would be an indefensible construction to construe the words as referring it to the thirty-six-year limitation of the exclusive right regulated by the preceding part of the same section.

Coming now to the question as to what is the meaning and scope of the partial exemption found in this clause, we are confronted, first, with the contention that only the shares in the hands of shareholders are within either the first or second clause of this contract, and that the entire property of the company is subject to the taxing power of the state, unaffected by any contract for any stipulated form of limited taxation. This claim is, of course, bottomed on the contention that 'stock of the said company and its branches' refers to and means only the shares in the capital stock held by the shareholders, and that the benefit of the stipulation was intended for the shareholders in their character as such.

The word 'stock' is not uniformly used to designate the capital of a corporation, although its primary meaning is capital, in whatever form it may be invested. Indeed, it is not at all unusual to find the word used synonymously with 'shares,' and meaning the certificates issued to subscribers to the company's stock. It is therefore important to look at the connection in which the word is used when an exemption or substituted method of taxation is involved, to see whether the legislative intent was to exempt the capital of the company, in whatever form invested, or the shares of stock in the hands of the shareholders. Powers v. Detroit, G. H. & M. R. Co. 201 U. S. 543, 559, 50 L. ed. 860, 865, 26 Sup. Ct. Rep. 556. There is an obvious distinction between the capital stock of an incorporated company and the 'shares' of the company. The one is the capital upon which the business is to be undertaken, and is represented by the property of every kind acquired by the company. Shares are the mere certificates which represent a subscriber's contribution to the capital stock, and measure his interest in the company. The charter, plainly enough, recognized this. Thus, in the 3d section, it is provided that 'the stock of the company . . . shall consist of 15,000 shares of $100 per share, and the said company to be formed on that capital.' By a later section the times and places for taking subscriptions are defined, 'so that, on summing up the whole, it may appear whether the stock is filled up, or falls short of the aforesaid capital.' In the 7th section we find the interest of the subscribers to the 'stock' recognized and described as shares, while the capital of the company in which he holds such shares is described as 'the stock of the said company.' Thus, each subscriber is given 'a number of votes equal to the number of shares he may hold in the stock of the company.' That 'stock,' as used, means 'capital,' in whatever form invested, appropriate to the purpose of the company, is also plainly evidenced by the provision that, after the total exemption period, this stock shall be subjected to a specific tax 'on the net proceeds of their investments.' It has been suggested that by 'their investments' was meant the investments of the shareholders in the company's stock. This interpretation is based upon the use of the plural 'their;' but in many places in this same charter the company is referred to in the plural. As this same act provides for the organization of one or more companies to construct branch lines, and extends to them the same tax exemption, it is grammatically correct to read 'their' as referring to this plurality of companies. That 'stock' in the first clause means capital, and 'their investments,' the property into which the company's capital has gone, seems, in any view you take of it, the most rational interpretation of the matter. That the only mode of taxation stipulated for after the period of total exemption is a tax upon the net income of the company's property is seemingly the plain and obvious meaning of this contract. That this is the way in which it has been read and interpreted by everybody who has had to do with the matter of taxation in an official way since 1845, when the railroad seems to have been finished, affords strong evidence that this construction accords with the intent of the charter. Aside from at least sixty years of legislative and executive acquiescence in reading this partial exemption as applicable to the capital stock of the company, there has been a series of cases decided by the supreme court of Georgia which involved the meaning of this clause. In each case the court has held, either, that the whole of the capital was exempt, in whatever...