# Louisville v. Palmes/Opinion of the Court

* Court Documents
* Case Syllabus
* Opinion of the Court
United States Supreme Court
109 U.S. 244
Louisville v. Palmes
The exemption from taxation, created by the eighteenth section of the internal improvement act of 1855, is in every respect similar to that which was declared in Morgan v. Louisiana, 93 U.S. 217, to be not assignable. No words of assignability are used by the legislature of the state in the language creating it, and from its nature and context it is to be inferred that the exemption of the property of the company was intended to be of the same character as that declared in reference to its capital stock and to its officers, servants, and employes, and that all alike were privileges personal to the corporation, or to individuals connected with it, entitled to them by the terms of the law. This exemption, therefore, did not pass from the Alabama & Florida Railroad Company to the Pensacola & Louisville Railroad Company by the conveyances which passed the title to the railroad itself, and to the franchises connected with and necessary in its construction and operation.
This conclusion is confirmed by the eighteenth section of the act of February 4, 1872, amending the charter of the Pensacola & Louisville Railroad Company. That section recites that the last-named company having become assignee of the Alabama & Florida Railroad Company, and of its franchises and property, 'which corporation was exempt from taxation for a limited period, the said Pensacola & Louisville Railroad Company and its property, now owned or hereafter to be acquired, shall also be exempted from taxation during the remainder of said period.' Here the original exemption is declared to be the privilege of the Florida & Alabama Railroad Company, the particular corporation to which it was granted, and the necessity for conferring it by a new legislative grant upon the assignee of the property and franchises of the original corporation, rests upon the implication that the exemption did not pass to it by the assignment between the parties. And the further inference is equally necessary, that the exemption transferred or created in the new company by the terms of the legislative grant is identical in its character as a personal and unassignable privilege to the new grantee, with that it had when it belonged to the first company.
But the second section of the act of February 27, 1877, incorporating the Pensacola Railroad Company, authorized and empowered it to acquire by purchase and assignment all the property, rights, franchises, privileges, and immunities of the Pensacola & Louisville Railroad Company, and, upon completion of such purchase and assignment, declared that the former should be deemed, in law and in equity, to be fully invested with and entitled to all the said property, rights, franchises, privileges, and immunities as though the same were originally granted to or acquired by the said Pensacola Railroad Company.
It is claimed that this language is broad enough to cover the assignment and transfer of the immunity from taxation granted to the Pensacola & Louisville Railroad Company by the eighteenth section of its charter. And we are of this opinion. The language is comprehensive and unequivocal, and the word 'immunity' is apt to describe the exemption claimed. It admits of no doubt, we think, if the Pensacola & Louisville Railroad Company were entitled to this exemption, and if the legislative grant of authority to make and accept this assignment of it was valid and effective, that the right to be exempt from taxation according to its terms passed to the Pensacola Railroad Company. But it must be borne in mind that it must be taken to have vested in the latter, if at all, precisely as it had in the former; that is, as a personal privilege. The assignment in the particular instance, based upon the express authority of a new enactment, did not impart to the immunity the quality of general assignability to other successors in the title to the property and franchises, claiming only under a conveyance between the parties.
The title of the plaintiff in error, therefore, to the exemption claimed, must be supported by some other authority. This is claimed to be found in the general power given by the thirteenth section of its charter to the Pensacola & Louisville Railroad Company to lease or sell to or consolidate with any other railroad company in or out of the state, which power passed with others to the Pensacola Railroad Company by the second section of its charter. But as we have already seen, and as was decided in Morgan v. Louisiana, 93 U.S. 217, and Wilson v. Gaines, 103 U.S. 417, the exemption from taxation does not pass by virtue of a conveyance of the railroad and its franchises, which was all the Pensacola Railroad Company could pass under that authority, but requires for its transfer some particular and express description, indicating unequivocally the intention of the legislature that it might pass by an assignment. That does not exist in this case, and the exemption claimed by the plaintiff in error fails because it was not and could not be transferred to it, under the law, by the Pensacola Railroad Company.
It is sought to avoid this conclusion by converting the question into one of pleading. It is said that the bill alleges, as a matter of fact, that the exemption passed to and vested in the complaintant below, and that the truth of the allegation is admitted by the demurrer. But this is matter of law; the documents of title are exhibited with the bill and constitute part of the record; and we take judicial notice of their legal effect. A fact impossible in law cannot be admitted by a demurrer. In Wilson v. Gaines, 103 U.S. 417, it was inferred, in the face of a demurrer, claimed to be an admission of a contrary allegation, that the sale did not pass any rights of property, not described, as within the lien of the mortgage.
We have thus shown that the claim of the plaintiff in error to the exemption alleged fails, because the Pensacola Railroad Company, if it possessed it, had no power to convey it. It will appear, on further examination, that it fails for a distinct and deeper reason, namely, because the Pensacola Railroad Company was itself not entitled to any such exemption. That company was incorporated by the act of February 27, 1877, which undoubtedly did purport to grant to it, as assignee of the Pensacola & Louisville Railroad Company, in terms sufficiently broad, the immunity from taxation which, by the eighteenth section of the act of February 4, 1872, was expressly declared to be granted to the latter. Both the statutes, however, were passed by the general assembly of Florida, acting under the constitution of that state, which went into effect in 1868. Article 12, § 1, of that constitution is as follows:
'The legislature shall provide for a uniform and equal rate of taxation, and shall prescribe such regulations as shall secure a just valuation of all property, both real and personal, excepting such property as may be exempted by law for municipal, educational, literary, scientific, religious, or charitable purposes.'
'The property of all corporations, whether heretofore or hereafter incorporated, shall be subject to taxation, unless such corporation be for religious, educational, or charitable purposes.' In 1875 this clause was amended so as to read as follows:
'The property of all corporations, whether heretofore or hereafter incorporated, shall be subject to taxation, unless such property be held and used exclusively for religious, educational, or charitable purposes.'
It is under the authority and in pursuance of the mandates of these constitutional provisions that the legislature passed the act of March 5, 1881, under which the road of the plaintiff in error is subjected to taxation, and the validity of which is here under review.
It cannot be and is not contended that under these constitutional limitations the legislature of Florida could make an original grant to a railroad corporation exempting its railroad property from taxation. But the grant to the Pensacola & Louisville Railroad Company by the act of 1872, and that to the Pensacola Railroad Company by the act of 1877, though in form the renewal or transfers of previously existing grants, were in fact the creation of new ones. In Trask v. Maguire, 18 Wall 391-409, it was said, speaking of similar provisions in the constitution of Missouri: 'The inhibition of the constitution applies in all its force against the renewal of an exemption equally as against its original creation;' and in Shields v. Ohio, 95 U.S. 319, it was decided that in cases of corporations created by consolidation the powers of the new company did not pass to it by transmission from its constituents, but resulted from a new legislative grant, that could not transcend the constitutional authority existing at the time it took effect. It follows that the exemption from taxation in terms contained in the charters of 1872 and 1877 were void, as unauthorized and prohibited by the state constitution of 1868.
It does not weaken this conclusion to say that the exemption contained in the internal improvement act of 1855 was authorized by the constitution of the state then in force, which may be admitted, and that it was assignable in its nature or by its terms in such manner that it became impressed upon the property itself into whosesoever hands it should afterwards come, following the title, like an easement or a covenant running with the land, which we have shown, however, not to be the case; for, even on that supposition, the privilege is one that must be exercised by some person capable in law of accepting and exercising it. The conception of an immunity that is impressed upon the thing in respect to which it is granted is purely metaphorical. The grant is to a person in respect of a thing, and it is said to inhere in or be attached to the thing only when by its terms the grant is assignable by a conveyance of the thing, and passess as an incident with the title to each successor. There must always be a person capable not only of receiving the title, but also of accepting the conditions accompanying it, and which constitute the exemption; otherwise the conditions become impossible and void.
After the adoption of the constition of Florida of 1868, there could be no corporation created capable in law of accepting and enjoying such an exemption, for that was prohibited by the constitutional provisions that have been cited. In the case of the Pensacola & Louisville Railroad Company, in 1872, the capacity at that time to receive this privilege depended altogether upon the legislative act amending its charter to that effect; and if any doubt as to this might be reasonably entertained, certainly none can arise as to the Pensacola Railroad Company, which derived all its powers and its very existence from legislation dependent for its validity wholly upon the constitution of 1868. The prohibition which forbids the legislature from exempting the property of railroad corporations from taxation, makes it impossible for the legislature to create such a corporation capable in law of acquiring and holding property free from liability to taxation.
It has, however, been earnestly urged upon us in argument, by counsel for the plaintiff in error, that the supreme court of Florida, in the case of Gonzales v. Sullivan, 16 Fla. 791, explicitly decided, in opposition to the views we have expressed, that the railroad and property, the subject of this litigation, then held by the Pensacola & Louisville Railroad Company, were exempt from taxation, according to the terms of the provision in the internal improvement act of 1858; and it is pressed upon us as a conclusive determination of the law of Florida upon the point, particularly authoritative in the present case, for the reason that the plaintiff in error, having, subsequently to that decision, acquired its title, may be presumed to have acted upon the faith of it.
This presumption is not pressed, however, to the extent of establishing a contract between the plaintiff in error and the state of Florida, the obligation of which has been impaired by any law subsequently passed, nor of working an estoppel against the state as res adjudicata, with an equivalent effect. The decision cited, therefore, cannot be allowed any greater effect as an authority than ought to be given, in cases of this description, to the judgments of state tribunals.
The question we have to consider and decide is whether, in the judgment under review, the supreme court of Florida gave effect to a law of the state which, in violation of the constitution of the United States, impairs the obligation of a contract. In reaching a conclusion on that point, we decide for ourselves, independently of the decision of the state court, whether there is a contract, and whether its obligation is impaired; and if the decision of the question as to the existence of the alleged contract requires a construction of state constitutions and laws, we are not necessarily governed by previous decisions of the state courts upon the same or similar points, except where they have been so firmly established as to constitute a rule of property. Such has been the uniform and well-settled doctrine of this court. State Bank of Ohio v. Knoop, 16 How. 369-391.
As was said by Chief Justice TANEY in the case of Ohio Life Ins. & Trust Co. v. Debolt, 16 How. 416-432:
'But this rule of interpretation is confined to ordinary acts of legislation, and does not extend to the contracts of the state, although they should be made in the form of a law; for it would be impossible for this court to exercise any appellate power in a case of this kind, unless it was at liberty to interpret for itself the instrument relied on as the contract between the parties. It must necessarily decide whether the words used are words of contract, and what is their true meaning, before it can determine whether the obligation the instrument created has or has not been impaired by the law complained of. Now, in forming its judgment upon this subject, it can make no difference whether the instrument claimed to be a contract is in the form of a law, passed by the legislature, or of a covenant or agreement by one of its agents acting under the authority of the state.'
To the same effect are the cases of Jefferson Branch Bank v. Skelly, 1 Black, 436, and Bridge Proprietors v. Hoboken Co. 1 Wall. 116.
It is true that in all these cases the state courts, whose judgments were brought into review, had construed the statutes as not creating a contract; but the principle is equally applicable in the converse case. Burgess v. Seligman, 107 U.S. 20; [S.C.. 2 SUP. CT. REP. 10.]
It is undoubtedly true that the opinion of the supreme court of Florida, in the case of Gonzales v. Sullivan, 16 Fla. 791, is not consistent with that which we have expressed upon some of the principal questions involved in this case. It did declare, speaking of the effect of the internal improvement act of 1855, 'that an exemption from taxation resting in contract is annexed, by the terms of the law which created it, to the road itself, and not to the companies,' and that by the act of 1872 the Pensacola & Louisville Railroad Company, as assignee of the Florida & Alabama Railroad, became entitled to the exemption, because 'the property passed, and with it, as an incident, went the exemption.' But the main topics in the discussion in the opinion were, whether the Florida & Alabama Railroad was within the scope of the internal improvement act of January 6, 1855, by virtue of the amendment of December 14, 1855, the constitutional authority to pass which was denied in argument, but affirmed by the court; and the question as to the effect of the provisions of the constitution of 1868, which we have considered, upon the capacity of the Pensacola & Louisville Railroad Company and the Pensacola Railroad Company to accept the privilege and benefit of the exemption, by legislative authority exerted in 1872 and 1877, does not seem to have been raised or noticed, much less adjudged.
In our opinion there is no error in the judgment of the supreme court of Florida in the matter complained of, and it is accordingly affirmed.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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