Source: https://supreme.justia.com/cases/federal/us/236/687/
Timestamp: 2019-04-23 02:27:13+00:00

Document:
Justia › US Law › US Case Law › US Supreme Court › Volume 236 › Wright v. Louisville & Nashville R. Co.
Wright v. Central Ry. of Georgia, ante, p. 236 U. S. 674, followed to effect that, under the statutes of Georgia and the leases involved in this action, executions for ad valorem taxes on railroads the owners whereof were exempted by statute from a greater tax than a specified percent on the income, could not be enforced against those in possession of the railroads as lessees.
The fact that owners of a railroad, who are exempted by statute from paying a greater tax than a specified percent on the income thereof, lease the entire road to another company does not open the right of the state to tax such lessees on the fee of the property.
In this case, the exemption of the lessor from taxation on its road which it has leased applies to betterments and improvements made by the lessee such as the lessor would have made to meet enlarging business and so also as to rolling stock substituted for that of the lessor and which under the lease belongs to the lessor.
Railroad property jointly used with exempted property but not part of the road originally exempted may be subject to assessment, but not in one assessment covering both the classes of property.
201 F. 1023 modified and affirmed.
This is a bill brought by the railroad companies, respondents, to prevent the collection of a tax upon the Georgia Railroad, operated by them under a lease and assessed to them as their property. The district court made a decree for the plaintiffs with certain exceptions, which was affirmed on appeal and cross-appeal by the circuit court of appeals for the reasons given by the district court. 199 F. 454; 201 F. 1023.
The main question is similar to that disposed of in Wright v. Central of Georgia R. Co., just decided, ante, p. 236 U. S. 674.
"rent or farm out all or any part of their exclusive right of transportation or conveyance of persons, on the railroad or railroads, with the privilege to any individual or individuals, or other company, and for such term as may be agreed upon."
So the state has covenanted that the company's property shall be exempt from tax except upon its income, which it is authorized to make in any of three ways. And as bearing on the different uses of the company's franchise that were deemed possible in that day, as we remarked in the other case, we may add that, by § 13, if any persons intrude upon the railroad by any manner of use thereof, they shall forfeit to the company all the vehicles and animals that may be so intrusively introduced and used; that, by § 14, the company, if it sees fit to farm out any part of its exclusive right, may prescribe the value and size of vehicles to be used or pass on its road, and the locomotive power, and that, by § 22, the company, if it prefers, instead of railroads, may construct common roads and use steam carriages thereon.
had been renounced as against the lessor. If the fee of the roads is taxable to no one while the liability of the lessor to the above-mentioned one-half of one percent remains, an attempt to collect a tax upon the fee from the plaintiffs is an attempt on the part of the state to tax the leased property, which was completely beyond the reach of its taxing power except insofar as permitted by the contract, the obligations of which could not be impaired without a violation of the contract clause of the Constitution of the United States. Thus, the particular features of the case in hand take it without the rule applied in Rochester Railway v. Rochester, 205 U. S. 236, and other kindred cases, from which we have no purpose to depart.
bonds issued by it. We do not perceive why they should be put on a different footing from the others. And we are not prepared to say that terminals, etc., added to the demised property belonging to the lessor, although bought with $225,000 of money belonging to the lessees, were not reasonable betterments and exempt.
The Atlanta terminals require separate treatment. Besides so much of them as was embraced in the lease, there seems to be other land belonging to the West Point Company, and other land again of the Louisville & Nashville Railroad. By an agreement between the plaintiffs and the West Point Company, this property is converted into and used as a joint terminal. The assessment complained of deals with this as a separate entity and item, and in the decree is excepted from the injunction. It appears to us that so much of the property as is part of the exempted line still is exempt. It is used for the purposes of the line, although the relations have become more complex. The rest may be subject to taxation, but not in this assessment. The decree will be modified in this respect, but otherwise is affirmed.
MR. JUSTICE LAMAR took no part in the decision.
MR. JUSTICE HUGHES, MR. JUSTICE PITNEY, and MR. JUSTICE McREYNOLDS dissent.

References: v. 
 v. 
 v. 
 § 13
 § 14
 § 22
 v.