Source: https://supreme.justia.com/cases/federal/us/236/674/
Timestamp: 2019-04-24 11:58:07+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 236 › Wright v. Central of Georgia Ry. Co.
This Court will not presume that a state legislature in granting a charter containing exemptions would either practice deceit or make a futile grant.
A lessee of railroads which were built under special charters containing irrepealable contracts by which the property was not subject to be taxed higher than a specified percent on the annual income derived therefrom is not subject to an ad valorem tax as the owner of such property.
The statutes of Georgia in regard to the taxation of railroads involved in this action are construed as making the fee exempt from other taxation than that provided for in favor of the lessee as well as of the lessor.
While technical distinctions should be avoided a far as may be in matters of taxation in the interest of substantial justice, they should not be disregarded in order to enable a state to escape from a binding bargain, and so held in regard to distinctions between lessors and lessees where the protection of the latter is necessary in order to make good the promise of the state made to the former.
The courts cannot take the place of the taxing power, nor can taxes based on ownership of the property be enforced against a lessee of the property under the statutes of Georgia and the leases involved in this case.
after crediting . . . one-half of one percent of the net income . . . on that portion of its property known in its system,"
respectively, as the Augusta & Savannah Railroad and the Southwestern Railroad. These roads were built under special charters admitted to constitute irrepealable contracts, by which the property was not subject to be taxed higher than one-half of one percent upon the annual income, so that it may be assumed that the present taxes could not be sustained if the roads still were in the separate hands of the corporations that built them.
But in 1862, the Augusta & Savannah Railroad, and in 1869, the Southwestern Railroad, made leases of their respective roads and franchises to the Central Railroad & Banking Company of Georgia during the continuance of the charters of the lessors. In 1892, the property of the lessee went into the hands of a receiver, and the lessors, being allowed an election by the court, elected to allow the property to remain in his hands, which it did until a sale of the same and purchase, under a reorganization plan, by the appellee, the Central of Georgia Railway Company. In 1895, by agreement between the latter and the two lessors, the leases were modified so as to run for one hundred and one years from November 1 of that year, renewable in like periods upon the same terms forever. Notwithstanding these leases, the state has been content down to this time to collect from the lessors the tax provided for in their charter, but now, conceiving the state and its officers to have been mistaken, the comptroller seeks to tax the whole property to the lessee.
to tax the plaintiff upon property that it does not own. To decide whether these taxes are such an unjustified exaction, we must turn to the legislation of the state, bearing in mind that the practical construction given to the law for nearly half a century is strong evidence that the plaintiff's contention is right. Wright v. Georgia R. & Banking Co., 216 U. S. 420, 216 U. S. 426; Temple Baptist Church v. Georgia Terminal Co., 128 Ga. 669, 680.
"That said company shall at all times have the exclusive use of the said railroad, for the transportation or conveyance of merchandise, goods, wares, and freight of every kind, and passengers, over the said railroad, so long as they see fit to use this exclusive privilege, and said company shall be authorized to charge the same rates for freight or passage as are allowed in the charter of the Georgia Railroad & Banking Company: Provided always, that said company may, when they see fit, rent or farm out all or any part of their exclusive right of transportation of freight, or conveyance of passengers, with the privilege, to any individual or individuals, or other company, and for such term as may be agreed upon,"
it being added that the company, in the exercise of the right of transportation, or the persons or company "so renting from said company . . . shall, so far as they act on the same, be regarded as common carriers."
obtained by doing the whole business, by letting in others to share a part of it, or by making a lease of the whole. Any one of the three courses is permitted, one deemed as likely as another, and also, so far as appears, all standing alike in the mind of the legislature in respect of any legal effect upon the other grant of rights.
The foregoing view of § 16 would lead us to believe that no change in the matter of tax exemption was expected to follow from the demise of the road, any more than it would have followed from the admission of another carrier to partial rights, or of an individual to carry his own goods. But that is only an introduction to further considerations. We cannot suppose that the legislature meant either to practise a cunning deception or to make a futile grant. Therefore, we are unable to read the charter as making the exemption vain by reserving to the state an unlimited right to impose upon the lessee all that it had renounced as against the lessor. For that was to give notice to the parties, if they were supposed to know the law, that the exemption would be lost if the income was earned in one of the contemplated ways, or if they were supposed ignorant, was to invite them to a bargain that was to have an unexpected and disastrous result.
"so to lease to the Central Railroad & Banking Company of Georgia their respective railroads for such term of time and on such other terms as they respectively may deem best."
that it was encouraging a few years before. We still cannot suppose that it was inviting the lessors to lose the benefit of their exemption, or the lessees to find themselves entrapped with a burden made possible only by accepting the invitation of the act.
We are not suggesting that the contract in the charters of the lessors passed by assignment to the lessee, nor are we implying that the property was exempted generally, into whosoever's hands it might come. We are dealing only with the specific transaction permitted and encouraged by the Acts of 1838 and 1852, and saying that we cannot reconcile it with our construction of those acts to allow that transaction to change the position for the worse. We construe those statutes as making the fee exempt from other taxation than that provided for, in favor as well of the lessee as of the lessor, the protection of the lessee being necessary in order to make good that promised to the lessor.
a lease, having about eighty-five years to run, that may, not must, be renewed in perpetuity, and a fee subject to a rent charge. But the disregard of technical distinctions is in the interest of substantial justice, not for the purpose of enabling the state to escape from a binding bargain. If we are right in our interpretation of the statute from which the parties to the leases got their powers, this later legislation of Georgia is immaterial, or should not be construed as embracing an attempt to escape from a contract by a subtlety that almost defies ingenuity to understand. See Wright v. Georgia R. & Banking Co., 216 U. S. 420, 216 U. S. 432.
The executions, as we have said, must stand or fall on the jurisdiction that they disclose. They attempt to tax the fee as the property of the plaintiff. The injunction runs only against taxing the plaintiff as owner. We discuss nothing but the question before us. For the reasons that we have given, we are of opinion that the taxes cannot be collected on the present executions. The court cannot take the place of the taxing power. Yost v. Dallas County, ante, p. 236 U. S. 50. It follows that the injunction must be sustained.
MR. JUSTICE LAMAR took no part in this decision.
It has repeatedly been declared by this Court to be settled law that tax exemptions, or tax limitations, are personal to the grantee; that is, are nontransferable, and do not run with the property unless the legislature has explicitly provided otherwise. It has been held not to be enough that the grantee is authorized to make a conveyance of all its property, estate, privileges, and franchises.
"A legislative authorization of the transfer of 'the property and franchises,' . . . of 'the property,' . . . of 'the charter and words,' . . . or of 'the rights of franchise and property,' . . . is not sufficient to include an exemption from the taxing or other power of the state, and it cannot be contended that the word 'estate' has any larger meaning."
"that a statute authorizing or directing the grant or transfer of the 'privileges' of a corporation, which enjoys immunity from taxation or regulation should not be interpreted as including that immunity."
See also Wright v. Georgia R. & Banking Co., 216 U. S. 420, 216 U. S. 437. The controlling principle of these decisions is that, in view of the supreme importance of the taxing power of the state, every doubt must be resolved in favor of its continuance.
"This salutary rule of interpretation is founded upon an obvious public policy, which regards such exemptions as in derogation of the sovereign authority and of common right, and therefore not to be extended beyond the exact and express requirement of the grants, construed strictissimi juris."
Memphis &c. R. Co. v. Railroad Commission, supra (p. 112 U. S. 617).
reasonable construction consistent with the reservation of the power."
Picard v. Tennessee &c. R. Co., supra (p. 130 U. S. 641).
I do not find a word in the statutes of Georgia which confers any immunity from the taxing power upon this appellee. The question relates to its interest, not to that of the original companies. What that interest or property may be, and how it is to be assessed, is another question. The first inquiry is whether the appellee has any immunity under the contract clause, and that, I submit, is answered when it is found that it has no contract of its own and no stipulation for a transfer to it of the immunity of others.
"plain that an exemption granted to the owner of the land in fee does not extend to an exemption from taxation of an interest in the same land, granted by the owner of the fee to another person as a lessee for a term of years."
"lasts only so long as the university owns the lands, and when it conveys a certain interest in them to a third person, it no longer owns that interest, which at once becomes subject to the right of the state to tax it."
In the present case, it may be assumed that what the appellee has, it has acquired lawfully, but it cannot claim to be immune from taxation, or plead the contract of another.
its argument that it "is not claiming any tax exemptions," and, as in fact it appears to have none, we should deal with the case upon this footing.
What, then, is the relation of the appellee to the property in question? Its predecessor, the Central Railroad & Banking Company of Georgia, had leased the railroad properties of the Augusta & Savannah and Southwestern Companies, respectively, in perpetuity, or during the entire existence of the lessor companies. The property of the Central Railroad & Banking Company of Georgia was sold under foreclosure in 1895, and the appellee was organized as a successor corporation, and leases to it of the railroad properties in question were executed by both the original companies "for the full term of one hundred and one years, and renewable in like periods upon the same terms forever." The rental in each case was the fixed sum of five percent on the amount of the capital stock then outstanding -- that is to say, the sum of $51,145 in the case of the Augusta & Savannah Company and $259,555 in the case of the Southwestern Company. In short, under what is termed a lease, the appellee took the entire property, to hold, if it pleased, in perpetuity, subject to an annual charge of the amounts specified.
"The value of property consists in its use, and he who owns the use forever, though it be on condition subsequent, is the true owner of the property for the time being. This holds equally of a city lot or all the land in the world. Where taxation is ad valorem, values are the ultimate objects of taxation, and they to whom the values belong should pay the taxes. Land sold or by a contract of bargain and sale demised forever, subject to a perpetual rent, is taxable as corporeal property, and in private hands the rent also is taxable as an incorporeal hereditament. The tax on the former is chargeable to the purchaser or perpetual tenant, and on the latter to the owner of the rent."
It can hardly be said that it makes a constitutional difference that a so-called lessee, who may enjoy forever, if it chooses, has also the privilege of giving up the property at the renewal dates. Nor do I understand it to be important, under the federal Constitution, how the interest of the appellee -- which in substance is ownership -- is technically described. Surely, the Fourteenth Amendment is not concerned with mere technicalities of tenure; these the state is free to abolish. And it should be added that we do not have here any question of double taxation, as the state has credited to the appellee against the tax demanded the one-half of one percent upon the net income, which was payable by the original companies, and the payment of which the appellee had assumed.
construction of the local law -- in the absence of a controlling local decision -- that the statutes of Georgia did not justify the assessment actually made, I should withhold this expression of dissent, for that would leave the matter, as I conceive it should be left, within the control of the courts and legislature of the state so far as the mere imposition of an ad valorem tax upon the property held and enjoyed by the appellee is concerned.
But I am unable to concur in the view that the tax here sought to be collected violates the Constitution of the United States.
I am authorized to say that MR. JUSTICE PITNEY concurs in this dissent.

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