Source: https://www.law.cornell.edu/supremecourt/text/153/486
Timestamp: 2016-02-10 08:51:51
Document Index: 573901074

Matched Legal Cases: ['§ 28', '§ 28', '§ 28', '§ 28', 'art. 1', '§ 10', 'art. 2', 'art. 2']

MOBILE & O. R. CO. et al. v. STATE OF TENNESSEE et al. | US Law | LII / Legal Information Institute
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153 U.S. 486 (14 S.Ct. 968, 38 L.Ed. 793)
[HTML] dissent, FULLER, GRAY, BREWER, SHIRAS
[HTML] E. L. Russell, E. J. Phelps, and F. W. Whitridge, for plaintiffs in error.
The railroad company was chartered by an act of the legislature of the state of Tennessee approved January 28, 1848. The state, in granting the charter, reserved no right to amend or repeal the same; nor was there any provision, either in the constitution or the general laws of the state,in existence at the time,which reserved to the state the right to alter, modify, or repeal the charter. By section 11 of the act of incorporation, it was provided 'that the capital stock of said company shall be forever exempt from taxation, and the road, with all its fixtures and appurtenances, including workshops, warehouses, and vehicles of transportation, shall be exempt from taxation for the period of twenty-five years from the completion of the road, and no tax shall ever be laid on said road or its fixtures which will reduce the dividends below eight per cent.'
Various grounds were alleged in the bill on which the effect of section 11 was sought to be avoided, or to show that the railroad company had waived or forfeited the benefits of the exemption contained in the last clause thereof. These allegations need not, however, be noticed, as they were found and adjudged by the supreme court of Tennessee against the complainants, and in favor of the railroad company.
The pleadings admitted and the proofs established that since the completion of the road to its original northern terminus on the Mississippi river, in April, 1861, the railroad company had neither earned nor declared any dividend, either on its whole line, or upon any portion of its road lying in the state of Tennessee. It is also shown that its earnings for the years 1885 to 1889, inclusive, were insufficient to pay any dividend to its stockholders.
The period of 25 years from the completion of the road, referred to in the section, having expired on April 22, 1886, the supreme court of the state disallowed the taxes assessed and claimed for the years 1885 and 1886, on the ground that they were covered by the 25-year exemption, but adjudged and decreed that the railroad company was liable to the respective complainants for the taxes of 1887, 1888, and 1889, in the following amounts. To the state of Tennessee, $24,117.73; to McNairy county, $16,365.52; to Madison county, $13,769.69; to Chester county, $4,210.25; to Obion county, $10,554.61; to Gibson county, $19,182.06,which sums were declared liens upon the property of the railroad company.
'And the court, construing said eleventh section of said Tennessee charter, is further of opinion, and doth so adjudge and decree, that the true intent and meaning of the said eleventh section of the Tennessee charter of the Mobile & Ohio Railroad Company, passed January 28, 1848, is that on and after the 22d day of April, 1886, being twenty-five years from the completion of said road, the road, with all its fixtures and appurtenances, including workshops, warehouses, and vehicles of transportation, all the property, franchises, etc., of the said Mobile & Ohio Railroad Company, became liable to taxation; and the court is further of opinion, and doth accordingly so adjudge and decree, that from and after said 22d day of April, 1886, all of said properties, of every description, of the said Mobile & Ohio Railroad Company,that is to say, its roadbed and fixtures and appurtenances, including workshops, warehouses, vehicles of transportation, and all of its property, of every kind and description, and franchises,become liable to taxation under the rule of equality and uniformity prescribed in article 2, § 28, of the constitution of 1834 of the state of Tennessee. And it further appearing to the court that the complainants have in their bill in this cause attacked the eight per cent. clause in the said section (11) eleven of the said charter of the said Mobile & Ohio Railroad Company, passed by the legislature of Tennessee on January 28, 1848, which eight per cent. clause reads as follows: 'And no tax shall ever be laid on said road or its fixtures which will reduce the dividends below eight per cent.,' and that they have charged in their said bill, among other things, that said eight per cent. clause is in violation of the rule of equality and uniformity of taxation prescribed by said article 2, § 28, of said constitution of 1834, and the court being of opinion that said property became taxable as aforesaid on and after April 22, 1886, therefore the court doth adjudge and decree that the said eight per cent. clause is in violation of said article 2, § 28, of said constitution of 1834, as aforesaid, and that the same is unconstitutional and void, which said article 2, § 28, of the said constitution of 1834 provides, among other things, 'that all property shall be taxed according to its value, that value to be ascertained in such manner as the legislature shall direct, so that the same shall be equal and uniform throughout the state. No one species of property from which a tax may be collected shall be taxed higher than any other species of property of equal value.' And the court is also of opinion, and doth accordingly so adjudge and decree, that said eight per cent. clause is likewise void because it is so vague, indefinite, and uncertain in its terms as to be nonenforceable, in this, to wit, that it does not appear from said clause, or anywhere in said charter, upon what dividends were expected to be declared; there being no amount or limit of capital stock fixed in said charter, and no means for fixing the same being provided, and no directions being given or means provided as to how said dividends should be ascertained, with a view to taxation or otherwise. And the court is of opinion, and doth accordingly so adjudge and decree, that said eight per cent. clause is arbitrary, insensate, and absurd, and is void and unenforceable, and furnishes no obstacle whatever to the taxation of said properties.
'It is therefore adjudged and decreed by the court that the road of the said the Mobile & Ohio Railroad Company, together with all its fixtures and appurtenances, including workshops, warehouses, and vehicles of transportation, and all its properties and franchises, are subject and liable to taxation for state and county purposes in said counties of Obion, Gibson, Madison, Chester, and McNairy (counties in said state of Tennessee), and have so been liable since the 22d day of April, 1886, according to and by the several general statutes of assessment and taxation in force in the state of Tennessee during the years 1887, 1888, and 1889, and forever thereafter, under the equal and uniform laws of the state of Tennessee. And it is further adjudged and decreed by the court that the acts of the general assembly of the state of Tennessee, as set forth in the pleadings, to wit, Acts 1875, c. 78, p. 103; Acts 1877, c. 19, p. 31; Acts 1881, c. 104, p. 133; Acts 1882 (Ex. Sess.) c. 16,all of which are set out in Milliken & Vertrees' compilation of the acts of the legislature of Tennessee, and known as 'Milliken & Vertrees' Code of Tennessee,' c. 5, pp. 140-145, being section 669 to section 708, inclusive, and the general revenue laws of the state covering the years 1887 to 1889, inclusive, being Acts 1885, c. 1, p. 1, and Acts 1887, cc. 1, 2, and Acts 1889, cc. 96, 130, under and by which statutes the complainants have caused to be assessed for taxes the property of the defendant the Mobile & Ohio Railroad Company, and are seeking to collect and enforce the payment of the taxes so assessed, are not in violation of section 10, art. 1, of the constitution of the United States of America, which provides, among other things, 'that no state shall pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility,' but that said acts are valid and constitutional, and said properties of said the Mobile & Ohio Railroad Company are, under said acts, liable for taxes from and including the year 1887, and that the provision of the eleventh section of the Tennessee charter of the Mobile & Ohio Railroad Company, which provides that 'no tax shall ever be laid on said road or its fixtures which shall reduce the dividends below eight per cent.,' does not prevent the assessment and collection of said taxes under said statutes enacted for assessing, collecting, and enforcing payment of taxes on said railroad property, for that the court is of opinion, and doth adjudge and decree, that said eight per cent. clause just quoted above is invalid, and that the provision set forth therein, that 'no tax shall ever be laid on said road or its fixtures which will reduce the dividends below eight per cent.,' is null and void, and doth not, therefore, interfere with or prevent the assessment and collection of taxes against said road under the said several revenue acts of the state of Tennessee, and that said several revenue acts are valid and constitutional, and not in violation of said article 1, § 10, of the constitution of the United States of America, for that the same, as applies to the taxes of 1887, 1888, and 1889, and future taxes, do not violate or impair the obligation of any contract with the Mobile & Ohio Company, the said eight per cent. clause being null and void, all of which is accordingly so adjudged and decreed by the court.'
In Bank v. Skelly, 1 Black, 436, 443, it was said by this court: 'Its the supreme court rule of interpretation has invariably been that the construction given by the courts of the states to state legislation and to state constitutions have been conclusive upon this court, with a single exception, and that is when it has been called upon to interpret the contracts of states, 'though they had been made in the forms of law,' or by the instrumentality of a state's authorized functionaries, in conformity with state legislation. It has never been denied, nor is it now, that the supreme court of the United States has an appellate power to revise the judgment of the supreme court of a state, whenever such a court shall adjudge that not to be a contract which has been alleged, in the forms of legal proceedings, by a litigant, to be one within the meaning of that clause of the constitution of the United States which inhibits the states from passing laws impairing the obligation of contracts. Of what use would the appellate power be to a litigant who feels himself aggrieved by some particular state legislation, if this court could not decide, independently of all adjucation by the supreme court of a state, whether or not the phraseology of an instrument in controversy was expressive of a contract, and within the protection of the constitution of the United States, and that its obligation should be enforced notwithstanding a contrary conclusion by a supreme court of a state?'
We come next to the consideration of the other ground on which the supreme court based its decree. In reaching its conclusion that the 8 per cent. dividend clause of the company's charter violated that portion of section 28, art. 2, of the state constitution of 1834, which provides: 'All property shall be taxed according to its value, that value to be ascertained in such manner as the legislature shall direct, so that the same shall be equal and uniform throughout the state. No one species of property from which a tax may be collected shall be taxed higher than any other species of property of equal value,'the supreme court of Tennessee gave no effect to that clause of the charter as an exemption, either fixed, conditional, or contingent, but proceeded upon the theory that the property of the railroad company became absolutely liable to taxation on and after April 22, 1886, at the expiration of the 25 years from the completion of the road, without regard to the state of the company's earnings, or its capacity to pay dividends in any amount. The construction thus placed upon section 11 of the charter practically assumed the main question of controversy involved in the case.
It is also established by the decisions of Tennessee, as counsel for defendants in error properly admit, that there was no imperative constitutional requirement upon the legislature to tax all property. The first paragraph of section 28, art. 2, of the constitution of 1834, provided that 'all lands liable to taxation, held by deed, grant, or entry, town lots, bank stock, slaves between the ages of twelve and fifty years, and such other property as the legislature may from time to time deem expedient, shall be taxable.' This provision, as held in Railroad v. Hicks, 9 Baxt. 448, 449, did not make it the duty of the legislature to tax all property, but left it discretionary with that body to tax, or to omit to taxthat is, to exemptas it might deem expedient. This provision meant only that when a tax was imposed it must be upon the value of the property, ascertained by some uniform rule.
Does this clause constitute an immunityfixed, special, conditional, or contingentfrom taxation?