Court Opinion

ID: 9418279
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:18:37.603614+00
Date Added: 2024-06-11T17:16:39.711650
License: Public Domain

Mr. Justice Holmes
delivered the opinion of the court.
This is a bill in equity brought by the Railway Company, the appellee, to prevent the collection of certain taxes, which, it is alleged, would be contrary to Article I, § 10, and to the Fourteenth Amendment of the Constitution of the United States. The case was heard on bill, demurrer and answer and certain agreed facts, and the District Court issued an injunction as prayed. 206 Fed. Rep. 107. The facts stripped of details not material to the question before us, are as follows: In 1912 the defendant issued executions against the plaintiff to collect ad valorem taxes on the “real estate, road bed, and franchise value, *677after crediting . . . one-half of one per cent, of the net income, ■ ; . . on that portion of - its property known in its system” respectively as the‘Augusta and. 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 per cent, 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 and Savannah Railroad and in 1869 the Southwestern Railroad made leases of their respective roads and franchises to the Central Railroad and 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.
The executions are for taxes on property .of the plaintiff and must show jurisdiction to issue them. Harris v. Smith, 133 Georgia, 373, 374; Equitable Building & Loan Ass’n v. State, 115 Georgia, 746. Here the jurisdiction depends upon these roads being in effect the plaintiff’s property as matter of law. If they are not, the attempt is an attempt *678to 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. R. & Banking Co., 216 U. S. 420, 426; Temple Baptist Church v. Georgia Terminal Co., 128 Georgia, 669, 680.
The charter of the Augusta and Waynesboro’ Rail Road, afterwards the Augusta and Savannah, approved December 31, 1838, alongside of the taxing provision in § 13 to which we have referred, provided as follows in § 16: “That said Company shall at all times have the exclusive use of the said Rail Road, for the transportation or conveyance of merchandise, goods, wares, and freight of every kind, and passengers, over the said Rail Road, 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 Rail Road and 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.” (Laws of 1838, p. 174, at p. 179.)
It will be perceived that when this section was drawn it was supposed that different persons might be allowed to put their carriages upon the new form of road, as perhaps may be seen even more clearly in other early charters in Georgia and elsewhere. And the revenue that was to be derived from the exclusive privilege granted might be *679obtained by doing the whole business, by letting in others to share á 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 practice 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.
After the charter came a special act of January 22,1862 (Laws of 1852, p. 119), which authorized the Central Railroad and Banking Company "to lease and work for such time and on such terms as may be agreed on by the parties interested,” the two roads with which we are concerned, among others, and reciprocally giving power to the corporations owning those roads "so to lease to the Central Railroad and Banking Company of Georgia their respective Railroads for such term of time and on such other terms as they respectively may deem best.” In the interval the Rail Road had become a Railroad — but we see no ground for believing that there has been any change in the attitude of the State toward the pioneer enterprises *680that 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 whosesoever 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.
The present instruments, made- in pursuance of the foregoing powers in October, .1895, purport to ‘demise, lease and to farm let ’ the property for the term of one hundred and .one years, renewable as above stated. The lessee covenants to pay a fixed rent semi-annually and various expenses incident to taking over the occupation of the road and there is a clause of reentry in case of failure for six months to make the semi-annual payment as agreed. Meantime, however, the Code of 1861 had introduced distinctions, hard to grasp for one trained only in the common law of real property, between the usufruct of a tenant and an estate for years; Code of 1910, §§ 3685, 3687, 3690, 3691; and it is argued that these leases created estates of such a nature that the lessee was practically in the position of owner subject to a rent charge, and was taxable for the land. We agree that technical distinctions are to be avoided as far as may be in matters of taxation, and we are not curious to insist upon the differences be*681tween 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. R. & Banking Co., 216 U. S. 420, 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. 50. It follows that the injunction must be sustained.

Decree affirmed.

Me. Justice Lamak took no part in this decision.