RAILROAD COMPANY v. MAINE.

ERROR to the Supreme Judicial Court of the State of Maine.

An act of the legislature of Maine, passed in 1874, provides for a tax upon the corporate franchise of every railroad company in that State, at the rate of one and one-half per cent upon its estimated value, determined in this wise: The governor and council of the State are each year required to ascertain the true market value of its shares, and estimate therefrom the fair cash valuation of all the shares constituting its capital stock, on the first day of the preceding April. From this valuation are to be deducted the value of its real estate and other property subjected to local taxation, and, where its lines extend beyond the limits of the State, such portion of the valuation as is proportional to the length of that part of the lines lying without the State. Upon the value of the franchise thus determined the governor and council are to assess the tax; the assessment is to be certified by the secretary of state to the treasurer, and by him notice thereof is to be given to the company. The tax thus assessed is to be in lieu of all taxes on shares of the company previously required by law; and, in case of non-payment, an action will lie for its collection.

The Maine Central Railroad Company was a corporation of Maine in 1875, and the owner of a railroad in the State, and its franchise was assessed and taxed for that year under this statute. It is admitted that the provisions of the act were in all respects complied with, and the required notice of the assessment given to the company. The tax not being paid, the present action of debt was brought for its recovery. The company pleaded in defence that the act of 1874 was is conflict with the provisions of its charter, and also with the Constitution of the State and of the United States, in that it impaired the obligation of the contract contained in the charter. Upon an agreed statement of facts, the case was submitted to the Supreme Court of the State for its decision. That court gave judgment for the State, sustaining the validity of the tax; and the company brought the case to this court on writ of error.

The Maine Central Railroad Company was originally formed in October, 1862, by the consolidation of two distinct corporations, the Androscoggin and Kennebec Railroad Company, which was incorporated in March, 1845, and had constructed a railway from Waterville to Danville; and the Penobscot and Kennebec Railroad Company, which was incorporated in April, 1845, and had constructed a railway from Bangor to Waterville.

The charter of each company required it to keep a regular account of its disbursements, expenditures, and receipts, in a book, which was to be open at all times to the inspection of the governor and council, and any committee of the legislature; and required its treasurer, at the expiration of every year, to make, under oath, an exhibit to the legislature of the net profits derived from the income of its road. It also provided that the real estate of the company should be taxable by the towns, cities, and plantations in which it lay, in the same manner as that of private persons, and its value be estimated in the same way; that the shares of the stockholders should be deemed personal estate, taxable to them at their places of residence; and that whenever the annual net income of the company amounted to ten per cent upon the cost of the road and 'its appendages, and incidental expenses,' the directors should make a special report of the fact to the legislature, 'from and after which time' one moiety, or such other portion as the legislature might determine, of the net income accruing thereafter, above the ten per cent, first to be paid to the stockholders, should annually be paid by the treasurer of the corporation, as a tax, into the treasury of the State. It also declared that no other tax should ever be levied or assessed on the corporation, or any of its privileges or franchises, and that the charter should 'not be revoked, annulled, altered, limited, or restrained, without the consent of the corporation, except by due process of law.'

The consolidation of these two companies into the Maine Central Railroad Company was effected under an act passed in April, 1856, which authorized it upon the agreement of their directors, approved by the stockholders, prescribing the terms and conditions thereof, the mode of carrying the same into effect, the name of the new corporation, the number of its directors, the time and place of holding the first election, the amount of its capital, the number of shares of stock, and the manner of converting the shares of the capital stock of each of the corporations into those of the new corporation; and filing a duplicate or counterpart of the agreement in the office of the secretary of state. Immediately afterwards, upon the election of the directors, the corporation making the agreement were to be consolidated, and, together, to constitute a new corporation, by the name therein mentioned. The act provided that the new corporation thus formed should have 'all the powers, privileges, and immunities' possessed by each of the corporations entering into the agreement, and be subject to all the legal obligations then resting upon them respectively; with a proviso, however, that it should not be construed as extinguishing the old corporations or annulling their charters, but that they should be 'regarded as still subsisting, so far as their continuance for the purpose of upholding any right, title, or interest, power, privilege, or immunity, ever possessed, exercised, or enjoyed by either of them may be necessary for the protection of the creditors or mortgagees of either of them, or of such new corporation; the separate exercise of their respective powers and the separate enjoyment of their respective privileges and immunities being suspended until the protection of such creditors or mortgagees shall require their resumption, when such suspension shall cease, so far and for such time as the protection of such creditors or mortgagees may require.'

Some years after this consolidation, by a law passed in 1873, three other railroad companies, whose roads were at that time under lease to the Maine Central Railroad Company, were allowed to consolidate with it, upon the same terms and conditions prescribed by the act of 1856, so far as they were applicable; and such second consolidation was effected in 1874. These three companies were the Protland and Kennebec Railroad Company, which owned a railroad from Augusta to Portland; the Sommerset and Kennebec Railroad Company, which had constructed a railroad from Skowhegan to Augusta; and the Leeds and Farmington Railroad Company, which owned a railroad from Farmington to Leeds Junction.

The first of these three companies was formed by holders of bonds of the Kennebec and Portland Railroad Company, a corporation created in 1836, and, by the act of 1845, possessed of a similar conditional immunity from taxation to that of the two companies first consolidated. By authority of the legislature, this company had issued its bonds, secured by mortgage upon its road and franchise. In 1862, the mortgage was foreclosed, and the present corporation formed. The new corporation was, by statute, invested with the legal rights and immunities of the original corporation. It is admitted that the charters of the other two of those three corporations contained no limitation upon the taxing power of the State.

It is upon the franchise of the Maine Central Company, as formed in 1874, upon the second consolidation, that the tax was assessed and levied for which this action was brought.

An act of the legislature of Maine, passed in 1831, c. 503, contained the following provision:——

'All acts of incorporation, which shall be passed after the passage of this act, shall at all times hereafter be liable to be amended, altered, or repealed, at the pleasure of the legislature, in the same manner as if an express provision to that effect were therein contained, unless there shall have been inserted in such act of incorporation an express limitation or provision to the contrary.'

Judgment was rendered in favor of the State, and the company sued out this writ of error.

Mr. Josiah H. Drummond for the plaintiff in error.

1. The legislature has the power, by contract, to exempt a person or corporation from taxation, and no subsequent legislature can repeal the exemption. Cooley, Taxation, 55; New Jersey v. Wilson, 7 Cranch, 164; Gordon v. Appeal Tax Court, 3 How. 133; Piqua Branch of State Bank of Ohio v. Knoop, 16 id. 369; Ohio Life Insurance & Trust Co. v. Debolt, id. 416; Dodge v. Woolsey, 18 id. 331; Mechanics', &c. Bank v. Thomas, id. 384; Jefferson Branch Bank v. Skelly, 1 Black, 436; McGee v. Mathis, 4 Wall. 143; Von Hoffman v. City of Quincy, id. 535; Home of the Friendless v. Rouse, 8 id. 430; Washington University v. Rouse, id. 439; Wilmington Railroad v. Reid, 13 id. 264; Raleigh & Gaston Railroad Co. v. Reid, id. 269; Tomlinson v. Jessup, 15 id. 454; Tomlinson v. Branch, id. 460; Humphrey v. Pegues, 16 id. 244; The Delaware Railroad Tax, 18 id. 206; Pacific Railroad Co. v. Maguire, 20 id. 36; Erie Railway Co. v. Pennsylvania, 21 id. 492; Bailey v. Magwire, 22 id. 215; Central Railroad, &c. Co. v. Georgia, 92 U. S. 665; Branch et al. v. City of Charleston et al., id. 677.

This power, when the charters of the consolidating companies were granted, or when any of the acts in addition thereto, or under which the plaintiff in error claims any rights, were passed, was not limited by any provisions of the Constitution of Maine.

2. The plaintiff in error has a valid subsisting contract in its charter, in relation to the manner in which it shall be taxed. The two companies first consolidated into the Maine Central were, by their charters of 1845, subjected only to a tax upon the net income of their roads, to be ascertained in a prescribed manner, over and above ten per cent first paid to their stockholders; and their charters declared that no other tax should ever be levied or assessed upon the corporations, or any of their privileges or franchises.

The act of 1874 authorizes, in terms, a tax 'upon the corporate franchise' of the Maine Central Company; and it is admitted that such a tax is other than the one provided in the charters of the two consolidating companies. The act of consolidation of 1856, under which the Maine Central was formed, provided that it should have 'all the powers, privileges, and immunities' possessed by each of the consolidating companies; and thus the question arises, whether the act of 1874 overrides and controls this exemption; if it does not, the judgment below must be reversed.

3. The charters of the consolidating companies were not controlled by the act of 1831, for they contain a provision that they 'shall not be revoked, annulled, altered, limited, or restrained, without the consent of the corporation, except by due process of law;' and no specific reference to that act was necessary. It is claimed by the State that that act does apply, as there is no express exemption from it contained in the act of 1856, which, it is insisted, was an act of incorporation accepted by the company.

We answer, that the act of 1831 is limited, in its effect, to 'acts of incorporation;' and that the act of 1856 was not an 'act of incorporation,' within the meaning of the term in the act of 1831.

An act of incorporation was then understood to be the granting of a franchise by the State to a body created by its authority, and was called a charter.

The act of 1856 does not create a body corporate, but merely authorizes two existing bodies corporate to unite in one; nor does it grant a franchise, but merely provides that, by the consolidation, their franchises shall thereby, eo instanti, be transferred to and vested in the consolidated corporation.

It is true that the act uses the term 'new corporation,' but it uses the term to distinguish the consolidated corporation from those composing it. In that limited sense, but not in the legal sense, it is a new corporation.

4. The present charter of the Maine Central Railroad Company consists of the several charters of the original companies, which are now merged into the present company. Its rights, powers, and privileges, as to any particular portion of its railroad, must be determined from these charters, and not from the consolidating act. Such has been the uniform decision of this court, as is shown by the cases already cited.

In Chesapeake, &c. Railroad Co. v. Virginia (94 U. S. 718), the court says (p. 725), in effect, that it has been settled by its repeated decisions, that when two companies consolidate, with all the rights, privileges, and immunities of each, and one had an exemption and one had not, the consolidated company takes the one with the exemption, and the other without,—a doctrine expressly in conflict with the right of the State to the tax in question.

If the immunity from taxation, therefore, now claimed originally existed, and was not affected by the consolidation of 1862, it was not impaired by the consolidation of 1874. See also The Delaware Railroad Tax Case, 18 Wall. 206, and Central Railroad, &c. Co. v. Georgia, 92 U. S. 665.

Mr. Lucius A. Emery, Attorney-General of Maine, contra.

1. The Maine Central Railroad Company, which came into existence in 1862, was not a revival nor a continuation of the consolidating corporations. By the very terms of the act of 1856 creating it, it was a new corporation with a different name, and it was to have a separate board of directors. All the rights, franchises, and property of the old corporations were 'transferred to and vested in' it. Its distinct and independent existence is made apparent by the fourth section of the act, which provides that the old corporations shall still retain an existence, though in an attenuated form, for the purpose of protecting their respective creditors. Although it was not, in fact, organized until 1862, nevertheless, the sole source of and authority for its existence was that act. Assuming that the act can be repealed, the simple words, 'the act of 1856 is hereby repealed,' would dissolve this new corporation. Its franchises were conferred upon it, not by the old companies, but by the legislature. The old corporations were incorporated in 1845; the new one, in 1856. The old corporations gave up their rights, property, and franchises, and had no existence for active duties. Their organization was gone. They had neither president nor directors. They surrendered their respective charters. Their franchises returned to the legislature which gave them, and were granted by it to the new corporation. The latter was a new birth, without the sin of exemption from taxation. This view is sustained by the authorities. See State v. Sherman, 22 Ohio St. 411; McMahan v. Morrison, 16 Ind. 172; Clearwater v. Meredith et al., 1 Wall. 25.

2. The new corporation became at once subject to the act of 1831, which is an essential provision of every subsequent act of incorporation, and is as much a part of the act of 1856 as if it were therein specially set forth. The right of the legislature to annul or repeal such subsequent act is, therefore, unquestionable, unless it contains 'an express limitation or provision to the contrary.' The limitation must be expressed, directly and in terms.

3. Every presumption will be indulged against the intention of the legislature to surrender the power of taxation. The language in which the asserted surrender is made must be clear and unmistakable. Erie Railway Co. v. Pennsylvania, 21 Wall. 492; Tucker v. Ferguson et al., 22 id. 527; Bailey v. Magwire, id. 215; St. Louis v. Boatman's Insurance & Trust Co., 47 Mo. 155.

4. The legislature could not have intended to exempt the plaintiff in error from taxation. When it provided a specific mode of taxation for the Androscoggin and Kennebec Company, and the Penobscot and Kennebec Company, and covenanted never to tax them in any other way, it imposed on them certain duties. The directors of each corporation were required to keep accounts of the expenses and earnings of its road, and make a special report to the legislature when the earnings were ten per cent per year upon the cost. If the directors neither could nor would do this, the company would be obliged to submit to some other form of taxation. So of the treasurer. Now, each of these corporations of 1845 having surrendered its franchise to the legislature, and given up its organization, has neither directors nor a treasurer to make report and pay over. Each, so long as it stood ready to perform the prescribed duties, was entitled to this exemption, and lost it the moment it incapacitated itself from performing them.

MR. JUSTICE FIELD, after stating the facts, delivered the opinion of the court.