Mobile Company v. Tennessee/Dissent Fuller

Mr. Chief Justice FULLER, with whom concurred Mr. Justice GRAY, Mr. Justice BREWER, and Mr. Justice SHIRAS, dissenting.

In my opinion the judgment of the supreme court of Tennessee should be affirmed. It is well settled that the taxing power of a state cannot properly be held to have been relinquished, in any instance, unless the deliberate purpose of the state to that effect clearly appears. Exemption therefrom is in derogation of the sovereign authority and of common right, and therefore not to be extended beyond the exact and express requirements of the grant, construed strictissimi juris. An exemption is claimed in this case under the eleventh section of the company's charter from the state of Tennessee, which reads: 'That the capital stock of said company shall be forever exempt from taxation, and the road, with all its fixtures and appurtenances, including shops, 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.' The reasonable meaning of this section seems to me, plainly, to be that the capital stock is exempted forever, and the road, its fixtures, etc., for 25 years from the completion of the road, after which the exemption has spent its force, and the road, fixtures, etc., become taxable, but the taxation must be so laid as not to reduce the dividends below 8 per cent. The closing words prescribe a rule of taxation, and do not operate to continue an exemption which has expired by the express terms of the grant. What is forbidden is the laying of a tax in such manner as will produce a particular result. If this be not clear, as I think it is, yet any other construction is certainly not so, and doubt is fatal to the claim.

If the exemption exists, as insisted, then the capital stock is free from taxation forever, and the road and its property are likewise free until, after deducting from its earnings all expenses, fixed charges (which include interest on all its bonded debt), and 8 per cent. upon its capital stock, there remains a surplus sufficient to pay all the taxes on its property according to the current rate. By the company's Alabama charter, it was provided that the capital stock should not exceed ten millions; the Mississippi act set forth that act in full. The Tennessee act provided that the citizens of that state might subscribe to the amount of one-fourth of the capital. So far as the eleventh section is concerned, the amount of capital stock at any particular time, or what the taxes on the company's property in any particular year might be, is left undefined. The view contended for practically leaves it to the company to say when it may be taxed, and when not; and while a state must be held to the bargains it makes, however improvident, it ought not to be held to have made such a contract as it is argued this is, unless its terms are so plain as not to be open to construction.

The difference between this provision and that in the company's charter in Mississippi, referring to the same subject, is significant. The latter reads: 'That whenever any portion of said railroad shall be completed through this state, and is paying an interest of eight per cent. per annum on its cost, and not before, such portion may be taxed the same percentage, and no more, upon the capital expended in the construction thereof, as lands in this state shall be taxed.' That difference explains why the supreme courts of Mississippi and Tennessee arrived at different conclusions.

In a certain line of cases, absolute exemptions from taxation have been recognized as secured in consideration of certain amounts to be paid, sometimes called 'taxes,' although really merely the consideration paid as under contract; but the principle of commutation has no application here.

I concur with the supreme court of Tennessee in regarding the last part of the eleventh section as prescribing a special and discriminative rule of taxation; and as that court held it void as such, because in conflict with the equality and uniformity clause of the constitution of 1834, that conclusion should be accepted.

I am constrained, therefore, to dissent from the opinion and judgment just announced, and am authorized to say that Mr. Justice GRAY, Mr. Justice BREWER, and Mr. Justice SHIRAS concur in this dissent.