Powers v. Detroit Grand Haven Milwaukee Railway Company

This case, which is a suit brought by the appellee in the circuit court of the United States for the western district of Michigan, while involving the validity of the railroad tax law of the state of Michigan (Acts 1901, chap. 173, p. 236), recently considered by this court (ante, page 459) involves the further question of the existence and scope of an alleged contract in respect to taxation. The Detroit & Pontiac Railroad Company was chartered by the legislature of the territory of Michigan, March 7, 1834, the Oakland & Ottawa Railroad Company by the legislature of the state of Michigan, April 3, 1848 (Laws 1848, p. 351). By an act of February 13, 1855 (Laws of 1855, p. 305), the Detroit & Pontiac Railroad was authorized to change its name to the Detroit & Milwaukee Railway Company, to purchase all the rights, property, and franchises of the Oakland & Ottawa Railroad Company for the building and operating a continuous line of road from Detroit to Lake Michigan, and the purchase and sale thus provided for was duly effected. Section 9 of this act provided that--'the said company shall, on or before the first day of July, pay the state treasurer an annual tax of 1 per cent on the capital stock of said company paid in, which tax shall be in lieu of all other taxes, except for penalties imposed upon said company by its act of incorporation, or any other law of this state. The said tax shall be estimated upon the last annual report of said corporation.'

Since 1850 the state Constitution has contained these provisions:

'Corporations may be formed under general laws, but shall not be created by special act except for municipal purposes. All laws passed pursuant to this section may be amended, altered, or repealed. But the legislature may, by a vote of two thirds of the members elected to each house, create a single bank with branches.' Art. 15, § 1.

'The legislature shall pass no law altering or amending any act of incorporation heretofore granted, without the assent of two thirds of the members elected to each house; nor shall any such act be renewed or extended. This restriction shall not apply to municipal corporations.' Art. 15, § 8.

In 1860 certain mortgages on the road were foreclosed and the company reorganized, and again in 1878 the road with its appurtenances and franchises was sold upon mortgage foreclosure and again reorganized as the Detroit, Grand Haven, & Milwaukee Railway Company. These foreclosures and reorganization took place under the authority of act No. 96 (Laws of 1859, p. 52).

On the hearing in the circuit court it was held that § 9, above quoted, created a contract between the state and the company which prevented the enforcement against it of the railroad tax law, and a decree was entered accordingly (138 Fed. 264) from which decree the state auditor appealed directly to this court.

Messrs. Timothy E. Tarnsney, John E. Bird, Charles A. Blair, Loyal E. Knappen, and Roger Irving Wykes for appellant.

[Argument of Counsel from pages 545-551 intentionally omitted]

Messrs. H. Geer and L. C. Stanley for appellee.

Statement by Mr. Justice Brewer:

[Argument of Counsel from pages 551-555 intentionally omitted]

Mr. Justice Brewer delivered the opinion of the ocurt: