Trask v. Maguire

APPEAL from the Circuit Court for the District of Missouri; in which court Trask filed a bill against Maguire, collector of State and county taxes at St. Louis, to restrain him from collecting taxes upon the property of the St. Louis and Iron Mountain Railroad Company, a corporation organized in the State of Missouri, July 26th, 1867, and to have the property of the said company decreed exempt from liability to such taxes.

The case was this:

A general corporation law of Missouri, in force in 1845, thus ordained:

'The charter of every corporation that shall hereafter be granted by the legislature shall be subject to alteration, suspension, and repeal, at the discretion of the legislature.'

This provision of general law being in force, the legislature of Missouri, on the 3d of March, 1851, passed 'An act to incorporate the St. Louis and Iron Mountain Railroad Company.' The capital stock of the company was $6,000,000, and it was enacted that—

'The stock of said company shall be exempt from all State and county taxes.'

On the 17th of February, 1853, it was enacted that the railroad abovementioned as having been incorporated should be exempted from the provisions of the general corporation law already quoted. The statute further enacted:

'All the engines, cars, wagons, machines and other property belonging to said company, shall be deemed a part of the capital stock of the company, and shall be vested in the respective shareholders of the company forever, according to their respective shares, and transferable by them in the transfer of stock, as personal property.'

Subsequently to this, and to aid it in making the road, the State of Missouri lend to the company (in the shape of bonds, the principal and interest of which the company agreed to pay) a large sum of money. The act authorizing the transaction enacted that none of the bonds should be delivered to the company until it filed in the office of the secretary of state certificates of acceptance of them, executed under the corporate seal, &c. The act then proceeded:

'SECTION 4. Each certificate of acceptance so executed and filed as aforesaid, shall be recorded in the said office of the secretary to state, and shall thereupon become and be, to all intents and purposes, a mortgage of the road of the company executing and filing their acceptance, as aforesaid, and every part and section thereof, and its appurtenances, to the people of this State, for securing the payment of the principal and interest of the sums of money for which such bonds shall from time to time be issued and accepted.

'SECTION 11. In case the said companies, or either of them, shall make default in the payment of either interest or principal of the said bonds. . . it shall be lawful for the governor to sell their road and its appurtenances, by auction to the highest bidder, or to buy in the same at such sale for the use and benefit of the State, subject to such disposition in respect to such road or its proceeds as the legislature may thereafter direct.'

On the 4th of July, 1865, the State of Missouri adopted a new constitution of government. It contained the following provisions:

'No property, real or personal, shall be exempt from taxation, except such as may be used exclusively for public schools, and such as may belong to the United States, to this State, to counties, or to municipal corporations within the State.

'The General Assembly shall not pass any special laws. . . exempting the property of any named person or corporation from taxation.'

At the same time that it adopted this new constitution it adopted, in the separate form of AN ORDINANCE, entitled 'An ordinance for the payment of State and railroad indebtedness,' certain provisions which were to have 'full force and effect as a part of the constitution of the State.'

The ordinance was thus:

'SECTION 1. There shall be levied and collected from the Pacific Railroad, the North Missouri Railroad Company, and the St. Louis and Iron Mountain Railroad Company, an annual tax of 10 per centum of all their gross receipts for the transportation of freight and passengers. . . from the 1st of October, 1866, to the 1st October, 1868, and 15 per centum thereafter; which tax shall be appropriated by the General Assembly to the payment of the principal and interest now due, or hereafter to become due, upon the bonds of the State, and the bonds guaranteed by the State, issued to the aforesaid railroad companies.

'SECTION 3. The tax in this ordinance specified shall be collected from each company hereinbefore named only for the payment of the principal and interest on the bonds, for the payment of which such company shall be liable; and whenever such bonds and interest shall have been fully paid, no further tax shall be collected from such company.

'SECTION 4. Should either of said companies refuse or neglect to pay said tax as herein required, and the interest or principal of any of said bonds, or any part thereof, remain due and unpaid, the General Assembly shall provide by law for the sale of the railroad and other property, and the franchises of the company that shall be thus in default, under the lien reserved to the State, and shall appropriate the proceeds of such sale to the payment of the amount remaining due and unpaid from said company.

'SECTION 5. Whenever the State shall become the purchaser of any railroad or other property, or the franchises sold as hereinbefore provided for, the General Assembly shall provide by law in what manner the same shall be sold, for the payment of the indebtedness of the railroad company in default; but no railroad or other property, or franchises purchased by the State, shall be restored to any such company until it shall have first paid. . . all interest due from said company; and no sale or other disposition of any such railroad or other property, or their franchises, shall be made without reserving a lien upon all the property and franchises thus sold or disposed of, for all sums remaining unpaid; and all payments therefor shall be made in money or in bonds or other obligations of this State.'

On the 1st of November, 1865-soon after the adoption of the new constitution and of this ordinance-the General Assembly met, and bills were introduced providing for the sale of several railroads, including the St. Louis and Iron Mountain, then in default on its obligations. Pending these bills, questions as to the effect of the ordinance arose in the mind of the governor, and on the 27th of the same month of November he propounded to the judges of the Supreme Court, as it was his right to do under the constitution of Missouri, certain interrogatories as to the operation of the ordinance, and among the rest one as follows:

'If you are of opinion that the sale of the railroads may be ordered before such refusal or neglect, I request you to say whether such sale can be made 'without reserving a lien upon all the property and franchises thus sold for all sums remaining unpaid,' as provided by section five of the ordinance. In other words: Does this clause in the ordinance constitute a condition of all sales of railroads ordered by the State, or does it refer only to sales made, under the ordinance, for refusal or neglect to pay the tax?'

To these questions the judges replied. In the course of their reply they say that one of the things provided for by the ordinance is a tax to pay the debts of the railroad companies to the State, and another thing provided for is, 'in what manner railroads purchased by the State under her lien shall be sold again;' that 'the fifth section relates to all sales of railroads under liens reserved to the State,' whether sold for the non-payment of the tax or for the nonpayment of the mortgage-debt. 'The fifth section,' say the judges, 'provides further that no sale or other disposition of any such railroad or other property, or their franchises, shall be made by the State without reserving a lien upon the property sold for all sums remaining unpaid-that is to say by the purchaser, and the purchaser is required to make all payments therefor in money, or in bonds, or other obligations of this State; but the legislature is left unrestricted further as to the time, terms, and conditions of sale.'

After this, that is to say, on the 16th of February, 1866, the legislature passed an act 'to foreclose the State lien and to secure the early completion of the road.'

By the act it was made the duty of the governor to advertise for sale the different roads in default, 'their appurtenances, rolling stock, and property of every description, and all rights and franchises.' A board of commissioners was to attend the sale, and on a contingency named purchase for the State. The commissioners, in case the State should purchase, were to give notice of their authority to sell, and to invite proposals to purchase. The governor, on a sale being made by the commissioners, was to make a deed to the purchaser, which, it was provided, should have 'the effect to convey, transfer, and make over to the purchaser said road and all of the franchises, privileges and rights, title and interests appertaining to the road.' And the act further provided, that the purchaser should acquire by his purchase 'all the rights, franchises, privileges, and immunities which were had and enjoyed by' the original corporation 'under the charter and the laws amendatory thereof.'

One month after the passage of the act just quoted, and pending proceedings thereunder for the sale of the road, another act was passed, approved March 20th, 1866, entitled, 'An act authorizing the incorporation of the purchaser or purchasers of any railroad, or of any part, section, or branch thereof, which has heretofore or may hereafter become forfeited to and sold by the State.' That act enacted thus:

'SECTION 4. Each corporation provided under this act shall have the same power, franchises, right, and privileges, and be subject to the same liabilities and restrictions as the corporation to which it shall become the successor may have had by its original charter, and the amendments thereto, into and over the property and franchises forfeited and sold aforesaid.'

At the sale, which the governor advertised, the State bought the railroad and its appurtenances in: and the commissioners sold it to three persons, who afterwards sold it to one Allen. Allen, availing himself of the privileges of the last above-quoted act, organized himself and certain other persons, including 'Trask, already named as the complainant below, into a new corporation having the name of the old one.

Hereupon the defendant, Maguire, a collector, as already said, of State and county taxes in Missouri, having sought to levy certain State and county taxes on this new corporation, Trask filed a bill in the court below to enjoin him, and that court dismissed the bill. Trask now appealed from that decree.

Messrs. B. R. Curtis and Drydens, for the appellant:

That the property of the original corporation was exempt from taxation is undeniable. It is nearly or quite as clear that if the purchaser at the sale which was made had been a private person, or a corporation-any purchaser other than the State-such purchaser would have held what he bought, equally exempt. The lien of the mortgage was 'on the road of the company, and every part and section thereof, and its appurtenances.' That by the word appurtenances it was meant at the time that all rights, franchises, privileges, and immunities should pass under the lien is hardly questionable. In any but a purely technical sense-the sense in which the word is used in a deed-appurtenances would certainly include them. They would certainly do so alike in the popular and in the legislative sense, and these are the only important senses to be considered here; for the transaction was between managers of a railroad and a body of legislators. The State expected to get and the road meant to give as a security all that it had. Why retain an immunnity from taxation when 'the road and every part and section thereof, and its appurtenances,' were put in mortgage and liable to be gone? Of what use would the immunity be when there was no property to which it could apply? Further than this, there would be ground to argue that in a stricter sense the word appurtenances would include the immunity.

The only difficulty in the case is that the State has purchased; that becoming owner of the road, she held it, of necessity and independently of any contract with the mortgagors, free from liability to taxation. And then, the further difficulty, that before she sold, the provisions of the new constitution intervened, and prevented her granting, as she undeniably meant to do, free from her own ability to tax.

The difficulty vanishes in the face of the 'ordinance,' which has 'the same force and effect' as the constitution.'1. The constitution and the ordinance being parts and parcels of one law ought not to be construed separately, but in the construction of the one the other ought to be taken into consideration.

Inasmuch as the ordinance, by its plain words, intended to pass to the purchaser all the franchises of the railroad companies named in it; and as one of the franchises of at least one of the companies was exemption of its property from taxation, the ordinance was of necessity an exception, and intended to be an exception to the general rule established by the constitution, subjecting all property to taxation. There is room for both parts of the law to operate; the rule and the exception each in its place. And the law should be so construed as that both may stand and have effect.

2. The rule and the exception are not inharmonious in their general objects. The primary object of the rule is revenue. If revenue was not the primary object of the exception it was at least a prominent one, as a recurrence to the situation of the State and the history of the times will show. At the time of the adoption of this constitution and ordinance, it is matter of common knowledge that the State was staggering under the burden of an enormous debt, with resources wasted by a devastating war. In such an exigency what measure would so likely add to the wealth of the people and to the resources of the State as the extension of her railroads, then but just begun, into the mineral and agricultural regions of the State, lying as yet undeveloped? It was in this view, and in a large degree as a measure of finance, that the convention resolved upon the project of selling these roads and extending them to their ultimate destinations. But in order to the success of the project, privileges and franchises had to be offered to induce the embarkation of capital apparently, but not really, at the expense of the public revenue.

3. Upon a fair construction of the ordinance, power was given to the legislature to grant to the purchasers of the property of the defaulting corporations the exemption insisted upon by the complainant. The fourth section of the ordinance relates to a period of time prior to the foreclosure, while yet the title to the property remains with the mortgagor, and contemplates a then future sale in foreclosure at which the State might become the purchaser. The fifth section looks to a period after foreclosure and presupposes the purchase of the mortgaged property by the State at the foreclosure sale. Both sections direct that provision be made by law for sales. What is it that the fourth section requires to be sold? 'The railroad and other property, and the franchises.' Not one franchise, merely, but the plural; franchises, all of the franchises of the company. What by the fifth section is to be sold? The answer is, the same railroad, the same other property, the same franchises 'as hereinbefore provided for' in the fourth section. All, without exception or diminution, that the State acquired at the sale under the fourth section was to be sold by it to its own vendee under the fifth section; the vendee of the State was to take every right that the State acquired at the sale for foreclosure. The State acquired at the foreclosure sale every right that the mortgagor had. If the mortgagor had the right to hold its property exempt from taxation, that right, by the provisions of the ordinance, would pass by the sale under the mortgage to the State and then from the State to its vendee. If it be objected that the franchises of the St. Louis and Iron Mountain Railroad Company did not, for want of apt words, pass by the mortgage, and that therefore the franchises of the company did not pass to the State at the foreclosure sale; we reply: first, as we have already once said, that the words of the mortgage were and are sufficient in law to pass the franchises of the mortgagor. But, second, this ordinance was the work of the people acting as lawmaker in their sovereign capacity. The sovereign possesses within himself all fulness of franchises. He is the author and source of all franchises. The sovereign people professed in this ordinance to possess and to be able to impart the franchises of these defaulting companies. Their lawfully appointed agents sold, and for them professed to convey these franchises, and having done this they will not be permitted now to stultify themselves by the plea that they did not possess the things which they professed to grant. But if they did not then possess them specifically they must be held to supply the lack from their original inexhaustible stores.

It was the clear intention of the convention to give to the purchaser all that was enjoyed by the companies in default, and it was just as clearly within the competency of the convention to give what it thus intended to give, whether the franchises previously given out had come back to the State or not. And as all parties, vendor and vendee, here contracted upon the idea that the one was giving and the other receiving the franchises claimed, it is no hardship to hold nor is it any stretch of judicial authority to decide that in law the convention gave what it then intended to give, and had the power to give.

Mr. R. E. Rombauer, contra.

Mr. Justice FIELD delivered the opinion of the court.