Yazoo Company v. Thomas/Opinion of the Court

by Melville Fuller

United States Supreme Court

132 U.S. 174

Yazoo Company  v.  Thomas

'Statutes exempting persons or property from taxation, being in derogation of the sovereign authority and of common right, are, according to all the authorities, strictly construed. As taxation is the rule, and exemption the exception, the intention to create an exemption must be expressed in clear and unambiguous terms, and it cannot be taken to have been intended when the language of the statute on which it depends is doubtful or uncertain. Legislation which relieves any species of property from its due proportion of the burdens of government must be so clear that there can be neither reasonable doubt nor controversy in regard to its meaning. Cooley, Tax'n, (2d Ed.) 204; Bailey v. Magwire, 22 Wall. 215; Railroad Co. v. Dennis, 116 U.S. 665, 6 Sup. Ct. Rep. 625; Frantz v. Dobson, 64 Miss. 631, 2 South. Rep. 75. In the light of these principles, we are unable to find anything in the charter of appellant to warrant the exemption claimed in this case. It is quite plain to us that the exemption created by section 8 of appellant's charter (Acts 1882, p. 847) was intended to commence from and after the completion of a railroad to the Mississippi river, and was to continue thereafter for twenty years, if the road was completed to the river in five years from the date of the approval of the act, but liable to be diminished by whatever time beyond five years was consumed in the completion of the road to the river. At the time appellant's charter was enacted, railroads in process of construction were not taxable under the general laws of the state, (Code, § 608,) and this may account for the charter providing exemption from taxation after the completion of the road, and none during the period of its construction.'

Together with arguments upon the merits, a motion to dismiss was also submitted.

James Fentress and W. P. Harris, for plaintiff in error.

T. M. Miller and Marcellus Green, for defendants in error.

Mr. Chief Justice FULLER, after stating the facts as above, delivered the opinion of the court.

The supreme court of Mississippi did not put its decision upon the ground that it was not competent under the state constitution for the state to contract with the company that the latter should not be subjected to taxation, but upon the ground that the exemption claimed could not be allowed. The taxes in question were assessed under the act of 1888, and if the charter of the company, which became a law on the 17th of February, 1882, inhibited such taxation, then this court has jurisdiction to re-examine the conclusion reached. Although by the terms of the act of 1888 the taxes therein referred to were not to be levied as against a railroad exempt by law or charter, yet the supreme court held that this company is not exempt, and is embraced within the act; so that, if a contract of exemption is contained in the company's charter, then the obligation of that contract is impaired by the act of 1888, which must be considered, under the ruling of the supreme court, as intended to apply to the company. The result is the same, although the act of 1888 be regarded as simply putting in force revenue laws existing at the date of the company's charter, rather than itself imposing taxes, for, if the contract existed, those laws became inoperative, and would be reinstated by the act of 1888. The motion to dismiss the writ of error is therefore overruled.

By the eighth section of the company's charter it was declared 'that said company, its stock, its railroads, and appurtenances, and all its property in this state necessary or incident to the full exercise of all the powers herein granted, not to include compresses and oil-mills,-shall be exempt from taxation for a term of 20 years from the completion of said railroad to the Mississippi river, but not to extend beyond 25 years from the date of the approval of this act; and, when the period of exemption herein prescribed shall have expired, the property of said railroad may be taxed at the same rate as other property in this state.' If the provision had terminated with the words 'Mississippi River,' it would not be open to argument in this court that the exemption claimed did not commence until the river was reached. In Railroad Co. v. Dennis, 116 U.S. 665, 6 Sup. Ct. Rep. 625, it was held that a provision in a railroad charter by which 'the capital stock of said company shall be exempt from taxation, and its road, fixtures, work-shops, warehouses, vehicles of transportation, and other appurtenances, shall be exempt from taxation for ten years after the completion of said road within the limits of this state,' did not exempt the road, fixtures, and appurtenances from taxation before such completion. It was argued there, as it is here, that the legislature, while exempting the railroad from taxation for 10 years after its completion, could not have intended to subject it to taxation before its completion, and when its earnings were little or nothing. On the other hand, it was argued there, as it is here, that one reason for defining the exemption of the railroad and its appurtenances from taxation as 'for ten years after the completion of said road,' without including any time before its completion, was to secure a prompt execution of the work, and to prevent the corporation from defeating the principal object of the grant, and prolonging its own immunity from taxation by postponing or omitting the completion of a portion of the road; but this court said, speaking through Mr. Justice GRAY: 'Each of these arguments rests too much on inference and conjecture to afford a safe ground of decision where the words of the statute creating the exemption are plain, definite, and unambiguous.' It appeared there, as it does here, that the taxing officers of the state had omitted in previous years to assess the property; but it was held that such omission could not 'control the duty imposed by law upon their successors, or the power of the legislature, or the legal construction of the statute under which the exemption is claimed.' And the court took occasion to reiterate the well-settled rule that exemptions from taxation are regarded as in derogation of the sovereign authority and of common right, and therefore not to be extended beyond the exact and express requirements of the language used, construed strictissimi juris. Tested by that rule, did the addition of the words 'but not to extend beyond 25 years from the date of the approval of this act' operate to create an exemption of 25 years from the date of the act, subject to being reduced to less than that if the road were completed to the river before the lapse of 5 years, but for 20 years at all events; or did it operate to reduce the term of the 20 years exemption by so much as the completion of the road to the river took over 5 years? Upon the one view, there would be a loss of exemption through rapidity of construction; in the other view, a gain,-or, rather, the prevention of a loss. Does it appear by clear and unambiguous language that the state intended to surrender the right of taxation for 25 years? If the surrender admits of a reasonable construction consistent with the reservation of the power for a portion of the longer period, then for that portion it cannot be held to have been surrendered. Is not the construction that the exemption was to be for a term of 20 years, subject to a diminution of that term if the river were not reached in 5 years, as reasonable as the opposite construction; and, if the latter construction be adopted, would it not be extending the exemption beyond what the language of the concession clearly requires? Can an exemption expressly limited to a term of 20 years after the accomplishment of a designated work, but not to extend beyond 25 years from a certain date, be read as an exemption for 25 years, but not to extend beyond 20 years from the completion of that work? It seems to us, notwithstanding the able and ingenious arguments of appellant's counsel, that these questions answer themselves, and that the exemption claimed cannot be sustained. By the general law of the state of Mississippi in force at the time the charter of appellant was granted, it was provided that no railroad company should be subject to taxation while the same was in process of construction, but, if any part of any road should be completed so as to be used for profit, the part so used should be taxed, although the whole road might not be finished. Rev. Code Miss. 1880, § 608. It is admitted that the taxes here were levied in respect to parts of the road which were in operation.

The second section of its charter empowered the corporation to build and construct, and thereafter use, operate, own, and enjoy a railroad or railroads into, along, and across that part of the state lying between the Mississippi river and the Chicago, St. Louis & New Orleans Railroad, 'one of said lines, or a branch therefrom, to reach the Mississippi river at or near a point opposite Arkansas City, if practicable, so as to connect such point on the east bank of the Mississippi river with some point or points on the line of the Chicago, St. Louis and New Orleans Railroad;' and by section 7 it was empowered to 'build, construct, maintain, and operate of itself, or with others, in or out of this state, a ferry across, or a tunnel under, or a bridge over, the Mississippi river, at any point within this state where its railroads, branches, laterals, or spurs may reach said river,' and to acquire lands, etc., for landings, wharves, inclines, etc., and to establish said landings, wharves, inclines, etc., as might be necessary or convenient in transporting freights, passengers, etc., upon and across said Mississippi river. In our opinion, it cannot be doubted that a principal object of the grant to the company was the building of a line across the state from the Chicago Railroad to the Mississippi river, and that the point of contact was to be opposite Arkansas City, if that were practicable. Five years was contemplated as sufficient to complete the road to the river, so that the 20-years exemption should commence. By the thirteenth section it was provided that the legislature might declare the charter forfeited, if 20 miles were not constructed and in operation within three years from the passage of the act. This indicates that the legislature did not assume that the line might probably be extended to the river in less than 5 years, and were not thereby induced to insert the 20 years as a limitation on the 25. No reason is perceived for limiting the exemption to begin with the completion of the railroad to the Mississippi river, if it were intended that the exemption should be for more than 20 years, at all events, commencing with the approval of the act. The question when the property may be taxed is answered by ascertaining when the period of the specified exemption begins; for until then the general law provided that, while the road could not be taxed during the process of construction, such parts as were finished and in operation could be, though they might be for a time exempt, under the charter, after the line was completed to the Mississippi river. When the Mississippi river was reached, then the period of exemption would begin; but how long it would continue would depend upon the length of time to elapse before the end of 25 years from the approval of the charter. And this disposes of the argument that it is immaterial whether the period of exemption is 20 or 25 years, because it is agreed that the property could not be taxed until the period of exemption, whatever that is, shall have expired; for that ignores the real inquiry, which is as to when the exemption commences.

Again, the preamble to the act is referred to by counsel, as sustaining their construction, because it is therein declared that the work is one of 'great public importance,' and 'to be encouraged by legislative sanction and liberality,' and that 'the physical difficulties of constructing and maintaining railroads to, across, along, or within either the Mississippi, Sunflower, Deer Creek, or Yazoo bottoms or basins, or the other alluvial lands herein referred to, are such that no private company has so far been able to establish a railroad and branches developing said basins and alluvial lands, and connecting them with the railroad system of the country.' But, as the preamble is no part of the act, and cannot enlarge or confer powers, nor control the words of the act, unless they are doubtful or ambiguous, the necessity or resorting to it to assist in ascertaining the true intent and meaning of the legislature is in itself fatal to the claim set up. Indeed, what is therein stated appears to us to be quite as referable to the remarkably extensive powers granted as to the assignment of reasons for exemption from taxation. It is true that it is stated in section 8 that, in order to encourage the investment of capital in the enterprise, and 'to make certain in advance of such investment, and as inducement and consideration therefor, the taxes and burdens which this state will and not impose thereon,' the exemption is thereby declared. Yet if, not withstanding that statement, the matter were left uncertain, that would not allow the court to make it certain by construction, and to remove ambiguity upon the presumption of a legislative intent contrary to the fixed presumption where the rights of the public are involved. In short, there can be no uncertainty in the result when the language used is construed, as it must be, in accordance with thoroughly-settled principles. After stating the exemption in controversy, section 8 concludes as follows: 'And when the period of exemption herein prescribed shall have expired the property of said railroad may be taxed at the same rate as other property in this state. All of said taxes to which the property of said company may be subject in this state, whether for county or state, shall be collected by the treasurer of this state, and paid into the state treasury, to be dealt with as the legislature may direct; but said company shall be exempt from taxation by cities and towns.' Since upon the expiration of the period of exemption it would have followed that the property of the company would be subject to taxation at the same rate as other property, it may be that the object of the final clause was to create a scheme of taxation peculiar to the road. Upon the comprehensiveness and validity of such scheme we do not undertake to pass. It was not to take effect until the exemption expired, and the terms in which it was couched do not render the commencement of the exemption other than the supreme court held it to be. The case is clearly controlled by our decision in Railway Co. v. Dennis, supra, and the judgment must therefore be affirmed.

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