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United States Supreme Court

80 U.S. 264

Wilmington Railroad  v.  Reid

ERROR to the Supreme Court of North Carolina; the case being thus:

In 1853 the legislature of North Carolina chartered the Wilmington and Raleigh Railroad Company. One section of the charter ran thus:

'It shall be lawful for the president and directors to purchase with the funds of the company, and place on the said railroad, all machines, wagons, vehicles, carriages, and teams of any description whatsoever which may be deemed necessary for the purposes of transportation; and all the property purchased by the said president and directors, and that which may be given to the company, and the works constructed under the authority of this act, and all profits accruing on the said works and the said property shall be vested in the respective shareholders of the company and their successors and assigns forever, in proportion to their respective shares; and the shares shall be deemed personal property; and the property of said company and the shares therein shall be exempt from any public charge or tax whatsoever.'

With this charter in force, the franchise and rolling stock of the company were assessed, under a subsequent law and pursuant to it, for taxation by the State of North Carolina and the county of Halifax, in two parts-one, the apportioned share for the county of Halifax, assessed in each case upon the entire franchise and rolling stock jointly, and the other a tax assessed upon certain lots of land in Halifax County, appurtenant to and forming a part of the property of the company, and necessary to its business.

On application for injunction against one Reid, sheriff, who was going to seize the company's property for nonpayment of the tax-the application for the injunction being made on the ground that the subsequent law impaired the obligation of a contract-the Supreme Court of the State adjudged that the law did not do this, and that the tax was valid. The case was accordingly now brought here by the company to review that judgment.

It may be here added that provisions exempting the property of companies chartered by it, exist in the cases of numerous companies incorporated by the legislature of North Carolina; beginning with the charter to the Dismal Swamp Canal Company, A. D. 1790. In some cases the provision exempted the company from all taxes forever; in others but for a limited time. In some, all dividends were exempted; in others, dividends when not exceeding a certain rate per cent. Such exemptions are more observable in earlier times than in later ones.

Mr. W. H. Battle, in support of the ruling below:

In the Binghamton Bridge Case, [1] it is said by this court 'that all rights which are asserted against the State must be clearly defined, and not raised by inference or presumption; and if the charter is silent about a power, it does not exist.' The reason for such a doctrine is obvious. It is that the taxing power is one of the highest and most important attributes of sovereignty; essential to the establishment and continued existence of the government. No government can divest itself altogether of such a power. Concede, that it may, by a contract for an adequate consideration, bind itself for a longer or a shorter period, not to exercise its taxing power at all, or not beyond a certain extent, upon certain persons or things. Still this is a dangerous restriction upon its power, because the necessities of the government cannot always be foreseen. In the changes and chances of things, those who have charge of the administration may have need of all the possible resources of the country to save it from great disaster, if not from ruin. [2]

Now the franchise of the corporation is something distinct from its property, and the distinction is recognized in adjudged cases. [3] In this case the tax is upon the franchise. The exemption of the charter extends only to the property, leaving the franchise or body politic itself liable to be taxed; just as an individual might have his property exempt while the State might tax his poll ad libitum. [4] In view of the great explicitness of language required to divest a State of so necessary an attribute of sovereignty, we think that nothing less than the exemption in terms of the franchise as well as of the property of a corporation from taxation, can or ought to relieve it from the burden of contributing its just proportion towards the support of the government. [5]

Messrs. Carlisle, McPherson, and B. F. Moore, contra.

Mr. Justice DAVIS delivered the opinion of the court.


^1  3 Wallace, 75.

^2  State v. Petway, 2 Jones's N. C. Equity, 396; Bank of Pennsylvania v. Commonwealth, 19 Pennsylvania State, 144; Lord Middleton v. Lambert, 1 Adolphus & Ellis, 401; Christ Church v. County of Philadelphia, 24 Howard, 300.

^3  State v. Rives, 5 Iredell, 297-Revised Code of 1856, ch. 26, §§ 5 to 10; State v. Petway, 2 Jones's N. C. Equity, 396; Attorney-General v. Bank of Charlotte, 4 Id. 287.

^4  Union Bank of Tennessee v. State, 9 Yerger, 490.

^5  Home of the Friendless v. Rouse, 8 Wallace, 430; the Washington University v. Rouse, Ib. 439.

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).