Wright v. Georgia R. & Banking Co., 216 U.S. 420 (1910)

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Wright v. Georgia Railroad and Banking Company

No. 70

Argued January 11, 1910
Decided February 21, 1910
216 U.S. 420

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES

FOR THE NORTHERN DISTRICT OF GEORGIA

Syllabus

A special charter to a railroad corporation contained a provision of exemption from taxation as follows:

The stock of the said company and its branches shall be exempt from taxation for and during the term of seven years from and after the completion of the said railroads, or any of them, and after that, shall be subject to a tax not exceeding one-half of one percent, per annum on the net proceeds of their investments.

In construing this provision, held that:

The words "after that" are equivalent to the word "thereafter" and relate to the entire period of time after the expiration of the seven years of total exemption, and are not to be construed as limited by another provision in the charter for a definite period during which the corporation should have exclusive rights.

The capital stock of a corporation is the capital upon which the business is to be undertaken, and is represented by property of every kind acquired by the company, while the shares are mere certificates representing a subscriber’s contribution to the capital stock and measuring his interest in the company. This distinction is obvious, although the words "stock" and "shares" are sometimes used synonymously.

The stock exempted in this case was the capital or property of the corporation, and not the shares of stock in the hands of the stockholders.

The federal courts accord to a judgment of the state court only that effect given to it by the courts of the state in which it was rendered, and where the highest court of a state has held that a judgment in a tax suit is not res judicata in a suit for taxes subsequently assessed for another year, even though it must be decided on the same questions, this Court will regard such a decision only as an authority and determine the question on its merits.

Where the capital of a corporation is exempted from taxation, except as specified, the exemption continues even if the property appreciates in value, and where, as in this case, it is evident that the legislature intended that the taxation of the corporation should be measured by the income, the exemption will not be construed as limited to the then value of the property, so that natural increases in value will be subject to any other method of taxation than that stipulated in the charter.

A law which imposes a tax upon the franchise of a railroad company whose property is exempt from taxation is a law in derogation of the exemption contract.

An act of a state legislature attempting to tax the whole or any part of the capital or franchise of a corporation, whose charter contains an express limitation and method of taxation, such as in this case, by any method other than that specified therein, impairs the obligation of the charter and is unconstitutional under the contract clause of the federal Constitution.

A state statute authorizing or directing the grant or transfer of the privileges of a corporation which enjoys immunity from taxation or regulation should not be interpreted as including that immunity in the grant or transfer. Rochester Railway Co. v. Rochester, 205 U.S. 236, 252.

While an exemption from taxation enjoyed by a corporation which acquires the franchises and property of another corporation may not be affected as to property which it already possesses, such exemption does not apply to additional property so acquired, nor do the exemptions enjoyed by the corporation whose property and franchise are acquired pass to the purchasing corporation.

The power of taxation is never to be regarded as surrendered or bargained away if there is room for rational doubt as to the purpose.

Where the decree is affirmed but modified as to a substantial contention, the costs of the appeal will be divided.

The facts are stated in the opinion.