U.S. Supreme Court
New Jersey v. Yard, 95 U.S. 104 (1877)
New Jersey v. Yard
95 U.S. 104
1. A statute of a state which declares that all charters of corporations granted after its passage may be altered, amended, or repealed by the legislature does not necessarily apply to supplements to an existing charter which were enacted subsequently to the statute.
2. Nor does a provision which declares that "this supplement, and the charter to which it is a supplement, may be altered or amended by the legislature" apply to a contract with the corporation made in a supplement thereafter passed.
3. Such statutory reservations of the right to repeal, unlike similar constitutional provisions, are only binding on a succeeding legislature so far as it chooses to conform to them, and if it so intends, an irrepealable legislative contract may be made. It is therefore in every case a question whether the legislature making the contract intended that the former provision for repeal or amendment should, by implication, become a part of the new contract.
4. In this case, the contract of 1865 for a specific rate of taxation is inconsistent with any such implication because: 1. there was a subject of dispute and a fair adjustment of it for a valuable consideration on both sides; 2. the contract assumed, by legislative requirement, the shape of a formal written contract; 3. the terms of the contract, that "this tax shall be in lieu and satisfaction of all other taxation or imposition whatsoever by or under the authority of this state, or any law thereof," exclude, in view of the whole transaction, the right of the state to revoke it at pleasure.
The Morris and Essex Railroad Company was, by an act of the Legislature of New Jersey, passed Jan. 29, 1835, created a corporation.
The fifteenth section of the charter enacted that as soon as the net proceeds of said railroad amounted to seven percent on its costs, the corporation should pay to the treasurer of the state a tax of one-half of one percent on the cost of said road, to be paid annually thereafter on the first Monday of January of each year, provided that no other tax or impost should be levied or assess d upon the corporation.
The twentieth section reserved to the legislature the right to alter, amend, or repeal the act whenever it should think proper.
A supplement to the charter passed March 2, 1836, gave power to build a branch and lateral roads, and repealed the twentieth section of the original charter, but reserved the right chanroblesvirtualawlibrary
of the legislature to alter or amend the supplement, or the act to which it is a supplement, whenever the public good may require it.
On the 14th of February, 1846, a general act relating to corporations was approved which enacted that the charter of every corporation which should thereafter be granted by the legislature should be subject to alteration, suspension, and repeal in the discretion of the legislature.
On March 28, 1862, a general tax act was approved, the eighth section of which enacts that all private corporations of the state except those which, by virtue of any irrepealable contract in their charters or other contracts with the state, are expressly exempted from taxation, should be and were thereby required to be respectively assessed and taxed at the full amount of their capital stock paid in, and accumulated surplus.
Sec. 13 enacts that the real estate of private corporations situate within the state shall be assessed against said corporation in the township or ward in which it is located in the same manner as the real estate of individuals, and the amount of such assessment shall be deducted from the amount of the capital stock, &c.
The twenty-first section repeals all acts and parts of acts, whether special or local, or otherwise, inconsistent with the provisions of the act.
Another supplement was approved on the 23d of March, 1865. It authorizes a branch road through Boonton and to Paterson, and for that purpose empowers the company to exercise all the powers and franchises given by the original act and supplements, subject, however, to all the restrictions, limitations, and conditions of said original act and supplements which may be applicable to the powers and franchises conferred by this supplement.
The third section enacts that the tax of one-half of one percent, provided by the said original act of incorporation to be paid by said company to the state whenever the net earnings of the company amounted to seven percent upon the cost of the road, shall be paid at the expiration of one year from the time when the road of the company shall be open and in use chanroblesvirtualawlibrary
to Phillipsburgh and annually thereafter, which tax shall be in lieu and satisfaction of all other taxation or imposition whatsoever by or under the authority of the state or any law thereof, provided that the section shall not go into effect or be binding upon the company until it, by an instrument duly executed under its corporate seal and filed in the office of the secretary of state, shall have signified its assent hereto, which assent shall be signified within sixty days after the passage of the act, or the act shall be void.
The fifth section enacts that the act shall take effect immediately.
In due time, the company filed a paper under its seal, bearing date April 24, 1865, reciting said third section and setting forth that the company had received a copy of the act and had considered it. It then declares that in consideration of the terms and conditions of the said supplement, and more especially of the third section thereof, the company has assented, and does thereby assent, to the said act, and has agreed and does thereby agree to be subject to the provisions of the said act and to pay the tax therein named, as therein specified.
On the 5th of March, 1867, another supplement to the charter was approved which, after reciting that the company had lately extended its railroad from Hackettstown to Phillipsburgh, gives power to increase its stock and straighten its road, and declares that the company for this purpose shall be invested with all the powers conferred by the charter and supplements, subject to the duties and liabilities thereby imposed. It enacts that no tax by or under the authority of the state shall be imposed upon any property purchased, held, or used by said company for the purposes of its charter or any of the supplements thereto, except the tax of one-half of one percent on the cost of its road, which, by the said charter and the supplement thereto approved on the twenty-third day of March, 1865, was required to be paid by said company in lieu of all other taxes, any act to the contrary notwithstanding.
No formal acceptance of this act was provided for or given.
On the 2d of April, 1873, an act entitled "An Act to establish just rules for the taxation of railroad corporations, and to chanroblesvirtualawlibrary
induce their acceptance and uniform adoption," was passed. The preamble recites as follows:
"Whereas, for the encouragement of railroad enterprise, laws creating and regulating railways in this state usually provide for the payment by them, in consideration of their chartered privileges, of a fixed rate upon the capital stock or the cost of their works in lieu of the payment by them, in consideration of their chartered privileges, of a fixed rate upon the capital stock or the cost of their works in lieu of the payment by them, in consideration of their chartered privileges, of a fixed rate upon the capital stock or the cost of their works in lieu of all other public impositions whatever, that it is nevertheless contended that the property of such corporations, being largely acquired for or through the growth and extension of their prosperity, should contribute to the charges and expenses essential for municipal and county purposes; that it is desirable, in order to the avoidance of litigation and future dissatisfaction, that such municipal and county taxation shall be authorized, and that the same shall be permanently fixed and regulated."
Sec. 1 then enacts that all taxation upon all railroad companies occupying and using railroads in the state, whether as lessees or otherwise, shall hereafter be made as follows: first, such companies shall pay upon the cost, equipment, and appendages of said railroads, respectively, a state tax after such rate of taxation as may have heretofore been fixed by law upon such companies, or, in default thereof, after the rate of one-half of one percent upon such cost. Second, a tax of one percent on the value of the corporations' real estate (except the track, roadbed and ten acres at the termini) for the benefit of the counties and municipalities in which it lies.
The ninth section makes the corporation liable for city improvements beneficial to such property, for the purposes for which it is used, except that made subject to state tax, but provides that the laws relating in other respects to such city improvements be not thereby altered.
The act then recites that
"Whereas certain railroad corporations, owning or occupying railroads in this state, claim exemption from all taxation, whether state, county, or municipal, further than is provided for by their charters, or by special laws for their benefit now existing, which claims, even if legal, subject said corporations to public ill will, and make it their interest to forego the same and agree to the scheme of taxation hereby established."
Sec. 10 then enacts that any such railroad corporation may, chanroblesvirtualawlibrary
within six months from the approval of the act, make and execute, under its common seal and the signature of its president, and file in the office of the secretary of state a declaration in writing surrendering all claim to exemption from taxation by it heretofore had or made and accepting the provisions of this act in lieu thereof.
Sec. 11 repeals all acts and parts of acts inconsistent with said act, and declares that the act shall take effect immediately.
Yard, the tax commissioner provided for in the act, made the statement and valuation required by it with respect to the Morris and Essex Railroad Company's real estate. By this it appears that its real estate, to the amount of $2,089,520, is subject to a tax of one percent for the years 1873, 1874, and 1875 for the benefit of the counties and municipalities where it is situate.
This valuation was removed to the Supreme Court of New Jersey by certiorari, and the reasons assigned for setting it aside were four: 1st, the commissioner had no power to make the valuation; 2d, the act of 1873 does not apply to the Morris and Essex Railroad Company; 3d, if it does apply, it impairs a contract between the state and the company; 4th, general illegality and violation of vested rights.
The contract was, it is alleged, created by the company's acceptance under its seal of the said third section of the supplement to its charter, approved March 23, 1865.
The supreme court rendered a judgment sustaining the assessment.
That judgment having been affirmed by the Court of Errors and Appeals, the State of New Jersey, on the prosecution of the company, brought the case here. chanroblesvirtualawlibrary