text:
The Emily Souder/Opinion of the Court

The rule announced in The Grapeshot, and there relieved from the supposed embarrassment of some previous decisions of this court, and repeated and affirmed in The Lulu, and The Kalorama, and followed in The Patapsco, disposes of the main question in these cases. The steamer here had entered the port of Maranham, on the coast of Brazil, in distress; she had lost her propelling screw, and was towed into port by another steamer, for which she had signalled. The repairs there made to the vessel, and the supplies furnished to her, and the expenses incurred on her account, were necessary to render her seaworthy and enable her to leave the port and prosecute her voyage to New York. The captain was without adequate funds for these purposes, the whole amount in his possession being under $600, and that sum being insufficient to meet the contingent expenses of the vessel. Both he and the owners of the vessel were unknown in Maranham, and without credit there. It was under these circumstances that he requested the consul of the United States in that port to obtain for him a consignee who would attend to the business of the vessel and advance the requisite funds. And it was only after applying without success to several parties, that he succeeded in inducing the firm of Packenham Beatty & Co., the libellants in one of these cases, to make the arrangement desired with the captain. The stipulation in the arrangement for five per cent. commission on the funds advanced, and five per cent. commission for attending to the business of the vessel was not unreasonable nor unusual. The steamer was detained at Maranham nearly five weeks, and the moneys advanced by the libellants, it is true, were not entirely for the repairs to the vessel and the supplies needed for the voyage; they were intended and applied in part to meet the expenses of her towage into port and of pilotage, and to pay the customhouse dues, consular fees, and charges for medical attendance upon the sailors. These various items, however, stood in the same rank, with necessary repairs and supplies to the vessel, and the libellants advancing funds for their payment, were equally entitled as security to a lien upon the vessel. The items were all submitted to the examination of the captain, and were approved by him before they were paid.

The drafts given by the captain upon the owners of the vessel in New York were not received by the libellants in discharge and satisfaction of the sums advanced. They were received only as conditional payment. Such would be the presumption of law in the absence of any direct evidence on the point. For by the general commercial law of the world, a promise to pay, whether in the form of notes or bills, is not of itself the equivalent of payment; it is treated everywhere, in the absence of express agreement or local usage to the contrary, as conditional payment only. On principle, nothing can be payment in fact except what is in truth such, unless specially agreed to be taken as its equivalent. But here the evidence of the libellants is direct and positive that the drafts were only taken as conditional payment, and on the trial they were produced and surrendered for cancellation.

The consent of Pritchard, the libellant in one of the cases, to advance a portion of the funds after Packenhm Beatty & Co. had agreed to advance the whole, does not in our judgment in any respect affect the implied hypothecation of the vessel for the whole. The whole sum advanced was required, and the question is not whether it came from one or more parties, or whether the advances were made at one time or at different times, but whether they were made on the personal credit of the captain or of the owners, or were made on the credit of the vessel also. And upon this question there can be in this case no reasonable doubt. The presumption of law always is, in the absence of fraud or collusion, that where advances are made to a captain in a foreign port, upon his request, to pay for necessary repairs or supplies to enable his vessel to prosecute her voyage, or to pay harbor dues, or for pilotage, towage, and like services rendered to the vessel, that they are made upon the credit of the vessel as well as upon that of her owners. It is not necessary to the existence of the hypothecation that there should be in terms any express pledge of the vessel, or any stipulation that the credit shall be given on her account. The presumption arises that such is the fact from the necessities of the vessel, and the position of the parties considered with reference to the motives which generally govern the conduct of individuals. Moneys are not usually loaned to strangers, residents of distant and foreign countries, without security, and it would be a violent presumption to suppose that any such course was adopted when ample security in the vessel was lying before the parties. The presumption, therefore, that advances in such cases are made upon the credit of the vessel is not repelled by any loose and uncertain testimony as to the suppositions or understandings of one of the parties. It can be repelled only by clear and satisfactory proof that the master was in possession of funds applicable to the expenses, or of a credit of his own or of the owners of his vessel, upon which funds could be raised by the exercise of reasonable diligence, and that the possession of such funds or credit was known to the party making the advances, or could readily have been ascertained by proper inquiry.

In the cases at bar, the presumption is not only not repelled by any satisfactory evidence, but is supported by the positive testimony of the libellants. Beatty, who appears to have transacted the business of Packenham Beatty & Co. with the captain, and Pritchard, both declare in the most emphatic manner that they made the advances on the credit of the vessel, and would not have made them on any other condition.

The evidence of the captain, it is true, is to some extent in conflict with their testimony, but considering the circumstances under which the advances were made, it is entitled, as against their direct and positive declarations, to little weight. Perhaps, as suggested by the Circuit Court in its opinion, the inferences of the captain were not the result of any intended untruth on his part, but were drawn from the fact that nothing was said during the negotiation for advances intimating in terms that the libellants were to have a lien upon the vessel.

The fact that the vessel was, at the time the advances were made, under mortgage to the claimants, does not subordinate the lien of the libellants to the claim of the mortgagees. Funds furnished in a foreign port, under the circumstances and for the purposes mentioned in this case, have priority as a lien upon the vessel over existing mortgages. Advanced for the security and protection of the vessel, they were for the benefit of the mortgagees as well as of the owners. If liens created by the necessities of vessels in a foreign port could be subordinated to or displaced by mortgages to prior creditors at home, such liens would soon cease to be regarded as having any certain value, or as affording any reliable security.

As the advances were in gold, and the drafts on the owners in New York show that the payment to the libellants was to be made also in gold, the court below ruled rightly in directing its decrees to be entered for the amount due them in like currency.

DECREE AFFIRMED in both cases, with interest and costs.

title: The Emily Souder/Opinion of the Court


text: Talk:The Emily Souder/Opinion of the Court

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


text:
Life Insurance Company v. Francisco

ERROR to the Circuit Court for the District of California; the case being thus:

Dolores Francisco sued the Manhattan Life Insurance Company upon a contract of insurance, made February 5th, 1867, upon the life of her husband. The husband died twenty-four days afterwards; that is to say on the 1st of March, 1867, and before the policy actually issued. There were two conditions in the policy, which would have been issued had Francisco lived:

1st. That if any representation made by the assured in the application for the policy should prove to have been untrue, the policy should be void.

2d. That payment of the loss would be made within ninety days after notice of the death, and due proof of the just claim of the assured.

Upon the trial of the cause the plaintiff offered evidence to prove the contract, and the death of her husband, and also that she had filled up in the presence of the agent of the company and handed to him, who received them without any objection, blank forms which had been furnished by the company, and which were those always used in making proof of death, but offered no evidence as to the contents of those papers. The plaintiff rested, and the defendant moved the court to instruct the jury that on the evidence given the plaintiff could not recover; which instruction the court refused to give, and the defendant excepted. This was the first exception.

The company then gave in evidence this and other papers which the wife had handed to the agent as proof of her right to demand the insurance-money. They contained answers by the wife herself in reference to the questions on the blank form, thus:

'QUESTION. State all the facts regarding cause of death.

'ANSWER. About the 14th of February, 1867, was taken sick with a severe colic fever; was confined to his house for two days; finally was well enough to attend to business five days succeeding; was again taken sick on the 22d of February, 1867, and from which sickness he died on the 1st of March, 1867.

'QUESTION. How long has he been sick?

'ANSWER. In both attacks about ten days.

'QUESTION. Did he die suddenlu, or was his disease after an illness of how many months, and weeks, and days' duration?

'ANSWER. He died from an acute attack of the congestion of the liver, which produced fever, and from the effects of which he died, to the best of my knowledge and belief.'

Besides the statement of the wife, there were the statements by the physician, Dr. Franklin, who had attended Francisco in his last illness; and also of an acquaintance, one Mardis. The physician stated that he had prescribed for the deceased occasionally since 1856, and had 'been his physician principally for the last three or four years; his disease had been indigestion, torpid liver, and colic,' and that he died of 'acute hepatitis.' The acquaintance, Mardis, knew 'of his being sick for short periods of a day or two, for about eighteen months previous to his death, of cramps in the stomach.'

The company also gave in evidence the application for the policy and the representations therein made, referred to. The answers to the usual questions were given by Mr. Francisco, as agent for his wife. He was asked whether he had ever had liver complaint, whether any disease was suspected, whether he had had at any time disease of the stomach or bowels, whether, during the last seven years, he had any sickness or disease, and if so what were the particulars and what physician had attended him; to all which he answered in the negative.

The defendant then rested. The plaintiff then produced nine witnesses, every one of whom testified that they had known Francisco for longer or shorter terms of time, and that they had never known him to be at all unwell, or more than very slightly so; and that they considered him a healthy man. Four of these were asked whether they could say that the physician, Dr. Franklin's, statements were not correct, and answered that they could not say so; the other five were not questioned on the point.

The plaintiff rested and the evidence was closed. The defendant then prayed the court to instruct the jury that the evidence was not sufficient to entitle the plaintiff to a verdict. The court refused to grant the instruction, and the defendant excepted. This was the second exception.

The evidence having been summed up by counsel, the counsel for the defendant offered to the court certain instructions which he desired the court to give to the jury, but the judge refused, saying it was too late to ask instructions, after argument to the jury, to which defendant excepted. This was the third exception.

There was a general rule of the court—

'In causes, civil or criminal, tried by a jury, any special charge or instruction asked for by either party must be presented to the court, in writing, directly after the close of the evidence, and before any argument is made to the jury, or they will not be considered.'

The court instructed the jury that it was for them to determine whether the deceased had had any disease or sickness within the meaning of the term as used in the question answered by him; that he might have had a cold or headache so slight as not to constitute sickness or disease within the meaning of the question, to which part of the charge the defendant excepted. This was the fourth exception.

The court proceeded to say that the ailment might be so serious as to constitute disease.

The court instructed the jury that it was for them to determine whether the party had been afflicted with any sickness or disease within the proper meaning of those terms, as used in the application; to which part of the charge the defendant excepted. This was the fifth exception.

Verdict and judgment having gone for the plaintiff, the case was brought here on the following assignments of error:

I. The court erred in refusing the instructions asked as stated in the first and second exceptions.

II. The court erred in refusing to consider the request for instructions after the close of the argument to the jury, as stated in the third exception.

III. The court erred in charging the jury as stated in the fourth and fifth exceptions.

Messrs. J. M. Carlisle and J. D. McPherson, for the plaintiff in error; a brief of Messrs. Doyle and Barber being filed on the same side:

As to the first exception. The court allowed the plaintiff to recover on evidence that the defendant had made the agreement declared on, and that the person whose life was assured had died, with further proof that papers, in the form of those used by the company in 'proof of the just claim of the assured,' had been prepared and handed to the agent of the defendant.

Now, the plaintiff, by the terms of the policy, was bound to furnish, first, 'satisfactory evidence of the death of the insured,' and second, 'proof of the just claim of the assured under this policy.' The defendant had offered no proof on the latter point when the instruction was asked and refused. The proofs were correct in form but bad in substance. The company was not bound to return them, or ask an explanation, or suggest a mode of explaining away fatal admissions.

The instruction was asked after the plaintiff had rested. and it was in the nature of a demurrer to the evidence.

As to the second exception. The preliminary proofs offered by the plaintiff are admissions by her, and they show that the deceased, her agent, had given false answers to the questions contained in the application for the policy. If this was so, then, by the very terms of the policy, there could be no recovery. The questions were in writing, the answers in writing, and the plaintiff's admissions in writing; these writings it was the province of the court to construe to the jury.

As to the third exception. The refusal of the judge to consider any instructions asked after argument to the jury was in accordance with a rule of the court, but the right of counsel to submit instructions at any time before the jury leave the box is part of the common law of the land and cannot be taken away by such rule. This is decided by the Supreme Court of California in People v. Williams.

As to the fourth and fifth exceptions. The charge of the court was erroneous in the particulars excepted to. There was no evidence before the jury tending to show that the disease specified by Dr. Franklin, or the sickness testified to by Mardis, was not in fact sickness or disease. Certain ordinary acquaintances of Francisco's, not one of whom is shown ever to have crossed his threshold, did not witness the specific attacks of sickness and disease spoken of by Franklin and Mardis, and of course knew nothing of them. They did not pretend to deny their occurrence. Their testimony proved nothing more than that Francisco's general health, so far as they knew, was good. When a medical witness says that he has attended a patient for years for a disease which he characterizes as indigestion, torpid liver, and colic, and another witness speaks of the patient as having been subject, for eighteen months or two years prior to his decease, to attacks, lasting a day or two, of cramps in the stomach, and these witnesses are uncontradicted, it is error to intimate to the jury that they are at liberty to find, from the evidence, that there was no disease in the case. Parks v. Ross rules this. The evidence on the point was all in one direction, but under the intimation of the court the jury disregarded it, and assumed that certain specific attacks of indigestion, colic, torpid liver, and cramps of the stomach, running through a series of years, were of so trivial a character as not to amount to sickness or disease.

Mr. C. W. Kendall, contra.

Mr. Justice STRONG delivered the opinion of the court.

title: Life Insurance Company v. Francisco


text: Talk:Life Insurance Company v. Francisco


text:
Life Insurance Company v. Francisco/Opinion of the Court

The evidence that preliminary proof of the death of Francisco and of the justice of the claim of the assured were given to the defendants ninety days before the suit was brought was quite sufficient to go to the jury. The proofs were in forms, blanks for which had been furnished by the insurers, and the forms were filled up in the presence of their agent. He received them without objection, and it does not appear that at any time before the trial of the case it was ever suggested to the assured that the proofs were insufficient, either in form or in substance. Clearly, therefore, it was not for the court to instruct the jury that the plaintiff was not entitled to a verdict. It seems to have been the idea of the defendants that the statements of the witnesses by whom the preliminary proofs were made did not establish the justice of the plaintiff's claim. But whether they did or not was a question which the court had no right to determine as a conclusion of law. They furnished, at least, some evidence that the claim was just, and this they would have furnished had they contained nothing more than averments that the defendants had agreed to insure, and that the person whose life was insured had died. The first assignment of error is, therefore, not sustained.

The second is equally without merit. After the case had been summed up, and when the court was about the charge the jury, the defendants offered to submit prayers for instructions, but the court refused to receive them, assigning as a reason that the offer was too late. This is alleged to have been an error. What the prayers were, whether the instructions asked were pertinent to the case or not, or whether they could rightfully have been given had they been received, we are not informed. They were not incorporated in the bill of exceptions, and they do not appear in the record. But, assuming that they were such as the court ought to have given had they been presented in time, there was no error in refusing to receive them after the case had been argued to the jury. The rule of the court then existing was as follows: 'In causes, civil or criminal, tried by a jury, any special charge or instruction asked for by either party must be presented to the court, in writing, directly after the close of the evidence and before any argument is made to the jury, or they will not be considered.' This is a reasonable rule, intended to guard as well the court as the opposite party against sudden surprise. It does not deprive either party of a right to the opinion of the court upon any material propositions which he may desire to have presented to the jury. It merely regulates the exercise of that right. The rule exists in very many courts, and it has been found necessary in the administration of justice. No doubt a court may, notwithstanding the rule, in its discretion, receive prayers for instructions even after the general charge has been given to the jury, but neither party can claim as a right a disregard of the ordinary rules of practice in the court. There is nothing inconsistent with this to be found in the case cited. On the contrary, whether a court shall enforce such a rule, or depart from it, is treated in that case as a matter resting in the discretion of the court. That it is competent for courts to adopt such a rule has often been decided, and once, at least, if not oftener, in California.

The remaining errors have been assigned to the charge of the court. The principal defence set up at the trial was that in the application for insurance false answers had been given to the questions propounded by the defendants. Those questions were, in substance, whether the person whose life was proposed for insurance had had certain diseases, or, during the next preceding seven years, any disease, and the answers given were that he had not. It was in reference to this that the court instructed the jury it was for them to determine from the evidence whether the person whose life was insured had, during the time mentioned in the questions propounded on making the application, any affliction that could properly be called a sickness or disease, within the meaning of the term as used, and said, 'for example, a man might have a slight cold in the head, or a slight headache, that in no way seriously affected his health or interfered with his usual avocations, and might be forgotten in a week or a month, which might be of so trifling a character as not to constitute a sickness or a disease within the meaning of the term as used, and which the party would not be required to mention in answering the questions. But again, he might have a cold or a headache of so serious a character as to be a sickness or disease within the meaning of those terms as used which it would be his duty to mention, and a failure to mention which would make his answer false.'

There is no just ground of complaint in this instruction, either considered abstractly or in its application to the evidence in the case. It was, in effect, saying that substantial truth in the answer was what was required. If, therefore, the defendants have been injured it was by the verdict of the jury rather than by any error of the court.

JUDGMENT AFFIRMED.


text: Talk:Life Insurance Company v. Francisco/Opinion of the Court


text:
Page:Triangles of life, and other stories.djvu/16

4 "that was the ground mist comin' up, an' it was gettin' chilly," and he proposed that they'd all go to the Farmers' Arms, where he'd fill up the pewter.

Little "God Forgive Billy," the greenest of New Chum Jackeroos, had been sent up by the Government, or Labour Bureau—that is he was given a pass and some rations, and sent away almost from the ship into the disc of Australia, of which he knew absolutely nothing except the awful blaze and dust of it—the blasting reason-shaking contrast from the green lanes of England—which was driving him mad. He had learned potato-peeling and rough cooking aboard the ship, and was liked here because of his fresh innocence, mild and obliging disposition, his gentle nursing and attention to Bogan when he had a touch o' the sun, and his smile, which was dimples deepened and lengthened a bit, hardened and fixed. Besides, he could play both mouth-organ and tin whistle. And he had one surprising gift altogether out of keeping with his appearance and character or nature. A gift that astonished all who saw an exhibition of it for the first time—and startled some. He could act the drunken man. That is a certain type of him. And the type was Australian, and not English. He was a perfect face-maker in this respect—for it was a silent part. He'd half turn away and damp his hair and moustache swiftly, by a quick pass or sleight of hand, and his hair would be dank, his moustache slobbered, and his hand would pass drunkenly over it to fling the surplus beers away, and his limbs would go, and his left eyelid keep dropping, like a lid, and—and


text:
Allen v. Ferguson

ERROR to the Circuit Court for the Eastern District of Arkansas.

P. H. Allen & Co. sued A. H. Ferguson upon a promissory note, dated March 20th, 1867, payable one day after date, with interest.

Ferguson appeared and pleaded his discharge in bankruptcy in bar to the action.

The plaintiffs replied a new promise in writing made while the proceedings in bankruptcy were pending. This promise the plaintiffs averred that they relied upon, and in consequence of it made no efforts to collect their debt. The alleged promise was contained in the following letter, which the plaintiffs made part of their replication, viz.:

'CROCKETT'S BLUFF, ARKANSAS, January 7th, 1868.

MESSRS. T. H. ALLEN & CO.

'DEAR SIR: I avail myself of this opportunity to give you a fare statement of my pecuniary affa'res. First, I failed to make a crop; secondly, find myself involved as security to the amount of five or eight thousand dollars; was sued, and judgments was render'd against me at the last turm of our co'rt for about $4000, a sum suf'ic'ent to sell all the avai'ble property that I am in possession of. I lost about $3000 by persons taking the bankrupt law. This is my situation. I was, as you can re'dily conclude, in a bad fix. To remain as I was, at that time, my property would be sold to pay security debts, and my just creditors would not get any part of it, and that I would be redused to insolvency and still ju'gments against me. As a last resort concluded to render a skedule myself in order to forse a prorater division of my affects. The five bales cotton I shipt you was all my crop, to pay you for the meat that you had sent me, to enable me to make the little crop that I did make. The cash that I requested you to send me was, for myself and William Ferguson, to pay his hands for labor; and one hundred and fifty yards of the bag'ing was for W. Ferguson, and one barel of the salt. I have been absent from home for the last two weeks; got home last night, and has not sean him yet, but suppose he has shipt you some cotton. If he has not done so, I will see that he sends you cotton at once. ''Be satisf'ed; all will be right I intend to pay all my just debts, if money can be made out of hired labor. Security debt I cannot pay''. I shall have a hard time, I suppose, this se'son, but will do the best I can.

'JAN. 8.-Since the above was writ'en I have seen William Ferguson. He says he ship'ed you two bales cotton, ten or twelve days ago, and ship'ed in my name, as the baggin' was order'd by me for him. William Ferguson will be in Memphis betwixt this and the first of March, and will call and see you on bisness matters betwixt me and you'self. All will be right betwixt me and my just creditors. Don't think hard of me. Attibet my poverty to the unprincipel'd Yankey. Let me heare from you as usel.

'Yours, very respectfully,

'A. H. FERGUSON.'

To this replication the defendant demurred. The demurrer was sustained by the Circuit Court, and this appeal was taken by the plaintiffs.

Mr. A. H. Garland, for the plaintiff in error; Messrs. Clark and Williams, contra.

Mr. Justice HUNT delivered the opinion of the court.

title: Allen v. Ferguson


text: Talk:Allen v. Ferguson

title: Talk:Allen v. Ferguson


text:
Allen v. Ferguson/Opinion of the Court

The question is, does the letter of the defendant, set forth in the replication, contain a sufficient promise to pay the debt in suit?

All the authorities agree in this, that the promise by which a discharged debt is revived must be clear, distinct, and unequivocal. It may be an absolute or a conditional promise, but in either case it must be unequivocal, and the occurrence of the condition must be averred if the promise be conditional. The rule is different in regard to the defence of the statute of limitations against a debt barred by the lapse of time. In that case, acts or declarations recognizing the present existence of the debt have often been held to take a case out of the statute. Not so in the class of cases we are considering. Nothing is sufficient to revive a discharged debt unless the jury are authorized by it to say that there is the expression by the debtor of a clear intention to bind himself to the payment of the debt. Thus, partial payments do not operate as a new promise to pay the residue of the debt. The payment of interest will not revive the liability to pay the principal, nor is the expression of an intention to pay the debt sufficient. The question must be left to the jury with instructions that a promise must be found by them before the debtor is bound.

The plaintiffs in error contend that such promise is to be found in the letter of the defendant, forming a part of their replication. They rely chiefly on these expressions: 'Be satisfied; all will be right. I intend to pay all my just debts, if money can be made from hired labor. Security debt I cannot pay,' and on the postscript where he adds, 'All will be right betwixt me and my just creditors.'

There can be no more uncertain rule of action than that which is furnished by an intention to do right. How or by whom is the right to be ascertained? What is right in a particular case? Archbishop Whately says: 'That which is conformable to the supreme will is absolutely right, and is called right simply, without reference to a special end. The opposite to right is wrong.' This announces a standard of right, but it gives no practical aid. What may be right between the defendant and his creditors is as difficult to determine as if he had no such standard. It is not absolutely certain that it is right for a creditor, seizing his debtor, to say, Pay me what thou owest, or that it is wrong for the debtor to resist such an attack. It is not unnatural that the creditor should think that payment of the debt was right, and that it was the only right in the case. It is equally natural that the debtor should entertain a different opinion. The law holds it to be right that a debtor shall devote his entire property to the payment of his debts, and when he has done this that after-acquired property shall be his own, to be held free from the obligation of all his debts, just debts as well as unjust, principal debts as well as security debts. Neither the supreme will, so far as we can ascertain it, nor the laws of the land, require that a debtor whose family is in need, or who is himself exhausted by a protracted struggle with poverty and misfortune, should prefer a creditor to his family; that he should appropriate his earnings to the payment of a debt from which the judgment of the law has released him, rather than to the support of his family or to his own comfort. What an honest man should or would do under such circumstances it is not always easy to say. When, therefore, the debtor in this case said to the plaintiff: 'Be satisfied; I intend to do right; all will be right betwixt my just creditors and myself,' he cannot be understood as saying that he would certainly pay his debt, much less that he would pay it immediately, as the plaintiff assumes. What is or what may be right depends upon many circumstances. The principle is impracticable as a rule of action to be administered by the courts. There is no standard known to us by which we are able to say that it is wrong in the defendant not to pay the plaintiff's debt.

We are of the opinion that the letter produced does not contain evidence of a promise to pay the debt in suit, and that the judgment appealed from must be

AFFIRMED.

title: Allen v. Ferguson/Opinion of the Court


text: Talk:Allen v. Ferguson/Opinion of the Court


text:
Union Pacific Railroad Company v. Peniston

APPEAL from the Circuit Court for the District of Nebraska; the case being thus:

By act of Congress of July 1st, 1862, entitled 'An act to aid in the construction of a railroad and telegraph line from the Mississippi River to the Pacific Ocean, and to secure the government the use of the same for postal, military, and other purposes,' Congress incorporated certain individuals, their associates and successors, as the 'Union Pacific Railroad Company,' with authority to build a continuous railroad and telegraph from a point on the one hundredth meridian to the western boundary of Nevada Territory. The act fixed the amount of the capital stock and shares, and declared that 'the stockholders should constitute said body politic and corporate.' The government had no stock in the road, though through the President of the United States it was to appoint two directors, not stockholders, out of fifteen, which the charter provided for as the number to be appointed in all. Annual reports were to be made to the Secretary of the Treasury. The act granted to the company the right of way through the public lands, and 'for the purpose of aiding in the construction of said railroad and telegraph line, and to secure the safe and speedy transportation of the mails, troops, munitions of war, and the public stores thereon,' made to it an extensive grant of lands, and provided for the issuing of patents therefor. And for the same purposes the United States agreed to, and did issue its 6 per cent. bonds, payable in thirty years, to the company, to the amount of $16,000 per mile, for each section of forty miles; which bonds the original act declared 'shall, ipso facto, constitute a first mortgage on the whole of the railroad and telegraph, together with the rolling stock, fixtures, and property of every kind,' and made specific provision as to proceedings on the failure of the company to redeem the bonds.

By an act of July 2d, 1864, this was changed, and the company authorized to issue its 'first mortgage bonds to an amount not exceeding the bonds of the United States,' and the lien of the bonds of the United States was declared to be subordinate to the bonds so issued by the company, with the exception relating to the transportation of dispatches, troops, mails, &c., for the government.

The grants to the company were declared by the original act to be made upon condition that the company shall (1) pay the bonds of the United States at maturity; (2) keep their line and road in repair and use; (3) 'transmit dispatches over said telegraph line, and transport mails, troops, and munitions of war, supplies, and public stores upon said railroad for the government,' & c., giving the government the preference at fair and reasonable rates of compensation, not exceeding those charged to private individuals, the amount thus earned to be applied in payment of the bonds, as well as 5 per cent. of the net earnings of the road after its completion.

By the seventeenth section of the same act it was provided that if the road, when finished, should for any unreasonable time be permitted to remain out of repair, or unfit for use, Congress should have authority to put the same in repair and use, and from the income of the road reimburse the government for expenditures thus caused.

The eighteenth section provided that when the net earnings of the road should exceed 10 per cent. of its cost, Congress might reduce, fix, and regulate rates of fare thereon, and declared that 'the better to accomplish the object of this act, to wit, to promote the public interest and welfare by the construction of said railroad and telegraph line, and keeping the same in working order, and to secure the government at all times (but particularly in times of war) the use and benefits of the same for postal, military, and other purposes, Congress may at any time, having due regard for the rights of said companies named herein, add to, alter, amend, or repeal this act.'

The act also contained provisions, that so far as the public and government were concerned the railroad and branches should be worked as one connected and continuous line.

There was no provision, in any act of Congress relating to this company, respecting the taxation of it or its property by the States through which its roads might run.

The road was completed and put in operation in May, 1869, and with the Central Pacific Railroad formed a continuous line from the Missouri River and the Eastern States to California and the Pacific, thus uniting the extremities of the country. At the time of granting the charter, the territory over which this line was projected all belonged to the United States. But Nevada was admitted into the Union as a State in 1864, and Nebraska in 1867, and the road, as constructed, crosses the latter State in its whole breadth, from east to west.

So far as to the history of the Union Pacific Railway. Now as to a certain tax laid upon it, the subject of this suit.

On the 15th of February, 1869, the legislature of Nebraska passed an act 'to define the western boundary of Lincoln County,' which, after defining it, provided,

'That all the unorganized country lying west of the western boundary of Lincoln, and east of the east line of Cheyenne County, and south of the North Platte River be, and the same is hereby, attached to the said county of Lincoln, for judicial and revenue purposes, and that the county of Cheyenne be, and the same is hereby, attached, for judicial and revenue purposes, to said county of Lincoln.'

In this state of things the authorities of Lincoln County, in the State of Nebraska, under a revenue law of the State, passed on the same 15th of February, 1869, laid a tax upon the property of the railroad company, embraced within the taxation, upon the valuation of $16,000 per mile, for a length of one hundred and seventy-six miles.

The property of the company thus rated and taxed consisted of its road-bed, depots, wood-stations, water-stations, and other realty; telegraph-poles, telegraph-wires, bridges, boats, books, papers, office furniture and fixtures, money and credits, movable property, engines, &c.

The population of Lincoln County and all the attached territory, by the census of 1870, was 1352 persons. The whole amount of the tax list was $4,081,904, of which was

Property of the company, $3,936,000

Property of other taxpayers, 145,904

The tax levied by the county was $41,328 upon the company's property, and $6350.45 upon the property of other taxpayers.

The tax levied upon the company's property was distributed under the following heads or purposes of taxation:

For State general fund, $7,872

For State sinking fund, 3,936

For State school fund, 3,936

For county general fund, 19,680

For county sinking fund, 3,936

And for district school purposes, 1,968

The length of the company's road lying within the territory ascribed to Lincoln County for taxation, was as follows: In Lincoln County, eight miles; in Cheyenne County (unorganized), one hundred and five miles; between the two counties, sixty-three miles; making a total of one hundred and seventy-six miles.

In this state of things, one Peniston, Treasurer of Lincoln County, being about to collect the tax laid, the Union Pacific Railroad Company filed a bill in the Circuit Court of the United States in the District of Nebraska against him, to restrain his doing so; assigning as grounds for the bill among others--

That the State of Nebraska had no power to subject to taxation for State purposes the road-bed, rolling-stock, and other property necessary for the use and operation of the road; such power resting, as it was asserted by the bill, exclusively in the government of the United States.

That Lincoln County was not by law authorized to tax any portion of the road-bed or property of the company, except such as was situate within its geographical limits.

The cause was heard upon pleadings and agreed proofs, and the Circuit Court refused to restrain the collection of the tax against the one hundred and seventy-six miles of the road, holding the same to have been lawfully imposed, and the property of the company to be open to State taxation. Upon this decree being brought here by the present appeal, the following errors were assigned:

First. That it was error to hold the tax a valid imposition upon the property of the Union Pacific Railroad Company subjected to it, such property being exempt from State taxation, by virtue of the incorporation of the company by the United States as a means for the performance of certain public duties of the government, enjoined and authorized by the Constitution.

Second. That it was error to hold the rating and taxing of the property of the company, outside the county of Lincoln, by the authorities of that county, valid and lawful under the legislation of the State.

Mr. W. M. Evarts, for the appellant:

I. The tax and the statute of Nebraska, so far as it authorized the tax, were void, and the company's property should have been relieved, and protected therefrom by the judgment of the court.

1. The railroad company was created and endowed by Congress, with its franchises, powers, and property, as a means, instrument, and agency for the execution of the powers vested in the General government by the Constitution of the United States.

2. At the time of the passage of the act of Congress, under which the corporate powers were created and conferred, the government of the United States exercised the sole and undivided dominion over the territories to be traversed by the railroad, or affected by the powers of this corporation or their administration.

3. The tax here authorized by the statute of Nebraska, and actually laid by the county of Lincoln, is rated and assessed upon whatever constitutes the property and the means of the company as collected, combined, prepared, and worked (under or by authrority of the act of Congress) as the instrument and agent of the General government, for the execution of its constitutional powers and the performance of its constitutional duties, so far as this instrument and agent has its structure, capital in any and every form of use or investment, and its operations within the local range of the taxing power.

The theory of the taxation is an apportionment of the total and aggregated means of the corporation per mile of its railroad, and a valuation and taxation of the ratable share of the length of the railroad found within the different counties of the State.

4. If the tax be looked at in its circumstances as well as in its principle, it is not too much to say that the introduction and operation of this means and agency of the General government within the territorial limits of what now constitutes the State of Nebraska, is made the occasion, and the means and agent made the subject, of taxation for local and general State purposes, in exoneration of the property of the population which should bear those burdens.

II. The settled doctrines of this court, in expounding the relations which the means, instruments and agencies, created by the General government for the execution of its constitutional powers bear to the States, and taxation under the authority of the States, exempt the Union Pacific Railroad Company from the taxation to which it is sought to be subjected.

The principles established in the celebrated cases of McCulloch v. Maryland, and Osborn v. Bank of United States, stand unbroken and impregnable. Neither the force of their reason, nor the weight of their anthority, is, in the least, abated by any subsequent adjudications in pari materia.

The late Chief Justice Chase thus speaks of these decisions:

'That Congress may constitutionally organize or constitute agencies for carrying into effect the National powers granted by the Constitution; that the agencies may be organized by the voluntary association of individuals, sanctioned by Congress; that Congress may give to such agencies, so organized, corporate unity, permanence, and efficiency; and that such agencies in their being, capital, franchises, and operations, are not subject to the taxing power of the States, have ever been regarded, since those decisions, as settled doctrines of this court.

'Those decisions were the judgments of great men and of great judges. They were pronounced by the most illustrious of their number, and are distinguished by his peculiar clearness and cogency of reasoning. For nearly half a century the principles vindicated by them have borne the keen scrutiny of an enlightened profession and the sharp criticism of able statesmen, and they remain unshaken. All the judges who concurred in them have descended long since into honored graves, but their judgments endure, and gathering vigor from time and general consent, have acquired almost the force of constitutional sanctions.'

A concise and authoritative statement of what principles were decided in mcCulloch v. Maryland, and Osborn v. Bank of the United States, is given by this court in its opinion, as delivered by Marshall, C. J., in Weston v. Charleston.


text: Talk:Union Pacific Railroad Company v. Peniston


text:
Union Pacific Railroad Company v. Peniston/Opinion of the Court

'We will not repeat the reasoning which conducted us to the conclusion thus formed; but that conclusion was, that all subjects to which the sovereign power of a State extends, are objects of taxation; but those over which it does not extend, are, upon the soundest principles, exempt from taxation.

"The sovereignty of a State extends to everything which exists by its own authority, or is introduced by its permission;' but not to those means which are employed by Congress to carry into execution powers conferred on that body by the people of the United States.

'The attempt to use the power of taxation on the means employed by the government of the Union in pursuance of the Constitution, is in itself an abuse, because it is the usurpation of a power which the people of a single State cannot give.

'The States have no power by taxation, or otherwise, to retard, impede, burden, or in any manner control the operation of the constitutional laws enacted by Congress, to carry into execution the powers vested in the General government.'

III. But, if the State act be constitutional, in its application to the property of this company subjected to it, it is submitted that the property outside of the county of Lincoln is not lawfully taxable by the authorities of that county under the laws of the State.

The main objection to these taxes is, that they are imposed upon an agent of the Federal government. The objection cannot be supported as an original proposition. We concede that those agencies which Congress has established for the purpose of carrying into execution the powers conferred in the Federal Constitution, are in no way liable to interference by the States. This court has reiterated that principle many times, and with great emphasis. But there is another principle which this court has as often and as emphatically asserted, and which is equally necessary to the harmonious relations of the State and Federal powers. It is, that the taxing power exists in the States unrestricted by the Federal Constitution or government, except as to the means necessary to the latter to discharge its functions.

This matter received full exposition from this court (Chase, C. J., speaking for it), in Lane County v. Oregon.

These two principles are fundamental in our complex system:

1. The taxing power of a State extends to every matter of value within its sovereignty.

2. But that power cannot reach those agencies which are employed by Congress to carry into execution the powers conferred in the Federal Constitution.

These principles are coefficient. By the one, the just and necessary powers of the States, by the other the just and necessary powers of the Nation are preserved. But they are not co-ordinate. The first is the rule, the second the exception thereto. It devolves upon those who would withdraw 'any property, business, or persons, within their respective limits, from the taxing power of the States,' to show the same to be within the exception.

But there are many agencies of the Federal government which do not enjoy any exemption whatever from taxation by the States. They do not claim such exemption, even in respect of property which they use when serving the government.

The steamship on the ocean, which bears the ambassador to a foreign court, and the dispatches by which the diplomatic intercourse of the nation is guided, are agents of the government, and discharge most necessary, valuable, and efficient service. The railroad companies, in every one of whose trains is a postal car, bearing the orders of the executive to subordinate officers scattered all through the wide country, and by which the domestic policy and operations of the government are directed, are its agents, also discharging most necessary, valuable, and efficient service. The stage-coach upon the frontier, taking up and carrying into remote parts these orders, so that from this centre the volitions and pulsations are obeyed and felt to the extremities of the land, shares in the vast service of the republic. And, for all this service, these agents, and thousands of others like them, are paid by the government. Not a small proportion of their earnings, and the dividends which they distribute among their stockholders, is derived from the government. They even pay to the State taxes upon these earnings. They have conveniences for doing this service, used for this service exclusively; the steamship, apartments; the railroad, postal cars; the stage-coach, wagons; and they pay taxes thereon; and yet they never claim exemption from State taxes. Or if one of them, the Kansas Pacific Railroad, is any exception, if it has claimed exemption on that ground, it stands solitary and alone in asserting such claim, and it has signally failed in establishing it.

But, as all know, there are agencies to which such exemption is conceded. The line of separation is clearly drawn by Chief Justice Marshall in Osborn v. The Bank of The United States. He says:

'The foundation of the argument in favor of the right of a State to tax the bank, is laid in the supposed character of that institution. The argument supposes the corporation to have been originated for the management of an individual concern, to be founded upon contract between individuals, having private trade and private profit for its great and principal object.

'If these premises were true, the conclusion drawn from them would be inevitable. This mere private corporation, engaged in its own business, with its own views, would certainly be subject to the taxing power of the State, as any individual would be; and the casual circumstance of its being employed by the government in the transaction of its fiscal affairs, would no more exempt its private business from the operation of that power, than it would exempt the private business of any individual employed in the same manner. But the premises are not true. The bank is not considered as a private corporation, whose principal object is individual trade and individual profit, but as a public corporation, created for a public and national purpose. That the mere business of banking is, in its own nature, a private business, and may be carried on by individuals or companies, having no political connection with the government, is admitted; but the bank is not such individual or company. It was not created for its own sake, or for private purpose. . ..

'Why is it that Congress can incorporate or create a bank? This question was answered in the case of McCulloch v. The State of Maryland. It is an instrument which is 'necessary and proper' for carrying on the fiscal operations of government.'

From the exposition of the relations and immunities of the agencies of the government, traced in the case cited, these principles are deducible:

1. A private corporation, whose principal object is individual trade and individual profit, is not exempted from State taxation by the casual circumstance of being employed by the government in the transaction of its fiscal affairs.

2. While it is true that the agent entitled to exemption may transact private business, its capacity so to do must be an incident to its agency, and be in aid thereof.

3. Its operations in transacting private business must be necessary to its character and efficiency, as a machine employed by the government.

But it is not all of the property of any agents of the Federal government that may be withdrawn from the taxing power of the States. The Bank of the United States was a fiscal agent of the government; it bore a most intimate relation to that government; and yet in McCulloch v. Maryland, Marshall, C.J., said:

'This opinion does not deprive the States of any resources which they originally possessed. It does not extend to a tax paid by the real property of the bank, in common with other real property within the State.' And again, in Osborn v. The Bank of the United State, he said, that the local property of the bank may be taxed by the State, the same as the property of other citizens.

But there is a position in which the Federal officer is entitled to the protection of the Federal power. While the property of the officer in general is subject to State taxation, his salary is entirely exempt therefrom. And the same is true of the corporate agent. If 'the tax be upon its operations, and consequently upon the operation of an instrument empowered by the government of the Union, to carry its powers into execution,' then the tax is unconstitutional. The reason of the rule marks its limitations. The National government must be free to use such means as it selects, to carry out its functions, else it cannot exist. When a State tax impairs the efficiency of any instrumentality which Congress selects to carry out the legitimate purposes of the Federal government, it is unconstitutional. When it does not have that effect, it is within the competency of the State to impose it.

Miller, J., delivering the unanimous opinion of the court, in National Bank v. Commonwealth, one of the cases of the bank taxes, distinguishes the cases in the way we do, where the State may and where it may not tax. He says:

'It is argued that the banks, being instrumentalities of the Federal government, by which some of its important operations are conducted, cannot be subjected to such State legislation. It is certainly true that the Bank of the United States, and its capital, were held to be exempt from State taxation on the ground here stated; and this principle, laid down in the case of McCulloch v. The State of Maryland, has been repeatedly affirmed by the court. But the doctrine has its foundation in the proposition, that the right of taxation may be so used in such cases, as to destroy the instrumentalities by which the government proposes to effect its lawful purposes in the States; and it certainly cannot be maintained that banks, or other corporations or instrumentalities of the government, are to be wholly withdrawn from the operation of State legislation. The most important agents of the Federal government are its officers; but no one will contend that when a man becomes an officer of the government he ceases to be subject to the laws of the State. The principle we are discussing has its limitation; a limitation growing out of the necessity on which the principle itself is founded. That limitation is, that the agencies of the Federal government are only exempted from State legislation so far as that legislation may interfere with or impair their efficiency, in performing the functions by which they were designed to serve that government. Any other rule would convert a principle founded alone in the necessity of securing to the government of the United States the means of exercising its legitimate powers, into an unauthorized and unjustifiable invasion of the rights of the States. The salary of a Federal officer may not be taxed; he may be exempted from any personal service which interferes with the discharge of his official duties, because those exemptions are essential to enable him to perform those duties. But he is subject to all the laws of the State which affect his family or social relations, or his property; and he is liable to punishment for crime, though that punishment be imprisonment or death. So of the banks. They are subject to the laws of the State, and are governed in their daily course of business, far more by the laws of the State than of the nation. All their contracts are governed and construed by State laws. Their acquisition and transfer of property, their right to collect their debts, and their liability to be sued for debts, are all based on State laws. It is only when the State law incapacitates the banks from discharging their duties to the government, that it becomes unconstitutional.'

Indeed, it is believed that no case adjudged by this court can be found, of a tax on the property of a third party-meaning by this term some agency, other than an integral part of the machinery of government-made use of by the National government, which has been held invalid. The tax in question, in McCulloch v. Maryland, and Osborn v. The United States Bank, was upon the operations of the bank, and not upon its property.

And in one of the cases of the bank tax, the taxation of the present national banks has been supported upon the same theory: the theory, to wit, that it was upon the new use, in the business of banking, to which the Federal bonds were put, and not upon the bonds nor upon the banks that the taxes were imposed.

It may be that the language of some of the judges, and even the reasoning which they have pursued, seem to favor the doctrine of total exemption of the property of an agent of the National government from State taxes. But, as Chase, C.J., said in Thompson v. The Pacific Railroad, these decisions are limited to the cases before the court.

It is obvious, upon the principle of the cases above cited, that there are agencies of the government, like the old Bank of the United States, the nature of which places them beyond the reach of the States. But there are other agencies, as the new banks, whose principal business is private, and the public business is an incident thereto, which cannot be placed in the same category. As to this latter class, it is not too much to insist that exemption from State regulation should be secured by express direction of Congress; that if Congress does not in terms grant the exemption the State sovereignty is not displaced. It is not needful to this case, to go through the judgments of this court in order to ascertain whether the State power is displaced without a direct enactment of Congress to that effect. There was a long disagreement between the judges on this subject. But in Gilman v. Philadelphia, Swayne, J., delivering the opinion of the court, assigned as one of the reasons for sustaining the State law authorizing the bridge, against objections that it conflicted with the commercial power of the nation, the fact that 'Congress may interpose whenever it shall be deemed necessary, by general or special laws,' the inference being, that until such interposition the power of the State must be respected; and in Woodruff v. Parham, Miller, J., also speaking for the court, pretty clearly intimates the same view.

Turning now to the immediate case before us. Is this railroad company entitled to exemption from State taxation because it is an agency of the Federal government?

It is a private corporation whose principal object is individual trade and individual profit. True, it is incorporated by Congress; but, when regard is had to the circumstances, this fact has no significancy. It was authorized to build a road from a point on the one hundredth meridian to 'the western boundary of Nevada Territory.' At that time, and when the amendatory act of 1864 was passed, that whole section was territory not within any State. Again: there was a careful abstinence from the claim of any power to authorize the building of a road within any State. It was important, in order to secure all the advantages of the work, to construct parts of it and branches of it in States; but those parts and those branches were to be built by State corporations, and not by the Union Pacific Railroad Company appellant here.

The Central Pacific, a California corporation, was to build from the Pacific coast, or the headwaters of the Sacramento, to the eastern boundary of California. The Leavenworth, Pawnee, and Western, a Kansas corporation, was to build from the Missouri, near the Kansas River, to the one hundredth meridian. The Hannibal and St. Joseph, a Missouri corporation, with the consent of Kansas, was to build into that State, either under its own franchise or one derived from Kansas. And so on. Every mile of road to be built within the limits of any State was to be built by a State corporation. And these several corporations received the same aid in bonds and lands from the United States as did the railroad company which is now here as the appellant in this case.

This corporation, we say, was formed for private trade and private profit. The service which it renders to the government is only an incident to its general business. Its operations are only accidentally, they are not inseparably connected with those of the government. Between it and the old Bank of the United States there is in this respect the widest possible distinction. The bank, by the system of exchanges which it maintained between different sections of the country, was converted into a convenient agency for transferring the public funds from place to place. Every bill drawn at one branch upon another, transmitted and paid, was an operation not only of which the government might avail itself, but it increased to a degree the facility of communication which the treasury had need of. And the necessity to the treasury of the most facile and certain and efficient means for the transmission of funds was what justified the incorporation of the bank. But who shall say of this railroad company, that the running of its daily trains is thus needful or useful to the government?

What are the services required of it by the government? They are stated to be to 'transmit dispatches over said telegraph line, and transport mails, troops, and munitions of war, supplies, and public stores upon said railroad for the government.' Every grant of land ever made by Congress to a railroad has provided in the same terms for the same services.

Not to go farther back than 1850, the grant to Illinois in aid of what became the Illinois Central, contains this clause:

'The said railroad and branches shall be and remain a public highway for the use of the United States, free from toll or other charge, upon the transportation of any property or troops of the United States.'

And—

'The United States mail shall, at all times, be transported on the said railroad, under the direction of the Postoffice Department, at such price as the Congress may by law direct.' These exact words are found in the grant to Missouri, for the Hannibal and St. Joseph Railroad, in that to Arkansas and Missouri, to Minnesota, Iowa, Florida and Alabama, Alabama, Louisiana, Wisconsin, Michigan, Mississippi, and so on down to the last act of the kind passed by Congress.

The service stipulated for by Congress, to be rendered by every land-grant railroad in this country, is as large, as necessary, as valuable as that to be rendered by the company appellant. And yet, it will not be argued that all these agencies are rendering this service as the principal part of their business, and rendering only an incidental service to the public.

Congress has not interposed any claim of exemption on behalf of the government of the character set up by the appellant.

Neither the title of the act nor the terms used in the act have such reach or force.

The objects of the act, as declared in the eighteenth section, are twofold: first, to promote the public interest, &c.; and secondly, to secure to the government the use of the road. One of these objects was evidently as prominent in the mind of Congress as the other. The circumstances of the company's incorporation are matters of common knowledge. Congress was moved to pass the original act by the consideration, at the time greatly agitating the public mind, that the Pacific States and Territories, by reason of their separation from the other parts of the country, might follow the example of the Southern States and seek to withdraw from the Union. To bind those distant parts more closely to the rest, by the bands of commerce, was the argument most pressed upon Congress. Facility in the transportation of the mails, troops, and stores of the government was rather the incident to this broad and partriotic policy. So that whether we regard the words of the acts or the circumstances of their passage, it is obvious that those services, on account of which exemption from State taxation is here claimed, must be considered incidental only.

There is nothing in this record to show that the taxes here complained of will interfere with or impair the efficiency of the railroad company in performing the service required of it by the acts. And if we look to the effect of taxation generally, upon the services to be rendered, nothing appears at all within the rule as laid down by Miller, J., in the National Bank v. The Commonwealth. Congress gave the corporation power to make contracts, which implies also the power to make debts. A creditor could sue his demand and recover judgment, and, by proper process, enforce it. These duties and liabilities would be as much interfered with by such judicial process as by sale for taxes; and the supreme rights of the government may as reasonably be interposed in one case as the other. Those rights, however, find their protection in the fact that, whether the property remains in the corporation or passes to another, it is bound to those duties and liabilities; that is to say, the purchaser takes the property subject to them in both instances.

There is no need of words to show that this tax is upon the property of the corporation and not upon its operations, and that it is not a constituent element in the government, but a third party made use of by it incidentally to render to it a certain service.

A private corporation, organized for private trade and private profit, rendering to the government a service incidentally in the course of its private business, and not inseparably connected with the government operations; not a constituent part of the machinery of the government, but called in to discharge a duty for which it is compensated; not claimed by Congress as an agency entitled to freedom from State control; its efficiency to discharge its duty, not impaired by the taxation complained of, and its property only, and not its operations, subjected to taxes;-this company must submit, in common with all citizens and all corporations, to those reasonable exactions which the State must make to support the government which gives protection and value to its business and its property.

But this case has been substantially decided by this court. In Osborne v. The United States Bank, it is emphatically said that the circumstance that the bank was a Federal corporation was not important. The question, and the only question, there treated as vital was, what was the nature of the services required of it by the government?

In the bank-tax cases of Van Allen v. The Assessor and National Bank v. The Commonwealth, the distinction which we seek to maintain between what interests of a Federal corporation are taxable by a State and what non-taxable is clearly taken.

In Thompson v. The Railroad Company, the services, duties, liabilities, relations of the company in question, were all precisely the same as those of this plaintiff. They were all imposed by these same acts we have been considering. In the words of section nine, of the first:

'The Leavenworth, Pawnee, and Western Railroad Company of Kansas, are hereby authorized to construct a railroad and telegraph line. . . upon the same terms and conditions, in all respects, as are provided in this act for the construction of the Union Pacific Railroad.'

And yet those services, duties, liabilities, relations, grants, and subsidies did not secure the exemption sought. It is true that the opinion of the Chief Justice was confined to a State corporation. But put the case of Osborne v. The Bank of the United States with that case and the rule of this case is directly established. The case of Thompson v. The Railroad Company holds that a State corporation, rendering the same services, subject to the same duties and liabilities, sustaining the same relations as this appellant, must pay its State taxes. The case of Osborne v. The Bank of the United States holds that a State corporation and a Federal corporation are on precisely the same footing in these respects. The conclusion covers this company.

And, after all, on plain principles, it must be so. Here is a corporation running the whole length of Nebraska, four hundred and fifty miles, owning millions of property, conducting an immense and profitable traffic. Every day it appeals to the officers of the State for protection. Why should it not contribute to the State a due share and portion of what is necessary to maintain that State's power of protecting it?

II. It is further objected that only eight miles of road is in Lincoln County, and that there is no provision of law for its authorities taxing what lies in the other sections. But the Revised Statutes of Nebraska provide that 'all unorganized counties shall be attached to the nearest organized county directly east of them, for election, judicial, and revenue purposes.' This seems conclusive.

Reply: The adjudications in the bank tax cases cited by the opposing counsel, or the reasoning upon which they rest, do not in the least impair the scope or vigor of the principles, and the authorities already cited by us, in their efficient protection from State taxation, of the means and agencies created by the General government, in execution of its constitutional powers. The cases mentioned simply hold that it is competent for Congress, in its establishment and arrangement of these means and agencies, to concede to the States such measure and modes of taxation, as Congress deems consistent with the safety and efficiency of these means and agencies, of executing the powers of the General government. This is taxation, not by predominance of State authority, but by favor of Federal submission of the subject to State taxation, upon motives of Federal policy. But this concession is not a judicial question. The judicial conclusion excludes the taxation of the States from the province of Federal means and agencies, and requires the express assent of Federal authority to support the State taxation, and fix its measure and its modes. To make the measure or mode of State taxation, as allowable or excessive, a judicial question, is flatly repugnant to the celebrated cases cited, and subversive of their reasoning.

The doctrine of this court, as declared in Thompson v. Pacific Railroad, also much relied on by the opposing counsel, that the adoption by Congress of the aid or operation of corporations created by the States, in performing services in connection with the execution of the constitutional power of the Federal government (in the absence of all indication on the part of Congress that the State agencies so employed should be exempted, in consequence of such employment, from State taxation), does not exempt such State corporations from State taxation, has no application to the case of this Union Pacific Railroad Company, an incorporation of the General government confessedly, under acts of Congress. That decision rests upon the distinction between the case of the employment of the State corporation for a Federal service and the creation of a corporation as a Federal means and agency, within the discretion of Congress, for the execution of the constitutional powers of the General government. The court held that, in case of the employment of State corporations by Congress, it was competent for Congress to 'exempt, in its discretion, the agencies employed in such services from any State taxation which will really prevent or impede the performance of them.'

The only question, therefore, raised and decided by the court in this case was thus stated by the court:

'But can the right of this road to exemption from such taxation be maintained in the absence of any legislation of Congress to that effect?'

The argument that the doctrine of the court in McCulloch v. Maryland exempted the Bank of the United States, with its branches, from taxation by the State of Maryland, although no express exemption was found in the charter, and that under that doctrine a State corporation, employed as an agent of the operations of the General government, was equally exempt, is thus disposed of by the court:

'But it must be remembered that the Bank of the United States was a corporation created by the United States; and, as an agent of the constitutional forms of the government, was endowed by the act of creation with all its faculties, powers, and functions. It did not owe its existence or any of its qualities to State legislation. And its exemption from taxation was put upon this ground.'

'The State tax, held to be repugnant to the Constitution, was imposed directly upon an operation or an instrument of the government. That such taxes cannot be imposed on the operations of the government is a proposition which needs no argument to support it. And the same reasoning will apply to instruments of the government created by itself for public and constitutional ends.'

And the doctrine of court is thus expressed:

'But it will be safe to conclude, in general, in reference to persons and State corporations employed in government service, that when Congress has not interposed to protect their property from taxation, such taxation is not obnoxious to that objection' (i. e., to the objection that the State taxation is used 'to defeat or hinder the operations of the National government.')

The tax under consideration does not fall, as the counsel opposed to us argue, within the limitation suggested by the court, in McCulloch v. Maryland, and incorporated in the National Bank Act by Congress. The court say of the exemption asserted, that—

'It does not extend to a tax paid by the real property of the bank, in common with the other real property within the State, nor to a tax imposed on the interest which the citizens of Maryland may hold in this institution in common with other property of the same description throughout the State.'

The tax of the State of Nebraska is not laid upon the shares of the Union Pacific Railroad Company held by citizens of that State, nor upon the real property of the company in common with the other real property within the State. The tax is upon the universal possessions and resources of the company, as collected, combined, prepared, and applied, within the State, in the operations of the government services, for which this instrument was created and endowed by Congress. This tax, then, in the final proposition of the court, after the statement of the above limitation, 'is a tax on the operation of an instrument employed by the government of the Union to carry its powers into execution. Such a tax must be unconstitutional.'

It is not necessary to suggest that the intimated liability in McCulloch v. Maryland, of the real estate of the bank to the State taxation, could not by parity of reason be held to expose the real estate of a railroad-the very corpus of its structure for the operations of the government for which the company was created and endowed-to State taxation. The real estate of the bank is manifestly referred to as of merely incidental, and not substantial, relation to the public uses of the bank, for which it was created by Congress.

No intendment can be drawn from the absence of any express exclusion of State taxation by the act of Congress, that the exposure of this company to State taxation was contemplated by Congress. The whole road, to which the act of incorporation applies, was within the Territories of the United States, and there was no State government whose operation needed to be considered or provided against by Congress. Manifestly, nothing could have been further from the expectations of the capitalists who entered into the enterprise proposed to them by the acts of Congress incorporating and endowing this company, than that their property invested in this National road was to be rated and taxed to support the local government of the States that should come into being along its route. They accepted the established doctrines of this court as possessing, in the language of Chase, C. J., 'the force of constitutional sanctions.'

Mr. Justice STRONG delivered the judgment of the court.

That the taxing power of a State is one of its attributes of sovereignty; that it exists independently of the Constitution of the United States, and underived from that instrument; and that it may be exercised to an unlimited extent upon all property, trades, business, and avocations existing or carried on within the territorial boundaries of the State, except so far as it has been surrendered to the Federal government, either expressly or by necessary implication, are propositions that have often been asserted by this court. And in thus acknowledging the extent of the power to tax belonging to the States, we have declared that it is indispensable to their continued existence. No one ever doubted that before the adoption of the Constitution of the United States each of the States possessed unlimited power to tax, either directly or indirectly, all persons and property within their jurisdiction, alike by taxes on polls, or duties on internal production, manufacture, or use, except so far as such taxation was inconsistent with certain treaties which had been made. And the Constitution contains no express restriction of this power other than a prohibition to lay any duty of tonnage, or any impost, or duty on imports or exports, except what may be absolutely necessary for executing the State's inspection laws. As was said in Lane County v. Oregon: 'In respect to property, business, and persons within their respective limits, the power of taxation of the States remained, and remains entire, notwithstanding the Constitution. It is, indeed, a concurrent power (concurrent with that of the General government), and in the case of a tax upon the same subject by both governments, the claim of the United States as the supreme authority must be preferred; but with this qualification it is absolute. The extent to which it shall be exercised, the subjects upon which it shall be exercised, and the mode in which it shall be exercised, are all equally within the discretion of the legislatures to which the States commit the exercise of the power. That discretion is restrained only by the will of the people expressed in the State constitutions, or through elections, and by the condition that it must not be so used as to burden or embarrass the operations of the National government. There is nothing in the Constitution which contemplates or authorizes any direct abridgment of this power by National legislation. To the extent just indicated it is as complete in the States as the like power within the limits of the Constitution is complete in Congress.' Such are the opinions we have expressed heretofore, and we adhere to them now.

There are, we admit, certain subjects of taxation which are withdrawn from the power of the States, not by any direct or express provision of the Federal Constitution, but by what may be regarded as its necessary implications. They grow out of our complex system of government, and out of the fact that the authority of the National government is legitimately exercised within the States. While it is true that government cannot exercise its power of taxation so as to destroy the State governments, or embarrass their lawful action, it is equally true that the States may not levy taxes the direct effect of which shall be to hinder the exercise of any powers which belong to the National government. The Constitution contemplates that none of those powers may be restrained by State legislation. But it is often a difficult question whether a tax imposed by a State does in fact invade the domain of the General government, or interfere with its operations to such an extent, or in such a manner, as to render it unwarranted. It cannot be that a State tax which remotely affects the efficient exercise of a Federal power is for that reason alone inhibited by the Constitution. To hold that would be to deny to the States all power to tax persons or property. Every tax levied by a State withdraws from the reach of Federal taxation a portion of the property from which it is taken, and to that extent diminishes the subject upon which Federal taxes may be laid. The States are, and they must ever be, coexistent with the National government. Neither may destroy the other. Hence the Federal Constitution must receive a practical construction. Its limitations and its implied prohibitions must not be extended so far as to destroy the necessary powers of the States, or prevent their efficient exercise.

These observations are directly applicable to the case before us. It is insisted on behalf of the plaintiffs that the tax of which they complain has been laid upon an agent of the General government constituted and organized as an instrument to carry into effect the powers vested in that government by the Constitution, and it is claimed that such an agency is not subject to State taxation. That the Union Pacific Railroad Company was created to subserve, in part at least, the lawful purposes of the National government; that it was authorized to construct and maintain a railroad and telegraph line along the prescribed route, and that grants were made to it, and privileges conferred upon it, upon condition that it should at all times transmit dispatches over its telegraph line, and transport mails, troops, and munitions of war, supplies and public stores, upon the railroad for the government, whenever required to do so by any department thereof, and that the government should at all times have the preference in the use of the same for all the purposes aforesaid, must be conceded. Such are the plain provisions of its charter. So it was provided that in case of the refusal or failure of the company to redeem the bonds advanced to it by the government, or any part of them, when lawfully required by the Secretary of the Treasury, the road, with all the rights, functions, immunities, and appurtenances thereunto belonging, and also all lands granted to the company by the United States which at the time of the default should remain in the ownership of the company, might be taken possession of by the Secretary of the Treasury for the use and benefit of the United States. The charter also contains other provisions looking to a supervision and control of the road and telegraph line, with the avowed purpose of securing to the government the use and benefit thereof for postal and military purposes. It is unnecessary to mention these in detail. They all look to a purpose of Congress to secure an agency competent and under obligation to perform certain offices for the General government. Notwithstanding this, the railroad and the telegraph line are neither in whole nor in part the property of the government. The ownership is in the complainants, a private corporation, though existing for the performance of public duties. The government owns none of its stock, and though it may appoint two of the directors, the right thus to appoint is plainly reserved for the sole purpose of enabling the enforcement of the engagements which the company assumed, the engagements to which we have already alluded.

Admitting, then, fully, as we do, that the company is an agent of the General government, designed to be employed, and actually employed, in the legitimate service of the government, both military and postal, does it necessarily follow that its property is exempt from State taxation?

In Thompson v. The Union Pacific Railway Company, after much consideration, we held that the property of that company was not exempt from State taxation, though their railroad was part of a system of roads constructed under the direction and authority of the United States, and largely for the uses and purposes of the General government. The company, in that case, were agents of the government, precisely as these claimants are, to the same extent and for the same purposes. Congress had made the same grants to them, and attached to the grants the same conditions. They, too, had received from Congress grants of land, and of bonds, and of a right of way for the purpose of aiding in the construction of their railroad and telegraph line, but with the condition that they should keep their railroad and telegraph line in repair and use, and should at all times transmit dispatches over their telegraph line, and transport mails, troops, and munitions of war, supplies and public stores, upon their railroad for the government, whenever required to do so by any department thereof, and that the government should at all times have the preference in the use thereof for the purposes aforesaid. There is no difference which can be pointed out between the nature, extent, or purposes of their agency and those of the corporation complainants in the present case. Yet, as we have said, a State tax upon the property of the company, its road-bed, rolling-stock, and personalty in general, was ruled by this court not to be in conflict with the Federal Constitution. It may, therefore, be considered as settled that no constitutional implications prohibit a State tax upon the property of an agent of the government merely because it is the property of such an agent. A contrary doctrine would greatly embarrass the States in the collection of their necessary revenue without any corresponding advantage to the United States. A very large proportion of the property within the States is employed in execution of the powers of the government. It belongs to governmental agents, and it is not only used, but it is necessary for their agencies. United States mails, troops, and munitions of war are carried upon almost every railroad. Telegraph lines are employed in the National service. So are steamboats, horses, stage-coaches, foundries, ship-yards, and multitudes of manufacturing establishments. They are the property of natural persons, or of corporations, who are instruments or agents of the General government, and they are the hands by which the objects of the government are attained. Were they exempt from liability to contribute to the revenue of the States it is manifest the State governments would be paralyzed. While it is of the utmost importance that all the powers vested by the Constitution of the United States in the General government should be preserved in full efficiency, and while recent events have called for the most unembarrassed exercise of many of those powers, it has never been decided that State taxation of such property is impliedly prohibited.

It is, however, insisted that the case of Thompson v. The Union Pacific Railroad Company differs from the case we have now in hand in the fact that it was incorporated by the Territorial legislature and the legislature of the State of Kansas, while these complainants were incorporated by Congress. We do not perceive that this presents any reason for the application of a rule different from that which was applied in the former case. It is true that, in the opinion delivered by the Chief Justice, reference was made to the fact that the defendants were a State corporation, and an argument was attempted to be drawn from this to distinguish the case from McCulloch v. The State of Maryland. But when the question is, as in the present case, whether the taxation of property is taxation of means, instruments, or agencies by which the United States carries out its powers, it is impossible to see how it can be pertinent to inquire whence the property originated, or from whom its present owners obtained it. The United States have no more ownership of the road authorized by Congress than they had in the road authorized by Kansas. If the taxation of either is unlawful, it is because the States cannot obstruct the exercise of National powers. As was said in Weston v. Charleston, they cannot, by taxation or otherwise, 'retard, impede, burden, or in any manner control the operation of the constitutional laws enacted by Congress to carry into execution the powers vested in the General government.' The implied inhibition, if any exists, is against such obstruction, and that must be the same whether the corporation whose property is taxed was created by Congress or by a State legislature.

Nothing, we think, in the past decisions of this court is inconsistent with the opinions we now hold. McCulloch v. The State of Maryland and Osborn v. Bank of the United States are much relied upon by the appellants, but an examination of what was decided in those cases will reveal that they are in full harmony with the doctrine that the property of an agent of the General government may be subjected to State taxation. In the former of those cases the tax held unconstitutional was laid upon the notes of the bank. The institution was prohibited from issuing notes at all except upon stamped paper furnished by the State, and to be paid for on delivery, the stamp upon each note being proportioned to its denomination. The tax, therefore, was not upon any property of the bank, but upon one of its operations, in fact, upon its right to exist as created. It was a direct impediment in the way of a governmental operation performed through the bank as an agent. It was a very different thing, both in its nature and effect, from a tax on the property of the bank. No wonder, then, that it was held illegal. But even in that case the court carefully limited the effect of the decision. It does not extend, said the Chief Justice, to a tax paid by the real property of the bank, in common with the other real property in the State, nor to a tax imposed on the interest which the citizens of Maryland may hold in the institution, in common with the other property of the same description throughout the State. But this is a tax on the operations of the bank, and is, consequently, a tax on the operations of an instrument employed by the government of the Union to carry its powers into execution. Such a tax must be unconstitutional. Here is a clear distinction made between a tax upon the property of a government agent and a tax upon the operations of the agent acting for the government.

In Osborn v. The Bank the tax held unconstitutional was a tax upon the existence of the bank-upon its right to transact business within the State of Ohio. It was, as it was intended to be, a direct impediment in the way of those acts which Congress, for National purposes, had authorized the bank to perform. For this reason the power of the State to direct it was denied, but at the same time it was declared by the court that the local property of the bank might be taxed, and, as in McCulloch v. Maryland, a difference was pointed out between a tax upon its property and one upon its action. In noticing an alleged resemblance between the bank and a government contractor, Chief Justice Marshall said: 'Can a contractor for supplying a military post with provisions be restrained from making purchases within a State, or from transporting the provisions to the place at which the troops were stationed? Or could he be fined or taxed for doing so? We have not heard these questions answered in the affirmative. It is true the property of the contractor may be taxed; and so may the local property of the bank. But we do not admit that the act of purchasing, or of conveying the articles purchased, can be under State control.' This distinction, so clearly drawn in the earlier decisions, between a tax on the property of a governmental agent, and a tax upon the action of such agent, or upon his right to be, has ever since been recognized. All State taxation which does not impair the agent's efficiency in the discharge of his duties to the government has been sustained when challenged, and a tax upon his property generally has not been regarded as beyond the power of a State to impose. In National Bank v. The Commonwealth of Kentucky, when the right to tax National banks was under consideration, it was asserted by us that the doctrine cannot be maintained that banks, or other corporations or instrumentalities of the government, are to be wholly withdrawn from the operation of State legislation. Yet it was conceded that the agencies of the Federal government are uncontrollable by State legislation, so far as it may interfere with, or impair their efficiency in performing the functions by which they are designed to serve that government.

It is, therefore, manifest that exemption of Federal agencies from State taxation is dependent, not upon the nature of the agents, or upon the mode of their constitution, or upon the fact that they are agents, but upon the effect of the tax; that is, upon the question whether the tax does in truth deprive them of power to serve the government as they were intended to serve it, or does hinder the efficient exercise of their power. A tax upon their property has no such necessary effect. It leaves them free to discharge the duties they have undertaken to perform. A tax upon their operations is a direct obstruction to the exercise of Federal powers.

In this case the tax is laid upon the property of the railroad company precisely as was the tax complained of in Thompson v. Union Pacific. It is not imposed upon the franchises or the right of the company to exist and perform the functions for which it was brought into being. Nor is it laid upon any act which the company has been authorized to do. It is not the transmission of dispatches, nor the transportation of United States mails, or troops, or munitions of war that is taxed, but it is exclusively the real and personal property of the agent, taxed in common with all other property in the State of a similar character. It is imposible to maintain that this is an interference with the exercise of any power belonging to the General government, and if it is not, it is prohibited by no constitutional implication.

It remains only to notice one other position taken by the complainants. It is that if the act of the State under which the tax was laid be constitutional in its application to their property within Lincoln County, the property outside of Lincoln County is not lawfully taxable by the authorities of that county under the laws of the State. To this we are unable to give our assent. By the statutes of Nebraska the unorganized territory west of Lincoln County, and the unorganized county of Cheyenne, are attached to the county of Lincoln for judicial and revenue purposes. The authorities of that county, therefore, were the proper authorities to levy the tax upon the property thus placed under their charge for revenue purposes.

The decree of the Circuit Court is affirmed.

Mr. Justice SWAYNE, concurring in the judgment:

I concur in the affirmance of the judgment in this case. I see no reason to doubt that it was the intention of Congress not to give the exemption claimed. The exercise of the power may be waived. But I hold that the road is a National instrumentality of such a character that Congress may interpose and protect it from State taxation whenever that body shall deem it proper to do so. For some of the leading authorities in support of the principle involved in this view of the subject I refer to the Chicago and Northwestern Railway v. Fuller, decided by this court a short time ago.

DECREE AFFIRMED.

Mr. Justice BRADLEY, with whom concurred Mr. Justice FIELD, dissenting.


text: Talk:Union Pacific Railroad Company v. Peniston/Opinion of the Court