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Wilmington Railroad v. Reid, 80 U.S. 13 Wall. 264 264 (1871)

Wilmington Railroad v. Reid

80 U.S. (13 Wall.) 264


1. A statute exempting all the property of a railroad corporation from taxation, exempts not only the rolling stock and real estate owned by it and required by the company for the successful prosecution of its business, but its franchise also.

2. A charter to a railroad company containing such an exemption is a contract, and a law subsequently passed, laying a tax on the company's franchise, rolling stock, or real property, violates the obligation of the contract, and is void.

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

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

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

Page 80 U. S. 265

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

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

Page 80 U. S. 266

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