Chesapeake and Ohio Railroad Company v. Virginia

by William Strong

United States Supreme Court

94 U.S. 718

Chesapeake and Ohio Railroad Company  v.  Virginia

ER OR to the Supreme Court of Appeals of the State of Virginia.

The Chesapeake and Ohio Railroad Company was incorporated in the year 1868, by the action of joint commissioners of Virginia and West Virginia, in pursuance of the legislation of those States. The object of the incorporation was to construct a railroad from Covington in Virginia, through their territory, to the Ohio River. The Virginia Central Railroad Company was then operating a continuous line from Richmond to Covington, composed of the Blue Ridge road and of its own road, running westward until it connected with that road, which was the property of the State, and so used by arrangement with the State.

The extension of railroad communication between Covington and the Ohio River, through territory then all her own, had been some time before undertaken by Virginia, and a large amount of money and labor expended on the enterprise by the State Board of Public Works, operating as a corporation styled the Covington and Ohio Railroad Company; but the work had been arrested by the war in 1861.

Subsequently, West Virginia was taken from Virginia by a line which cuts the proposed route some sixteen miles west of Covington, leaving within the limits of Virginia about two hundred and eight miles of completed road from Richmond to Covington, and about sixteen miles beyond Covington, over which the road was yet to be constructed. The distance from Covington to the Ohio, over which the road was to be carried, is about two hundred and fifteen miles.

After the separation, Virginia passed an act, approved Feb. 26, 1866, by which any responsible capitalists, who would accept the benefits of the charter thereby created, and become organized according to its terms, should constitute a corporation under the same style of the Convington and Ohio Railroad Company. When fully organized, the company was to have 'all the rights, interests, and privileges of whatever kind, in and to the Covington and Ohio Railroad, and appurtenances thereto belonging, now the property of the State, upon condition that it shall, within six months after its incorporation, as provided in the tenth section of this act, commence, and within six years complete, equip, and operate a railroad, from some point at or near Covington in Alleghany County, Virginia, and connecting with the Virginia Central Railroad, by the way of the White Sulphur Springs and the valleys of Greenbrier River, New River, and Kanawha River, to a point at or near the mouth of Scary Creek, and thence to the Ohio River.' 'But this grant is not intended to include the unexpended amount appropriated by the State of Virginia to this work.'

It further provides, 'that the rates of charge by said company for passengers and freight transported on the main line and branches shall never exceed the highest allowed by law to other railroads in the State of Virginia, and no discrimination shall be made in such charge against any connecting railroad or canal company in which the State has an interest, and no taxation upon the property of the said company shall be imposed by the State until the profits of the company shall amount to ten per cent a year on its capital.'

Commissioners were appointed by the act (and, if a like number should be appointed by West Virginia, the whole were to act in conjunction), 'to offer the benefits of the charter for the acceptance of capitalists, to insure the speediest and best construction, equipment, and operation of said railroad. To this end they are hereby empowered to make a contract with any parties who shall give the best terms and the most satisfactory assurances of capacity and responsibility, and to introduce into the said contract such additional stipulations for the benefit of the State, and in furtherance of the purposes herein declared, and not inconsistent with this act; which said contract shall be, to all intents and purposes, as much a part of this charter as if the same had been herein included at the time of the passage of this act.' Virginia Session Acts, 1865-66, p. 317.

This act was, March 1, 1866, met by corresponding legislation on the part of West Virginia, and the benefits of the charter were offered to capitalists by the joint commissioners of the States, but not accepted; and no company was ever organized as contemplated under the authority of the laws so passed.

Afterwards laws were passed by the States for the further encouragement of the enterprise, by which the Covington and Ohio Railroad Company, when organized under the preceding acts, was authorized to conslidate with the Virginia Central Railroad Company, and other companies named (all or either of them), upon terms to be agreed upon between them. The companies thus consolidated were to constitute one corporation, to be vested with all the rights, privileges, and franchises, and property which may have been vested in either company prior to the act of consolidation, the new corporation to be known as 'The Chesapeake and Ohio Railroad Company.' The new company was further authorized, within two years after its organization, to purchase the stock held by the State in the company, and also the right to the State in the Blue Ridge Railroad. Further, it was provided, that 'The Virginia Central Railroad Company may contract with the Covington and Ohio railroad commissioners for the construction of the railroad from Covington to the Ohio River; and, in the event such contract be made, the said Virginia Central Railroad Company shall be known as the Chesapeake and Ohio Railroad Company, and shall be entitled to all the benefits of the charter of the Covington and Ohio Railroad Company, and to all the rights, interests, and privileges which by this act are conferred upon the Chesapeake and Ohio Railroad Company when organized.' Acts of Virginia, 1866-67, p. 705.

The contract thus authorized to be made between the joint commissioners and the Virginia Central Railroad Company, was made by them on the 31st August, 1968; and it is a conceded fact, that the exemption from taxation provided for in the acts hereinbefore referred to was held out to the Virginia Central Railroad Company by the commissioners appointed by said acts as one of the inducements to the company to unite in the contract with them for the construction of the railroad from Covington to the Ohio River, it being supposed by said commissioners and the Virginia Central Railroad Company that such exemption would apply to the whole line from Richmond to the Ohio River.

Under this contract the Chesapeake and Ohio Railroad Company was duly organized. It took the interest of the State in her uncompleted work on the line west of Covington, and constructed and equipped a railroad thence to the Ohio River, according to its charter; and, within two years after its organization, purchased the Blue Ridge Railroad from the State, and has ever since operated a continuous line of road from Richmond to the Ohio River.

The profits of the company have never amounted to ten per cent per annum on its capital.

Certain proceedings, under the assessment and tax acts of Virginia, were instituted in the Circuit Court of the City of Richmond, against the company, for failing to report to the auditor of public accounts, on the first day of February, 1871, the estimated value of its real and personal property of every description; and for failing, also, to report quarterly, on the first day of February, May, August, and November, of that year, the net earnings of the road for the preceding three months; and for failing to pay the taxes imposed thereon by law into the treasury at the time fixed for making said report.

The company contended that those acts did not apply to it; and, if they did, that they were in violation of the tenth section of the first article of the Constitution of the United States, as by the charter no taxation was to be imposed upon its property until its profits should amount to ten per cent a year upon its capital. The court sustained the claim of exemption set up by the company, the dismissed the pr ceedings. The judgments of that court were reversed by the Supreme Court of Appeals of the State of Virginia; whereupon the company brought the cases here.

Mr. William M. Evarts and Mr. William J. Robertson for the plaintiff in error.

Mr. R. T. Daniel, Attorney-General of Virginia, contra.

MR. JUSTICE STRONG delivered the opinion of the court.

Notes