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NORTHERN CENTRAL RAILWAY COMPANY v. MARYLAND

December 1, 1902

NORTHERN CENTRAL RAILWAY COMPANY
v.
MARYLAND



ERROR TO THE COURT OF APPEALS OF THE STATE OF MARYLAND

Fuller, Harlan, Brewer, Brown, Shiras, Jr., White, Peckham, McKenna

Author: White

[ 187 U.S. Page 266]

 MR. JUSTICE WHITE, after making the foregoing statement of the case, delivered the opinion of the court.

In order to confine the controversy arising on this record to the propositions upon which its decision must really rest, to eliminate the questions discussed at bar, which are either irrelevant or so effectually foreclosed by prior decisions of this court as to be no longer open to controversy, the following propositions are stated:

Where a contract is claimed to arise from a state law and it is held below that a subsequent statute has repealed the

[ 187 U.S. Page 267]

     alleged contract and effect is thereby given to the subsequent law, the mere question whether the alleged contract has been repealed by the subsequent law is a state and not a Federal question. In such a case this court concerns itself not with the question whether the state law, from which the contract is asserted to have arisen, has been repealed, but proceeds to determine whether the repeal was void because it produced an impairment of the obligations of the contract within the purview of the Constitution of the United States. In other words, where the state court has given effect to a subsequent law, this court decides whether such effect, so given by the state court, violates the Constitution of the United States. Gulf & Ship Island Railway Company v. Hewes, 183 U.S. 66. We therefore put out of view the question whether the acts of 1854 or of 1880 were repealed by the subsequent state statutes, as held by the court below, and treating such repeal as an accomplished fact, shall determine whether the repealing acts were void because impairing the obligations of the contract relied upon, in violation of the Constitution of the United States. In considering this question it will be borne in mind that it is elementary that where the constitution of a State reserves the right to repeal, alter or amend, all charters granted by the legislature are subject to such provision, and therefore are wanting in that attribute of irrevocability which is essential to bring them within the intendment of the clause of the Constitution of the United States protecting contracts from impairment. The cases supporting this doctrine are so numerous that they need not be cited. We content ourselves, therefore, by referring to one of them: Citizens' Savings Bank v. Owensboro, 173 U.S. 636, 641. It is, moreover, conclusively determined that where the constitution of a State reserves the power to repeal, alter or amend a charter, such provision is applicable to the charter of a consolidated corporation where as the result of the consolidation a new corporation takes being, new stock is provided for, new franchises are conferred and new officers appointed. In other words, that where a legislature is inhibited by the constitution from making an irrepealable charter it cannot create a new contract and bring into being a new corporation, and yet

[ 187 U.S. Page 268]

     by the charter of such corporation give rise to the irrepealable contract which the constitution absolutely prohibits. To state the doctrine in another form, it is this: That where a new corporation is chartered, subject to a constitution which forbids the granting of an irrepealable right, such new corporation cannot become endowed by the effect of a legislative contract with an irrepealable right forbidden by the constitution. If one of the constituent elements of the corporation possessed, prior to the formation of the new corporation, such right, and under the assumption that the right itself passed to the new body, it loses its irrepealable character, because the new corporation is subject by the very law of its being to the provision of the constitution forbidding irrepealable grants.

The doctrine as just stated has been so frequently declared by this court that it is no longer open to discussion. The whole subject has been so recently fully reviewed and restated it is sufficient to refer to that case: Yazoo & Mississippi Valley Railway Company v. Adams, 180 U.S. 1, 17 et seq., and authorities there cited.

Coming to apply the principles just stated to the case before us, it is apparent that unless there is something peculiar in this case which takes it from under the control of the doctrine referred to, that the court below correctly held that the new corporation created by the act of 1854 had no irrepealable contract exempting it from taxation either as the result of the act of 1854 or of the act of 1880. The positive prohibition existing in the constitution of the State against irrepealable charter grants both when the act of 1854 and the act of 1880 were passed, renders any other conclusion impossible. But it is insisted that as the constitution of 1867, which was in force when the law of 1880 was enacted, reserved the right to repeal, alter or amend only charters granted or adopted, the act of 1880 did not come within the right to repeal or amend because it was not a charter, but a contract entered into between the State and the corporation. True, the act of 1880 was put, not in the form of a charter amendment, but in that of a contract. The lower court, after quoting from the opinion rendered by it, when the case was before it under the act of 1854 (44 Maryland) said:

[ 187 U.S. Page 269]

     "It is to be observed that the court did not rest the inability of the legislature to grant to the corporation an irrepealable exemption from taxation upon the form or character of the particular statute then under consideration, but puts it upon the broad ground of the want of power in the legislature under the constitution to make such a grant at all. The court certainly in effect determines that any form of law which grants to a corporation such a corporate privilege as immunity from taxation is one ...


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