Adams v. Tombigbee Mills

Whitfield, G. J.,

delivered the opinion of the court.

The appellee was chartered March 27, 1887, under the general statute of this state, approved March 9, 1882, entitled “An act to encourage factories in this state, and to exempt them from taxation,” section 1 of which is as follows:

“ Section 1. Be it enacted by the legislature of the state of Mississippi, That to encourage the introduction of factories in this state, the machinery used for the manufacture of cotton or woolen goods, yarns or fabrics, composed of _ these or other materials, or for the making of all kinds of machinery or implements of husbandry, or all other things or articles not prohibited by law; the manufactured goods and the material used therefor, the buildings in which the machinery is located and ground upon which situated or which may be within the necessary inclosure around such buildings, also all warehouses and other storehouses used exclusively by the company in its business and adjacent to the factory and its inclosure, and also the offices of the officers and employes adjacent to and located on the grounds of such factory, and used by them alone (but shall not apply to any railroad shops or machine works which are the property of railroads), and no other property shall be, and is hereby declared to be, exempt from all taxation, state, county and municipal, for the period of ten years from the time such factory is completed and in operation.”

It will be carefully noted that this is npt a special act, attempting to grant a special exemption to a particular corporatiod, as was the case in Yazoo, etc., R. R. Co. v. Adams, 77 Miss., 194 . Nor is it a statute applicable to all corporations of the same class even constructing such factories, whilst subjecting such factories to be constructed by individuals to taxation. It is a broad general statute, applicable to the particular kind of property specified — cotton factories to be built— whether owned by corporations or individuals.

In Yazoo, etc., R. R. Co. v. Adams, 77 Miss., 194 , we said: ' ‘Mississippi Mills v. Oooh decided that the property of private *685 corporations for pecuniary profit was and should remain subject to taxation. It expressly held that while an exemption might be granted, yet it might at any time be repealed by the legislature, and, further, that no exemption could be granted to any private corporation for pecuniary profit by a special act extending a special exemption to that special corporation alone, but that, in order to make any such exemption valid, it must be extended to all corporations for pecuniary profit of the same class and in the same situation. And the precise exemption asserted in that case was asserted distinctly .under the acts of April 1, 1872, and of April 17, 1873, amendatory thereof, set out at pages 42 and 43 of 56 Miss. The Mississippi Mills did not claim that it had a valid exemption by virtue of a special act granting such special exemption to the Mississippi Mills alone, but that it had such exemption in common with all other factories similarly situated, by virtue of said general law. The exemption set up here under the twenty-first section of the Mo- > bile & Northwestern charter is wholly different. The claim here is that this particular railroad is entitled to this special exemption, which it is conceded is not now and never was extended to all other railroads similarly situated in this state. And, further, this exemption is irrepealable on its face, and the Mississippi Mills case decided that no irrepealable exemption was constitutional. It is certainly;obvious from these.considerations alone that Mississippi Mills v. Cook is no authority to sustain the exemption set up here. It is further clear that the constitutionality, under the constitution of 1869, of a legislative grant of exemption to private corporations for pecuniary profit, if it embraced all of the same class, the property of individuals being at the same time taxed, was not argued, considered or decided in Mississippi Mills v. Cook, but was conceded by the attorney-general and the judges who wrote the majority opinions. One of the vices of the decision in Mississippi Mills v. Cook is that it did not hold'that all property of such corporations was required to be taxed by the terms of the constitution *686 (secs. 13, 20, art. 20) just as and when the property of individuals was. Instead of doing this, the court decided that all such property was free from taxation, unless the legislature expressly subjected it to taxation, even though the property of private individuals was taxed, inverting the rule of the constitution. It was certainly an idle performance to declare, as the court did declare, that the whole effect of the constitutional provision was to render the property of private corporations for pecuniary profit liable to taxation. That everybody knew, and to so limit t.he constitutional declaration was to emasculate it.

“ More than thirty-five years had intervened between the previous constitution of the state and the constitution of 1869. When that previous constitution was adopted (in 1832) the state was young, and had little experience with the grasping demands of corporations for grants of exclusive privileges; but the experience of more than thirty-five years had taught it wisdom in this regard — wisdom learned long prior by other commonwealths like California and Iowa, from the constitution of which latter state the provisions of the constitution of 1869 in question were doubtless borrowed; and so section 13, of article 12, was put in the organic law .of the land, beyond the reach of legislative control, for the express purpose of formulating a fundamentally great line of public policy prohibiting any difference in the exercise of the taxing power between the property of individuals and the property of private corporations for pecuniary profit. The court in Mississippi Mills v. Cook, 56 Miss., at pages 51, 52, looked too narrowly at the mere word ‘subject.’ It should have taken broadly the whole section into view and deduced from all its terms the meaning of the provision. Judge Campbell, in Beck, v. Allen, 58 Miss., 177 , most wisely said: ‘ Subiety and refinement and astuteness are not admissible to explain away the expression of the sovereign will. The framers of the constitution and the people who adopted it must be understood to have intended the words em *687 ployed in that sense most likely to arise from them on first reading them. ’ This is the doctrine announced by Cooley and Story, and our construction of the meaning of section 13, to-wit, that it required the property of private corporations for pecuniary profit to be taxed just as and when — -‘the same as ’ — the property of individuals, so that one would not be exempt and the other taxed, is the identical construction placed upon the same words by the supreme courts of the United States, of Alabama, Arkansas, California, Florida, and Iowa. We prefer now to distinctly align ourselves with the supreme court of the United States on this important question, and overrule the Mississippi Mills v. Goole in so far as it held that the property of private corporations for pecuniary profit was not, by constitution 1869, article 12, sections 13, 20, expressly directed to be taxed just as the property of individuals. The decisions of the United States supreme court to which we refer are as follows: Railroad Co. v. Palmes, 109 U. S., 248 , s.c. 3 Sup. Ct., 193; Railway Co. v. Berry, 113 U. S., 475 , s.c. 5 Sup. Ct., 529; People v. Cook, 148 U. S., 408 , s.c. 13 Sup. Ct., 645; Keokuk & W. R. Co. v. Missouri, 152 U. S., 303 , 310-312, s.c. 14 Sup. Ct., 592.

‘ ‘ The decisions of the state supreme courts to which we have referred are as follows: City of Davenport v. Chicago, R. I. & P. R. Co., 38 Iowa, 635 ; People v. McCreery, 31 Cal., 432 ; Fletcher v. Oliver, 25 Ark., 289; Palmes v. Railroad Co., 19 Fla., 231 (which collates the constitutions of Wisconsin, Missouri, Illinois, Kansas, Mississippi, Alabama, Arkansas, and Louisiana).” We then reviewed the facts in that case and added: “It will thus be clearly seen: (1) That the exemption claimed in Mississippi Mills v. Cook , was one claimed under a general law applicable to all the factories in the state of the same class; whereas, the exemption claimed here, to wit: the twenty-first section of the charter of the Mobile & Northwestern Railroad Company, is an exemption attempted to be granted to. this special corporation, and not to all the other railroads in *688 the state, a special privilege under a special charter to a special corporation. (2) That the Mississippi Mills had established their factory, after the passage of the acts of 1872 and 1873, on the faith of those acts as a rule of property; whereas, the Louisville, New Orleans & Texas Railway Company never came into existence, as admitted by counsel for the railroad, until the twelfth day of August, 1884, by the consolidation of the Baton Rouge Railroad and the Vicksburg & Memphis Railroad, after the construction of the road had been practically finished in July, 1884. (3) That the exemption claimed in Mississippi Mills v. Cook had no irrepealable feature; whereas, the exemption set up under the said twenty-first section is on its face irrepealable, and was so judicially declared to be'in the Lambert case itself. (4) That the Louisville, New Orleans & Texas Railway Company claims under charters granted in 1882 and 1884, asserting as its exemption this twenty-first section, the unconstitutionality of which, as violative of section 13 of article 12 of the constitution of 1869, was not only not considered, argued, or decided in Mississippi Mills v. Cook , but which, by virtue of its irrepealable feature and its special grant of an exclusive privilege to a special corporation, would have been condemned by the reasoning of that very case. (5) And not only is it true that the particular exemption claimed here, under this twenty-first section, was not argued or decided in Mississippi Mills v. Cook , but no other decision was ever rendered in this state in which the constitutionality of this twenty-first section was even involved until Me Culloch v. Stone, decided in 1886, four years after the grant of the charter of the Louisville, New Orleans & Texas Railroad Company. (6) From which it necessarily follows that that road was not built on the faith of any decision ever rendered in this state, up to the time of the grant of its charter, which even involved the constitutionality of said twenty-first section, and that the claim that it was organized or built on the faith of such decision, operating as a rule of property, is utterly unfounded and ab *689 surd. (7) That the Taylor case was neither more nor less than a fictitious case, which misled the court by the misstatement of fact that the Vicksburg, Pensacola & Ship Island Railroad was one of the constituent members of the Louisville, New Orleans & Texas Railway, and its charter was a constituent charter of that railroad, and that the Taylor case is authority for nothing. (8) That the Lambert case was decided at the March term, 1893, eleven years after, not before, the grant of the charter of the Louisville, New Orleans & Texas Railway Company; and it is hence, utterly incomprehensible to the legal mind how anybody could invoke that case, under the doctrine of stare decisis, as affording a rule of property to a company constructed under a charter granted before it was rendered. Such claim becomes more incomprehensible still when the further fact is recalled that the consolidation of the Louisville, New Orleans & Texas and Yazoo & Mississippi Valley into the present Yazoo & Mississippi Valley Railroad Company, took place October 21, 1892, long before the decision in the Lambert case.

“Let us get out of the realm of idle and reckless assertion into the realm of fact, and inquire more particularly and accurately exactly what was decided, even in the opinion of the court, which went far beyond the record, in Mississippi Mills v. Cook . The vice of that decision is that it looked exclusively to the word ‘subject,’ in section 13, article 12, and failed to give force and effect to the words, ‘ the same as that of individuals. ’ When we say that the court’s construction of the word ‘ subject ’ attributed to it some supposed magical effect, we are simply reiterating the language of Chalmers, J. He said ( 56 Miss., 69 ): ‘I find no such magic as my colleague in the words, “shall be subject to taxation the same as that of individuals. ” To me they have no meaning other than that which would be conveyed by the equivalent phrase, “shall be treated or shall be dealt with the same as that of individuals.” This and many similar phrases which might perhaps be suggested convey one and the same idea, namely, that the lawgiver, *690 in the imposition of taxes, shall know no difference between the property of individuals and that of corporations for pecuniary profit. The opinion of the court declares as its gist that section 13 was not mandatory upon the legislature to tax the property of private corporations for pecuniary profit whenever the property of individuals was taxed. It distinctly put the property of such private corporations, as to the power to tax them or exempt them, in a class by themselves, distinct from the class of individuals. In other words, it held that, although the property of individuals might be taxed, yet the property of such corporations might be at the same time exempted by the legislature from taxation, provided such exemption extended to all corporations of the same class in the state. We think it is perfectly manifest that the language, ‘ the same as the property of individuals, ’ imperatively commanded the legislature, whenever they tax the property of private individuals, to tax also the property of such corporations, and under the same rules of equality and uniformity.

“It was well said by Campbell, judge, that this provision of section 13 ‘ sprang from the experience that corporations were in the habit of asking and obtaining legislative exemption from liability to taxation.’ 56 Miss., 56 . That experience the state had acquired in the thirty-five years elapsing between the constitution of 1832 and the constitution of 1869, and that experience was wisely availed of to put an end to the grant of exclusive privileges to such corporations. It marked a new era in the history of corporate taxation in this state. It laid down a fundamentally new line of great public policy, one that will be found essential to the preservation of the rights of the people, as is abundantly attested by the experience of older states dealing with such corporations. It is that feature of the decision, thus holding that this section 13 merely permitted the taxation of such corporations, but did not require that taxation whenever the property of individuals was taxed, and in just the same manner, in all respects, as the property *691 of private individuals was taxed, which we now condemn and overrule. ■ In no other respect do we interfere with the decision in that case. That case decided that under the constitution, of 1869 the legislature had the power to select for exemption from taxation certain designated kinds of property, such as the agricultural implements of farmers, the tools of the mechanic, etc. Such exemption of particular kinds of property, for reasons of public policy, the constitution allowed the legislature to .grant, and when granted, it applied to such property, whether owned by individuals or such corporations. And to permit such exemption was perfectly consistent with holding that said section mandatorily required the legislature to tax the property of such corporations whenever and just as it taxed the property of individuals. The vice of the holding of the court was in disregarding and repudiating the correlation by the constitution of the property of such corporations and the property of private individuals in the same category as to the right to tax and the duty to tax, and in declaring that under that section the legislature might put into operation a scheme of taxation which taxed property of all the private individuals in the state, and at the same time, at the will of the legislature, exempt all property of such corporations from any taxation whatever. The constitution plainly and clearly.yoked together indissolubly the property of such corporations and the property of individuals, and subjected both alike to the same taxation, to be imposed under the same rules of equality or uniformity. The legislature might not exempt all the property of private corporations for pecuniary profit, and tax all the property of private individuals, but it might exempt certain selected kinds of property, in pursuance of a wise public policy, whether that property belonged to such corporations or to private individuals.

“ One other observation. The case before us most emphatically does not present a claim to exemption under a charter identical with the charter in Mississippi Mills v. Cook , nor the *692 case of any corporation which has acted on the faith of a decision construing a charter identical with the charter in the case of Mississippi Mills v. Cook , and which might thus be said to constitute, for such corporation, acting on it and investing its capital on it, a rule of property. It will be time enough to decide that precise question when that question shall be presented. ’ ’

A case stronger than that is now before us in this respect, that this act of 1882, under which appellee was organized, applies not only to all corporations of the same class, but to the specified property in the hands of individuals or corporations. It does not select certain persons or certain corporations, and seek invidiously to extend to them special privileges denied to all others. But in furtherance of a great and just public policy, alwaj^s cherished in this state, namely, the establishment of cotton factories for the consumption of the product on which our material wealth rests, it did, as under the constitution of 1869 it might do, select certain kinds of property, whether owned by individuals or corporations, and exempted that selected property from taxation. Manifestly this exemption contained in the said act of 1882 was valid, and it is clear it has never been repealed, and it was not sought to be made irrepealable. This appellee never lost its exemption by consolidating with any other .corporation. It has always retained “the precise corporate existence ” it originally had. Its exemption was therefore continued by section 181 of the constitution of 1890, subject to legislative repeal, but it has never been repealed.

The legislation with respect to railroads and cotton factories, under this act as to this matter of exemption, is materially different as to legislative repeal. Section 182 of the constitution of 1890, expressly authorized exemptions from taxation of manufactories and other new enterprises of public utility, for five years from the date of the charter, in the case of a corporation and from the commencement of the work in the case of in *693 dividual enterprises, but no such provision was made for railroads. And § 3744, subdivision (v) of the code of 1892, passed in pursuance of section 182 of the constitution of 1890, provides for these exemptions as to manufactories of various kinds. Here is both constitutional and legislative recognition of the exemption in this case as still existing. For it would be obviously absurd for the legislature to enact said subdivision (v) of § 3744, offering this five years exemption to cotton factories for the future, and at the same time repeal the sort of an exemption we have before us here. That would be £ £ keeping the word of promise to the ear, but breaking it to the hope. ” Individuals and corporations would "distrust as to the future, if an exemption like this, validly granted, under general law and on the faith of which appellee has invested its money, should be repealed. But a very different state of case existed, as already pointed out, as to the exemption denied in Yazoo, etc., R. R. Co. v. Adams, 77 Miss., 194 . There the exemption was void • in its origin, being a special grant by a special act, to a special corporation; and that exemption was repealed. It is not at all difficult to see the wisdom of the public policy which makes the discrimination between the exemption here and that in Yazoo, etc., R. R. Co. v. Adams . Let it be specially noted that the discrimination is pointedly made in this very act, which, while exempting the machinery, shops, etc., of factories, expressly says 1 £ it shall not apply to any railroad shops or machine works while on the property of railroads. ”

But it is clear that the real estate assessed at $9,000, being the tenement houses of the employes, is not exempt under the act of 18.82. It is not ££ located on the grounds of said factory.” And it is equally clear that the capital stock of said appellee is not exempt eo nomine within and under said act. Section 6 of the charter uses the word “property ” — not the act of 1882. The charter must square with the act of 1882; the exemption must be such as that act allows. Strictissimi juris is the rule *694 against the exemption and in favor of the state. The word “property” in the charter must be held to'mean such property as is specified in the act of 1882, the visible property therein named.' But there is an agreement in the record that the entire capital stock has been all along invested in the said exempt plant, except $60,000 of it, which it is also agreed has been invested all along in the purchase of the raw material, which is also exempted from taxation.

It is not here a question as to the power of the legislature to exempt such visible property and tax the capital stock, but the question here is, What did the legislature intend to exempt ?

We think it is clear that the capital stock should be estimated at its market value, and, if that market value exceeds the amount of the capital stock so invested in the exempted plant and raw material — that is to say, in this case, all the capital stock — the excess of the market value over the amount of capital stock so used to purchase the plant and the raw material— in this case, all the capital stock — alone should be taxed. That is to say, all that can be taxed here, under the agreement in this record, would be the excess in value of the market value of the capital stock over its par value. All this is matter of evidence. Clearly this was the legislative intent, for otherwise the exemption would be one in name merely. To exempt the plant and yet tax that amount of the capital stock used to purchase the plant, would be to give with one hand and take back with the other. This is the doctrine of State v. Simmons, 70 Miss., 485 , and is thoroughly set forth in 2 Thompson on Corporations, sections 2813-2819. See especially section 2813.

For the reasons indicated, the judgment is reversed and cause remanded.