International & Great Northern Railway Company v. The State of Texas, 75 Tex. 356

STAYTON, Chief Justice. This proceeding was brought by the State through the Attorney-General under the act regulating proceedings in quo warranto, and the purpose of the proceeding was: 1. To have declared a forfeiture of the company’s charter and wind up its business. 2. To have a decree withdrawing from the company’s property the immunity from taxation given by the Act of March 10, 1875.

On hearing the court below found that the facts proved did not justify ■a forfeiture of the company’s charter, but that the facts relied upon for that purpose were sufficiently shown to authorize a decree declaring the company’s property no longer exempt from taxation. A judgment was entered accordingly by the District Court for Travis County on June 21,1888. Appellant gave notice of and perfected an appeal in proper time, and both parties filed assignments of error, but the record was not filed at any branch of this court until April 3, 1889, when a motion to dismiss the appeal was filed by the State.

This court was in session at Austin when the judgment was rendered,, and on the first Monday of October following convened at Tyler, where a term was held, and then convened at Galveston, where a term was held, after which it convened at Austin again on the first Monday in April, 1889. The ground of the State’s motion to dismiss was that the appeal was not prosecuted to the term pending when the judgment was rendered, nor to the succeeding term held at Tyler.

The motion was overruled, but without any written opinion, and the State now seeks a revision of so much of the action of the court below as refused to forfeit the charter of the company, and to sustain the other part of the judgment.

The statute regulating appeals from judgments rendered in proceedings on information in the nature of quo warranto provides that “all such appeals shall be prosecuted to the term of the court in session, at either branch, or to the first term to be held, if not in session, after judgment has been rendered in the District Court;” and it has been held, in accordance with this and other provisions of the statute showing a legislative intention that such cases should be speedily disposed of, that there must be a substantial compliance with the statute.

The act prescribes the cases in which informations under it may be prosecuted, and its other provisions must be held to apply only to such proceedings as are contemplated by it.

So much of the act as it will be necessary to consider is as follows: “ In case any person shall usurp, intrude into, or unlawfully hold or execute, or is now intruded into, or now unlawfully holds or executes any office or franchise, or any office in any corporation created by the authority of this State, or any public officer shall have done or suffered any act which by the provisions of law works a forfeiture of his office, or any association of numbers of persons shall act within this State as a corporation without being legally incorporated, or any incorporation does or omits any act which amounts to a surrender or a forfeiture of its rights and privileges as a corporation, or exercises powers not conferred by law, * * * the Attorney-General, or district or county attorney of the proper county or district, either of his own accord or at the instance of any individual relator, may present a petition,” etc.

There are but two parts of this statute which can have any application to the question raised by the motion to dismiss, and to the State’s right now to have revised so much of the decree as refused a forfeiture of the charter of the company. If the State attempted to do something through this proceeding not contemplated by the statute, then its provisions regulating appeals as to such a matter can have no application; but in so far as the proceeding was contemplated by and in pursuance of the statute its provisions regulating appeals must be applied.

That part oí the statute which declares that an information may be filed and heard “ in case * * * any incorporation does or omits any act which amounts to a surrender or a forfeiture of its rights and privileges as a corporation,” and that in case the corporation be adjudged guilty the court shall declare a forfeiture of the corporate franchise, is that on which the proceeding was based, and properly based, in so far as a forfeiture of the charter of the company was concerned; and if the State desired to appeal from the judgment in so far as adverse to it, then it should have complied substantially with the statute, and not having done so, we are of opinion that it can not now have a revision of any matter permitted by the statute to be adjudicated under the terms and restrictions therein found.

We will notice the grounds on which the motion to dismiss the appeal was overruled, for it is intimately connected with the main question involved in this appeal. It was not believed that the statute on which the proceeding is based authorized so much of it as sought to have a decree declaring that the exemption of appellant’s property given by the Act of March 10, 1875, and compliance therewith should cease to exist, and that for this reason the provisions in regard to appeals could not affect appellant’s right to prosecute its appeal under the general laws applicable thereto.

It would hardly be contended if the State’s officer, in a proceeding properly instituted under the statute to forfeit the charter of the company, had joined with that a proceeding to try the company’s title to its lands, railway, rolling stock, and other property, that the latter would be governed by the statute in question as to time or mode of prosecuting an appeal.

To be governed by the particular statute the proceeding must be one authorized and contemplated by it, for it is only because it was thought that the best interests of all in reference to such matters would be sub-served by most speedy determination of the litigation, that a different rule to that applied in other cases as to time within which appeals should be prosecuted was prescribed.

The “rights and privileges” contemplated by the clause of the statute before referred to are evidently such as result from the fact of incorporation—the right and privilege to be a corporation, and to exercise the powers necessary to the consummation of the purposes for which corporate existence is given—“rights and privileges as a corporation,” and not such rights and privileges in relation to property as may be vested in a corporation or an individual by contract or legislation. Morgan v. Louisiana, 93 U. S., 223; Railway v. Miller, 114 U. S., 185.

The character of right conferred by the Act of March 10, 1875, in so far as it exempted appellant’s property from taxation for a fixed period, will be considered in another connection, and it is sufficient now to say that it is not embraced in the term “rights and privileges as a corporation.” That part of the statute which declares that information may be filed “in case any person shall-usurp, intrude into, or unlawfully hold or execute, or is now intruded into, or now unlawfully holds or executes any office or franchise, or any office in any corporation created by authority of this State,” is the only part not considered which, with any show of reason, could be claimed to authorize a proceeding under the statute to withdraw appellant’s right to exemption from taxation; but it is too clear that this language does not apply to such a right or immunity, even though in a general sense it may be termed a franchise, and that it applies only to usurpation of or intrusion into an office, or a franchise pertaining thereto.

A much more restrictive meaning has constantly been given to the statute of Anne, from which this part of the statute is taken. State v. Smith, 55 Texas, 451. Appellant’s claim to exenqp tion from taxation is based on the act of March 10, 1875, so much of which as has application to the question before us is as follows: “

An Act for the relief of the International Railroad Company, now consolidated with the Houston & Great Northern Railroad Company, under the name of the International & Great Northern Railroad Company: “Whereas, on the 5th day of August, A. D. 1870, the Legislature of the State of Texas passed

an act entitled c

An Act to incorporate the International Railroad Company, and to provide for the aid of the State of Texas in constructing the same; ’ and “Whereas, by the ninth

section of said act it is claimed the State of Texas obligated itself to donate and grant to the said company the bonds, of the State of Texas to the extent and amount of ten thousand dollars per mile for each mile of railroad constructed under said charter; and “Whereas, the said railroad company has already constructed about two-hundred miles of railroad, in accordance with the provisions of its charter; and “Whereas, the said International Railroad Company has been consolidated with the Houston & Great Northern Railroad Company under the name of the International & Great Northern Railroad Company; and “ Whereas, questions have arisen between the State of Texas and the said company as to the legal liability of the State to deliver said bonds to the said company; and “Whereas, it is important both to the State and said company that, these questions should be definitely settled by a just and reasonable compromise; therefore, for that purpose, “Section 1.

Be it enacted by the Legislature of the State of Texas, That in full settlement and satisfaction of all claims of the said The International Railroad Company and of the said The International & Great-Northern Railroad Company against the State for bonds under the provisions of the 9th

section of the aforesaid Act of August 5, A. D. 1870, there is hereby granted to the said last named company, its successors and assigns, twenty sections, of six hundred and forty acres each, of the unappropriated public lands of the State for each mile of railroad which has been and which may hereafter be constructed pursuant to the authority conferred by the said Act of August 5, A. B. 1870.

And the said company, its successors and assigns, shall have the right to locate the said lands as headright certificates were formerly located, without being under obligation to locate alternate sections for the State; and the said lands and the certificates issued therefor are hereby exempted and released from all State, county, town, city, municipal, and other taxes for the period of twenty-five years from the date of the respective certificates issued therefor.

And the said railroad company and its successors, and its and their capital stock, rights, franchises, railroads constructed and to be constructed, pursuant to the said Act of August 5, A. D. 1870, and this act, rolling stock, and all other property which now is or hereafter may be owned or possessed by said company or its successors in virtue of the said Act of August 5, A. B. 1870, is hereby exempted and released from all State, county, town, city, municipal, and other taxes, for a period of twentj^-five years from the 5th day of August, A.

B. 1875, except county and municipal taxes in such counties, cities, and towns as have donated their bonds to aid in the construction of said railroad; but this exception shall not remain in force in favor of any county, city, or town which, having thus donated bonds, shall make default in the payment of either the interest or principal thereof; provided, that this exemption from taxation shall not be held or construed to include or apply to the lands or railroads which at the time of the consolidation herein-before recited belonged to the Houston & Great Northern Bailroad Company, or which has since been or hereafter may be constructed or acquired under its charter; provided, nothing in this act contained shall be so construed as to exempt from taxation any lands to which the company may be entitled by virtue of the charter of the Great Northern Bailroad Company, or the franchise, road bed, rolling stock, or any property acquired or hereafter to be acquired by virtue of the charter of the Great Northern Bailroad Company. “Sec. 7.

That if a majority, in amount, of all the stockholders of the said The International & Great Northern Bailroad Company shall in person or by proxy, at a meeting of the said stockholders held for that purpose, vote in favor of accepting the provisions of this act, and a certificate certifying that fact under the common seal of said company, attested by its secretary, shall be filed in the office of the Secretary of State within forty-five days after the approval of this act by the Governor of the State, this act shall thereupon be and become obligatory upon said company and its successors, and, its provisions being complied with by the State, it shall be and constitute a full, final, and conclusive settlement of all the claims and demands of said company against the State for bonds under the ninth

section of the said Act of August 5, A.

D. 1870; and this act shall also be held to constitute an irrepealable contract and agreement between the State and the said company, its successors and assigns.” The information alleges that the “State of Texas by said last named special act granted to it (the railway company) and it now enjoys the said extraordinary exemptions, special privileges, immunities, and franchises from all State, county, city, town, municipal and other taxes on its said road bed, rolling stock, and other property, in and from its said eastern terminus at Longview, Gregg County, in and through the aforesaid intermediate counties, and all the towns and cities thereof, to its western terminus at Laredo, in Webb County, and still claims the right to continue to enjoy said exemption until August, 1900.” This contains a clear recognition of the fact that all the requirements of

section 7 of the act had been complied with and that the exemption existed at the time the information was filed. The grounds on which the forfeiture of the company’s charter and its right to immunity from taxation were asked are thus summarized in brief filed for the State: “1. That the respondent had willfully permitted its road bed and rolling stock to get out of repair, so as to endanger the lives of its passengers, and to delay and retard rather than to promote and facilitate travel; giving particulars. “2.

That it had failed to keep and maintain passenger and freight depots sufficient to accommodate the demands of the public, and that such as it did keep were low, flat, indecent buildings, totally unfit for railway purposes. “3. That it had willfully diverted its corporate funds to other and different purposes, and was so encumbered by fictitious liabilities as to render itself unable to perform its public functions. “4. That it failed to operate continuous and regular trains over its road from its eastern to its western termini as it had agreed to do. “5.

That it had abandoned the use of its road, over which it had never run any trains of its own for a number of years, from Taylor westward, a distance of several hundred miles, which part of the road was exclusively used by other and different railway companies. “6. That it had leased and sold out its whole corporate property and franchises to a parallel and competing railway company and to a foreign corporation, in violation of its charter. “7.

That it had removed its general offices, domicile, and managing officers all out of this State into the city of ¡New York, where they were maintained not by itself but by a foreign railway company. “8. That it was operating in and under the control of the Texas Traffic Association, a combination of competing- railways, for the purpose and effect of preventing competition between itself and others. “ 9. That the officers of other competing railway companies controlled and managed the affairs of respondent exclusively. “10.

That it was without a bona fide organization at all in the State of Texas.” Thus it is seen that the State bases its fight to withdraw the immunity from taxation on no other ground than the failure of the company faithfully to exercise the powers conferred on it by its charter, in accordance with the laws of this State. The court below held that the failure of the corporation in this respect was not such as to justify the forfeiture of its charter, but that it was such as required a judgment declaring that its property should not have the immunity from taxation given by the Act of March 10, 1875.

The first conclusion of the court below, for reasons before given, we can not revise; and if the immunity from taxation could be termed a corporate franchise, we do not see how it could be withdrawn until the term for which it was given expires, so long as the existenóe of the corporation continues, in the absence of something in the statute authorizing a partial forfeiture. There is nothing in the statute which authorizes this partial forfeiture.

We can not now enter into an inquiry as to the inducement which may have led to- the grant of the original .charter to the International Railroad Company, nor into the validity of any claim appellant may have asserted against the State which led to the compromise act passed March 10, 1875. All such questions were no doubt considered by the Legislature, and the rights of the parties settled by the act referred to and the acceptance of its provisions by appellant. The validity of the exemption from taxation has been considered in former cases, and need not now be again discussed. Railroad Company v.

Anderson County, 59 Texas, 654; Railroad Company v. Smith County, 65 Texas, 21. Looking to the provisions of the Act of March 10,1875, we think there can be no doubt that the exemption from taxation given by it, instead of being a right vesting only in appellant, is a right which inheres in the property to which it applies, and follows it into the hands of whomsoever may become its owner.

The exemption is not given to a company named alone, but to its assigns and successors as well, thus evidencing an intention that the exemption from taxation should adhere to the property exempted, and follow it into thé hands of whomsoever may become its owner. Ro such state of facts is shown in the following cases, to which counsel for the State refers and on which it relies: Morgan v. Louisiana, 93 U. S., 217; Railway v. Georgia, 98 U. S., 359; Railway v. Berry, 113 U. S., 465; Railway v. Miller, 114 U. S., 176; Pickard v. Railway, 9 Sup. Ct. Rep., 640.

These cases hold that exemption from taxation given to a named corporation will not inure to the benefit of another that may buy the property, or to a corporation formed from the consolidation of the one holding the exemption and another, in the absence of something showing an intention to fix the exemption on the property into the hands of whomsoever it may go. These decisions, however, are fatal to the proposition that exemption from taxation in such cases is, within the meaning of the law, a corporate franchise, though it may be a franchise owned by a corporation.

The act in question and its acceptance by the company constitutes, as declared by the Legislature, “an irrepealable contract and agreement between the State and the said company, its successors and assigns,” based on consideration deemed by the Legislature sufficient; and under it the right to the exemption would continue in favor of persons or corporporations who may become the owners of the property to which the exemption applies, even though the appellant corporation should be dissolved by a decree declaring the forfeiture of its charter.

The existence of this right enhances the value of the property to which it applies. Shareholders and creditors must be presumed to have dealt with the corporation on the faith of the contract which, gave the exemption, and it can not be taken away by legislation, by dissolution of the corporation, or in any other manner not sufficient to pass title to any other property from one person to another.

The right to exemption from taxation is secured by the same guaranty which secures titles to those owning lands granted under the act, and though the corporation may be dissolved, will continue to exist in favor of persons owning the property to which the immunity applies.

Lawful dissolution of a corporation will destroy all its corporate franchises or privileges vested by the act of incorporation; but if it holds rights, privileges, or franchises having the nature of property, secured by contract based on valuable consideration, these will survive the dissolution of the corporation for the benefit of those who may have right to or just claim upon its assets.

The court below erred in adjudging a forfeiture of appellant’s immunity from taxation, and in so far its judgment will be reversed and so much of the action as sought such relief will be dismissed, as ought to have been done by the court below on demurrer. Reversed and dismissed„ Delivered December 10, 1889.