191 U.S. 379, 386, 387, 24 S. Ct. 107, 48 L. Ed. 229
In 1893 the State of Michigan enacted legislation levying a specific tax on railroads.1 The statute included a provision exempting new railroads built north of parallel forty-four from the tax rates until they had been operated for ten years or their gross earnings reached four thousand dollars per mile.2 On October 23, 1893, the Menominee and Northern Railroad Company was incorporated in Michigan.3 That company immediately conveyed all its property, rights, and franchises to the plaintiff, a Wisconsin corporation that stood in its place.4 The plaintiff constructed the railroad north of the parallel, and the line never generated gross earnings of four thousand dollars per mile.5
On June 4, 1897, the Michigan legislature passed an act amending the 1893 statute.6 The new law levied a specific tax on the property and business of every railroad corporation operated within the state.7 For railroads operating partly inside and partly outside Michigan, the statute directed that gross income be calculated by combining intrastate earnings with a proportionate share of interstate earnings.8 The proportion was determined by comparing the length of track in Michigan to the entire length of the road.9 This 1897 law formed the basis for the tax the plaintiff sought to avoid.10
The plaintiff brought suit in the United States Circuit Court against the auditor general of Michigan.11 The complaint sought an injunction against collection of the tax.12 It asserted that the 1897 legislation impaired contractual obligations and burdened interstate commerce.13 The Circuit Court sustained the defendant's demurrer.14 The court then dismissed the bill.15
The plaintiff appealed the dismissal to the Supreme Court of the United States.16 The plaintiff also advanced an alternative argument that the 1897 act should not be read to repeal the earlier exemption for companies in its position.17
Whether the May 27, 1893 Michigan statute created an irrevocable contract exempting railroads built north of parallel forty-four from taxation?18
A distinction exists between an exemption from taxation contained in a special charter and general encouragement to all persons to engage in railroad building.19 Attempts to make a contract out of the clauses in a scheme of taxation which happen to benefit railroad companies have failed.20 The presence or absence of consideration is an aid to construction in doubtful cases.21 The broad ground is that in view of the subject matter, the legislature is not making promises, but framing a scheme of public revenue and public improvement.
No. The 1893 statute was part of a general scheme of taxation and public improvement rather than a promise to specific parties.22 Although the plaintiff incurred detriment by building the railroad, the statute did not set the promise and the detriment as conventional inducements each for the other.23 The legislature merely held out a hope but did not amount to a covenant.24
The May 27, 1893 Michigan statute did not create an irrevocable contract exempting railroads built north of parallel forty-four from taxation.25
Whether the June 4, 1897 Michigan statute repealed the exemption provisions of the 1893 statute for railroads in the plaintiff's position?26
When a later statute amends an earlier one and contains express words repealing all acts or parts of acts contravening its provisions, the repeal is plain. The state court's interpretation on this question is followed by the Supreme Court.27
Yes. The 1897 act was an amendment of the section quoted from the act of 1893. It contained express words at the end of the section repealing all acts or parts of acts contravening the provisions of that section.28 The state court in Manistee & Northeastern Railroad Co. v. Commissioner of Railroads held that the repeal was plain.29 Therefore the 1897 statute repealed the exemption provisions of the 1893 statute for railroads in the plaintiff's position.30
The June 4, 1897 Michigan statute repealed the exemption provisions of the 1893 statute for railroads in the plaintiff's position.31
Whether the tax imposed by the 1897 Michigan statute unconstitutionally interferes with interstate commerce?32
A tax in form on the property and business of a railroad corporation operated within the State, computed upon percentages of gross income with a measure using the proportion of road length in the state for interstate business, does not unconstitutionally interfere with interstate commerce when the measure has been previously approved.33
No. The tax is in form a tax on the property and business of such railroad corporation operated within the State, computed upon percentages of gross income. The prima facie measure of the plaintiff's gross income is substantially that which was approved in Maine v. Grand Trunk Railway Co. Therefore the tax does not unconstitutionally interfere with interstate commerce.34
The tax imposed by the 1897 Michigan statute does not unconstitutionally interfere with interstate commerce.35