
199 U.S. 1 (1905)
THE PEOPLE OF THE STATE OF NEW YORK ex rel. METROPOLITAN STREET RAILWAY COMPANY
v.
NEW YORK STATE BOARD OF TAX COMMISSIONERS.
No. 74.
Supreme Court of United States.
Argued April 17, 18, 19, 1905.
Decided May 29, 1905.
ERROR TO THE SUPREME COURT OF THE STATE OF NEW YORK.
*9 Mr. Elihu Root and Mr. William D. Guthrie for plaintiffs in error in this case and in Nos. 75 and 76.
*21 Mr. Elihu Root, with whom Mr. Frank H. Platt was on the brief, for plaintiffs in error in Nos. 77 and 78 argued simultaneously herewith.
Mr. Charles A. Collin, with whom Mr. William F. Sheehan was on the brief, for plaintiffs in error in No. 79.
Mr. Louis Marshall and Mr. Julius M. Mayer, Attorney General of the State of New York, for defendant in error in this case and for defendant in error in Nos. 75, 76, 77, 78, 79 and 80.
*35 MR. JUSTICE BREWER, after making the foregoing statement, delivered the opinion of the court.
The decision of the Court of Appeals settles that there is nothing in the law or the proceedings in this case in conflict with the constitution of that State. It is not contended by the plaintiff in error that there is any constitutional objection to the taxation of franchises. The right to subject them to a share in the burden of supporting the government is conceded.
The main contention is that this tax legislation impairs the obligation of contracts. It must be borne in mind that presumptively all property within the territorial limits of a State is subject to its taxing power. Whoever insists that any particular property is not so subject has the burden of proof and must make it entirely clear that, by contract or otherwise, the *36 property is beyond its reach. In Providence Bank v. Billings, 4 Pet. 514, Mr. Chief Justice Marshall, in delivering the opinion of the court, said (p. 561):
"That the taxing power is of vital importance; that it is essential to the existence of government; are truths which it cannot be necessary to reaffirm. They are acknowledged and asserted by all. It would seem that the relinquishment of such a power is never to be assumed. We will not say that a State may not relinquish it; that a consideration sufficiently valuable to induce a partial release of it may not exist; but as the whole community is interested in retaining it undiminished, that community has a right to insist that its abandonment ought not to be presumed in a case in which the deliberate purpose of the State to abandon it does not appear."
In Vicksburg &c. R.R. Co. v. Dennis, 116 U.S. 665, Mr. Justice Gray cited many authorities, quoting the different phraseology in which by the several writers of the opinions the same rule was announced. In Wells v. Savannah, 181 U.S. 531, the law was thus stated by Mr. Justice Peckham (p. 539):
"The payment of taxes on account of property otherwise liable to taxation can only be avoided by clear proof of a valid contract of exemption from such payment and the validity of such contract presupposes a good consideration therefor. If the property be in its nature taxable the contract exempting it from taxation must, as we have said, be clearly proved. It will not be inferred from facts which do not lead irresistibly and necessarily to the existence of the contract. The facts proved must show either a contract expressed in terms, or else it must be implied from facts which leave no room for doubt that such was the intention of the parties and that a valid consideration existed for the contract. If there be any doubt on these matters, the contract has not been proven and the exemption does not exist."
In Chicago Theological Seminary v. Illinois, 188 U.S. 662, the same Justice declared (p. 672):
"The rule is that, in claims for exemption from taxation *37 under legislative authority, the exemption must be plainly and unmistakably granted; it cannot exist by implication only; a doubt is fatal to the claim."
See also Erie Ry. Co. v. Pennsylvania, 21 Wall. 492; Wilmington & Weldon R.R. Co. v. Alsbrook, 146 U.S. 279; Ford v. Delta & Pine Land Co., 164 U.S. 662.
This rule is akin to, if not part of, the broad proposition, now universally accepted, that in grants from the public nothing passes by implication. As said by Mr. Chief Justice Taney, in Charles River Bridge v. Warren Bridge, 11 Pet. 420, 549:
"The inquiry, then, is, does the charter contain such a contract on the part of the State? Is there any such stipulation to be found in that instrument? It must be admitted on all hands that there is none; no words that even relate to another bridge, or to the diminution of their tolls, or to the line of travel. If a contract on that subject can be gathered from the charter, it must be by implication, and cannot be found in the words used. Can such an agreement be implied? The rule of construction before stated is an answer to the question. In charters of this description, no rights are taken from the public or given to the corporation, beyond those which the words of the charter, by their natural and proper construction, purport to convey. There are no words which import such a contract as the plaintiffs in error contend for, and none can be implied."
Applying these well-established rules to the several contracts, it will be perceived that there was no express relinquishment of the right of taxation. The plaintiff in error must rely upon some implication and not upon any direct stipulation. In each contract there was a grant of privileges, but the grant was specifically of privileges in respect to the construction, operation, and maintenance of a street railroad. These were all that in terms were granted. As consideration for this grant the grantees were to pay something, and such payment is nowhere said to be in lieu of or as an equivalent or substitute for taxes. All that can be extracted from the language used was a grant *38 of privileges and a payment therefor. Other words must be written into the contract before there can be found any relinquishment of the power of taxation.
In the well-considered opinion of the Court of Appeals in this case it was stated by Mr. Justice Vann:
"The franchises are grants which usually contain contracts, executed by the municipality, but executory as to the owner. They contain various conditions and stipulations to be observed by the holders of the privilege, such as payment of a license fee, of a gross sum down, of a specific sum each year or a certain percentage of receipts, as a consideration, or `in full satisfaction for the use of the streets.' There is no provision that the special franchise, or the property created by the grant, shall be exempt from taxation.

* * * * * * * *
"The condition upon which a franchise is granted is the purchase price of the grant, the payment of which in money, or by an agreement to bear some burden, brought the property into existence, which thereupon became taxable at the will of the legislature, the same as land granted or leased by the State. There is no implied covenant that property sold by the State cannot be taxed by the State, which can even tax its own bonds, given to borrow money for its own use, unless they contain an express stipulation of exemption. The rule of strict construction applies to state grants, and unless there is an express stipulation not to tax, the right is reserved as an attribute of sovereignty. Special franchises were not taxed until by the act of 1899 amending the tax law they were added to the other taxable property of the State. This is all that the statute does, so far as the question now under consideration is concerned. No part of the grant is changed, no stipulation altered, no payment increased and nothing exacted from the owner of the franchise that is not exacted from the owners of property generally. No blow is struck at the franchise, as such, for it remains with every right conferred in full force, but, as it is property, it is required to contribute its ratable share, dependent *39 only upon value, toward the support of government."
It would not be doubted that if a grant was of specific tangible property, like a tract of land, and the payment therefor was a gross sum, no implication of an exemption from taxation would arise. Whether the amount paid was large or small, greater or less than the real value, if the payment was distinctly the consideration of a grant, that which was granted would pass into the bulk of private property, and, like all other such property, be subject to taxation. Nor would this result be altered by the fact that the payment for the thing granted was to be made annually instead of by a single sum in gross. If it was real estate it would be equivalent to the conveyance of the tract subject to ground rent, and the grantee taking the title would hold it liable to taxation upon its value. If this be true in reference to a grant of tangible property it is equally true in respect to a grant of a franchise, for a franchise, though intangible, is none the less property, and oftentimes property of great value. Indeed, growing out of the conditions of modern business, a large proportion of valuable property is to be found in intangible things like franchises. We had occasion to review this subject in Adams Express Company v. Ohio, 166 U.S. 185, where we said (pp. 218, 219):
"In the complex civilization of to-day a large portion of the wealth of a community consists in intangible property, and there is nothing in the nature of things or in the limitations of the Federal Constitution which restrains a State from taxing at its real value such intangible property. . . . It matters not in what this intangible property consists  whether privileges, corporate franchises, contracts or obligations. It is enough that it is property which, though intangible, exists, which has value, produces income and passes current in the markets of the world. To ignore this intangible property, or to hold that it is not subject to taxation at its accepted value, is to eliminate from the reach of the taxing power a large portion of the wealth of the country."
*40 In State Railroad Tax cases, 92 U.S. 575, 603, is this language by Mr. Justice Miller, speaking for the court:
"That the franchise, capital stock, business, and profits of all corporations are liable to taxation in the place where they do business, and by the State which creates them, admits of no dispute at this day. `Nothing can be more certain in legal decisions,' says this court in Society for Savings v. Coite, 6 Wall. 607, `than that the privileges and franchises of a private corporation, and all trades and avocations by which the citizens acquire a livelihood, may be taxed by a State for the support of a state government.' State Freight Tax Case, 15 Wall. 232; State Tax on Gross Receipts, 15 Wall. 284."
It is urged that when the public grants a privilege on condition of the payment of an annual sum the contract implies that the public shall exact no larger amount for that privilege, that to impose a tax is simply increasing the price which the grantee is called upon to pay for the privilege, and Gordon v. Appeal Tax Court, 3 How. 133, is relied upon as authority. It is true, in the opinion of the court, announced by Mr. Justice Wayne, is this language (p. 145):
"Such a contract is a limitation upon the taxing power of the legislature making it, and upon succeeding legislatures, to impose any further tax upon the franchise. But why, when bought, as it becomes property, may it not be taxed as land is taxed which has been bought from the State? was repeatedly asked in the course of the argument. The reason is, that every one buys land, subject in his own apprehension to the great law of necessity, that we must contribute from it and all of our property something to maintain the State. But a franchise for banking, when bought, the price is paid for the use of the privilege whilst its lasts, and any tax upon it would substantially be an addition to the price."
But there was in that case an express exemption from taxation in these words:
"`And be it enacted, that, upon any of the aforesaid banks accepting of and complying with the terms and conditions of *41 this act, the faith of the State is hereby pledged not to impose any further tax or burden upon them during the continuance of their charters under this act."
There being thus an express stipulation on the part of a State not to impose any further tax or burden, the question decided was really the extent of the exemption, and it was held to apply not merely to the franchise but to the property of the bank. The statements of Mr. Justice Wayne were only by way of argument to support the conclusion that the exemption went beyond the franchise alone. Furthermore, that case has been repeatedly qualified and limited by subsequent decisions. In New Orleans City Railroad Company v. New Orleans, 143 U.S. 192, Mr. Justice Gray, speaking for the court, said (p. 195):
"Exemption from taxation is never to be presumed. The legislature itself cannot be held to have intended to surrender the taxing power, unless its intention to do so has been declared in clear and unmistakable words. Vicksburg &c. Railroad v. Dennis, 116 U.S. 665, 668, and cases cited. Assuming, without deciding, that the city of New Orleans was authorized to exempt the New Orleans City Railroad Company from taxation under general laws of the State, the contract between them affords no evidence of an intention to do so. The franchise to build and run a street railway was as much subject to taxation as any other property.
"In Gordon v. Appeal Tax Court, 3 How. 133, upon which the plaintiff in error much relied, the only point decided was that an act of the legislature, continuing the charter of a bank, upon condition that the corporation should pay certain sums annually for public purposes, and declaring that, upon its accepting and complying with the provisions of the act, the faith of the State was pledged not to impose any further tax or burden upon the corporation during the continuance of the charter, exempted the stockholders from taxation on their stock; and so much of the opinion as might, taken by itself, seem to support this writ of error, has been often explained or disapproved. State Bank v. Knoop, 16 How. 369, 386, 401, *42 402; People v. Commissioners, 4 Wall. 244, 259; Jefferson Bank v. Skelly, 1 Black, 436, 446; Farrington v. Tennessee, 95 U.S. 679, 690, 694; Stone v. Farmers' Loan & Trust Co., 116 U.S. 307, 328.
"The case at bar cannot be distinguished from that of Memphis Gaslight Co. v. Shelby County, in which this court upheld a license tax upon a corporation which had acquired by its charter the privilege of erecting gas works and making and selling gas for fifty years; and, speaking by Mr. Justice Miller, said: "The argument of counsel is that if no express contract against taxation can be found here, it must be implied, because to permit the State to tax this company by a license tax for the privilege granted by its charter is to destroy that privilege. But the answer is that the company took their charter subject to the same right of taxation in the State that applies to all other privileges and to all other property. If they wished or intended to have an exemption of any kind from taxation, or felt that it was necessary to the profitable working of their business, they should have required a provision to that effect in their charter. The Constitution of the United States does not profess in all cases to protect property from unjust and oppressive taxation by the States. That is left to the state constitutions and state laws.' 109 U.S. 398, 400."
Murray v. Charleston, 96 U.S. 432, is not in point. The city of Charleston, having issued bonds, subsequently passed an ordinance assessing a tax upon all real and personal property in the city, and directed the treasurer to retain out of the interest due on those bonds the amount of the tax. Murray was a resident of Germany and resisted the reduction of interest, and it was held that the city could not by way of a tax reduce the amount of the interest which it had promised to pay to this non-resident holder, the court saying in its opinion (p. 440): "A non-resident creditor cannot be said to be, in virtue of a debt due to him, a holder of property within the city; and the city council was authorized to make assessments only upon *43 the inhabitants of Charleston, or those holding taxable property within the same."
Chicago v. Sheldon, 9 Wall. 50, is also not in point. An ordinance was passed by the city council of Chicago prescribing the amount of work which a street railway company must do in the grading, paving, etc., of the streets on which its railway was authorized to be constructed. The company, having accepted and complied with the terms of this ordinance, the city attempted by assessments for special improvements to compel the railway company to pay for further work of the nature required by the original ordinance, and it was held that the obligations assumed by the railway company in respect to street improvements, as provided by the ordinance, could not be increased by special assessments for further improvements. But this involved no question of liability to general taxation, and only held void the effort of the city under the guise of special assessments to increase the obligations specifically assumed by the railway company under the original ordinance.
In New Jersey v. Yard, 95 U.S. 104, there was a contract that a certain tax should "be in lieu and satisfaction of all other taxation or imposition whatsoever, by or under the authority of this State, or any law thereof," and the decision simply upheld that exemption specifically contracted for.
It is further contended that there has been a recognition and practical construction in respect to the grants of these franchises, and on these grounds: First, no attempt was ever made to legislate in respect to their taxation until 1899, although some of them had been in existence for many years; second, Governor Cleveland in one of his messages called the amount required to be paid by the contract a "tax," and Governor Roosevelt also spoke of existing "taxes;" third, section 46 of the legislation authorizing the tax upon these franchises provided that "any sum based upon a percentage of gross earnings, or any other income, or any license fee, or any sum of money on account of such special franchise, granted to or possessed by such person, copartnership, association, or *44 corporation, which payment was in the nature of a tax, all amounts so paid for the exclusive use of such city, town or village, except money paid or expended for paving or repairing of pavement of any street, highway or public place, shall be deducted from any tax based on the assessment made by the state board of tax commissioners for city, town or village purposes, but not otherwise; and the remainder shall be the tax on such special franchise payable for city, town or village purposes;" fourth, the Court of Appeals of New York in Heerwagen v. Crosstown Street Railway Company, 179 N.Y. 99, 104, said:
"In the first place, both in statutes and in judicial decisions the term `tax' is frequently used in a much more comprehensive sense than that which we have stated to be its accurate meaning. It is not used so broadly as to include the revenue from private property which the State or one of its political divisions may hold for emolument the same as other owners; but it certainly is used to comprehend exactions for the privilege of exercising franchise rights, which latter are often, especially in the case of foreign corporations, merely the consideration received for privileges which the State is at liberty to grant or to withhold at pleasure."
We are not disposed to undervalue the force of these suggestions, but it would be giving them undue significance to hold that they are potent to displace the power of the State to subject to the burdens of taxation property within its limits. The word "tax" is not infrequently used in a general sense as denoting a burden or charge, and not in the strict legal sense of the charge or burden imposed by the State for the purposes of revenue for its support. Undoubtedly the payment for the franchise of an annual sum was a burden, and in that sense it might not unnaturally have been spoken of as a tax. Being recognized as a burden it may also well be that when the franchise itself was of comparatively little value the legislature did not see fit to subject it to the burdens of ordinary taxation. But the omission of one legislature or a dozen legislatures does *45 not destroy the power of the State. The language quoted from section 46 indicates the desire of the legislature to deal equitably with the corporations holding these franchises. Surely the manifestation of this desire cannot be construed into a repudiation of power. These annual charges are not called taxes, but are spoken of as in the nature of a tax, and the legislature recognizing the equitable force of the claim based thereon provided that the corporation be given credit for sums thus payable. In this connection it is well to recall that in section 1 of the act of 1886, supra, these annual charges are called "rental or percentage of gross earnings."
The quotation from the Court of Appeals must be interpreted in the light of the question presented. That was whether the appellee company was entitled to avail itself of the provision of sec. 46 just quoted, it having been required by its charter to pay a certain percentage of its gross receipts. It was held that it was so entitled, and the argument was to show that the words "in the nature of a tax" were used in a broad and comprehensive sense to include a payment made on account of the privilege granted. No question was made or considered as to the liability of the company to the tax on its franchise. Its only claim was to the deduction on account of the percentage of its receipts already paid. The court, in addition to the language quoted, said (p. 106):
"The statute in question was enacted at a special session of the legislature convened by the Governor for that purpose. In his message to the legislature he recommended that `it should be provided that from the sum assessed by the state authorities as the tax which a corporation must pay because of its local franchise, there shall be deducted the amount already annually paid by it to the locality for such franchise. In no other way is it possible to tax these corporations with uniformity and equity.' It may be that this view is erroneous, and that the more accurate and equitable way would be to determine the value of the franchise not as free and clear but as burdened by the charges to which it might be subject. Nevertheless *46 it is plain that this view was accepted by the legislature, for under the scheme provided by the present statute the franchise is to be assessed as real estate; that is to say, not subject to diminution for charges thereon, and the allowance for such charges is made only by deducting them from the tax."
We are of opinion that no contract right of the relator was impaired by the legislation in question.
It is further insisted that the special franchise tax law denies the relator the equal protection of the laws and due process in three separate and distinct aspects, "namely, (1) in that it adds to the obligations of their various contracts while preserving all the burdens of those contracts; (2) in that it provides for the deduction of annual payments covered by existing contracts from the amount of tax levied, by reason of which deduction those who agreed to pay for their franchises lump sums or annual amounts less than the new tax are discriminated against; and (3) in that it discriminates against them and subjects them to taxation, while their competitors operating under the surfaces of many of the same streets are to be exempted."
The first specification is answered by the conclusion that we have reached in respect to the claim of an impairment of contract obligations, for if there was no such impairment the fact that the companies have escaped the burden for these many years is their good fortune, and in no manner discharges them from the ordinary burdens of taxation which the present law imposes.
With respect to the second, it may be observed that the lump sum is so obviously a payment for the franchise that it cannot be considered in any just sense as possessing the nature of a tax. It is not even rental. It is like money paid for a tract of land, part of the purchase price. It does not, like a percentage of the gross receipts, vary with the changes of business, has no resemblance to a continuing discharge of the obligation which property is under for contribution to the support of the Government. Further, this whole matter of allowing a reduction on account of that which is spoken of as "in the nature of *47 a tax" is a matter of grace on the part of the legislature. The franchises granted were, as we have held, subject to taxation, and the fact that upon equitable considerations the State has consented that a certain reduction shall, in some cases be made, does not entitle every holder of a franchise to a like reduction. It is akin to an exemption, and there is nothing in the Federal Constitution to prevent a State from granting exemption from taxation. Bell's Gap Railroad Company v. Pennsylvania, 134 U.S. 232.
With regard to the third contention, it may be said that there is a difference between surface and subsurface street railroads sufficient to justify a diversity in the mode and extent of taxation. In Savannah &c. Railway Company v. Savannah, 198 U.S. 392, just decided, taxation of a street railroad was challenged on the ground that a steam railroad which ran into the city and along its streets, and there did some of the same kind of work as the ordinary street railroad, was not subject to the same tax, and, referring to this contention, is this declaration by Mr. Justice Holmes: "The difference between the two railroads is obvious and warrants the diversity in the mode of taxation." Further, the condition of the title to the only subsurface road in the city of New York clearly puts it in a class by itself.
These are all the questions we deem it important to consider. We find no error in the decision of the Supreme Court of New York, and it is
Affirmed.
