
    The State ex rel. The South Carolina Railroad Company vs. William Hood, Treasurer, and F. W. Green, Sheriff, Richland District. The State ex rel. The Greenville and Columbia Railroad Company vs. The Same. The State ex rel. The Northeastern Railroad Company vs. The Same.
    
      Taxation — Stoclc— Gross Income.
    
    A charter of a railroad corporation exempting the “ stock” of the Company from taxation, exempts also its “ gross income.” Such income being but an accessory of the stock, which is the principal thing — the aggregate of the property and effects of the corporation.
    The case first stated was heard at Richland, Fall Term, 1867, before Moses, J., who made a report as follows :
    “By the Act to raise supplies, passed on December 21, 1866, the Legislature imposed 'a tax on the gross income of all railroads (not exempted by law) of one dollar on every hundred dollars,’ and required ‘that it be returned to and paid directly into the treasury of the State.’ — Acts of 1866, pp. 896, 397.
    “ The South Carolina Railroad Company, not considering that the said tax applied to it, made no return, and the Treasurer has issued an execution for a double tax in the sum of $26,256.76, with orders to the Sheriff to proceed to its collection.
    “The Company seeks by prohibition, to restrain the said Treasurer and Sheriff) and all others acting under them, from enforcing the process, and the only question before me, is as to the liability of the Company for the said tax.
    
      “By Act of December, 1827, (8 Stat. 351,) the formation of a Company for constructing railroads or canals from the city of Charleston to each of the towns of Columbia, Camden and Hamburg, by the name of the South Carolina Canal and Railroad Company was authorized. Its charter was extensively amended by the Act of January, 1828, (8 Stat. 355,) and by the 14th section, (p. 361,) it was provided, ‘ that during the first period of thirty-six years, from the completion of the road, the stock of the Company and the real estate that may be purchased by them, and connected with, and be subservient to the works herein authorized, shall be exempted from taxation.’ It was stated in the argument, without dissent, that the completion was in 1833.
    • “ By Act of December, 1835, (8 Stat. 409,) the Cincinnati and Charleston Railroad Company was incorporated, and by the 43d clause of the charter, (p. 417,)' the capital stock in the said Company, the dividends thereon, and all the property and estates, real- and personal, belonging to the said Company, were forever exempt from taxation in each and every of the States of South Carolina, North Carolina, Tennessee, and Kentucky,’ and it was further declared, ‘not to be lawful for either of the said States, or any corporate, municipal, police, or other authority thereof, or of any town, city, county, or district thereof, to impose any tax on such stock or dividends, property or estates, provided that the said stock or dividends, when the said dividends 'shall exceed the legal interest of the State, may be subject to taxation by the State in common with other money at interest, and interest thereon.’
    “It was not claimed at the hearing, that the said dividends had exceeded such rates.
    “By Act of December, 1836, (8 Stat. 96,) the Company incorporated in the States of South Carolina, North Carolina, and Tennessee, by the name of the Cincinnati and Charleston Railroad Company, and in the State of Kentucky, by tbe name of tbe Louisville, Cincinnati and Charleston Railroad Company, was to be known as a body corporate in all tbe said States by tbe name of tbe Louisville, Cincinnati and Charleston Railroad Company.
    “In December, 1843, (11 Stat. 273,) tbe name and style of tbe Louisville, Cincinnati and Charleston Railroad Company was changed by Act to the South Carolina Railroad Company, and tbe South Carolina Canal and Railroad Company was merged in 'the South Carolina Railroad Company, and all tbe rights, privileges, and property belonging to tbe said South Carolina Canal and Railroad Company, vested in the said South Carolina Railroad Company; so it is thus apparent, that to whatever exemptions, rights, privileges, and property, either the South Carolina Canal and Railroad Company, or the Cincinnati and Charleston Railroad Company was entitled, were to be enjoyed to the same extent, by the Company which after December, 1843, was to be recognized by the name of the South Carolina Railroad Company.
    “ The capital stock of the Company, the dividends arising thereon, and all the property and estates, real and personal, belonging to it, being exempt from taxation by express language, (unless I find in the Act of 1866, free from ambiguity and probable chance of doubt, words which preclude a different conclusion,) I cannot hold that the Legislature intended to include this Company as one upon ■which the enactment was to operate.
    . “The establishment of railroads demanding large capital and great expenditures, promotive as well of public good as of private interest, has been fostered and encouraged by this State to a very liberal extent. In almost every instance, besides full and ample charters, material aid has been afforded jn the shape of subscriptions and guarantees. This aid was not extended either with the expectation or hope of pecuniary profit, but was afforded from a due appreciation of the great benefits which accrued to the State from enterprises of this character, entering so largely into all the influences which give prosperity to the country, and increasing in every form its commercial and agricultural resources.
    “It is not to be supposed that by.the Act of 1866, the Legislature intended to restrict any of the exemptions or privileges it had already extended to the Company; such an intent (even without questioning the right to execute it) should be by express words, and not left to be gathered from inference.
    “Giving any construction to the words of the Act, I do not conceive how they can be held to apply the tax to this Company, for whether the words ‘ not exempted by law,’ are to be referred to those which they immediately follow, or to the word ‘incomes,’ still, in my judgment, the same result follows. Could the Legislature have employed more comprehensive language to exempt this Company from taxation at its hands ? All its real and personal property is protected, and what could it hold which might not be thereunder included ? If its capital stoclc, dividends, aud all its real and personal property are by the aforesaid Acts exempt from taxation, from what sources is the income to accrue separate and apart from those named ? A tax on the income must operate as a tax on the dividends, (to say nothing of the effect on its stock and other property,) for the dividends are" but the portion of the joint profit or fund of the corporation to be divided among its shareholders. If the tax is imposed on the income, which is the source of the dividends, is it not virtually laid on them ?
    “It was contended in opposition to the motion for the prohibition, that the Act of 1843, reduces the privileges, as it confers only those originally granted to the South Carolina Canal and Railroad Company, and not those granted to tbe Cincinnati and Charleston Railroad Company.
    “ Tbe Act of 1836, however, only changed tbe name of tbe Cincinnati and Charleston Railroad Company to that of tbe Louisville, Cincinnati and Charleston Railroad Company, but left it with all the powers, rights, privileges and exemptions, which its charter had previously conferred; and the Act of 1843, also changing the name to the South Carolina Railroad Company, in no way deprived it of all the rights, franchises, powers, privileges, and exemptions which the former Company by law enjoyed.
    “ It was also urged, that there was a difference between privileges and exemptions, that the first were only granted, not the latter. I do not perceive the force of the objection. What is an exemption but a privilege freeing a party from some claim or obligation, which but for it, he would be compelled to render ?
    “I have rested my judgment, as to the effect of the Act of 1866 on this Company, on the various Acts of the Legislature to which I have referred, and which I conclude exempts it from the tax demanded. If necessary, I should be forced to hold that the Legislature did not intend to impose the tax on any railroad company whose capital stock it had exempted from taxation by its charter. I shall forbear, however, from any expression of opinion here on that point, as I will be necessarily obliged to enlarge upon it, in the judgment I shall pronounce on the application of the Greenville and Columbia Railroad Company, for a prohibition to prevent the enforcement of the same tax claimed of it, which was heard with -the motion made in this case.
    “Let the prohibition issue against the said Treasurer and Sheriff and all others acting under them, in the enforcement of the said execution, and let all the papers be filed with the Clerk of the Court for Richland.”
    
      The respondents appealed, and now moved this Court to reverse the decision of his Honor, Judge Moses, on the grounds:
    1. It is apparent from the Tax Act of 1866, that the policy of the Legislature approved the taxation of all railroad companies, as such, all of which had hitherto escaped taxation.
    2. The parenthesis, ("not exempted by law") meant no more than the declaration, that in applying this general policy to the railroads of the State, the Legislature did not mean to abrogate any pre-existing law, on the subject of exemption from taxation, and was intended to refer to the Courts the question, whether the tax as laid, did or did not come under the exemption provided in the charters of the roads respectively; said parenthesis was not, it is submitted, intended to designate any class of railroads or any one railroad, nor was it intended to admit, or deny, anything in regard to exemptions, but on the contrary, by express reservation, to hold that question open for future adjudication.
    8. An income tax has never been considered as the same thing with a tax on property. In common acceptation, a tax on gross income is not included in a tax on stock ox dividends, or on properly real or personal. Income may exist independent of all these subjects of taxation, and frequently is taxed in addition to all these. i
    4. The various Acts on the subject, when properly construed, in connection with each other, do not bear the interpretation placed on them by the Judge granting the prohibition.
    5. That the Treasurer‘was bound under the Tax Act of 1866, to issue the said execution, that it was the duty of the Sheriff to execute the same, and that the said prohibition was improvidently granted.
    The reporter has hot been furnished with briefs in the other cases, but it is clear from the judgment of the Court that the statement therein contained is complete without them.
    Hayne, Attorney-General, for the motion.
    
      Porter <& Conner, contra.
   The opinion of the Court was delivered by

iNGLis, A. J.

In the “ Act to raise supplies,” of December 21st, 1866, (18 Stat. S. C. 396,) there is imposed as part of a general “ tax on incomes,” a tax of one dollar on every hundred dollars of the " gross incomes of all railroads not exempted by law.” The three companies severally re-lators in the cases before the Court, claim that they are by the terms of their respective charters exempted by law,” within the meaning of the exception, and are therefore not subjected to this tax. In the original charter of the-South Carolinia Eailroad Company it is stipulated ” that during the first period of thirty-six years, the stock of the company, and the real estate that may be purchased by them, and connected with and subservient to the works herein authorized, shall be exempted from taxation.” (A. A. 1828, Sec. 14, 8 Stat. S. C. 861.) The "first period of thirty-six years,” which was to be computed from the time when the said railroad should be completed for transportation,” (1833,) has not yet expired. In the 43d section of the Act of 1835, (8 Stat. S. C. 417,) creating the “ Cincinnati and Charleston Eailroad Company,” which is supposed to have been by subsequent legislation (A. A. 1843, 11 Stat S. C. 278) incorporated into tbe charter of tbe South Carolina Railroad Company, fuller and more specific terms of exemption are used. As, however, this latter Act does not seem to the Court materially to enlarge the exemption prom-mised in the original charter, it will not be necessary to advert more particularly to this difference of phraseology, or to consider the precise effect of this subsequent legislation. In the charter of the Greenville and Columbia Railroad Company (A. A. 1845, Sec. 16,11 Stat S. C. 829) there is a similar exemption of that company “ during the term of thirty-six years from the time of its corporate existence,” in language almost identical with that used in the original charter of the South Carolina Railroad Company. The North Eastern Railroad Company was incorporated in 1851, (12 Stat. S. C. 129,) “ for the term of fifty years,” and by a subsequent amendment of its charter (A. A. 1855, Sec. 1, 12 Stat. S. C. 407) “ the stock ” of the company, and the real estate that it then owned, or should afterwards acquire, connected with, or subservient to the works authorized in the charter, were exempted from all taxation during the con-continuance of the charter. “The stock" of each of these companies and its real estate, employed in, or subservient to its chartered enterprise, are thus, in express terms, exempted from taxation. Is the gross income of its railroad exempt ?

On the part of the relators, it has been argued, that the General. Assembly intended not to impose this tax upon any company which by any existing law was then at all exempted from taxation, though not in terms or in effect from this particular form of tax, and thus to grant all such already favored companies a new and additional exemption, “not exempted by law,” in the parenthesis is, it is said, a predicate not of “ incomes,” but of railroads. This may be conceded, an'd still the inquiry “ exempted by law ” from what? remains to be answered, and the only proper answer is — “from this particular form of tax now imposed upon railroads.” Distinctions of this kind are odious and unjust, unless founded upon considerations of public benefit, and there can be no such reasons for thus discriminating in favor of railroads already completed and in operation; the fact that in the past legislation these companies had been privileged beyond others, instead of a justification, would be an aggravation of the present favoritism. Grants of exemption from a common burden of public charge are to be strictly construed. “Every exemption must be Couched in such plain and unambiguous language as to satisfy the Court beyond doubt that the Legislature intended to create the exemption. Such a right can never arise by mere implication, and all laws granting the exemption are to be most strictly construed.” (Blackwell, Tax titles, 408-10; Dwarris Stat. 648.) To adopt the interpretation of the expression “ not exempted by law,” which is thus asked, by adding, in order to the completion of its meaning, “ from taxation,” instead of “ from this kind of tax,” would surely be a wide departure from this wholesome rule. The true inquiry here is, whether by any past legislative grant of exemption, the General Assembly was precluded from the imposition of this form of tax. The purpose was, not to show favor, but to keep faith, and to exempt from the imposition of this tax those companies, and those alone, upon which the State had, for adequate considerations, engaged not to impose it. The right of each of these relators to exemption from this particular tax, if it exist, must, therefore, be derived from the grant contained in its charter.

The “stock” of a railroad company is the aggregate of the property and effects of the company, which as a principal or capital fund is employed in, or made subservient to the prosecution of the specific business for which the company was chartered. In its original form, it is the sum of the moneys, contributed in fixed proportions, for the purposes of the adventure, by the persons willing to take part in it, but, by speedy conversion, it becomes the lands, rights of way, roadbed, track, depots, workshops, machinery, engines, carriages, &c., acquired, or constructed by or for the com.pany, and the franchises derived from the Legislative grant. The individual contributories are denominated “ stockholders.” They are holders of the “stock” in shares proportionate to their several contributions; but they are not in ¡law owners, either jointly of the whole, or severally of distinct parts of the property and effects which thus constitute .the stock of the company. They cannot, as individuals, dispose of it or any part of it, by sale, gift or otherwise, nor can it, at common law, be taken in execution for their separate personal debts. The legal title to the whole is in the body, not as a firm of partners, nor as an association of part owners, but in its corporate capacity, as an artificial being. It holds this legal title, however, upon the trust to employ the stock — the visible property, funds and franchises, in carrying on the chartered business, only for the .use and benefit of the individual stockholders, and to distribute to these, in shares proportioned to their several interests, from time to time, during the continuance of the corporate existence, the profits arising from such employment, and, at the dissolution of the corporation by the expiration of the charter, or otherwise, the proceeds of any residue of the corporate property, funds and effects, which shall then be on hand. The right to his just share in this distribution is the exact interest or property which the individual stockholder has — a right in the nature of a chose ■in action, to be enforced, if denied or withheld, by suit — an equity like the interest of an ordinary cestui yne trust. It is in consequence cf this identity of the “stock,” whether regarded as an aggregate vested in the corporation as a •legal estate, or as shares vested in the individual corpora-tors as equitable interests, that “ in the absence of any exemp tion, while tbe capital stock of a corporation may, in tbe discretion of tbe Legislature, be taxed as an aggregate to tbe corporation, according to its value, or to the stockholders, on account of their separate ownership of it, it cannot be taxed at the same time in both modes,” for this would be double taxation. (Aug. & Ames on Corp. Sec. 461, et seq.) And hence also, it necessarily results that a general exemption of a corporation from taxation operates to exempt the shares of its stock in the hands of the individual corpor-ators, as their several property, from taxation theieon. “ The aggregate could not be taxed without its having the same effect upon the parts, that a tax upon the parts would have upon the whole.” (Gordon vs. Ann. Tax Court, 3 How. S. C. R. 133; and see Gordon vs. Mayor, &c., of Baltimore, 5 Grill, 231.)

In The King vs. Vndewall, (2 Burr. 991,) it was held, that when land was taxed in the bands of the occupiers, the quit rents and other profits derived therefrom in the hands of tbe landlord could not be taxed ; and in The King vs. Church Wardens, &c., of Alberbury, Sc., (1 East. 534,) when this case was cited, Lord Kenyon said, The case of quit-rents goes on the objection of double-rating the same property in -the hands of the landlord as well as of the tenant.” “Landlords who derive a certain profit upon it in the nature of rent could not have been rated, because that would be to rate the subject matter twice.” The “income” of a railroad is, at least, as closely indentified with its “ stock,” as the rent with the land out of which it issues. Such income is the produce of the'stock, the money earned by the employment of the corporeal property and funds of the company in the exercise of its franchises; and therefore, when the shares of corporate stock, in the hands of individual holders, are taxed, eo nomine, the corporation itself is not liable to be taxed for personal estate or for “ income.” (Aug. & Ames on Corp., sec. 460; Boston Water Co. vs. City of Boston, 9 Metc. 199.)

To impose taxes upon the company in respect of its “stock,” and also in respect of its “income,” at the same time, though not more really, is yet certainly more manifestly a “ double taxation,” or “ twice taxing the same subject matter.” In other words, taxing the “income” of the stock is only another mode of taxing the “stock” itself; and hence an exemption of the “stock” in terms from taxation would be nugatory, if the income was not thereby equally exempt. If the income can be taxed, the stock is not exempt. In The State ex rel. Sebring et al. vs. The City Council of Charleston, (5 Rich. 561,) the Court of Errors'of this State decided that, where by the terms of a bank charter “the corporation and the stock thereof is relieved from the payment of all taxes during the time for which it is incorporated,” a tax could not be imposed on the dividends received by the stockholders on the shares of stock held by 'them severally. The argument by which this conclusion is reached derives all its force from the fact, that the “ stock ” is exempted. The two relators were holders of stock in different banks, in the charter of one of which there is an express exemption of the “ stock ” eo nomine, but in the other only the corporation is relieved from all taxes. And the conclusion attained is made to embrace both cases expressly on the ground, that however different the language in the various bank charters in this particular, “the design was and the effect has been to put each on the same footing.”

A corporation is an artificial being, the creature of positive law, wholly disliuct from the natural persons composing it, its identity being unaffected by changes, however extensive and frequent, of these. An exemption of the corporation, considered as a person merely, cannot necessarily involve an exemption of the individual corporators as persons. But an exemption of a corporation as such, as of a natural person, from all taxation, must be understood to exempt not merely the person, but' also all the property of the corporation, as bad been previously held in T.he State Bank et al vs. The City Council. &c., (3 Rich. 342;) and the legal effect was the same, therefore, as if “ stock ” had been expressly named in the exemption of each charter. “ Relief of the bank from all taxation,” says the Court, “ includes property of the bank; relief of the citizen from all taxation includes the property owned by him; each as incidents. If this be so of persons, natural or artificial, the principle must equally apply to things.”

But if the “dividends” on the “stock ” which are at least only the net “income” or profits thereof distributed among the individual corporators according to their respective interests, are, after they have come into the hands of the stockholders and thereby ceased to be property of the corporation, exempted from taxation, by an exemption therefrom of the “ stock,” how much more surely exempted thereby must be the “gross income” — the entire earnings of the stock,” while still the property and in the hands of the corporation itself, and then chargeable with the current expenses of the business, for defraying which it is in itself possibly insufficient and would be rendered more probably so by this additional expense of the tax. This is assumed, as if beyond controversy, in the argument of the Court in Sebring's case, (ubi supra) “ If the citizen be relieved from the payment of taxes on a house and lot, by no fair-construction could the rent he might derive be the subject-of taxation.” " If the citizen intending to invest his private capital in bonds at interest, should secure relief from' taxation thereon, by no just interpretation could he be deprived of the profits of his investment by a tax on the interest accruing from year to year.” “ Profits on stock remaining in the bank are not taxable, though segregated they may be from other funds. In what lies the difference, when transferred to the individual stockholder and when held by the stockholders jointly, is not easily perceived.”

But what was the purpose of these exemptions? Although it has been elsewhere gravely denied, it would yet seem that a government may grant a special exemption from taxation, just as it may relieve individuals from other public burdens, such as a jury or military service, or may give bounties, ensure exclusive privileges as of copy or patent rights, or road, ferry, bridge or banking franchises, or depute the exercise of the right of eminent domain, or confer other special immunities. But as the government is a trustee of its powers for the use and benefit of the State or political community, the only legitimate ground upon which it may grant such special distinctions is, that thereby is secured some benefit or advantage to the public, which is supposed to be an adequate return for the concession. In every instance where there is accorded to an association of persons the limited liability and other advantages of a charter of incorporation, it is, in theory at least, for the accomplishment of some enterprise important to the public, which individuals separately are not able to undertake, or for the prosecution of which they will not venture their, whole estates under a general liability; and such also is or ought to be the consideration for every special privilege or immunity conferred in the charter. Thus in the present cases, because the construction and conduct of the railroad proposed under each of these charters was regarded as a public benefit, (and who can doubt that it has proved so ?) the franchises of incorporation and of making and exclusively using for gain a highway of travel and transportation, and to this end of condemning and appropriating the lands of individuals or the use thereof, &c., &c., were conferred as inducements to persons, who could spare the means, to embark them in the enterprise, and as a farther inducement, was added this, that the portion of their estate which they should so venture, the money they would contribute to the necessary capital, the “stock” they would take, .should, in consideration of this benefit to the public, for the period named be relieved from the liability to taxation to which their other property or this same money otherwise invested, might be subject according to the changing exigencies of the government. The necessity both of the privilege and the immunity to the success of the enterprise was enhanced-by its magnitude, and the merely experimental nature of the venture invited the uncertainty of individual remuneration. To compensate for and as far as possible diminish this uncertainty, the expenses attending the proposed employment of their capital were to be reduced by discharging it, while thus employed from the general burden of contributing to the public charges. To tax this “gross income ” of that employment of their capital, to which it was the very object of tendering these privileges to invite them, would be little else than to turn the tempting fruit into “ apples of Sodom,” in their grasp to convert what had worn the semblance of a substantial benefit long enough to accomplish the purpose of its exhibition, into a mere illusion. For the “gross income” is necessarily all that is received from the investment or employment of capital, without any deduction of the outgoing expenses attending its earning and gathering; and the existence of such income is entirely consistent not only with an unprofitable, but a positively losing business, inasmuch as the whole income might not suffice for defraying the cost of conducting the enterprise.

To admit an intention to retain such a power to impose a tax, under a new form and a new name, upon the employment of the capital stock while expressly exempting that stock ” itself from taxation, a power not only to deprive such employment of profit, bat to inflict apon it a loss, would be to impute bad faith of which the General Assembly cannot be supposed capable.

It is the judgment of this Court, that each of the relators, The South Carolina Eailroad Company, The Greenville and Columbia Railroad Company, and The Northeastern Eailroad Company, is exempted by law,” by the proper construction of the terms of its charter, from taxation upon its “gross income,” and is consequently excepted from the operation of that clause of the “Act to raise supplies, &c., of December 21st, 1866,” in which is imposed a tax of one dollar on every hundred dollars of “the gross income of all railroads (not exempt by law.)” The motion to reverse the order in the Court below for a prohibition made here in each of these cases is refused, and the appeals are dismissed.

DuNKIN, C. J., and Wardlaw, A. J., concurred.

Motion refused.  