to be strictly construed against the tion and in favor of the people. passes but what is granted in clear plicit terms. Neither the right of taxation nor any other power of sovereignty which the community has an interest in preserving undiminished, will be held by the court to be surrendered, unless the intention to surrender is manifested by words too plain to be mistaken. The relinquishment of the taxing power is never to be assumed. corpora- | railroads upon certain designated routes. One Nothing of these routes extended from Pére Marquette and ex- to Flint, both in that State. Early in the year 1857, the Flint and Pére Marquette Railroad Company was organized, under the general railroad law of Michigan of February 12, 1855, to construct a railroad from Flint to Pére Marquette, on Lake Michigan, a distance of one hundred and seventy miles. The Act of Congress, declared that the lands granted for each road "Shall be disposed of only as the work progresses, and that the same shall be applied to no other purpose whatsoever." They were made subject to the disposal of the Legislature of the State, for the accomplishment of the end in view; but the manner of disposing of them was not specifically prescribed. It was provided that at the outset one hundred and twenty sections within a continuous length of twenty miles of each road might be sold; and that whenever the Governor of the State should certify to the Secretary of the Interior that any twenty continuous miles of the road were completed, then another quantity of one hundred and twenty sections within a continuous length of twenty miles of the road might be sold, and so from time to time, until the entire road was completed. It was declared that, if any road was not completed within ten years, no further sale shall be made, and the lands unsold shall revert to the United States. Ohio Ins. & Trust Co. v. Debolt, 16 How., 416; Phila. & Wilm. R. Co. v. Maryland, 10 How., 376; Prov. Bk. v. Billings, 4 Pet., 514; Charles River Bridge v. Warren Bridge, 11 Pet., 420; Rice v. R. Co., 1 Black, 359, 17 L. ed. 147; Jefferson Branch Bank v. Skelly, 1 Black, 436, 17 L. ed. 173; Gilman v. Sheboygan, 2 Black, 510, 17 L. ed. 305; Wilmington R. Co. v. Reid, 13 Wall., 264, 20 L. ed. 568; Tomlinson v. Branch, 15 Wall., 460, 21 L. ed. 189. But a special exemption from taxation when possessed by a corporation by a legislative contract, is a franchise of the corporation like special charter privileges, which are contracts; and, by the Constitution of Michigan, article xv., section 1, special charter privileges or franchises to a corporation, the Legislature is prohibited from granting, and no corporation organized in Michigan since Jan. 1, 1851, the time when said Constitution took effect, could obtain from the Legislature any special charter privileges or franchises. The Supreme Court of Michigan has also indicated that section 10 of article XIV. of the State Constitution was designed to prevent the Legislature from binding the State by any agreement to exempt such corporations from taxation. Wolcott v. People, 17 Mich., 68. The right to sell having attached to these lands and been acted upon by the company, the object for which they were granted by the United States has been accomplished, and the lands are now held by the company discharged from the trust. The company, instead of selling them absolutely, has chosen to convey them as security for a loan and have the benefit of a rise in their value, consequent on the completion of the road and settlement of the country. It holds them as an investment for profit, and there is no possibility of their reverting to the United States. Why, then, are they not subject to local taxation? See Act of Congress of March 3, 1871; 16 Stat. at L., p. 582. Mr. Justice Swayne delivered the opinion of the court: By a Joint Resolution of Congress of February 17, 1865, the time for the completion of the road was extended five years. By the Act of March 3, 1871, it was further extended to March 3, 1876. By this Act it was provided that, "Whenever and as often" as ten additional miles of the road were completed, the Governor should certify the fact, and that thereupon the State might authorize the sale of sixty additional sections of land. It was finally provided in this Act, "That, in case the said railroad shall not be completed from Flint to Lake Michigan within the time as extended by this Act, all the lands included in said grant, to which the right to sell shall not then have attached, shall revert to the United States. The State, by an Act of her Legislature of the 14th of February, 1857, accepted the grants made by the Act of Congress of June 3, 1856, before mentioned, with the restriction and upon the terms and conditions contained in said Act. This Act of the Legislature gave to the Flint and Pére Marquette Company all the lands granted by Congress to the State for the construction of the road upon their route. Its further provisions, material to be considered in this case, are as follows: "The lands were to be applied to the construction of the road and to no other purpose. Upon the certificate of the Governor to the Secretary of the Interior, that twenty miles of the road were completed, the company was authorized to sell sixty sections of land, and so upon the completion of each succeeding twenty miles. When the entire road was completed the company was authorized to sell the residue of their lands, and not before. No tax was to be imposed on the lands of the company for seven years, exCongress, by the Act of June 3, 1856, granted cept such lands as should have been sold by to the State of Michigan the alternate sections the company or improved. Nothing in the Act of the public lands within certain prescribed was to be so construed as to relinquish the limits, to aid the State in the construction of right of the State to collect any specific tax This was an appeal in equity from the decree of the Circuit Court of the United States for the Western District of Michigan. The object of the suit is to have the defendants, who were the supervisors of certain townships in the County of Osceola, in Michigan, enjoined from assessing for taxation the lands described in the bill. imposed on any railroad in the State by the 20th section. In consideration of the land grant and other privileges, the company was required by that section, within sixty days from the first day of every year, to pay into the state Treasury one per cent. on the cost of the road, its equipment and appurtenances. It was declared lawful for the State after ten years to impose a further tax of two per cent. of the gross earnings of the road, which said above several taxes it was declared "Shall be in lieu of all further taxes to be imposed within this State." shall be collected from such property as shall be prescribed by law, and that: "Corporations may be formed under general laws, but shall not be created by special Act, except for municipal purposes. All laws passed pursuant to this section may be altered, amended or repealed." When this bill was filed, the company had completed about one hundred and twenty miles of their road, leaving about forty-eight to be constructed. A list of the lands granted to the company was made up at the General Land Office. The Act of February 14, 1859, increased the It embraced about 28.598 acres. in Osceola quantity of land authorized to be sold on the County. The company has sold about 17,705 completion of each twenty miles of the road, to acres of these lands, leaving a residue unsold one hundred and twenty sections. None of the of about 10,892 acres. The latter are the lands were to be taxable for seven years from lands described in the bill which the defendants the first of September then next ensuing, ex- claim the right to assess for taxation. cept such as were sold or improved. The com- None of the lands last mentioned were opposite pany was to be subject to the rate of taxation to or coterminous with the line of the road in specified in the 45th section of the Railroad operation in April, 1871. The title of the comAct of February 12, 1855. The Act of the 15th pany to all of them had become complete. of February, 1859, repealed the 20th section On the 25th of September, 1866, the comof the Act of February 14, 1857. The 45th sec-pany executed to the complainants as trustees, tion of the Act of 1855, which was substituted a mortgage and deed of trust conveying 153,for it, imposed a tax of one per cent. upon the capital stock paid in, and this tax it was declared "Shall be in lieu of all other taxes upon the property of said company, whether real, personal or mixed, except penalties by this Act imposed." 600 acres of the land, part of the grant, as security for bonds issued to the amount of $500,000. On the 4th of September, 1868, the company executed another mortgage and trust deed to the complainants as trustees, conveying all the residue of the land embraced in the The 37th section of the Act of April 18, 1871, grant to secure additional bonds issued to the imposed a tax upon the gross receipts of rail-amount of $2,500,000. These mortgages and road companies, according to the amount of such receipts. And this tax was to be in lieu of all other taxes upon the property of the company, whether real, personal or mixed, except penalties imposed by law, except real property not necessary for carrying on the ordinary operation or franchises of the road. This section declared further that "Only such lands granted to any railroad company shall be liable to local taxation, as may be opposite to and coterminous with the constructed portion and portions of said roads respectively; and that no such lands shall be subject to taxation until after the expiration of three years from and after the first day of April, 1871, and until after three years after the date of the certificates showing that such lands had been earned by said railroad company. It provided that lands opposite to and coterminous with the lines as now in operation, shall be subject to taxation in two years from the first of April, 1871. The Act of April 19, 1873, enacts that all lands earned by any company by the construction of a railroad in the State, shall be assessed and taxed in the same manner as other lands. Finally, the general Railroad Law of May 1, 1873, taxed the gross receipts of such companies according to their amount, such tax to be in lieu of all others, but there is the same exception as to real estate that is contained in the Act of 1871. Such real estate is made liable to assessment and taxation as is other real estate in the several townships in which the same may be situated. trust deeds conveyed the lands with other property to the trustees on certain trusts, to secure the payment of the bonds. Each contained a power of sale of the lands conveyed, and terms and conditions for the management of the trust, the sale of the land and the application of the proceeds to the payment of the bonds. The complainants accepted the trusts and entered upon their execution. On the first of January, 1873, there had been sold of the bonds secured by the mortgage of 1866, $146,000, and of the bonds secured by the mortgage of 1866, $2,224,000. The moneys received from the sale were all applied to the construction and equipment of the road. Some of the bonds have been taken up and canceled. The means of payment were derived from the sales of land under the power of sale in the mortgages. The mortgaged lands included all those before mentioned in Osceola County. The defendants demurred. The circuit court sustained the demurrer and dismissed the bill. In this court the appellants have assigned the following errors: That the interest of the United States in the lands was not so far extinguished that they were liable to taxation by the State. est in the lands inconsistent with taxation. That the State, as trustee, has still an inter That there was a contract between the State and the company, that the lands should be apvalue to the construction of the road, and that plied exclusively and without diminution of this contract is impaired by taxing [*543 them before they are sold and the proceeds so applied. The Constitution of the State provides that That the 20th section of the Act of the Legisthe Legislature may require the collection of lature of 1857 contained a contract that none specific taxes from banking, railroad, plank but specific taxes should be imposed upon railroad and other corporations, and that taxes 'road companies, and that the taxation of the lands in question under the Act of 1873 was a violation of that contract. That the State had no power to impair this contract to the prejudice of the company and its creditors. That the 37th section of the Act of 1871 contained a grant that lands opposite to and coterminous with the constructed portions of the road, should not be subject to local taxation until three years from the first of April, 1871, and that the taxation of the lands in question in 1873 was an impairment of that grant, and illegal. That the Constitution of Michigan prohibits the imposition of any but specific taxes upon railway corporations. We shall consider the several propositions without again specifically stating them. in nowise fettered, except as she had agreed to fulfill all the terms and conditions which accompanied the grant. To that extent she was clearly bound, and anything in conflict with those conditions would be ultra vires and cannot be supported. What were the terms to which she submitted herself? She was to devote the lands to the accomplishment of the object which Congress had in view, and there was an implied agreement on her part to take all the measures reasonably within her power to make their application effectual to that end. The mode was left entirely to herself. We see no ground upon which it can be claimed she bound herself any further. Upon general principles she could not tax the land while the title remained in the United States, nor while she held them as the trustee of the United States, which, in the view of the law, was the same thing. But when the State, proceeding in the execution of the trust, had transferred her entire title to the company, and they had perfected their title and acquired the right to sell, the case assumed a very different aspect. The validity of the mortgages is not drawn in question, and is too clear to be doubted. We need not, therefore, consider that subject. When the mortgages were executed the complainants took the legal title, so far as the company held by that title, and the equitable or inchoate title of the company to the residue of the lands. Copies of the mortgages *are not attached to the bill, and we are [*573 not advised particularly of their contents. If they contain a covenant of warranty, the legal title, as fast as it was acquired by the company, inured to the mortgages. Bk. v. Mersereau, 3 Barb. Ch., 528. If there was no warranty, and the land and not the title of the company was conveyed, the company is barred by estoppel from setting up the after-acquired title, and the estoppel runs with the land. The result is the same as if there had been a warranty. Van Rensselaer v. Kearney, 11 How., 323. The United States granted the lands to the State for a specific purpose. That purpose was "to aid in the construction of railroads" upon the routes designated. The land was made "subject to the disposal of the Legislature for the purpose aforesaid, and no other." Congress prescribed certain safeguards to secure their application to the construction of the roads, and to prevent failure or diversion. The precautions were few and simple. Except as to the first one hundred and twenty sections, the power of sale was to attach only as the road was completed in successive sections of twenty miles each. Subsequently the extent of the sections and the quantity of land were reduced one half. If the entire road was not completed within the time limited, no further sales were to be made, and all the unsold land was to revert to the United States. Subsequently the reverter was limited to the lands to which the right to sell had not attached. In other words, it was confined to those where the title was inchoate only, and had no application to those where the title was complete. As to those of the former class, there was not, when the b was filed, and is not now, any default. If the fact were otherwise, it would be for the United States, by office found, or other proper proceeding, to assert their rights. But they do not complain, and the complainants cannot do it vicariously for them. Baker v. Gee, 1 Wall., 333, 17 L. ed. 563. It is a conclusive answer to the proposition we are considering that the United States have no more claim, legal or Forbearance to tax was a bounty voluntarily equitable, touching the lands here in question given by the State. Forbearance for a time than they have to lands which they have sold doubtless increased, to some extent, the value and patented to others in the regular course of of the lands. Never to tax would have increased the administration of the Land Department of their value still more. N. J. v. Wilson, 7 the government; and that Congress has not Cranch, 164. There is no foundation for a 572*] seen *fit, either expressly or by impli- claim for one more than for the other. The cation, to impose any restriction upon the tax-State in the Act accepting the grant, agreed sua ing power of the State. That subject was re- sponte, to forbear to tax for seven years. There mitted, as, under the circumstances, it might is no complaint that this stipulation has been well be, wholly to her wisdom and discretion. violated. Any obligation, legal or equitable, The State accepted the grant subject to all to do more in this way is wanting. the conditions prescribed. She thereupon be- The company, so far as the matter of right came the agent and trustee of the United is concerned, were upon a footing with all other States. The powers and duties with which she alienees of the United States. The imposition was clothed might all have been discharged of taxes can in no just sense be said to be a by private individuals. The characters of sov- diminution of the value of the lands. R. Co. v. ereign and trustee were united in the same Hayne, 19 Iowa, 143. If Congress had thought party. The State did not in anywise abdicate so, they would have forbidden it. Liability_to her sovereignty by accepting the trust, but the taxation is an incident to all real estate. Exformer might be exercised to render more ef-emption is an exception. When claimed, to be fectual the discharge of the latter. She was effectual, it must be clearly made out. When the grant was made by the State to the company, the entire title before held by the former passed to the latter. Nothing remained to the State but the performance of the remaining duties of the trust, without any title, present or potential, to the lands. 393; Bk. v. Skelly, 1 Black., 447, 17 L. ed. 179; R. Tax, 18 Wall., 225, 21 L. ed. 894. The proposition founded upon the 20th sec- are not forbidden. But the contract must be tion of the Act of the Legislature of the 14th shown to exist. There is no presumption in its 574*] of February, 1857, is *unsound. There favor. Every reasonable doubt should be reare several answers. We shall state but one solved against it. Where it exists it is to be of them. That section imposes a tax with ref- rigidly scrutinized, and never permitted to exerence to the railroad itself. It has no relation tend, either in scope or duration, beyond what to the lands owned by the company not used the terms of the concession clearly require. It nor necessary in operating the road. The lands is in derogation of public right, and narrows & of the class of those here in question doubtless trust created for the good of all. Bk. v. Billwere not present to the mind of the Legisla-ings, 4 Pet., 561; R. Co. v. Maryland, 10 How., ture when that section was framed. The language employed cannot receive the comprehensive construction contended for. R. Co. v. Burlington, 28 Vt., 193; State v. Newark, 1 Dutch., 315; Inhab. of Worcester v. R. Corp., 4 Met., 564; State v. Flavell & Fredericks, 4 Zab., 370. The subject of taxing the lands of the company had already been dealt with. The 7th section of the Act provided that they should not be taxed for seven years from the first of September, 1857. It would have been a solecism to exempt them for seven years and in the same Act to exempt them without limit of time. Our view gives harmony and symmetry to the two provisions. Where such an exemption is claimed, the language from which it is alleged to arise is always to be strictly construed. This provision for exemption was, by the clearest implication, an assertion by the State in limine of the power to tax. The subsequent exemption involves the like claim. Whether, under the Constitution of Michigan, the State can impose taxes other than those which are specific upon the Flint and Pére Marquette Company, is a question which in this case does not arise. The taxes involved in this controversy were not to be upon the corporation, nor upon property used in [*576 the exercise of its franchises, but upon lands which it had mortgaged and was holding for sale. The distinction and the consequences have been considered. We need say nothing further upon the subject. We think the demurrer was necessarily sus tained, and the bill properly dismissed. The decree of the Circuit Court is affirmed. Mr. Justice Hunt did not sit during the argument of this cause. *UNITED STATES, Appt., [*99 v. THE HOME INSURANCE COMPANY. The provision of the 37th section of the Act of 1871, exempting the lands specified from local taxation until three years from the first of April, 1871, which period has not elapsed, was not a contract. There was no consideration. The company was required to do nothing and did nothing in return. As between individuals the stipulation would belong to the THE category of nude pacts. It has no higher character because one of the parties was a State, the other a corporation, and it was put in the form of a statute. It was the promise of a v. SOUTHERN INSURANCE & TRUST (See S. C., 22 Wall., 99-104.) valid-insurance company. 1. All the enactments of the de facto Legislatures in the insurrectionary States during the war, which were not hostile to the Union, nor to the authority of the General Government, and which were not in conflict with the Constitution of the United States or of the States, have the same validity as if they had been enactments of legitimate Legislatures. gratuity spontaneously made, which might be Legislatures of insurgent States what Acts kept, changed or recalled at pleasure. The case of Christ Ch. Hospital v. Philadelphia Co., 24 575*] How., 301, 16 L. ed. 604, is *instructive upon this subject. In 1833 the Legislature of Pennsylvania passed an Act declaring "that the real property, including ground-rents, now belonging to Christ Church Hospital, in the City of Philadelphia, so long as the same shall 2. An insurance company, created by the Legiscontinue to belong to said hospital, shall be lature of a State, while the State was in armed reand remain free from taxes." In 1853 a law bellion against the United States, is a valid corporwas passed which subjected the ground-rentsation and has a legal capacity to sue in the Court of Claims for the proceeds of the sale of property to taxation. The Supreme Court of the State under the Captured and Abandoned Property Act. sustained the validity of the latter Act. The [Nos. 315, 316.] hospital removed the case, by a writ of error under the 25th section of the Judiciary Act of Argued Feb. 26, 1875. 1789, to this court. Here it was insisted that the Act of 1833 was a contract in perpetuity; and the contract clause of the Constitution of the United States was invoked for its protection. This court unanimously affirmed the judgment of the Supreme Court of the State. The taxing power is vital to the functions of government. It helps to sustain the social compact and to give it efficacy. It is intended to promote the geral welfare. It reaches the interests of every member of the community. It may be restrained by contract in special cases for the public good, where such contracts Decided Mar. 22, 1875. The cases are stated by the court. PPEALS from the Court of Claims. The court below grounds its decision entirely upon the decision of this court in the case of Texas v. White, 7 Wall., 700, 19 L. ed. 227. We do not think that decision goes to the extent claimed. The language of this court is: "Acts necessary to peace and good order among citizens, such, for example, as Acts Mr. Justice Strong delivered the opinion of the court: sanctioning and protecting marriage and the 16 Wall., 412, 21 L. ed. 318; Taylor v. Thomas, domestic relations; governing the course of No. 181, not reported, ante, 789. descents; regulating the conveyance and transfer of property, real and personal; and providing remedies for injuries to person and estate, and other similar Acts, which would be valid if emanating from a lawful government, must be regarded in general as valid when proceeding from an actual, though unlawful, government." The creation of insurance and banking companies is not an Act necessary to peace and good order among citizens. It is simply a privilege; a franchise granted by the Government to individuals. It has nothing to do with peace and good order among citizens. Such corporations are not necessary to the social or even business relations of a community. These were suits under the Captured and Abandoned Property Act, to recover the proceeds of the sale of cotton captured at Savannah in 1864, and now in the Treasury of the United States. From the findings of fact in the Court of Claims it appears that the plaintiffs are Corporations created by the Legislature of Georgia in 1861 and 1863, while the State was in armed rebellion against the Government of the United States; and the question now presented is, whether such corporation can be recognized as having a legal existence, with capacity to own cotton and to sue in the Court of Claims. It is insisted on behalf of the appellants that the courts of the United States will not recognize the competency of those bodies known as the Legislatures of the But if these Corporations had a legal exist-insurgent States to create corporations such as ence during the time the rebel Legislature as- insurance, banking and trust companies; and sumed to regulate the affairs of the community as the plaintiffs in the court below were incorcomposing the State of Georgia, such existence porated under Acts passed after the attempted ceased with that Legislature. The creature secession of Georgia from the Union and bewas not greater than its creator. That Legisla- fore the close of the war, it was argued that ture could not set up a monument of its power they can have now no legal existence. that the Federal Government would be compelled to respect. In the case of Sprott v. The U. S., decided at the present Term of this court (ante, 371), the court goes no further than to affirm the decision in the case of Texas v. White. Messrs. Denver & Peck and W. W. McFarland, for appellees: The objection made to the corporate existence of the claimants is, that the Acts of incorporation shown in the record were passed by the Legislature of the State of Georgia while that State was in rebellion against the United States. It will be observed that the Acts of incorporation are in the usual form for the organization of insurance companies. There is no reference to the rebellion or to the Confederate States; in fact there is nothing in these charters from which the existence of either could be imagined. It is well known that the insurance business of the United States has been principally done by companies located in the great money cenStates. ters of the Eastern The rebellion brought their transactions in the South to a sudden termination. Hence the necessity for providing new instruments for transacting this business, and these charters were granted to fill up the gap left by the retirement of the old established companies. The character and influence of this class of business, its necessity in all the peaceable pursuits of life, need no illustration or enforcement. If it differs in any respect from other mercantile pursuits of an innocent character, it is in the generally recognized fact that it must be carried on by the agency of associated capital, through incorporated companies. That charters granted for this purpose by the Legislatures of the seceded States are valid, seems to be placed beyond a doubt by the decisions of this court repeatedly given. Texas v. White, 7 Wall., 733, 19 L. ed. 240; Horn v. Lockhart, 17 Wall., 580, 21 L. ed. 660; Sprott v. U. S., ante, 371; White v. Hart, 13 Wall., 646, 20 L. ed. 685; Huntington v. Texas, It may well be doubted whether, under the pleadings in the court below, the appellants have any right to raise such an objection here. There was no plea that traversed directly the corporate existence of the plaintiffs. A general denial of the averments of the petition Notwithstanding the was hardly sufficient. rule that old a corporation suing must prove its corporate existence, it has [*101 been many times decided that a plea of the general issue admits its capacity to sue, as does going to trial upon the merits. Lehigh Br. Co. v. Lehigh Coal and Nav. Co., 4 Rawle, 9; Sutton v. Cole, 3 Pick., 245; Conard v. Ins. Co., 1 Pet., 450; Society, etc., v. Pawlet, 4 Pet., 501. And such is the established practice in the Court of Claims. Hebrew Cong. v. U. S., 6 Ct. Cl. Rep., 244. But it We do not, however, rest our decision upon this ground. We prefer answering the question which the appellants attempt to raise. No doubt the Legislature of Georgia in 1861 and 1863, when the enactments were made for the incorporation of these plaintiffs, was not the legitimate Legislature of the State. The State had thrown off its connection with the United States, and the members of the Legislature had repudiated or had not taken the oath by which the 3d section of the 6th article of the Constitution requires the members of the several State Legislatures to be bound. does not follow from this that it was not a Legislature, the Acts of which were of force when they were made, and are in force now. If not a Legislature of the State de jure, it was at least a Legislature de facto. It was the only law-making body which had any existence. Its members acted under color of office, by an election, though not qualified according to the requirements of the Constitution of the United States. Now, while it must be held that all their Acts in hostility to that Constitution, or to the Union of which the State was an inseparable member, have no validity, no good rea |