Statement of the Case.

ILLINOIS CENTRAL RAILROAD COMPANY v.

DECATUR.

ERROR TO THE SUPREME COURT OF THE STATE OF ILLINOIS.

No. 56. Argued November 22, 23, 1892. Decided January 9, 1893.

The provisions in Section 22 of the act incorporating the Illinois Central Railroad Company, (Private Laws, Ill. 1851, 61, 72,) exempting it from taxation, do not exempt it from the payment of a municipal assessment upon its land within a municipality in the State, laid for the purpose of grading and paving a street therein.

An exemption from taxation is to be taken as an exemption from the burden of ordinary taxes, and does not relieve from the obligation to pay special assessments, imposed to pay the cost of local improvements, and charged upon contiguous property upon the theory that it is benefited thereby.

ON February 10, 1851, an act was passed by the general assembly of Illinois, incorporating the Illinois Central Railroad Company. Private Laws, Ill. 1851, 61. By it the company was made the beneficiary of the land grant from Congress to the State of September 20, 1850. 9 Stat. 466. The 22d section (page 72) was in these words:

"SEC. 22. The lands selected under said act of Congress, and hereby authorized to be conveyed, shall be exempt from all taxation under the laws of this State until sold and conveyed by said corporation or trustees, and the other stock, property and effects of said company shall be in like manner exempt from taxation for the term of six years from the passage of this act. After the expiration of six years, the stock, property and assets belonging to said company shall be listed by the president, secretary or other proper officer, with the Auditor of State, and an annual tax for state purposes shall be assessed by the auditor upon all the property and assets of every name, kind and description belonging to said corpora tion. Whenever the taxes levied for state purposes shall exceed three-fourths of one per centum per annum, such excess shall be deducted from the gross proceeds or income

Argument for Plaintiff in Error.

herein required to be paid by said corporation to the State, and the said corporation is hereby exempted from all taxation of every kind except as herein provided for. The revenue arising from said taxation, and the said five per cent of gross or total proceeds, receipts or income aforesaid, shall be paid into the State Treasury, in money, and applied to the payment of interest-paying state indebtedness, until the extinction thereof: Provided, In case the five per cent provided to be paid into the state treasury, and the state taxes to be paid by the corporation, do not amount to seven per cent of the gross or total proceeds, receipts or income, then the said company shall pay into the state treasury the difference, so as to make the whole amount paid equal at least to seven per cent of the gross receipts of said corporation."

By section 27 it was provided that "this act shall be deemed a public act, and shall be favorably construed for all purposes therein expressed and declared in all courts and places whatsoever."

In 1887, proceedings were had in the county court of Macon County, to defray the cost of grading and paving a certain street in the city of Decatur. Under those proceedings two separate parcels of land belonging to the Illinois Central Railroad Company, and forming part of its right of way, were assessed to the amount of $262.70. The company objected to this assessment on the ground that by its charter it was exempted from all taxation of every kind except as therein provided for, and that there was no provision permitting such an assessment. This objection was overruled, and a judgment entered by the county court against the two parcels of land. Exception was taken, and an appeal allowed to the Supreme Court of the State. In that court the ruling of the county court was sustained, and the judgment affirmed, and the case is now brought here for review by writ of error.

Mr. Benjamin F. Ayer for plaintiff in error.

The terms of the contract between the State and the railroad company are explicit. Immunity from taxation was not

Argument for Plaintiff in Error.

granted to the company; but a certain rate and method of taxation, in the nature of a commutation, was agreed upon, and the revenues thus accruing to the State were to be received in lieu of all other taxes. The words are: "And the said corporation is hereby exempted from all taxation of every kind, except as herein provided for." The stipulation has all the elements of a legal contract. There is not only consent on the part of the State, but the consideration to be received by the State was largely in excess of the customary taxes, and therefore more than a fair equivalent for the exemption promised to the company.

The constitutional power of the legislature to make the contract is undoubted. That was authoritatively settled by the Supreme Court of the State in 1855, and the decision was affirmed in 1863. Ill. Cent. Railroad v. McLean County, 17 Illinois, 291; Neustadt v. Ill. Cent. Railroad, 31 Illinois, 484.

The taxes in question were assessed upon portions of the right of way of the company, that is, upon component parts of the railroad itself. It is not pretended that they are taxes provided for in the charter. If not, how can they be enforced without a plain violation of the contract?

The decision of the state court did not proceed upon any denial of the binding force of the contract, but upon an interpretation of the contract, which, it is respectfully submitted, is manifestly contrary to its plain import, and upon certain assumptions, which, with due deference, we say are wholly gratuitous. The taxes in question, it is said, are special taxes, levied on contiguous property for a local improvement, and cannot be regarded as burdens, because the property is supposed to receive benefits equal to the amount of the tax. Therefore, the court said, this is not an ordinary tax, and is not within the exemption clause of the charter.

It is quite clear, however, that the power to levy such local taxes is referable to and can be sustained only as an exercise of the power of taxation inherent in the State. It matters not how they are called - whether we style them "ordinary' taxes or extraordinary, general or special-or whether they are levied for. one public purpose or another; they are not

Argument for Plaintiff in Error.

the less taxes; and if they are taxes not provided for in the charter, it is respectfully submitted that they cannot be enforced without impairing the obligation of the contract.

The exemption guaranteed in the charter, is not an exemption from ordinary taxes only, but from "all taxation of every kind except as herein provided for." There is this saving clause-"except as herein provided for," and there is no other. These words necessarily exclude all other exceptions. The right to impose any other tax than those thus specially provided for is renounced and inhibited.

It is, no doubt, an established rule, that legislative contracts for exemption from taxation shall be construed with strictness, or, in other words, that they shall not be enlarged by construction. But this is a contract for commutation, based on full consideration, and it is accompanied by an express declaration, that the act which creates the contract "shall be favorably construed for all purposes therein expressed or declared, in all courts and places whatsoever."

It may well be doubted whether the rule of strict construction should be applied with the same severity to such a contract as to ordinary legislative grants.

Be that as it may, it is an inflexible rule in the construction of all statutes, both private and public, that the legislature must be understood to have intended what is plainly expressed. The same rule applies to the interpretation of contracts; and in this respect there is no difference between the contract of a State and the contract of a natural person. Tennessee v. Whitworth, 117 U. S. 129; Home of the Friendless v. Rouse, 8 Wall. 430; Farrington v. Tennessee, 95 U.S. 679.

It is assumed in the opinion of the state court, that the property of the plaintiff in error is not protected by the contract from "special assessments" for street improvements; and this is followed by the further assumption, that special taxes for street improvements are in all essential respects the same as "special assessments."

The constitution of Illinois in force from 1848 to 1870, contained the following clause in relation to municipal taxation: "The corporate authorities of counties, townships, school dis

VOL. CXLVII-13

Argument for Plaintiff in Error.

tricts, cities, towns and villages may be vested with power to assess and collect taxes for corporate purposes; such taxes to be uniform in respect to persons and property within the jurisdiction of the body imposing the same." Constitution of 1848, Art. IX, Sec. 5.

lic uses.

Special assessments in proportion to benefits, had been sustained by the courts on the theory that they were not taxes, and therefore not within the purview of the provisions of the constitution limiting the exercise of the taxing power. Taxes, it was said, are burdens put upon persons or property for pubAssessments laid on real estate for a local improvement precisely in the ratio of the advantages accruing to the property, are not burdens, but only a compensation or equivalent for the increased value of the property derived from the improvement. They had, it was held, none of the distinctive features of a tax, and were not therefore within the operation of the constitutional provision above mentioned, which required that taxes levied for corporate purposes should be uniform in respect to persons and property within the jurisdiction of the body imposing the same. Canal Trustees v. Chicago, 12 Illinois, 403; Peoria v. Kidder, 26 Illinois, 351.

Assessments levied under the act of 1863 were not apportioned according to benefits, and the question whether they could be discriminated from taxes, or reconciled in any way with the restrictions of the constitution, came before the Supreme Court for decision soon after the passage of the act. It was regarded by the court "as a very plain case," and the decision was against their validity. City of Chicago v. Larned, 34 Illinois, 203.

There has been no decision of the Illinois Court at variance with the doctrine in City of Chicago v. Larned. On the contrary the rulings there made have been approved and followed in all the subsequent cases relating to the same subject. We mention only a few of them. Ottawa v. Spencer, 40 Illinois, 211; Chicago v. Baer, 41 Illinois, 306; Wright v. Chicago, 46 Illinois, 44; St. John v. East St. Louis, 50 Illinois, 92.

The decisions in the very cases referred to in the judgment of the state court now under review, as establishing the doc